AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 9, 1999
Registration No.__________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUER
UNDER SECTION 12(B) OR (G) OF
THE SECURITIES EXCHANGE ACT OF 1934
____________________
PHOTOLOFT.COM
(Name of Small Business Issuer in its Charter)
NEVADA 87-0431036
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
300 ORCHARD CITY DRIVE, SUITE 142 CAMPBELL, CALIFORNIA 95008
(Address of Principal Executive Offices and Zip Code)
Issuer's Telephone Number: (408) 364-8777
Securities to be registered pursuant to Section 12(b) of the Act:
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
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PHOTOLOFT.COM
FORM 10-SB
Table of Contents
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Item 1 Description of Business 2
Item 2 Management's Discussion and Analysis or Plan of Operations 21
Item 3 Description of Properties 36
Item 4 Security Ownership of Certain Beneficial Owners and Management 38
Item 5 Directors, Executive Officers, Promoters and Control Persons 40
Item 6 Executive Compensation 44
Item 7 Certain Relationships and Related Transactions 49
Item 8 Legal Proceedings 52
Item 9 Market For Common Equity and Related Stockholder Matters 52
Item 10 Recent Sales of Unregistered Securities 54
Item 11 Description of Registrant's Securities to be Registered 58
Item 12 Indemnification of Directors and Officers 62
Item 13 Financial Statements 63
Item 14 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 63
Item 15 Financial Statements and Exhibits 64
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
"Photoloft" and "HOWDY" are trademarks and service marks of PhotoLoft.com.
All other trademarks, service marks or tradenames referred to in this
Registration Statement on Form 10-SB ("Registration Statement") are the property
of their respective owners. Except as otherwise required by the context, all
references in this Registration Statement to (a) "we," "us," "our" or
"PhotoLoft.com" refer to the consolidated operations of PhotoLoft.com, a Nevada
corporation, and its wholly-owned subsidiary, PhotoLoft.com, Inc., a California
corporation, (b) "you" refer to prospective investors in our common stock and
other readers of this Registration Statement, (c) the "Web" refer to the World
Wide Web, and (d) the "site" refer to our Web site.
This Registration Statement contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended
("Exchange Act"), and Section 27A of the Securities Act of 1933, as amended
("Securities Act"), and is subject to the safe harbors created by those
sections. These forward-looking statements are subject to significant risks and
uncertainties, including information included under Items 1 and 2 of this
Registration Statement, which may cause actual results to differ materially from
those discussed in such forward-looking statements. The forward-looking
statements within this Registration Statement are identified by words such as
"believes," "anticipates," "expects," "intends," "may," "will" and other similar
expressions regarding our intent, belief and current expectations. However,
these words are not the exclusive means of identifying such statements. In
addition, any statements which refer to expectations, projections or other
characterizations of future events or circumstances and statements made in the
future tense are forward-looking statements. Readers are cautioned that actual
results may differ materially from those projected in the forward looking
statements as a result of various factors, many of which are beyond our control.
We undertake no obligation to publicly release the results of any revisions to
these forward-looking statements which may be made to reflect events or
circumstances occurring subsequent to the filing of this Registration Statement
with the Securities and Exchange Commission ("SEC"). Readers are urged to
carefully review and consider the various disclosures made by us in this
Registration Statement.
This Registration Statement includes statistical data regarding
Photoloft.com and the markets in which it operates. Such data is based on our
records or are taken or derived from information published by various sources,
including Dataquest, Reuters Technology Survey, New Media, Jupiter
Communications, and International Data Corporation. Although these companies
specialize in providing market and strategic information for the information
technology industry, and we believe that data from these companies is generally
reliable, this type of data is inherently imprecise. You are cautioned not to
place undue reliance on this data.
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ITEM 1. DESCRIPTION OF BUSINESS
PhotoLoft.com is a leading photo-sharing and digital imaging e-commerce
community. Our revolutionary viewing and printing technology allows users to
view, share, and print personal images quickly, easily and inexpensively. Users
can choose from over 90 categories in which to catalogue their images and view
others. This growing list provides users with a quick reference point to access
images of interest to them, while at the same time giving potential advertisers
and sponsors on the site the opportunity to ultra-target their audience. We are
also developing a multi-faceted e-commerce program, including a complete line of
photo-personalized gifts and customized electronic greeting cards, consumables
such as ink, paper and other digital imaging items, and photos offered by
professional photographers.
BACKGROUND
Our predecessor company, AltaVista Technology, Inc. ("AltaVista"), was
formed in November 1993 to take advantage of the burgeoning need for fun and
creative applications for the Internet. The market place was rapidly leaving
behind cumbersome computers that required highly trained operators and was
turning to PC-based computing that allowed people with average computer skills
to enter a new world. AtlaVista began developing imaging software that made
computing even more fun, and the various products that the company designed and
marketed brought images to life on the computer. In 1995 the company introduced
Howdy!, the world's first ever multi-media e-mail tool. Still being shipped
today, the software was an instant success because it was engaging, fun and easy
to use. As a component of this product, AltaVista also established web pages
via e-mail. Over the years, AltaVista developed and marketed the following
products:
Howdy! - an electronic postcard maker for Windows PCs
Howdios - additional postcards for Howdy! owners available on line
Webcannon! - a template-driven Web page authoring "system"
Media Wrangler - a multimedia authoring tool
SmartNet Singles - thematic Internet access kits (27 titles)
Internet Suite - a suite of products designed to get users up and
Running quickly and easily on the Internet
As a software developer, AltaVista followed the traditional revenue model
of bundling its software with Original Equipment Manufacturers ("OEMs"). As
that market evolved into a non-revenue source, we began exploring new ways to
bring products to market at a profit. This coincided with the phenomenal growth
of the Internet and the evolution of Internet users who were rapidly beginning
to utilize the medium as a source of entertainment as well as information. The
expertise of the company was clearly in Internet imaging technology and the
decision was made to aggregate images into a photo-sharing community.
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We adopted our new business model in June 1998. In August 1998 we sold our
URL (AltaVista.com) to Digital Equipment (Compaq Computer) and changed our name
to PhotoLoft.com, Inc. ("PhotoLoft-California"). The official launch of our new
Web site was in February 1999, the same month that PhotoLoft-California entered
into a reorganization with Data Growth, Inc. ("DGI"), a non-operating public
company incorporated in Nevada. Under the terms of the reorganization,
PhotoLoft-California shareholders received shares of DGI in exchange for their
shares of PhotoLoft-California common stock, PhotoLoft-California became a
wholly-owned subsidiary of DGI, all of the executive officers and directors of
DGI resigned and the executive officers and directors of PhotoLoft-California
became the executive officers and directors of DGI, and DGI changed its name to
PhotoLoft.com. See "Item 7. Certain Relationships and Related Transactions."
All of our business is currently conducted through PhotoLoft-California, and our
principal executive offices are located at 300 Orchard City Drive, Suite 142,
Campbell, California. Our telephone number at this address is (408) 364-8777.
Photo Processing Technology
The continuing evolution of the Internet as an entertainment medium coupled
with rapid advances in technology are working together to create a very
different photo processing model that the traditional chemical film based model.
Typically, photographers drop their used film at a photo processor, return at a
later date to retrieve it, make decisions for additional copies of certain
photos and then return several days later to get those as well. Digital
photography, the Internet and advances in printing technology are making that
model obsolete.
According to Dataquest Inc. nearly 50% of all U.S. households owned a PC at
the end of 1998, versus 43% and 36% in 1997 and 1996, respectively. Two thirds
of new PC buyers purchase for entertainment purposes. The Ziff-Davis Technology
User Profile estimates that 61% of those households with a PC also access the
Internet. Reuters Technology Survey reports that Internet usage doubles every
100 days.
The digital capture market continues to explode as well. Digital camera
prices dropped 40 percent to 50 percent during 1998, making them more accessible
to more people. According to New Media, the digital camera market is currently
enjoying a boom that is expected to reach $5.4 billion in sales by 2002. In
Japan today, sales of digital cameras exceed those of film-based cameras.
Printer technology continues to focus on crisp, clear prints delivered via
the home printer at affordable prices. Companies like Hewlett-Packard derive
more revenue from ink sales than printer sales, and printers that provide
consumers with excellent images (and use a lot of ink in the process) help to
drive the technology.
In this new world, digital images are directly uploaded to the Internet
where the owner can view and share them with others. Traditional photos can
easily be scanned onto the Internet. The owner can then choose to print the
photo(s) of his choice from the comfort of his own PC. This avoids getting
unwanted photos, provides an excellent storage place for the images, and ensures
that photos can be found and reprinted at any time. Using our revolutionary
software, the prints made will be to the highest resolution of the printer,
which typically provides photo-finish quality prints. All printers shipped by
Epson and Hewlett-Packard in the U.S. in 1999 have this capability. The printer
prices start at $250. In addition, users can designate what standard
photographic size they prefer, anything from wallet to 8"x10".
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The Internet
The move from a chemical-based photo solution to a digital one coincides
with the explosive growth of the Internet into a significant global medium for
entertainment, communications, news, information and commerce.
Commercialization of the Internet began in the mid-1980s, with e-mail providing
the primary means of communication. However, it was the Internet's World Wide
Web, which provided a means to link text and pictures, that has led to the
blossoming of e-commerce and sparked the explosive growth of the Internet in the
1990s. Today, at least 100 million people in 135 countries send and receive
information, and purchase products and services, through the Internet.
While a number of factors have contributed to the continued growth of the
Internet, several specific trends have been particularly important. The first
has been the emergence of community Web sites. Community sites provide a
platform for publishing and aggregating the rapidly increasing volume of
personalized content created by Internet users. Online communities also provide
a single online destination where like-minded users can interact and quickly
find pertinent information, products and services related to their particular
needs. Community sites generally offer free services including access to e-mail
accounts, chat rooms, message boards, news and entertaining. Through these
features, community sites can provide Internet users with the same opportunities
for expression, interaction, sharing, support and recognition that they seek in
the everyday world. A successful community will accomplish these goals and
create a base of loyal members who will collaborate in the evolution of the site
as their needs and interests change and expand.
Online communities also provide advertisers an attractive means of
promoting and selling products and services. According to Jupiter
Communications, the amount of advertising dollars spent on the Web is expected
to grow from approximately $1.8 billion in 1998 to $7.7 billion by 2002, a
compound annual growth rate of 42%. To date, advertisers have typically used
traditional navigational sites and professionally created content sites to
promote their products and services online. However, online communities allow
them to reach highly targeted audiences within a more personalized context, thus
providing the opportunity to increase advertising efficiency and improve the
likelihood of a successful sale. Moreover, advertisers can track more
accurately the effectiveness of their advertising messages by receiving reports
of the number of advertising "impressions" delivered to consumers and the
resulting "click-through" rate to their Web sites.
According to Jupiter Communications, traditional on-line banner
advertising, while still strong, is beginning to give way to sponsorships. In
1998, 61% of ad inventory sold was banners and 27% was sponsorships. Jupiter
expects sponsorships to gain in popularity at the expense of banner advertising
for the next few years.
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The second trend of interest in the Internet world has been the advent of
e-commerce. According to International Data Corporation, worldwide commerce
revenue on the Internet is expected to increase from approximately $32 billion
in 1998 to approximately $130 billion in 2000. Surveys indicate that 35% of
people utilizing the Internet to purchase goods driven by price - shopping for
the best deal. The remaining 65% of the users are driven by convenience and
selection.
OUR SOLUTION
For Internet consumers, PhotoLoft.com provides a photo-sharing community
that continues to meet the evolving needs of the marketplace. It is attractive
to photographers of all types, from professional to neophyte, who want to share
their images, solicit comments on their photos, browse others' pictures and
participate in photo-personalized e-commerce or simply take advantage of a
convenient solution for purchasing digital imaging supplies. In addition, our
advanced viewing technology allows users to study photos from a number of
different angles and our printing technology allows them to print photo-finish
quality prints from their home or office printers. For business partners,
PhotoLoft.com brings a unique solution to the questions of how to make their
sites more interesting and ultimately more appealing to their users. No other
photo-sharing web site on the Internet offers this broad combination of products
and services to meet all of these needs.
Consumers
Our solution is well timed to take advantage of the growing popularity of
online communities. Jupiter Communications has reported that facilitating the
sharing of photos among communities will be the primary application for on-line
consumer digital imaging. Our response has been to offer a vertical portal for
digital imaging, replete with photo-sharing opportunities, photo chats,
contests, targeted advertising and a unique e-commerce solution. In addition,
our efforts to develop an entertaining community site are positioning us well to
capture a share of the next generation of Internet users who will be looking to
the Internet for reasons other than information. Internal statistics show that
as an entertainment medium and Web site, we are not only successful at
attracting users, but we also keep them on the site for long periods of time and
keep members once they upload their images. Sharing photos with family and
friends; being able to browse other photos and comment on them; and enjoying a
community of photography buffs, all combine to make us a popular community with
a promising future with new members.
In addition, PhotoLoft.com offers a highly focused Web site, which is
particularly attractive to advertisers. Through our 98 different categories,
advertisers can choose to target their audience as much or little as possible.
Combined with PhotoLoft.com's community, which sponsors contests and provides
information and news about digital imaging, the Web site is a very attractive
option for advertisers, that can choose traditional banner advertising on
ultra-targeted pages or sponsorships of the various activities available at the
site.
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We have also developed a multi-faceted e-commerce solution that will appeal
to users looking for photo-personalized gifts and greeting cards, as well as
those choosing to take advantage of the "ease of doing business" that
PhotoLoft.com affords them. The first component of the e-commerce program is in
place today and offers customers a choice of over 150 photo-personalized gift
items. Because these gifts are always unique, they can never be commoditized
and are proving to be an excellent opportunity for repeat sales to users. The
second component of the e-commerce program is photo-personalized cards, which
have the additional feature of customized greetings. The unique design of this
program allows PhotoLoft.com to generate both advertising and e-commerce
revenues. The third component of the e-commerce solution includes on-line sales
of digital imaging products such as cameras, scanners and printers. In
addition, we will offer printing paper and ink cartridges for sale at costs
competitive with more traditional retail outlets.
Business Partners
Jupiter Communications research also indicates the photos "anchor" a
community. As a photo-sharing community, PhotoLoft.com attracts members that
are actively looking for the "community" experience with a "photographic" slant.
As members join PhotoLoft.com they upload images and remain with us, as opposed
to some communities where it is easy to switch to a competitive site. In
addition, statistics show that PhotoLoft.com is an extremely "sticky" site, a
very important point for advertisers on the web site. Examining photos takes
more time than simply scanning most web sites. Also, PhotoLoft.com users then
zoom in on or pan the image they have chosen an average of three times. This
feature is very important because each time it is accessed it increases the
total amount of time a user is on the site. These two factors combined have
made PhotoLoft.com very attractive to other Web sites that are constantly
looking for ways to increase the potential of their communities. Utilizing
PhotoLoft.com's unique co-branding and private label opportunities, sites like
PowWow (owned by Tribal Voice) are able to further cement their relationship
with users.
The final component of the e-commerce solution involves PhotoLoft.com-enabled
e-commerce. This product was developed on demand from professional
photographers, who will utilize PhotoLoft.com to display photos taken for
events. Potential customers can browse the photos in a PhotoLoft.com album
created by the photographer and then print directly from the web site. The
photographer will be reimbursed based upon the number of photos printed.
Technology
What makes our site truly popular with all users is the technology. Our
leading-edge software greatly simplifies the task of displaying images on the
Internet, offering automatic creation of thumb-nails; auto-generation of a
perfectly sized viewable image; transparent image compression; the photo album
metaphor, and many other uses. We have also taken Internet digital imaging a
step further with our advanced viewing capabilities. Users can zoom in on or
pan an image, allowing them to observe even the tiniest details or enjoy the
full panorama of a photo. This technology, which is compatible with all on-line
auction sites, makes us particularly popular with bidders closely scrutinizing
their potential purchases. In addition, to take full advantage of the digital
revolution, we allow users to print their pictures at home. This home photo
processing is comparable to the current photo finish quality, and is cost
competitive with the traditional model of film processing with the added
advantages of allowing users the convenience of printing only the photos they
want, at the sizes they designate from the comfort of their homes.
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STRATEGY
In order to achieve our goal of becoming the most complete photo-sharing
e-commerce community on the Internet, we have implemented a multi-faceted
strategy to enhance the content and features available on our Web site, increase
the amount of traffic on our site, expand advertising sales and sponsorships,
and develop a variety of e-commerce solutions.
Enhance Our Online Community
We continue to evolve our site to offer the latest in technology as well as
the latest trends in Internet communities. To be successful in the rapidly
developing market, we need to be pacesetters at all times.
Recently, we began to aggressively upgrade the look and feel of our site,
creating new and popular contests, encouraging users to comment on photos via
the "guest books" feature, and bringing new users to the site through an
e-invitation e-mail program. By virtue of the photos, our site is inherently
"sticky," meaning that users visiting the site tend to be there a while. Users
study photos for a period of time before moving on and, due to the company''
advanced viewing technology, for every image served on our site, users zoom or
pan the image an average of three times. In addition, once users upload their
photos to the Loft, they are reluctant to move them. These are extremely
important features for potential partners as well as advertisers.
New developments trend into two distinct arenas: technology and
entertainment. Technically, we are working to add new features that enhance our
current product, such as advanced image editing - cropping, red eye, image
manipulation, etc., -- simplified image uploading, and the addition of audio.
We realize that to be successful, we must have an extremely easy, user-friendly
site. We recently instituted a "feedback" page on the site that allows users to
communicate their ideas easily and quickly with the company. Many of our new
enhancements will be derived from this user interface. We are also working to
cut the costs of technology. As our Web site continues to grow we can achieve
many cost efficiencies. In addition, our engineers are working to lower the
cost even more through new developing technologies for image hosting. Finally,
we are devoted to Internet image hosting, and as that develops, we plan to
remain on the forefront of the technology. For example, we are constantly
monitoring the state of web-based video.
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Perhaps even more important is the entertainment component of the site. We
are constantly on the lookout for new ideas that will enhance the community
experience for our users. In the very near term we anticipate adding additional
contests, an automated address book for emailing purposes and private chat
(communication) between members versus the public forum available today through
Guest Books.
Traffic Generation
We have made a strategic decision to make traffic generation our top
priority. In order to accomplish this, we intend to enter into co-branding
relationships with original equipment manufacturers (OEMs) of digital imaging
equipment. We currently enjoy successful partnerships with OEMs of digital
cameras, scanners, printers and other digital photography equipment, including
UMAX, Epson, and Hewlett-Packard. Our partners ship copies of our software with
new equipment; advertise PhotoLoft.com on their boxes; feature our site in box
inserts and/or user guides; and create links from their Web sites.
Typically OEM relationships are manifested as co-branded Web sites, whereby
users on the OEM partner's home page can click through to a page featuring the
OEM's branding along with PhotoLoft.com. As users browse through the site and
take advantage of all our unique features, they constantly see both brands-the
OEM and PhotoLoft.com. This solution, unique to PhotoLoft.com, is very popular
with OEM's that are understandably are reluctant to send potential customers to
another Web site. PhotoLoft.com, the OEM and the user are all winners: we grow
our user base and image bank; the OEM is perceived as offering a value-added
service; both companies share in the revenue generated by advertising sales and
e-commerce; and the user has an opportunity to join our community. See
"Marketing and Promotion--Co-Branding Agreements."
Another promising strategy for traffic generation is the development of
private label sites. This concept was pioneered when we developed a private
label site for the Walt Disney Company in conjunction with Disney's launch of "A
Bug's Life." Under this concept, a partner company, such as Disney, can
commission us to create a Web site that is branded exclusively for them, giving
users the impression they have never left the original site. As an added
feature, the private label partner can specify parameters for the site,
including content and advertising. The advantages of a private label site are
numerous for both the partner and us. The partner has total control over the
site, including tight security, the chance to communicate with visitors and
reinforce its brand. We add to our image bank, enjoy additional traffic and
participate in revenues generated via e-commerce and advertising sales.
Our private label program allows partners to choose how to feature
PhotoLoft.com or offer its services. That way, we are not a competitor, but a
value-added supplier and partner. As we add private label agreements,
PhotoLoft.com will quickly become the digital imaging host for the Internet.
See "Marketing and Promotion--Private Labeling Agreements."
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We are also maximizing relationships with other Web sites to drive traffic
from an entirely different population - Internet surfers. We already have
agreements in place with Compaq Computer; Lycos; Hylas; Tribal Voice and
Netopia, and are actively pursuing additional agreements with high traffic Web
sites. See "Marketing and Promotion--Web Site Partnering."
Advertising Sales
As advertising costs continue to spiral upward, savvy advertisers are
constantly on the look out for innovative ways to deliver their message to
increasingly targeted audiences. The Internet is an excellent medium for this
ultra-targeted advertising and we are an ideal Web site, acting as an
electronic alternative to printed photo magazines. Our unique design allows
users to generate numerous impressions based on just one image. Users
publishing complete albums create an exponential number of impressions. Each
impression allows advertisers to reach an increasingly targeted audience, an
advantage not lost upon cost-conscious advertisers looking for value. Also, the
unique nature of our greeting card program creates multiple impressions as users
create their own cards. In addition, the community nature of our Web site
creates opportunities to further segment the audience, giving advertisers an
even more targeted buy.
To further our advertising strategy, we have partnered with Adsmart as our
advertising representation company. Adsmart is the industry's largest
site-focused on-line advertising representation firm, and the relationship
provides us with a tremendous opportunity to grow advertising sales. In
addition, we are aggressively pursuing partnering arrangements with advertisers
interested in sponsorship opportunities on our Web site. See "Advertising."
E-Commerce
E-commerce is a growing phenomenon of the Internet and we intend to take
advantage of this opportunity by offering convenience and quality to buyers. We
currently offer a wide selection of photo-personalized gifts, and plans are in
place for phased introduction of additional products and services, including
photo-personalized greeting cards, consumables, and photos offered by
professional photographers. See "Products and Services--E-Commerce."
PRODUCTS AND SERVICES
Our Web Site
Our Web site at Photoloft.com was created to give our members a place to
store their pictures; a way to categorize their memories; and a mechanism for
sharing their photos. Members can store photos; utilize the site's album
metaphor to organize the photos; and either view them on-line, through high
quality output devises such as television, or print them using our revolutionary
print technology.
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Once users arrive at our site, navigating the different areas is quite simple.
Immediately, users can opt to sign up, upload their photos or search for a
specific album. Following this lead navigation bar, users can scroll through
the 98 photographic categories ranging from animals to news to travel. Views of
photos are only a click away. Users choosing to upload a photo must first join
PhotoLoft.com by completing a very brief registration form and agreeing to the
site's terms and conditions. Once that is handled, users can load their images
three ways, via the digital camera, scanning or emailing the image. They are
automatically stored in an "album" which can be edited and manipulated very
easily at any time. Also available on the home page are buttons to display the
current stock quote (through a link with Yahoo Finance); contest winners;
contest entries; and gift ordering.
One of the unique and attractive features of our Web site is the community
experience. The importance of community cannot be underestimated: Internet users
are looking for interaction and the "community" experience fulfills that need.
The longer users stay on the site, the more opportunity Web sites have to be
successful. Our site currently features 98 categories of images that users can
browse through. These categories represent the top subjects that photographers
typically photograph. In addition to giving users a convenient way to view
photos, the segmentation is attractive to potential advertisers that can use the
categories to ultra-target audiences. For example, pet food ads can be featured
on the "Pet" section of our site. The categories also help draw viewers deeper
into the site, increasing the number of impressions received and the number of
images served. This, in turn, makes our site particularly attractive for
advertisers, thereby increasing opportunities for advertising revenues. See
"Advertising."
Other features on our site that contribute to the community experience
include photo comments, photo sharing, and user participation via contests.
Using our Guest Books feature, users can comment on various images throughout
the site. Those comments can then be viewed by anyone accessing the photo.
This is a particularly popular feature for professional models, who use the site
to post their portfolios, and professional photographers. A unique component to
the Guest Books feature that is scheduled to launch during the third quarter of
1999, is an e-mail service that will alert users when comments about their
images have been received.
According to a Jupiter Communications study, sharing is one of the top
reasons that people choose digital images. Our site provides the perfect
vehicle to do that easily through its e-invitation feature. Members simply
e-mail their friends and family when they post a photo or album they want to
share. Rather than tie up the recipient's computer with large e-mail files
carrying photos, our system invites the recipient to "click here" to view the
photo or album. This system is extremely easy and popular; is very fast since
it does not download actual photos to the recipient's PC; and brings more users
to our site.
Another important aspect of our community experience is the contents and
other forms of entertainment on our site. Currently, our users can participate
in two contests on our site: "image of the week" and "album of the week." Users
are invited to submit their work for these contests and all interested users are
allowed to vote. These contests offer substantial promotional opportunities for
advertisers willing to "sponsor" a contest on our site. See "Advertising."
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Technology
One of our competitive advantages is our unique advanced viewing and
printing technologies. They are both based on Hewlett-Packard's FlashPix
technology, but take the concept a step further, allowing for the simplicity of
viewing and ease of printing.
Our advanced viewing capability is unique to our site and allows users to
zoom in on or out of a photo and examine the tiniest details of an image.
Conversely, users can also pan an image to enjoy the full panorama of the photo.
These features are available directly from the user's browser, requiring no
special down loads or add-ons and are particularly popular with users of on-line
auction sites.
Our proprietary printing technology allows users to print to the highest
quality of their printer, giving them crisp, clear photos. Most technology only
allows users to print 72 dots per inch (dpi) using the "screen print" feature on
their PCs. With our technology and the appropriate printer (prices for these
printers start at $250; every Hewlett-Packard printer shipped after 1998 has
this ability) users can easily print photos that rival those printed at the top
photo finishers. In addition, the technology allows users to grab and print the
identified image (versus printing the entire page) and gives users a variety of
size options ranging from 8"x10" to wallet sizes. This technology directly
rivals the traditional photo processing model. It is revolutionizing photo
printing, allowing photographers to bypass the local photo finishers.
E-commerce
We have taken a multi-faceted approach to e-commerce and expect that it
will become an important revenue stream in the future. The first phase of our
e-commerce solution, photo-personalized gifts, is already in place. Users
currently have a choice of over 120 gift items, ranging from T-shirts to coffee
mugs, all emblazoned with the image of their choice. This service is currently
provided to us through an arrangement with Pix.com, a leader in Web-based
e-commerce. Under terms of the agreement, we share the generated revenues with
Pix.com; however, we retain the right to utilize other services or implement
this program itself at any time.
The next phase of our e-commerce solution is photo-personalized greeting
cards. Other sites offering online greeting cards have generated a significant
amount of traffic, and printed photo-personalized greeting cards have also
become quite popular. Our greeting card solution will combine both of these
successful approaches into an easy Internet solution. Initially our members
will be able to choose from over 140 exclusive card designs, ranging from
birthdays to bar mitzvahs, that can not only be photo-personalized, but also
customized with the greeting of the members' choice. The cards can be e-mailed
or printed and mailed. Because of our proprietary printing technology, the home
printed greeting cards will be of the same quality as those purchased in stores
with the added bonus of being photo-personalized. In addition, the user can
provide us with the appropriate address and we will print and mail the card for
them. Users can order up to 500 copies of a greeting card to be printed and
either mailed to them or distributed to a mailing list provided to us. Adding
to the convenience is a value-added service that will trigger an e-mail reminder
when an important "card giving" occasion, such as a birthday or anniversary, is
approaching. Our greeting card products and services will be rolled out in
stages over the next three month and should be fully operational by the end of
the third quarter of 1999.
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The next phase of our e-commerce solution will be a wide array of
consumables. By simply clicking a mouse button, users will be able to order
paper, ink, cameras, scanners and other digital imaging and photo sharing
equipment on our site. A helpful reminder service will prompt users to
periodically check their ink and paper volumes to ensure they have a continuous
supply. Once ordered, the item will be delivered to the address indicated
within a specified time frame. We expect to launch this service during the
fourth quarter of 1999 and anticipate entering into resale agreements with
wholesalers of digital imaging products.
Prior to the end of 1999, we will expand our e-commerce opportunities to
professional photographers choosing to partner with us. Under this scenario,
professional photographers will upload photos from a specific event to their
album and utilize our e-invitation email system to notify customers that the
photos are available for viewing. Customers can then view the photos, choose
those they'd like to purchase, indicate the size and number they want and place
the order, all on-line. This option is particularly attractive to wedding and
special event photographers. This component of our service will have a "lock
out" provision on the printing technology to deter users from simply printing
their own images.
Product Development
Product development on our site continues at a rapid pace. We hired a site
producer in May 1999 and have identified 58 additional features that will be
added to the community by the end of the third quarter 1999. These include
advanced image editing (cropping, "red eye," spinning); introduction of
additional contests, such as a Treasure Hunt; an audio feature for slide shows;
introduction of a newsletter focusing on digital imaging and photography;
customized album designs; and much more.
Membership Plans
We currently offer two membership plans. Our free membership allows
members to access up to 20 megabytes of storage (approximately 200 photos). We
also offer members a premium account at a price of $29.95 annually. This
service gives users an additional 30 megabytes of storage, password protection
if the user opts for privacy; and merchandise discounts. The true benefit of
the Premium Account to us is that is allows partners (such as co-brand partners)
to bundle the Premium Account (which brings value to the co-brand and branding
to our site) with the other products creating a perception of value for the
consumer. See "Marketing and Promotion--Co-Branding Agreements."
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ADVERTISING
As advertising costs continue to spiral upward, savvy advertisers are
constantly on the lookout for innovative ways to deliver their message to
increasingly targeted audiences. The Internet is an excellent medium for this
ultra-targeted advertising and our Web site an ideal program, acting as an
electronic alternative to printed photo magazines. Our unique design allows
users to generate numerous impressions based on just one picture. Users
publishing complete albums create an exponential number of impressions. Each
impression allows advertisers to reach an increasingly targeted audience, an
advantage not lost upon cost-conscious advertisers looking for value. Also, the
unique nature of our site brings a virtually unlimited number of viewers to the
site each day to view the photos.
In addition, the community nature of Web site creates opportunities to
further segment the audience, giving advertisers an even more targeted buy.
Similar to the already successful community sites, our community encompasses 98
categories of popular targets ranging from astrology to zoos. Enthusiasts
simply post their photo albums to these communities, where they can share images
while seeing the latest from advertisers in that field.
We have recently entered into an agreement with Adsmart, an advertising
representation firm, to ensure that we maximize the opportunities available via
advertising sales. Adsmart is the industry's largest site-focused online
advertising representation firm. It has more than 175 premier Web brands
totaling 1.2 billion impressions per month. The contract guarantees that 100%
of our inventory will be sold each month. The CPM (cost per thousand)
impressions is based on a sliding scale. This number will increase as we
continue to increase the volume of traffic to our site. In addition, we can
receive more revenue per CPM by providing numerous ultra-targeted channels, such
as the categories. Working with Adsmart, we have begun to target key affinity
networks that will utilize our site as an advertising venue.
Recognizing that the traditional banner advertising will, by definition,
eventually reach a cap, we are beginning to explore more creative advertising
sales opportunities. Forrester Research speculates that over the next five
years, between 50%-70% of Internet marketing budgets will be spent on
promotional activities versus traditional banner advertising. Our promotions
are primarily taking the form of sponsorship opportunities. Under this
scenario, advertisers can "sponsor" a contest or other form of entertainment on
our Web site. The advantages to the sponsor are that it gets a more focused
audience, since visitors want to participate in the event and will not "click
through" the message; the message can be more advertorial, usually carrying more
credibility with the target audience; and it is not "competing" with the myriad
of other messages typically found on Web sites. The advantage to us is that it
allows us to work in conjunction with advertisers as business partners to create
venues that will enhance the community facet of our Web site and, ultimately,
increase our membership. Sponsorships also have the potential to generate more
revenue than most banner ads.
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Typical advertisers and sponsors on our site include Visa, Intel,
About.com, TravelNow, and Hewlett-Packard. Our contract with Adsmart will
increase the number of advertisers and allow us to target certain advertisers
that will benefit by the site's unique community set up.
MARKETING AND PROMOTION
We market our site through three primary channels: links to other sites
(Web site partnering); co-branding agreements; and private labeling agreements.
Web Site Partnering
Web site partnering arrangements allow us to recruit members from the
broadest of populations - Internet surfers. We already have agreements in place
with Compaq Computer (through the AltaVista search service); Hylas, Tribal
Voice, and Netopia, guaranteeing exposure to approximately 30 million potential
users per day, and we are actively pursuing additional agreements with high
traffic Web sites. To that end, we are actively utilizing banner swaps in our
advertising program. Under this scenario, we gain advertising space on targeted
Web sites in exchange for running that Web site's banner ads for free. This
barter arrangement allows us to advertise without incurring the expense that is
usually associated with Internet advertising.
Co-Branding Agreements
Co-branding agreements are particularly popular with original equipment
manufacturers (OEMs). Typically these agreements call for a co-branded home
page, featuring the look and feel of our site along with the brand of the
partner company. Usually this brand is found in the upper right corner of the
home page. The partner companies also advertise PhotoLoft.com through their
packaging by including our logo on the box, inserts in the packaging, and
mentions in the users' manuals or newsletters. Users are directed to our site
via a link at the partner company's Web site. As an added inducement to utilize
our site, all purchasers are offered premium accounts at no extra charge. We
share with our partners any revenues generated via advertising sales and
e-commerce from the co-branded site.
The OEM views adding our software to its package of products as a value
added benefit for the consumer. In addition, depending upon the OEM partner, we
can help to increase sales (as in the case of Hewlett-Packard, which can
increase sales of ink as consumers print high resolution photos--enabled by our
proprietary printing technology--on their HP printers). Currently we have
co-brand agreements in place with UMAX (which ships approximately 50% of the
scanners sold in the U.S.), Epson, Casio, Hewlett-Packard and others. We are
actively engaged in discussions to develop additional co-branding agreements
with other Web sites and Internet companies.
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As our business development team grows, co-branding agreements are being
marketed to other sectors as well. A recently signed agreement is with PowWow,
a fully integrated instant messaging and online community with over four million
users, that was developed by Tribal Voice. Under terms of the arrangement,
PowWow users will be notified that they have received a free one-year Premium
Account with PhotoLoft.com. Announcements in the online newsletter will further
explain the program and a direct link from the PowWow Web site will bring users
to our site. Tribal Voice was searching for a photo sharing solution for its
site, photos being a critical component in the success of a community site.
PhotoLoft.com was an excellent solution as our model of co-branded sites allowed
PowWow to keep its branding program in tact while offering an additional value
added service to its users.
Private Label Agreements
Our unique web site architecture allows the company to offer private label
agreements to partner companies. To date, no other photo sharing community has
integrated this component into its marketing strategy. In these agreements, the
partner company pays an initial development fee and we create a private photo
sharing community for that company. While the entire space is branded by the
partner company, a tag line reads "powered by PhotoLoft.com" and the uploaded
images become part of the our image bank. Typically we share with the partner
company any revenues generated by advertising sales and e-commerce on the
private label site.
The most prominent example of a private label site is the one created by
PhotoLoft.com for the Walt Disney Company in conjunction with its launch of "A
Bug's Life." As our marketing efforts mature, we are finding more and more
opportunities to create private label sites. They are particularly appealing to
online portals that are reluctant to lose their branding but want a photo
sharing community as a component of their portfolio.
OPERATIONS AND SYSTEMS
Administrative Operations
To provide our members with the most efficient, flexible, and innovative
services possible, our administrative operations combine in-house and outsourced
services and functions. Our strategy is to keep our in-house staff small, with
a focus on core competencies in technical and research and development areas,
and to outsource other functions and projects on an as-needed basis. Internal
functions currently include account management, traffic management, and
managerial projects focusing on the development and management of business
partnerships with appropriate parties. At this point, outsourced functions
include e-commerce business services and maintenance of network hardware and
Internet connections.
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Systems
Our Web site is located in a secured individual "cage" space at the San
Jose, California site hosting site operated by AboveNet Communications, Inc.
AboveNet is the architect of the global, one-hop Internet Service ExchangeTM
(ISXTM), a network delivering Internet connectivity and co-location solutions
for high-bandwidth, mission-critical applications. AboveNet's major networking
equipment includes Cisco 12000 and 7500 series routers and Cisco Catalyst
switches. The following carriers currently have fiber cabinets and connections
at the AboveNet San Jose Network Center: Brooks Fiber (OC-48 Connection),
Pacific Bell (OC-48 Connection), TCG (OC-12 Connection), and MFS (OC-48
Connection).
Our site is served on a series of Intel Pentium II - Dual Processor
Servers with high availability disk arrays for maximum uptime guarantee. Our
site currently utilizes several Single Processor Pentium 400's with 1Gb RAM for
the web servers. The Image servers are hosted by several Dual Processor Pentium
400's with 1Gb RAM. Currently, there is one dual Processor Pentium 400 with
512M RAM for the database engine. The combination of a database server, several
image servers, and several web servers is called a POD, and we add pods as our
community grows.
PhotoLoft.com's secure data management is through SQL Server version 7.0.
SQL Server Logs are generated every 24 hours to facilitate database
reconstruction in the case of hardware or software failure. These files are
written to the hard disk and the CD-ROM that is generated nightly. All data is
backed up on a daily basis utilizing CD-ROM Burner and software developed in
house. Currently, the average Photoloft.com web site serves .8 page views/sec
and the average peak load is 1.13 page views/sec. With the above referenced
software and hardware configurations, it has been determined that the current
peak load served is 15 page views per second per image server. With 6 image
servers, the site is capable of 90 page views per second. To scale the system,
additional web servers and image servers are added as needed. To scale the
database, a mirror copy is made of the database server and dedicated to a
particular account.
Since January 1998, our site has maintained an uptime service record of
99.6+%. This service time excludes outages that were due to "act of god" or
catastrophic failure of the hosting service unrelated to any specific
PhotoLoft.com software or hardware issues.
COMPETITION
Competition is the Internet photo sharing and digital imaging arena is
intensifying. When we began development of our site in 1998 there were
virtually no competitors. By the time that our site was officially launched in
February 1999, several potential competitors had emerged and we are aware of new
companies planning to enter the market in the near future. As one of the first
photo sharing communities in the marketplace, we have laid the groundwork for
many competitors to follow. In doing internal competitive analysis, it is clear
that we are seen as a leader in the space and that competitors have mimicked our
technology and marketing strategies in a number of ways. However, to date, none
of the competitors have successfully duplicated the unique combinations of
features and advanced technology that we offer.
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PhotoNet, PhotoHighway, PhotoPoint.com, and ClubPhoto are among the first
wave of companies engaged in activities similar to ours. These companies allow
users to upload their images and share them via e-mail, and some offer online
greeting cards and photo-personalized gifts. Some of these sites have followed
the online community business model. These companies are also forging valuable
marketing relationships and some enjoy significant financial backing. However,
they have not introduced advanced viewing and high resolution printing
capabilities comparable to ours. Also, at present, PhotoNet, which is 50% owned
by Kodak, is primarily designed to help Kodak protect the traditional chemical
film based photography industry. But, we anticipate that this will change in the
future as the popularity of digital imaging increases.
There are many other smaller photo-sharing Web sites in various stages of
development. In a recent competitive analysis, we identified at least 15
additional companies beginning to get into the photo sharing/digital imaging
Internet business. The barriers to entry for a photo storing Web site are few.
However, to develop an interactive site with a large database of images that
also offers advanced technology is more costly and time consuming. A more real
threat could be traditional media companies, a number of which, including
Disney, CBS and NBC, have recently made significant acquisitions or investments
in Internet companies.
We believe that the principle competitive factors in our market are
community development, technology (easy uploading, fun manipulation of images,
the ability to host huge image files, etc.) number of images in the database,
rate of adding members, ability to partner with companies that can bring large
groups of pre-qualified (already interested in digital imaging) users to our
site. Certain of our current and many of our potential competitors have longer
operating histories, larger customer bases, greater brand recognition in other
business and Internet markets and significantly greater financial, marketing,
technical and other resources than us. In addition, other online services may
be acquired by, receive investments from or enter into other commercial
relationships with larger, well-established and well-financed companies as use
of the Internet and other online services increases. Therefore, certain of our
competitors with other revenue sources may be able to devote greater resources
to marketing and promotional campaigns, adopt more aggressive pricing policies
and devote substantially more resources to Web site and systems development than
us or may try to attract traffic by offering services for free. Increased
competition may result in reduced operating margins, loss of market share and
diminished value of our brand. See "Item 2. Financial Information--Factors
Affecting Our Business, Operating Results and Financial Condition--We May Not Be
Able To Compete Successfully."
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INTELLECTUAL PROPERTY
We have registered our trademark "Howdy" with, and our application for
registration of the mark "Photoloft" is currently pending before, the United
States Patent and Trademark Office.
We regard the protection of our copyrights, service marks, trademarks,
trade dress and trade secrets as critical to our future success and rely on a
combination of copyright, trademark, service mark and trade secret laws and
contractual restrictions to establish and protect our proprietary rights in
products and services. We have entered into confidentiality and invention
assignment agreements with our employees and contractors, and nondisclosure
agreements with its suppliers and strategic partners in order to limit access to
and disclosure of its proprietary information. There can be no assurance that
these contractual arrangements or the other steps taken by us to protect our
intellectual property will prove sufficient to prevent misappropriation of our
technology or to deter independent third-party development of similar
technologies. While we intend to pursue registration of our trademarks and
service marks in the U.S. and internationally, effective trademark, service
mark, copyright and trade secret protection may not be available in every
country in which our services are made available online.
We also rely on certain technologies that we license from third parties,
such as the suppliers of key database technology, the operating system and
specific hardware components for our products and services. There can be no
assurance that these third-party technology licenses will continue to be
available to us on commercially reasonable terms. The loss of such technology
could require us to obtain substitute technology of lower quality or performance
standards or at greater cost, which could materially adversely affect our
business, results of operations and financial condition.
Although we do not believe that we infringe the proprietary rights of third
parties, there can be no assurance that third parties will not claim
infringement by us with respect to past, current or future technologies. We
expect that participants in our markets will be increasingly subject to
infringement claims as the number of services and competitors in our industry
segment grows. Any such claim, whether meritorious or not, could be
time-consuming, result in costly litigation, cause service upgrade delays or
require us to enter into royalty or licensing agreements. Such royalty or
licensing agreements might not be available on terms acceptable to us or at all.
As a result, any such claim could have a material adverse effect upon our
business, results of operations and financial condition.
GOVERNMENTAL REGULATION
Our company, operations and products and services are all subject to
regulations set forth by various federal, state and local regulatory agencies.
We take measures to ensure our compliance with all such regulations as
promulgated by these agencies from time to time. The Federal Communications
Commission sets certain standards and regulations regarding communications and
related equipment.
There are currently few laws and regulations directly applicable to the
Internet. It is possible that a number of laws and regulations may be adopted
with respect to the Internet covering issues such as user privacy, pricing,
content, copyrights, distribution, antitrust and characteristics and quality of
products and services. The growth of the market for online commerce may prompt
calls for more stringent consumer protection laws that may impose additional
burdens on those companies conducting business online. Tax authorities in a
number of states are currently reviewing the appropriate tax treatment of
companies engaged in online commerce, and new state tax regulations may subject
us to additional state sales and income taxes.
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Several states have also proposed legislation that would limit the uses of
personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also initiated
action against at least one online service regarding the manner in which
personal information is collected from users and provided to third parties.
Changes to existing laws or the passage of new laws intended to address these
issues, including some recently proposed changes, could create uncertainty in
the marketplace that could reduce demand for our products and services or
increase the cost of doing business as a result of litigation costs or increased
service delivery costs, or could in some other manner have a material adverse
effect on our business, results of operations and financial condition. In
addition, because our services are accessible worldwide and we facilitate sales
of goods to users worldwide, other jurisdictions may claim that we are required
to qualify to do business as a foreign corporation in a particular state or
foreign country. Our failure to qualify as a foreign corporation in a
jurisdiction where it is required to do so could subject us to taxes and
penalties for the failure to qualify and could result in our inability to
enforce contracts in such jurisdictions. Any such new legislation or regulation,
or the application of laws or regulations from jurisdictions whose laws do not
currently apply to our business, could have a material adverse effect on our
business, results of operations and financial condition.
EMPLOYEES
As of May 31, 1999, we had 17 full time employees, including 2 in marketing
and advertising sales and customer support; 2 in business development; 2 in
administration; and 11 in product development (this includes engineering and
support; and e-commerce). We recently embarked on an active search to hire up to
six additional product development employees; three additional advertising sales
and customer support professionals; three additional business development
experts; and one administration employee. Although talented and qualified
employees are difficult to find in the current tight job market, we have
experienced relative success in attracting and retaining highly motivated and
talented employees. Digital imaging is a growing field and many employees
working in the Internet arena are attracted to a start-up company with a record
of success in such a dynamic field.
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We believe that the future success of the company will depend in part on
our continued ability to attract, integrate, retain and motivate highly
qualified technical and managerial personnel, and upon the continued service of
our senior management and key technical personnel. The competition for
qualified personnel in our industry and graphical location is intense, and there
can be no assurance that we will be successful in attracting, integrating,
retaining and motivating a sufficient number of qualified personnel to conduct
its business in the future. From time to time, we also employ independent
contractors to support our research and development, marketing, sales and
support and administrative organizations. We have never had a work stoppage,
and no employees are represented under collective bargaining agreements. We
consider our relations with our employees to be good.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
SELECTED FINANCIAL DATA
The following table contains certain selected financial data of the Company
and is qualified by the more detailed financial statements and the notes thereto
provided in this Registration Statement. The financial data as of and for the
years ended December 31, 1998 and 1997, have been derived from the Company's
financial statements, which statements were audited by BDO Seidman, LLP. The
financial data as of March 31, 1999 and for the three-month periods ended March
31, 1999 and 1998, has been derived from the Company's unaudited financial
statements.
The comparisons made between the noted periods should be evaluated in light
of the following significant factors: (1) During 1997 and 1998, the Company's
primary source of revenue was derived from selling software. As the gross
margin from selling software began to decline, the Company explored other means
of generating revenue. Beginning in early 1998, the Company shifted focus and
began selling advertising on the AltaVista web page, (2) The sale of the
AltaVista URL in July 1998 resulted in a significant increase to net income but
eliminated the advertising revenue generated by the web site, which is
calculated based on the number of impressions the web site receives. With the
sale of AltaVista, the Company began developing PhotoLoft.com as a new source of
generating advertising revenue, (3) During 1999, the Company has begun to focus
on building the PhotoLoft.com brand name and increasing the number of daily
impressions to the site. As a means of achieving this, the Company has made a
strategic decision to focus on increasing traffic to the PhotoLoft.com web site
instead of generating revenue. To accomplish this, the Company has increased
its marketing efforts by trading advertising space with other Internet companies
and attending trade shows. As a result, the number of impressions to the
PhotoLoft.com web site has increased, which should ultimately increase revenues.
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Statement of Operations Data
<TABLE>
<CAPTION>
Three Months Ended Fiscal Year Ended
March 31, December 31,
------------------------ ----------------------
1999 1998 1998 1997
-------------- -------- ---------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $ 21,800 $204,100 $ 674,300 $ 574,200
Net Income (loss) (360,500) 300 1,663,600 (165,500)
Net Income (loss) per share to
Common Shareholders:
Basic $ (0.04) $ 0.00 $ .26 $ (0.03)
Diluted $ (0.04) $ 0.00 $ .18 $ (0.03)
Balance Sheet Data
March 31, December 31,
------------------------ ----------------------
1999 1998 1998 1997
-------------- -------- ---------- ----------
(unaudited) (unaudited)
Current Assets $ 2,093,000 $103,800 $1,211,100 $ 93,900
Total Assets $ 3,651,200 $132,700 $2,939,000 $ 123,900
Current Liabilities $ 542,400 $131,700 $ 502,900 $ 151,000
Long Term Debt
Total Liabilities $ 1,122,900 $131,700 $1,169,600 $ 151,000
Shareholders Equity $ 2,528,300 $ 1,000 $1,769,400 $ (27,100)
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following discussion of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and notes thereto appearing elsewhere in this Registration Statement.
The matters discussed in this Registration Statement contain forward-looking
statements that involve risks and uncertainties. Our actual results could
differ materially from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
below in "Factors Affecting Our Business, Operating Results, and Financial
Condition" as well as those discussed in this section and elsewhere in this
Registration Statement.
Overview
PhotoLoft.com is an Internet web site community that is revolutionizing
data imaging and photo processing. PhotoLoft.com is the fastest growing
photographic imaging community on the Internet, and its unique software allows
consumers to share and print personal images quickly, easily and inexpensively.
Users can create a "virtual photo album," which is impossible to lose; instantly
accessible and easily reproducible; easily transported; easily displayed on high
quality output devices, such as television; and completely personalized.
Members can automatically invite others to view their albums via e-mail and give
users the opportunity to comment on other images. PhotoLoft.com is also taking
advantage of the rise in e-commerce, offering a wide array of gift items that
have been imprinted with a PhotoLoft.com image selected by the user. The site
has been carefully designed to be user friendly and the community aspect of
PhotoLoft.com makes for a highly entertaining experience for visitors and
members.
PhotoLoft.com was founded in 1993 as AltaVista Technology, Inc.
("AltaVista"). In July 1998, the URL (AltaVist.com) was sold to Digital
Equipment (Compaq) and the company name changed to Photoloft.com. Since then,
we have continued to upgrade the site, offering better and faster user
components to PhotoLoft.com. Through February 1999, revenues have been derived
primarily through the sale of advertising. With the latest release of
PhotoLoft.com in February 1999, we began focusing on increasing e-commerce sales
and advertising sales. Anticipated success in these areas will come from the
increased membership base (estimated to increase from 24,000 to 123,000 in 1999)
and increased impressions per day (estimated to increase from 20,000 per day in
1998 to 500,000 per day in 1999).
In 1998, PhotoLoft.com began developing a new product, ID4Life. Designed
as a preventative service to aid in finding missing persons, ID4Life has
developed as a different product than the rest of PhotoLoft.com. We are seeking
to sell ID4Life and expect to complete a transaction during 1999.
Operating Results
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Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998
Revenues for the three months ended March 31, 1999 were $21,800, a decrease
of $182,300, or approximately 89%, compared to $204,100 for the three months
ended March 31, 1998. Revenues decreased primarily due to a change in the
Company's operations from selling software to selling advertising. This event
did not occur until the latter half of 1998 contemporaneously with the sale of
the URL to Compaq Computer. The new business plan is focused on advertising
sales and e-commerce revenues. The first quarter results reflect less than one
year operations under the new model.
The negative gross margin for the three months ended March 31, 1999 was
($14,500), a decrease of $186,400 or approximately 108%, compared to the gross
profit of $171,900 for the three months ended March 31, 1998. This decrease in
gross margin is due primarily to the transition of the Company's business from
software sales to advertising sales resulting in an inability to cover the fixed
cost component of the cost of revenues during the three months ended March 31,
1999 due to the significant decrease in revenues.
Selling, general, and administrative expenses for the three months ended
March 31, 1999 were $623,900, an increase of $453,500 or 266%,compared to
$170,400 for the three months ended March 31, 1998. This increase reflects the
growth phase of the Company's new business model, which includes a strategy for
aggressive growth immediately. Included in the costs are additional equipment
to handle increased image volume; necessary staffing increases, particularly in
the engineering and sales areas; and additional facilities. The growth plan
calls for a ramp up of all operations throughout 1999, leveling off in 2000
Loss from operations for the three months ended March 31, 1999 was
($638,400), a decrease of $639,900 compared to income from operations of $1,500
for the three months ended March 31, 1998. This decrease is primarily due to the
change in the Company's product and the costs incurred to develop the
PhotoLoft.com web site.
Interest income for the three months ended March 31, 1999 was $40,100, an
increase of 100% compared to $0 for the three months ended March 31, 1998.
Interest income increased due to the note receivable related to the sale of the
AltaVista URL in July 1998.
Fiscal Year Ended December 31, 1998 Compared to Fiscal Year Ended December 31,
1997
Revenues for fiscal 1998 were $674,300, an increase of $100,100 or
approximately 17%, compared to $574,200 for fiscal 1997. Revenues increased due
to the Company generating advertising revenue in addition to software sales.
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Gross profit for fiscal 1998 was $561,300, an increase of $47,900 or 9%,
compared to $513,400 for fiscal 1997. However, there was a decrease in the
gross profit as a percentage of sales to 8.3% for fiscal 1998 from 8.9% in
fiscal 1997 which was due primarily to a reduction in the sales price of
software bundled with OEM product.
Selling, general, and administrative expenses for fiscal 1998 were
$1,324,000, an increase of $649,600 or 96% compared to $674,400 for fiscal 1997.
As a percentage of revenue, selling, general and administrative expenses
increased to 196% in fiscal 1998 from 117% in fiscal 1997, primarily as a result
of investment in the technology required to generate web page advertising and
the increase in employee headcount.
Loss from operations for fiscal 1998 was ($762,700), an increase of
$601,700 compared to a loss from operations of ($161,000) for fiscal 1997. The
increase is due primarily to the higher selling, general and administrative
expenses resulting from the increased number of employees and the Company's
investment in technology.
Net income for fiscal 1998 was $1,663,300, an increase of $1,828,800
compared to the net loss of ($165,500) for fiscal 1997. The increase is
primarily due to the sale of the AltaVista URL in July 1998.
Liquidity and Capital Resources
Net cash used in operating activities during the three months ended March
31, 1999 was $527,300, which reflected the net effect of the net loss for the
period, decreases in deferred income taxes and deferred revenues and an increase
in prepaid expenses and other current assets, which was partially offset by an
increase in accounts payable. Net cash used in operating activities during
fiscal 1998 was $361,000, a decrease of $374,800 compared to net cash provided
by operating activities of $13,800 in fiscal 1997. The net cash used in
operating activities in fiscal 1998 reflects the gain on the sale of the
AltalVista URL that was partially offset by the net income for the year and an
increase in deferred income taxes.
Net cash used in investing activities was $47,700 for the three months
ended March 31, 1999, primarily reflecting cash used for the acquisition of
property and equipment. Net cash used in investing activities in fiscal 1998
was $54,300 compared with net cash used in fiscal 1997 of $14,200, with both
years reflecting cash used for the acquisition of property and equipment.
Net cash provided by financing activities was $1,286,900 for the three
months ended March 31, 1999, primarily reflecting cash received from the sale of
stock and exercise of stock options, and the proceeds from the note receivable
relating to the AltaVista URL sale. Net cash provided by financing activities
for fiscal 1998 was $785,300 due to the proceeds from the AltaVista URL sale.
25
<PAGE>
Our capital requirements are dependent on several factors, including market
acceptance of our services, the amount of resources devoted to investments in
the Company's Web site, the resources devoted to marketing and selling the
Company's services and brand promotions and other factors. Fueling the
Company's need for cash currently is the development of rival technology and new
Internet sites and portals offering similar products. See "Item 1.
Business-Competition." As we enjoy continued growth we must work to stay at the
forefront of technology and continue to grow in sales. This will necessitate a
substantial increase in capital expenditures consistent with its growth. In
addition, PhotoLoft.com will continue to evaluate possible investments in
businesses, products and technologies and plans to expand its sales and
marketing programs and conduct more aggressive brand promotions. We anticipate
that additional financing of $10 million will be needed to grow as contemplated.
At March 31, 1999, the Company had cash and cash equivalents totaling
$1,081,900, resulting principally from the sale of common stock in a private
placement during March 1999, and working capital of $1,550,600. The Company
believes that additional debt or equity financing will be needed, along with the
receipt of scheduled principal payments on its outstanding note receivable, in
order to satisfy the Company's capital requirements to support its expansion
plans.
We believe that our current cash and cash equivalents, as well as the
proceeds from scheduled payments from the sale of AltaVista.com to Compaq in
August 1998, will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures through 2001. If cash generated from
operations is insufficient to satisfy our liquidity requirements, we may seek to
sell additional equity or debt securities or to obtain a credit facility. The
sale of additional equity or convertible debt securities could result in
additional dilution to our stockholders. The incurrence of indebtedness would
result in an increase in our fixed obligations and could result in operating
covenants that would restrict its operations. There can be no assurance that
financing will be available in amounts or on terms acceptable to us, if at all.
If financing is not available when required or is not available on acceptable
terms, we may be unable to develop or enhance our products or services. In
addition, we may be unable to take advantage of business opportunities or
respond to competitive pressures. Any of these events could have a material and
adverse effect on our business, results of operations and financial condition.
Impact of the Year 2000
Many currently installed computer systems and software products are coded
to accept or recognize only two digit entries in the date code field. These
systems may recognize a date using "00" as the year 1900 rather than the year
2000. As a result, computer systems and/or software used by many companies and
governmental agencies may need to be upgraded to comply with Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities.
State of Readiness. The third-party vendor upon which we materially rely
is AboveNet Communications, Inc. which co-locates our Web equipment and provides
our connection to the Internet. We have sought confirmation from AboveNet
Communications, Inc. that its system is Year 2000 compliant and AboveNet
Communications, Inc. has informed us that its system is Year 2000 compliant.
26
<PAGE>
In addition, we plan to seek verification from other key vendors,
distributors and suppliers that they are Year 2000 compliant or, if they are not
presently compliant, to provide a description of their plans to become so. To
the extent that vendors fail to provide certification that they are Year 2000
compliant by September 1999, we will seek to terminate and replace these
relationships. Until our vendors, distributors and suppliers have provided
verification of their compliance, we will not be able to completely evaluate
whether our systems will need to be revised or replaced.
We are conducting an internal assessment of all material information
technology and non-information technology systems at our headquarters. Until we
complete the assessment, we will not know whether these systems are or will be
Year 2000 compliant by September 1999.
Costs. To date, we have not incurred any material costs in identifying or
evaluating Year 2000 compliance issues. Most of our expenses have related to,
and are expected to continue to relate to, the upgrades or replacements, when
necessary, of software or hardware, as well as costs associated with time spent
by employees in the evaluation process and Year 2000 compliance matters
generally. These expenses are included in our capital expenditures budget and
are not expected to be material to our financial position or results of
operations. These expenses, however, if higher than anticipated, could have a
material and adverse effect on our business, results of operations and financial
condition.
Risks. There can be no assurance that we will not discover Year 2000
compliance problems in our systems that will require substantial revisions or
replacements. In the event that the operational facilities that support our
business, or our Web-hosting facilities, are not Year 2000 compliant, we may be
unable to deliver goods or services to our customers and portions of our Web
site may become unavailable. In addition, there can be no assurance that
third-party software, hardware or services incorporated into our material
systems will not need to be revised or replaced, which could be time-consuming
and expensive. Our inability to fix or replace third-party software, hardware or
services on a timely basis could result in lost revenues, increased operating
costs and other business interruptions, any of which could have a material and
adverse effect on our business, results of operations and financial condition.
Moreover, the failure to adequately address Year 2000 compliance issues in our
software, hardware or systems could result in claims of mismanagement,
misrepresentation or breach of contract and related litigation, which could be
costly and time-consuming to defend.
In addition, there can be no assurance that governmental agencies, utility
companies, Internet access companies and others outside our control will be
Year2000-compliant. The failure by these entities to be Year 2000-compliant
could result in a systemic failure beyond our control, including, for example, a
prolonged Internet, telecommunications or electrical failure, which could also
prevent us from delivering our services to our users, decrease the use of the
Internet or prevent users from accessing our services, any of which would have a
material and adverse effect on our business, results of operations and financial
condition.
27
<PAGE>
Contingency Plan. As discussed above, we are engaged in an ongoing Year
2000 assessment and do not currently have a contingency plan to deal with the
worst case scenario that might occur if technologies on which we depend are not
Year 2000-compliant and fail to operate effectively after the Year 2000. The
results of our Year 2000 compliance evaluation and the responses received from
distributors, suppliers and other third parties with which we conduct business
will be taken into account in determining the need for and nature and extent of
any contingency plans.
If our present efforts to address the Year 2000 compliance issues discussed
above are not successful, or if distributors, suppliers and other third parties
with which we conduct business do not successfully address such issues, our
users could seek alternate suppliers of our products and services. Any material
Year 2000 problem could require us to incur significant unanticipated expenses
to remedy and could divert our management's time and attention, either of which
could have a material and adverse effect on our business, operating results and
financial condition.
This is a Year 2000 readiness disclosure statement within the meaning of
the Year 2000 Information and Readiness Disclosure Act (P.L. 105-271).
Effects of Inflation
Due to relatively low levels of inflation in 1997 and 1998, inflation has
not had a significant effect on our results of operations since inception.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 131, "Disclosure About Segments of an Enterprise and Related Information,"
which is effective for fiscal years beginning after December 15, 1997. SFAS
No.131 requires that public companies report certain information about operating
segments in their annual financial statements and in subsequent condensed
financial statements of interim periods issued to shareholders. This statement
also requires that public companies report certain information about their
products and services, the geographic areas in which they operate and their
major customers. Reportable operating segments are determined based on the
management approach, as defined by SFAS No. 131. The management approach is
based on the way that the chief operating decision-maker organizes the segments
within an enterprise for making operating decisions and assessing performance.
We have determined that we do not have any separately reportable business
segments.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS
No. 133 is effective for fiscal years beginning after June 15, 2000.
Historically, we have not used derivatives and therefore this new pronouncement
is not applicable.
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FACTORS AFFECTING OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION
The following risk factors should be considered in conjunction with the
other information included in this Registration Statement. This Registration
Statement may include forward-looking statements that involve risks and
uncertainties. In addition to those risk factors discussed elsewhere in this
Registration Statement, we have identified the following risk factors which
could affect our actual results and cause actual results to differ materially
from those in the forward looking statements.
We Have A Limited Operating History On Which To Evaluate Our Potential For
Future Success.
We launched our current business model in October, 1998 and therefore we
have only a limited operating history upon which you can evaluate our business
and prospects. You must consider the risks and uncertainties frequently
encountered by early stage companies in new and rapidly evolving markets, such
as e-commerce. If we are unsuccessful in addressing these risks and
uncertainties, our business, results of operations and financial condition will
be materially and adversely affected.
We Expect Losses For The Foreseeable Future.
Since 1997, we have incurred losses from operations, resulting primarily
from costs related to developing our Web site, attracting users to our Web site,
and establishing our brand. Because of our plans to invest heavily in marketing
and promotion, to hire additional employees, and to enhance our Web site and
operating infrastructure, we expect to incur net losses for the foreseeable
future. We believe these expenditures are necessary to build and maintain the
technical infrastructure necessary to host multiple images and to strengthen our
brand recognition, attract more users to our Web site and ultimately, generate
greater online revenues. If our revenue growth is slower than we anticipate or
our operating expenses exceed our expectations, our losses will be significantly
greater. We may never achieve profitability.
Our Future Revenues Are Unpredictable And Our Quarterly Operating Results May
Fluctuate Significantly.
Our revenues for the foreseeable future will remain primarily dependent on
the number of users that we are able to attract to our Web site, and on
sponsorship and advertising revenues. We cannot forecast with any degree of
certainty the number of visitors to our Web site or the amount of sponsorship
and advertising revenues.
We expect our operating results to fluctuate from quarter to quarter. We
believe that sponsorship and advertising sales in traditional media, such as
television and radio, generally are lower in the first and third calendar
quarters of each year. If similar seasonal and cyclical patterns emerge in
Internet sponsorship and advertising spending, these revenues may vary based on
these patterns. See "Management's Discussion and Analysis of Financial Condition
and Operations-Seasonality."
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Other factors which may cause our operating results to fluctuate
significantly from quarter to quarter include:
- our ability to attract new and repeat visitors to our Web site and
convert them into users;
- our ability to keep current with the evolving tastes of our target
market;
- our ability to manage the number of items listed on our services;
- the ability of our competitors to offer new or enhanced Web site
features, products or services;
- the demand for sponsorship and advertising on our Web site;
- the level of use of the Internet and online services;
- consumer confidence in the security of transactions over the Internet;
- unanticipated delays or cost increases with respect to product and
service introductions; and
- the costs, timing and impact of our marketing and promotion
initiatives.
Because of these and other factors, we believe that quarter-to-quarter
comparisons of our results of operations are not good indicators of our future
performance. If our operating results fall below the expectations of securities
analysts and investors in some future periods, then our stock price may decline.
Your Holdings May be Diluted in the Future.
We are authorized to issue up to 50,000,000 shares of common stock. See
"Item 11. Description of Registrant's Securities to be Registered." To the
extent of such authorization, our Board of Directors will have the ability,
without seeking stockholder approval, to issue additional shares of common stock
in the future for such consideration as our Board of Directors may consider
sufficient. The issuance of additional common stock in the future will reduce
the proportionate ownership and voting power of our common stock held by
existing stockholders. We are also authorized to issue up to 500,000 shares of
preferred stock, the rights and preferences of which may be designated in series
by our Board of Directors. To the extent of such authorization, such
designations may be made without stockholder approval. The designation and
issuance of series of preferred stock in the future would create additional
securities that would have dividend and liquidation preferences over our common
stock.
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We May Fail To Establish An Effective Internal Advertising Sales Organization To
Attract Sponsorship And Advertising Revenues.
To date, we have relied principally on outside parties to develop
sponsorship and advertising opportunities. We believe that the growth of
sponsorship and advertising revenues will depend on our ability to establish an
aggressive and effective internal advertising sales organization. Our internal
sales team currently has 2 members. We will need to increase this sales force in
the coming year in order to execute our business plan. Our ability to increase
our sales force involves a number of risks and uncertainties, including
competition and the length of time for new sales employees to become productive.
If we do not develop an effective internal sales force, our business will be
materially and adversely affected. See "Item 1. Business--Employees."
We Are Growing Rapidly, And Effectively Managing Our Growth May Be Difficult.
We are currently experiencing a period of significant expansion. In order
to execute our business plan, we must continue to grow significantly. This
growth will strain our personnel, management systems and resources. To manage
our growth, we must implement operational and financial systems and controls and
recruit, train and manage new employees. We cannot be certain that we will be
able to integrate new executives and other employees into our organization
effectively. If we do not manage growth effectively, our business, results of
operations and financial condition will be materially and adversely affected.
See "Item 1. Business-Employees" and "Item 5. Directors and Executive
Officers."
We Depend On Our Key Personnel To Operate Our Business, And We May Not Be Able
To Hire Enough Additional Management And Other Personnel As Our Business Grows.
Our performance is substantially dependent on the continued services and on
the performance of our executive officers and other key employees, particularly
Jack Marshall, our Chief Executive Officer, President and Treasurer. The loss of
the services of any of our executive officers could materially and adversely
affect our business. Additionally, we believe we will need to attract, retain
and motivate talented management and other highly skilled employees to be
successful. Competition for employees that possess knowledge of both the
Internet industry and our target market is intense. We may be unable to retain
our key employees or attract, assimilate and retain other highly qualified
employees in the future. See "Item 1. Business-Employees" and "Item 5. Directors
and Executive Officers."
We May Not Be Able To Compete Successfully.
The markets in which we are engaged are new, rapidly evolving and intensely
competitive, and we expect competition to intensify further in the future.
Barriers to entry are relatively low, and current and new competitors can launch
new sites at a relatively low cost. We currently or potentially compete with a
number of other companies, including a number of large online communities and
services that have expertise in developing online commerce, and a number of
other small services, including those that serve specialty markets. Competitive
pressures created by any one of these companies, or by our competitors
collectively, could have a material adverse effect on our business, results of
operations and financial condition. See "Item 1. Business--Competition."
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<PAGE>
We May Need Further Capital.
We currently anticipate that our available funds will be sufficient to meet
our anticipated needs for working capital, capital expenditures and business
expansion through September, 1999. Thereafter, we will need to raise additional
funds. If additional funds are raised through the issuance of equity or
convertible debt securities, the percentage ownership of our stockholders will
be reduced, stockholders may experience additional dilution and such securities
may have rights, preferences and privileges senior to those of our common stock.
There can be no assurance that additional financing will be available on terms
favorable to us or at all. If adequate funds are not available or are not
available on acceptable terms, we may not be able to fund expansion, take
advantage of unanticipated acquisition opportunities, develop or enhance
services or products or respond to competitive pressures. Such inability could
have a material adverse effect on our business, results of operations and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Operations-Liquidity and Capital Resources."
We May Fail To Establish And Maintain Strategic Relationships With Other Web
Sites To Increase Numbers Of Web Site Users And Increase Our Revenues.
We intend to establish numerous strategic alliances with popular Web sites
to increase the number of visitors to our Web site. There is intense competition
for placement on these sites, and we may not be able to enter into these
relationships on commercially reasonable terms or at all. Even if we enter into
strategic alliances with other Web sites, they themselves may not attract
significant numbers of users. Therefore, our site may not receive additional
users from these relationships. Moreover, we may have to pay significant fees to
establish these relationships. Our inability to enter into new distribution
relationships or strategic alliances and expand our existing ones could have a
material and adverse effect on our business.
We Would Lose Revenues And Incur Significant Costs If Our Systems Or Material
Third-Party Systems Are Not Year 2000-Compliant.
We have not devised a Year 2000 contingency plan. The failure of our
internal systems, or any material third-party systems, to be Year 2000-compliant
could have a material and adverse effect on our business, results of operations
and financial condition.
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To date, we have not incurred any material costs in identifying or
evaluating Year 2000 compliance issues. However, we may fail to discover Year
2000 compliance problems in our systems that will require substantial revisions
or replacements. In the event that the operational facilities that support our
business, or our Web-hosting facilities, are not Year 2000-compliant, portions
of our Web site may become unavailable and we would be unable to deliver
services to our users. In addition, there can be no assurance that third-party
software, hardware or services incorporated into our material systems will not
need to be revised or replaced, which could be time-consuming and expensive. Our
inability to fix or replace third-party software, hardware or services on a
timely basis could result in lost revenues, increased operating costs and other
business interruptions, any of which could have a material and adverse effect on
our business, results of operations and financial condition. Moreover, the
failure to adequately address Year 2000 compliance issues in our software,
hardware or systems could result in claims of mismanagement, misrepresentation
or breach of contract and related litigation, which could be costly and
time-consuming to defend.
In addition, there can be no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside our control will be Year 2000 compliant. The failure by these entities
to be Year 2000 compliant could result in a systemic failure beyond our control,
including, for example, a prolonged Internet, telecommunications or electrical
failure, which could also prevent us from delivering our services to our users,
decrease the use of the Internet or prevent users from accessing our services,
any of which would have a material and adverse effect on our business, results
of operations and financial condition. See "Management's Discussion and Analysis
of Financial Statements and Results of Operations- Impact of the Year 2000."
Acquisitions May Disrupt Or Otherwise Have A Negative Impact On Our Business.
We may acquire or make investments in complementary businesses, products,
services or technologies on an opportunistic basis when we believe they will
assist us in carrying out our business strategy. Growth through acquisitions has
been a successful strategy used by other Internet companies. We do not have any
present understanding, nor are we having any discussions relating to any such
acquisition or investment. If we buy a company, then we could have difficulty in
assimilating that company's personnel and operations. In addition, the key
personnel of the acquired company may decide not to work for us. An acquisition
could distract our management and employees and increase our expenses.
Furthermore, we may have to incur debt or issue equity securities to pay for any
future acquisitions, the issuance of which could be dilutive to our existing
shareholders.
Unforeseen Developments May Occur With Respect To Digital Imaging Technology.
Digital imaging is a relatively new phenomenon and the slower than expected
acceptance of the new technology could affect our ability to grow as rapidly as
we need to in order to meet our financial targets. Digital camera manufacturers
have made great strides in the past two years improving the functionality of
their cameras and pricing them in a range that is attractive to many consumers.
The continued refinement of the technology and commoditization of the price will
help to move acceptance of the technology along. Full acceptance of digital
imaging technology will require a move on the part of the photographic
population away from traditional chemical-based photo processing to the new
paradigm of home printed photos. The costs remain competitive for digital
imaging, however, there is no guarantee the general population will make this
shift rapidly, if at all.
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<PAGE>
We Are Dependent On The Continued Development Of The Internet Infrastructure.
Our industry is new and rapidly evolving. Our business would be adversely
affected if Web usage and e-commerce does not continue to grow. Web usage may be
inhibited for a number of reasons, including:
- inadequate Internet infrastructure;
- security concerns;
- inconsistent quality of service; or
- unavailability of cost-effective, high-speed service.
If Web usage grows, the Internet infrastructure may not be able to support
the demands placed on it by this growth, or its performance and reliability may
decline. In addition, Web sites have experienced a variety of interruptions in
their service as a result of outages and other delays occurring throughout the
Internet network infrastructure. If these outages or delays frequently occur in
the future, Web usage, including usage of our Web site, could grow slowly or
decline.
Our Long-Term Success Depends On The Development Of The E-Commerce Market, Which
Is Uncertain.
Our future revenues and profits substantially depend upon the widespread
acceptance and use of the Web as an effective medium of commerce by consumers.
Rapid growth in the use of the Web and commercial online services is a recent
phenomenon. Demand for recently introduced services and products over the Web
and online services is subject to a high level of uncertainty. The development
of the Web and online services as a viable commercial marketplace is subject to
a number of factors, including the following:
- e-commerce is at an early stage and buyers may be unwilling to shift
their purchasing from traditional vendors to online vendors;
- insufficient availability of telecommunication services or changes in
telecommunication services could result in slower response times; and
- adverse publicity and consumer concerns about the security of commerce
transactions on the Internet could discourage its acceptance and
growth.
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Adoption Of The Internet As An Advertising Medium Is Uncertain.
The growth of Internet sponsorships and advertising requires validation of
the Internet as an effective advertising medium. This validation has yet to
fully occur. In order for us to generate sponsorship and advertising revenues,
marketers must direct a significant portion of their budgets to the Internet
and, specifically, to our Web site. To date, sales of Internet sponsorships and
advertising represent only a small percentage of total advertising sales. Our
business, financial condition and operating results would be adversely affected
if the market for Internet advertising fails to develop or develops slower than
expected. See "Item 1. Business--Advertising."
We Face Risks Associated With Government Regulation Of And Legal Uncertainties
Surrounding The Internet.
Any new law or regulation pertaining to the Internet, or the application or
interpretation of existing laws, could increase our cost of doing business or
otherwise have a material and adverse effect on our business, results of
operations and financial condition. Laws and regulations directly applicable to
Internet communications, commerce and advertising are becoming more prevalent.
The law governing the Internet, however, remains largely unsettled, even in
areas where there has been some legislative action. It may take years to
determine whether and how existing laws governing intellectual property,
copyright, privacy, obscenity, libel and taxation apply to the Internet. In
addition, the growth and development of e-commerce may prompt calls for more
stringent consumer protection laws, both in the United States and abroad. See
"Item 1. Business - Government Regulation."
Shares Eligible For Future Sale By Our Current Stockholders May Adversely Affect
Our Stock Price.
To date, we have had a very limited trading volume in our common stock.
See "Item 9. Market Price and Dividends on the Registrant's Common Equity and
Related Stockholder Matters." Sales of substantial amounts of common stock,
including shares issued upon the exercise of outstanding options and warrants,
under SEC Rule 144 or otherwise could adversely affect the prevailing market
price of our common stock and could impair our ability to raise capital at that
time through the sale of our securities.
Anti-Takeover Provisions And Our Right To Issue Preferred Stock Could Make A
Third-Party Acquisition Of Us Difficult.
We are a Nevada corporation. Anti-takeover provisions of Nevada law could
make it more difficult for a third party to acquire control of us, even if such
change in control would be beneficial to stockholders. Our articles of
incorporation provide that our Board of Directors may issue preferred stock
without stockholder approval. The issuance of preferred stock could make it
more difficult for a third party to acquire us. All of the foregoing could
adversely affect prevailing market prices for our common stock. See "Item 11.
Description of Registrant's Securities to be Registered -- Nevada Anti-Takeover
Laws and Certain Charter Provisions."
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<PAGE>
Our Common Stock Price Is Likely To Be Highly Volatile.
The market price of our common stock is likely to be, highly volatile as
the stock market in general, and the market for Internet-related and technology
companies in particular, has been highly volatile. See "Item 9. Market Price
and Dividends on the Registrant's Common Equity and Related Stockholder
Matters." Investors may not be able to resell their shares of our common stock
following periods of volatility because of the market's adverse reaction to
volatility. The trading prices of many technology and Internet-related
companies' stocks have reached historical highs within the last 52 weeks and
have reflected valuations substantially above historical levels. During the same
period, these companies' stocks have also been highly volatile and have recorded
lows well below historical highs. We cannot assure you that our stock will trade
at the same levels of other Internet stocks or that Internet stocks in general
will sustain their current market prices.
Factors that could cause such volatility may include, among other things:
- actual or anticipated fluctuations in our quarterly operating results;
- announcements of technological innovations;
- changes in financial estimates by securities analysts;
- conditions or trends in the Internet industry; and
- changes in the market valuations of other Internet companies.
ITEM 3. DESCRIPTION OF PROPERTIES
Our executive offices, comprising approximately 2,628 square feet, are
located at 300 Orchard City Drive, Suite 142, Campbell, California 95008. These
facilities are leased pursuant to a lease expiring August 31, 2001. The monthly
rent is $5,519. We sublease approximately 1,288 square feet of additional space
in the same building under a sublease that expires in September 1999. We also
sublease approximately 1,430 square feet of space in another building located in
Campbell, California under a sublease that expires in September 2000.
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We maintain substantially all of our computer systems at AboveNet
Communications, Inc. See "Item 1. Business--Operations and Systems." Our
operations are dependent in part on our ability to protect our operating systems
against physical damage from fire, floods, earthquakes, power loss,
telecommunications failures, break-ins or other similar events. Furthermore,
despite our implementation of network security measures, our servers are also
vulnerable to computer viruses, break-ins and similar disruptive problems. The
occurrence of any of these events could result in interruptions, delays or
cessations in service to our users which could have a material adverse effect on
our business, results of operations and financial condition.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 7, 1999, the ownership of our
common stock by (i) each of our directors and executive officers; (ii) all of
our executive officers and directors as a group; and (iii) all persons known by
us to beneficially own more than 5% of our common stock.
Unless otherwise indicated in the footnotes to the table, (1) the following
individuals have sole vesting and sole investment control with respect to the
shares they beneficially own and (2) the address of each beneficial owner listed
below is c/o 300 Orchard City Drive, Suite 142, Campbell, California 95008.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER. . . . . . . . . . . . AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
EXECUTIVE OFFICERS AND DIRECTORS: . . . . . . . . . . . . . OWNERSHIP (1) CLASS (1)
- ----------------------------------------------------------- ------------------ -----------
<S> <C> <C>
Jack Marshall (2)(3). . . . . . . . . . . . . . . . . . . . 2,448,329 19.7%
- ----------------------------------------------------------- ------------------ -----------
Christopher McConn (4). . . . . . . . . . . . . . . . . . . 832,346 6.7%
------------------ -----------
Lisa Marshall (2)(5). . . . . . . . . . . . . . . . . . . . 155,963 1.3%
- ----------------------------------------------------------- ------------------ -----------
Patrick Dane (6). . . . . . . . . . . . . . . . . . . . . . 102,411 0.8%
- ----------------------------------------------------------- ------------------ -----------
John Marshall(2)(7) . . . . . . . . . . . . . . . . . . . . 772,080 6.2%
- ----------------------------------------------------------- ------------------ -----------
Gary Kremen (8) . . . . . . . . . . . . . . . . . . . . . . 251,294 2.0%
- ----------------------------------------------------------- ------------------ -----------
All directors and executive officers as a group (6 Persons) 4,492,933 36.1%
- ----------------------------------------------------------- ------------------ -----------
OTHER 5% STOCKHOLDERS:
- -----------------------------------------------------------
George Perlegos . . . . . . . . . . . . . . . . . . . . . . 2,270,063 18.2%
- ----------------------------------------------------------- ------------------ -----------
Keith Queeney . . . . . . . . . . . . . . . . . . . . . . . 700,759 5.6%
- ----------------------------------------------------------- ------------------ -----------
<FN>
(1) Calculated pursuant to Rule 13d-3(d) of the Exchange Act. Under Rule 13d-3(d),
shares not outstanding which are subject to options, warrants, rights or conversion
privileges exercisable within 60 days are deemed outstanding for the purpose of calculating
the number and percentage owned by such person, but are not deemed outstanding for the
purpose of calculating the percentage owned by each other person listed.
(2) John Marshall is the father of Jack and Lisa Marshall, who are brother and sister.
(3) Includes 331,051 shares of Common Stock subject to options that are
exercisable within 60 days of the date hereof.
(4) Includes 132,420 shares of Common Stock subject to options that are
exercisable within 60 days of the date hereof.
38
<PAGE>
(5) Includes 6,120 shares of Common Stock subject to options that are exercisable
within 60 days of the date hereof.
(6) Includes 88,911 shares of Common Stock subject to options that are currently
exercisable.
(7) Includes 88,911 shares of Common Stock subject to options that are currently
exercisable.
(8) Includes 88,911 shares of Common Stock subject to options that are currently
exercisable.
</TABLE>
39
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names and positions of our directors and
executive officers:
<TABLE>
<CAPTION>
NAME. . . . . . . . . . . AGE POSITION
- ------------------------- --- -------------------------------------
<S> <C> <C>
President, Treasurer, Chief Executive
Jack Marshall (1) (3) (4) 37 Officer and Director
- ------------------------- --- -------------------------------------
Chief Technology Officer
Christopher McConn. . . . 39 Director
- ------------------------- --- -------------------------------------
Lisa Marshall (1) . . . . 40 Secretary
- ------------------------- --- -------------------------------------
Patrick Dane (2) (3) (4). 49 Director
- ------------------------- --- -------------------------------------
Gary Kremen (2) (3) (4) . 35 Director
- ------------------------- --- -------------------------------------
John Marshall (1) (2) . . 69 Director
- ------------------------- --- -------------------------------------
<FN>
(1) John Marshall is the father of Jack and Lisa Marshall, who are brother and
sister.
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
(4) Member of the Finance Committee
</TABLE>
The following sets forth biographical information concerning our directors
and executive officers for at least the past five years:
JACK MARSHALL has been developing Internet applications since 1993. After
assignments at Texas Instruments and Honeywell, Mr. Marshall worked as a sales
manager for Teradyne (formerly MegaTest), a leading developer of high-end,
state-of-the-art semiconductor test equipment. Mr. Marshall founded Photoloft
in 1993 under the name AltaVista Technology. Inc. Mr. Marshall received his
bachelor's degree in electrical engineering and computer engineering from
Michigan State University and has taught electric circuit analysis at Highland
Community College in Illinois. He has also completed several masters level
courses in computer engineering at Santa Clara University.
CHRISTOPHER MCCONN has been the Chief Technology Officer of Photoloft.com
since February 1994. Prior to our adoption of the Photoloft.com business
strategy, he served as our webmaster and developed web-based multimedia and
imaging programs. He has extensive expertise in programming C++ and served as a
consultant to Borland International, a leading producer of C++ and software
development tools from July 1995 to July 1996. In this role, Mr. McConn helped
develop the Object Windows Library (OWL), a foundation for PhotoLoft.com. Mr.
McConn received his bachelor's degree in electrical engineering from UC Davis in
1982. Mr. McConn has over 13 years of industry experience including stints at
Ford Aerospace and Teradyne, where he oversaw the company's software QA
development.
40
<PAGE>
LISA MARSHALL has over 20 years of strategic and tactical communications
experience, focused primarily on investor relations, media communications and
marketing and brand development. Working in a number of diverse industries, she
helped spearheaded nationwide efforts to deregulate the airline, natural gas
transportation, and most recently, electric generation industries, working to
establish strong, deregulated competitors in the various marketplaces. In
addition, she handled the communications efforts of the Vastar Resources Initial
Public Offering, which was the largest to date on the New York Stock Exchange
when implemented in 1994. From 1985 to 1988 she served in various managerial
positions at Continental Airlines. From 1988 to 1993 she served in various
managerial positions at Tenneco Inc. From February 1993 to June 1997 she served
as director of Communications for ARCO/Vastar Resources. From July 1997 to
October 1998 she served as director of Communications for Southern Company. Ms.
Marshall earned her bachelor's degree from the University of Wyoming in American
Studies in 1980 and her bachelors degree from the University of Houston in
journalism in 1984.
PATRICK DANE has spent more than twenty years in the high technology
industry. He spent fifteen years in sales and marketing at Xerox where he was
responsible for bringing the "Alto" Computer Ethernet and File, Print &
Communication Servers out to the public from the Palo Alto Research center
(PARC) in 1980. Additionally, he was the creator of the award winning slogan
"Team Xerox" and other pioneering efforts. As Vice President, Sales & Marketing
at Dove Computer Corp. he introduced the MacWorld World Class Award Winning Dove
Fax Modem. As a General Manager with Calera Recognition Systems from 1991 to
1992 Dane was responsible for bringing Fax Grabber to there tail and OEM
marketplace. While President and CEO of SoftNet in from July 1992 to August 1993
he launched the category-leading Fax Works for Windows. Dane co-founded and ran
Pipeline Communications which introduced online warranty registration to the
computer industry. This service is used by over seventy five of the top PC
manufacturers and ISV's in the marketplace today. In the spring of1996, Dane
founded Tuneup.com an online PC service center, Quarterdeck Corporation acquired
his "Pioneer" among the Internet subscription-based businesses in May of 1997.
In September1996, Dane and Mike Walter began broadcasting a weekly radio show
devoted to the Internet called, "Pat & Mike's World Wide Web Radio Show". The
show, sponsored by CompuServe, Yahoo! IZift Davis, Hewlett-packard, Office
Depot.com, McAfee and USA Today, has a growing worldwide audience on the
Internet and in twenty seven real radio markets. The show was picked up for
national syndication by Premiere Radio Networks in mid 1997. Mr. Dane graduated
from Broom Comm College in 1969.
GARY KREMEN has been a member of the Board of Directors of Photoloft since
August, 1997. advisor and has over 12 years experience with emerging growth
companies and developing information technology. Mr. Kremen is a private
investor in companies such as: Resonate, Pinpoint Golf, Argus Software, ProShot,
Upside Media, Axicon, Tut Systems, Digital Technology Partners, and Electric
Classifieds, Inc. From 1995 to 1996 Mr. Kremen founded and served as president
of NetAngels.com, Inc., a company focused on Internet profiling and
personalization. In 1993, he founded the Board of Electric Classifieds, Inc.,
whose on-line personals service Match.com - is the leading community of its
kind. Mr. Kremen received his masters degree in business and administration from
Stanford University in 1989 and received bachelor's degrees in computer science
and electric engineering from Northwestern University in 1985.
41
<PAGE>
JOHN C. MARSHALL began his career in 1952 with Shell Oil Company, where he
held various management positions until 1975, when he was named General Manager
of Land Operations, North America. He left the company in 1979 to join Patrick
Petroleum (NYSE:PPC) as senior vice president. A year later he was named
executive vice president responsible for all operations (domestic and
international), and all merger and acquisition activity. After negotiating the
sale of all PPC assets to General Electric, he founded Kleenburn Energy in 1984
a privately held independent oil and gas concern. Mr. Marshall earned his
bachelor's degree in business from the University of Wyoming in 1952.
BOARD OF DIRECTORS
All directors hold office until the next annual meeting of shareholders
following their election or until their successors have been elected and
qualified. Executive officers are appointed by and serve at the pleasure of the
Board of Directors. We may adopt provisions in our By-laws and/or Articles of
Incorporation to divide the board of directors into more than one class and to
elect each class for a certain term. These provisions may have the effect of
discouraging takeover attempts or delaying or preventing a change of control of
Photoloft.
BOARD COMMITTEES
The Compensation Committee of the Board of Directors determines the
salaries and incentive compensation of our officers and provides recommendations
for the salaries and incentive compensation of our other employees. The
compensation committee also administers our Stock Option Plan. The current
members of the Compensation Committee are Messrs. Dane, Kremen and John
Marshall. Prior to April 8, 1999, we did not have a Compensation Committee or
any other committee of the Board of Directors that performed any similar
functions. See "Compensation Committee Interlocks and Insider Participation."
The Audit Committee of the Board of Directors reviews, acts on and reports
to the Board of Directors with respect to various auditing and accounting
matters, including the selection of our independent auditors, the scope of the
annual audits, fees to be paid to the auditors, the performance of our
independent auditors and our accounting practices. The current members of the
audit committee are Messrs. Dane, Kremen and Jack Marshall.
The Finance Committee of the Board of Directors reviews, acts on and
reports to the Board of Directors with respect to various financing matters. The
current members of the audit committee are Messrs. Dane, Kremen and Jack
Marshall.
The Board of Directors does not have a nominating committee.
42
<PAGE>
DIRECTORS' COMPENSATION
Directors who are also employees of Photoloft.com receive no compensation
For serving on the Board of Directors. With respect to directors who are not
employees ("Non-Employee Directors"), we intend to reimburse such directors for
all travel and other expenses incurred in connection with attending meetings of
the Board of Directors and any committees of the Board. Non-Employee Directors
are also eligible to receive and have received grants of non-qualified stock
options under our Stock Option Plan, and we intend to establish a Non-Employee
Director Stock Option Plan which will provide for initial option grants of a
fixed number of shares of our common stock to Non-Employee Directors and
successive annual option grants to such Non-Employee Directors covering an
additional fixed number of shares to provide us with an effective way to recruit
and retain qualified individuals to serve as members of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We did not have a Compensation Committee or other committee of the Board of
Directors performing similar functions during the fiscal years ending December
31, 1997 and 1998. Messrs. Jack Marshall and Chris McConn are each officers of
Photoloft.com and, as members of the Board of Directors, participated in
deliberations of the Board of Directors relating to the compensation of our
executive officers. The Board of Directors established a Compensation Committee
as of April 8, 1999. See "Board Committees."
43
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table sets forth the compensation awarded or paid to, or
earned by, our Chief Executive Officer and all our other executive officers who
earned in excess of $100,000 in salary and bonus (collectively the "Named
Executives") for services rendered to us during the year ended December 31,
1998:
SUMMARY COMPENSATION TABLE (1)(2)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------- --------------------------------
NAME AND PRINCIPAL NUMBER OF SECURITIES UNDERLYING
POSITION. . . . . . . . SALARY ($) OPTIONS (#)
<S> <C> <C>
Jack Marshall, CEO,
President and Treasurer 156,864 1,135,032
Christopher E. McConn
Chief Technology
Officer. . . . . . . . 127,229 454,013
<FN>
(1) Information set forth herein includes services rendered by the Named
Executives while employed by Photoloft.com, Inc. prior to the Reorganization and
by Photoloft.com following the Reorganization.
(2) The columns for "Bonus", "Other Annual Compensation", "Restricted Stock
Awards", "LTP Payouts" and "All other Compensation" have been omitted because
there is no compensation required to be reported.
</TABLE>
The following table sets forth certain information concerning options
granted to the Named Executives during 1998.
<TABLE>
<CAPTION>
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1998(1)
NAME Number of % of Total Exercise Expiration Potential Realizable Value at
Securities Options Price Per DATE(5) Assumed Annual Rates of Stock
Underlying Granted to Share Price Appreciation for Option
Options Employees ($/SH)(4) Term (6)
Granted (#) IN 1998 (3)
(2)
-------------------------------
0% 5% 10%
- --------------------- ----------- ----------- --------- ----------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Jack
Marshall 1,135,032 42.2% 0.48 July, 2007 ($181,605) $11,350 $306,459
- --------------------- ----------- ----------- --------- ----------- ---------- -------- ---------
Christopher E. McConn
454,013 16.9% 0.48 July, 2007 ($72,642) $ 4,540 $122,584
----------- ----------- --------- ----------- ---------- -------- ---------
<FN>
(1) No SARs were granted to the Named Executives during 1998.
(2) Each option represents the right to purchase one share of our common stock.
(3) In 1998, we granted officers, employees and consultants options to purchase an aggregate of
2,690,706 shares of our common stock.
(4) The fair market value of our common stock on the date of grant for each of the listed options,
as determined by our board of directors, was $0.32 per share.
(5) Options may terminate before their expiration dates if the optionee's status as an employee or
consultant is terminated or upon the optionee's death or disability.
(6) Amounts represent hypothetical gains that could be achieved for the respective options if
exercised at their end of their respective terms. The 0%, 5%, and 10% assumed annual rates of
compounded stock price appreciation are mandated by rules of the SEC and do not represent our estimate
or projection of the future prices of the common stock. Actual gains, if any, on any exercises of
options are dependent upon the future performance of the common stock and overall stock market
conditions. The amounts reflected in the table may not necessarily be achieved.
</TABLE>
44
<PAGE>
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth certain information with respect to the
Named Executives concerning exercisable and unexercisable stock options held by
them as of December 31, 1998. None of these executive officers exercised options
to purchase common stock in 1998.
AGGREGATE OPTION EXERCISES IN 1998 AND YEAR END OPTION VALUES(1)
<TABLE>
<CAPTION>
Name
Number of Unexercised Value of Unexercised In-the-
Options at Year End(#) Money Optionsat Year End (2)
--------------------------- ---------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- -------------- ----------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
Jack Marshall
1,270,726 1,016,799 $ 635,363 $ 508,399
- -------------- ----------- -------------- -------------- -----------------
Christopher E.
McConn 657,474 406,720 $ 328,737 $ 203,360
- -------------- ----------- -------------- -------------- -----------------
<FN>
(1) No SARs were owned or exercised by any of the Named Executives during 1998.
(2) Based on a per share fair market value of our common stock equal to $0.50
per share, the fair market value as determined by our Board of Directors at
December 31, 1998.
</TABLE>
45
<PAGE>
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
On February 26, 1999 we entered into an employment agreement (the
"Executive Employment Agreement") with Jack Marshall ("Executive"). Under the
Executive Employment Agreement, Jack Marshall is to serve as our Chief Executive
Officer, President and Treasurer and perform such duties as may be reasonably
assigned to him by the Board of Directors. The Executive Employment Agreement
provides for an annual base salary of $120,000 which shall be reviewed at least
annually. Under the Executive Employment Agreement, the executive is also
eligible for annual bonus compensation in the minimum amount of $60,000 if
Photoloft reaches certain specific milestones. The Executive Employment
Agreement also provides that Mr. Marshall is to receive options to purchase
between 250,000 and 750,000 shares of our Common stock if traffic to our Web
Site reaches between 500,000 and 1,000,000 hits in any particular month.
Executive is eligible to receive vacation in accordance with the Company's
policies. He is also eligible to participate in the health, life insurance,
medical, retirement and other benefit programs which we may offer from time to
time. He also is to receive a car allowance of $500 per month.
The term of the Executive Employment Agreement lasts until December 31,
2001 and continues thereafter on a year to year basis unless terminated pursuant
to the terms thereof. We may terminate Executive at any time with or without
cause. The term "cause" is defined in the Executive Employment Agreement as:
(i) the willful neglect of duties reasonably assigned by the Board of Directors;
(ii) material breach of the agreement; or (iii) willful gross misconduct. If
Executive is terminated without cause, he is to receive severance pay through
December 31, 2001 equal to: (i) the base salary; (ii) bonus compensation; (iii)
vested options to purchase Common stock; (iv) health insurance; (v) car
allowance; and (vi) any unused vacation time. pre payment of all automobile
allowance for the remaining period of the term. If the Executive resigns from
his position for good cause, including a substantial reduction in his position,
duties or a material breach of the agreement by us, he is to be deemed
terminated without cause and is eligible to receive severance.
EMPLOYEE BENEFIT PLANS
Stock Option Plan
Our Stock Option Plan (the "Plan") was adopted by the Board of Directors,
and ratified and approved by our stockholders, as of the closing of the
Reorganization. The Board of Directors amended the Plan in June 1999. The
following description of our Stock Option Plan is a summary and qualified in its
entirety by the text of the plan, which is filed as an exhibit to this
Registration Statement.
46
<PAGE>
The purpose of the Plan is to enhance our profitability and stockholder
value by enabling us to offer stock based incentives to employees, directors and
consultants. The Plan authorizes the grant of options to purchase shares of
common stock to employees, directors and consultants of Photoloft and its
affiliates. Under the Plan, we may grant incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986 and non-qualified
stock options. Incentive stock options may only be granted our employees.
The number of shares available for options under the Plan is 3,800,000. The
Plan is administered by the Compensation Committee of the board. Subject to the
provisions of the Plan, the Compensation Committee has authority to determine
the employees, directors and consultants of Photoloft who are to be awarded
options and the terms of such awards, including the number of shares subject to
such option, the fair market value of the common stock subject to options, the
exercise price per share and other terms.
Incentive stock options must have an exercise price equal to at least 100%
(110% if the grant is to a stockholder holding more than 10% of our voting
stock) of the fair market value of a share on the date of the award and
generally cannot have a duration of more than 10 years (five years if the grant
is to a stockholder holding more than 5% of our voting stock). Terms and
conditions of awards are set forth in written agreements between Photoloft.com
and the respective option holders. Awards under the Plan may not be made after
the tenth anniversary of the date of its adoption but awards granted before that
date may extend beyond that date.
If the employment with Photoloft of the holder of an incentive stock option
is terminated for any reason other than as a result of the holder's death or
disability or for "cause" as defined in the Plan, the holder may exercise the
option, to the extent exercisable on the date of termination of employment,
until the earlier of the option's specified expiration date and 90 days after
the date of termination. If an option holder dies or becomes disabled, both
incentive and non-qualified stock options may generally be exercised, to the
extent exercisable on the date of death or disability, by the option holder or
the option holder's survivors until the earlier of the option's specified
termination date and one year after the date of death or disability.
As of July 7, 1999 225,000 shares had been issued as the result of the
exercise of options previously granted under the Plan, 3,390,641 shares were
subject to outstanding options and 409,359 shares were available for future
grants. The exercise prices of the outstanding options ranged from $0.48 to
approximately $5.25. The options under the Plan vest over varying lengths of
time pursuant to various option agreements that we have entered into with the
grantees of such options.
We have not registered the Plan, or the shares subject to issuance
thereunder, pursuant to the Securities Act. Absent registration, such shares,
when issued upon exercise of options, would be "restricted securities" as that
term is defined in Rule 144 under the Securities Act.
47
<PAGE>
Optionees have no rights as stockholders with respect to shares subject to
options prior to the issuance of shares pursuant to the exercise thereof.
Options issued to employees under the Plan shall expire no later than ten years
after the date of grant. An option becomes exercisable at such time and for
such amounts as determined at the discretion of the Board of Directors or the
Compensation Committee at the time of the grant of the option. An optionee may
exercise a part of the option from the date that part first becomes exercisable
until the option expires. The purchase price for shares to be issued to an
employee upon his exercise of an option is determined by the Board of Directors
or the Compensation Committee on the date the option is granted. The purchase
price is payable in full in cash, by promissory note, by net exercise or by
delivery of shares of our Common stock when the option is exercised.
The Plan provides for adjustment as to the number and kinds of shares
covered by the outstanding options and the option price therefor to give effect
to any stock dividend, stock split, stock combination or other reorganization of
or by Photoloft.
48
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Unless otherwise indicated, information in this Item 7 regarding shares of
our Common Stock reflect the 1.5133753 for 1 conversion ratio applied to shares
of Photoloft-California Common Stock at the time of the reorganization.
ISSUANCES TO FOUNDER. Upon his founding of Photoloft-California in
November, 1993, we issued 756,688 shares of Common Stock to Jack Marshall in
exchange for $500.00. At that time, we also issued him options to purchase up to
1,152,493 shares of Common Stock which vested over a four year period and had an
exercise price of $0.001 per share. He exercised his options and elected to
purchase 1,152,493 shares of Common Stock in February, 1999. During the Series
A Preferred Stock Offering described below, he purchased 125,000 shares in
exchange for $25,000. He transferred 50,000 shares of Common Stock by gift in
February 1999. In March, 1999 his shares of Photoloft-California Common Stock
and his options to purchase shares of Photoloft-California Common Stock were
converted into shares of Photoloft.com Common Stock, and options to purchase
Photoloft.com Common Stock as a result of the Reorganization.
SERIES A PREFERRED OFFERING. From 1994 to 1998 we conducted a private
offering of Photoloft-California Series A Preferred Stock. As a result, we sold
the aggregate amount of 2,275,625 shares of Series A Preferred Stock in exchange
for $455,125. Under this offering, Messrs. John Marshall and Chris McConn
purchased 295,000 and 25,000, shares of stock, respectively. Ms. Lisa Marshall
purchased 12,500 shares for $2,500. As described above, Mr. Jack Marshall also
participated in the offering. Each outstanding share of Series A Preferred
Stock was converted into 1.5 shares of Common Stock of Photoloft-California
in February, 1999.
SERIES B PREFERRED OFFERING. In August 1996, conducted a private offering
of Photoloft-California Series B Preferred Stock. As a result, we sold 150,000
shares of our Series B Preferred Stock to Mr. Kris Chellum for $45,000. Each
outstanding share of Series B Preferred Stock was converted into 1.5 shares of
Common Stock of Photoloft-California in February, 1999.
1996 CONSULTING SERVICES. In 1996 we issued 53,472 shares of Common Stock to Mr.
Keith Queeney and Mr. Chris McConn in exchange for services provided to us.
SERIES C PREFERRED OFFERING. In October, 1997 we entered into an agreement
with Kremen, Father & Partners to provide us with financial consulting services
and assist us with obtaining financing. One of our directors, Gary Kremen, is a
principal of Kremen, Father & Partners. In exchange for $59,500 worth of
services, we issued, from 1997 to 1998, 63,384 shares of Series C Preferred
Stock to Mr. Kremen. Each outstanding share of Series C Preferred Stock was
converted into 1.5 shares of Common Stock of Photoloft-California in February,
1999. Currently, we no longer contract with Kremen, Father & Partners for any
services.
1998 CONSULTING SERVICES. In 1998 we issued 176,006 shares of Common Stock
to consultants and employees who provided services to us. Under this offering,
Ms. Lisa Marshall received 15,739 shares of Common Stock.
49
<PAGE>
EXERCISED STOCK OPTIONS. In February, 1999 we issued the aggregate amount
of 2,844,112 shares of Common Stock upon the exercise of options to purchase
Common Stock which were granted to employees, directors and consultants of the
Company between 1993 and 1998. Under this issuance, Messrs. Jack Marshall and
Chris McConn exercised options to purchase 1,152,493 and 610,181 shares of
Common Stock, respectively.
STOCK OPTION PLAN. In 1998, we issued options to purchase the aggregate
amount of 2,690,706 shares of Common Stock to employees, directors and
consultants of the Company pursuant to the Company's Stock Option Plan. These
options have an exercise price of $0.48 per share. Under this offering, Mr. Jack
Marshall and Mr. Chris McConn received options to purchase up to 1,135,032 and
454,013 shares of Common Stock, respectively, with exercise prices of $0.48 per
share. These options vest in 48 monthly installments. Additionally, from
January to July 1999, we have issued options to purchase the aggregate amount of
699,936 shares of Common Stock to employees, directors and consultants of the
Company pursuant to the Company's Stock Option Plan. These options were issued
at their fair market value on the date of grant and have exercise prices ranging
from $0.48 to $5.25.
In addition to the above, in March 1999, we issued the aggregate amount of
225,000 shares of Common Stock upon the exercise of options to purchase Common
Stock which were granted to certain employees, directors, and consultants of the
Company in March 1999 under the Company's Stock Option Plan. These options had
an exercise price of $0.50 per share. Under this offering, Mr. John Marshall
exercised options to purchase 13,500 shares of Common Stock.
REORGANIZATION. In February 1999, Photoloft-California entered into the
Reorganization with a non-operating public company, Data Growth, Inc., a Nevada
corporation incorporated in January, 1996 ("DGI"). Under the Reorganization
Agreement, the Photoloft-California stockholders received 1.5133753 shares of
DGI Common Stock in exchange for each of their shares of Photoloft-California
Common Stock. Additionally, the holders of options to purchase shares of Common
stock of Photoloft-California terminated their options and received options to
purchase shares of Common Stock of DGI. As a result of the Reorganization,
Photoloft-California became a wholly-owned subsidiary of DGI. DGI adopted the
Photoloft-California Stock Option Plan. An aggregate of 9,579,266 shares of
Common stock and options to purchase an aggregate of 2,795,734 shares of Common
stock were issued to the former Photoloft-California stockholders and option
holders, respectively, in the Reorganization and the Photoloft-California
stockholders owned approximately 77% of DGI immediately after the
Reorganization. As part of the Reorganization, all of the executive officers and
directors of DGI resigned and the executive officers and directors of
Photoloft-California became the executive officers and directors of DGI which
changed its name to Photoloft.com
50
<PAGE>
BAYTREE CAPITAL ASSOCIATES, LLC. In February, 1999 Photoloft-California
entered into an agreement with Baytree Capital Associates, LLC which we assumed
after the Reorganization. Under the agreement, Baytree provided financial
consulting and assistance to Photoloft-California which including the
structuring and negotiation of a loan, the identification of a merger candidate
and the assistance with the Reorganization. For their services, Baytree
received 25,000 shares of our Common Stock and was paid $10,000 in
non-accountable expense reimbursement. In addition, Baytree has been granted a
24 month right of first refusal with respect to any subsequent financings.
Baytree also has unlimited "piggyback" registration rights as to its 25,000
shares. Lynn Dixon, a shareholder of DGI was instrumental in locating DGI as an
entity to be used in the Reorganization. Mr. Dixon was also involved in the
negotiation of the terms of the transaction.
We believe that all of the transactions set forth above were made on terms
no less favorable to us than could have been obtained from unaffiliated third
parties. We intend that all future transactions, including loans, between us and
our officers, directors, principal stockholders and their affiliates will be
approved by a majority of the Board of Directors, including a majority of the
independent and disinterested outside directors on the Board of Directors, and
be on terms no less favorable to us than could be obtained from unaffiliated
third parties.
51
<PAGE>
ITEM 8. LEGAL PROCEEDINGS
There is presently two pending legal proceedings to which we are a party.
James Vierra has filed an action against us alleging, among other things,
breaches of fiduciary duties, violation of securities laws, and employment
related claims arising out of the disputed ownership of the ID4Life division and
the termination of Mr. Vierra's employment with us. We have answered the
complaint and asserted a counterclaim comprising of claims for declaratory
relief, breach of fiduciary duty and breach of contract against Mr. Vierra. We
believe that Mr. Vierra's claims are without merit and intend to defend our
position vigorously.
Hewlett-Packard, Co. has filed an action against us alleging trade secret
misappropriation, unfair competition, and breach of contract arising out of the
activities of one of our employees. Hewlett-Packard is seeking injunctive
relief and damages. We are presently in settlement negotiations with
Hewlett-Packard with regard to this matter. We have a preexisting relationship
with Hewlett-Packard with respect to the development and use of certain aspects
of our advanced viewing and printing technologies. See "Item 1. Business --
Products and Services."
To the best of our knowledge, there are presently no other legal
proceedings to which we or any of our subsidiaries is a party or to which any of
our property is subject and, to the best of its knowledge, no such actions
against us are contemplated or threatened.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
No shares of our common stock have previously been registered with the SEC
or any state securities agency or authority. Our common stock has been trading
on the National Association of Security Dealers Over-The-Counter Market Bulletin
Board ("OTCBB") since March 1, 1999 under the symbol "LOFT". The following table
sets forth the range of high and low bid prices of the common stock for each
calendar quarterly period since trading commenced as reported by the National
Quotation Bureau, Inc. ("NQB"). Prices reported by the NQB represent prices
between dealers, do not include retail markups, markdowns or commissions and do
not represent actual transactions.
<TABLE>
<CAPTION>
1999 High Low
- ----------------------------------- ------ ------
<S> <C> <C>
First Quarter (March 1 to March 31) $7.375 $4.500
Second Quarter (April 1 to June 30) $5.500 $3.625
Third Quarter (July 1 to July 7) $5.375 $5.062
</TABLE>
As of July 7, 1999 there were approximately 325 holders of record of our
common stock, which figure does not take into account those stockholders whose
certificates are held in the name of broker-dealers or other nominees.
52
<PAGE>
Dividend Policy
We have not declared or paid cash dividends or made distributions in
the past, and we do not anticipate that we will pay cash dividends or make
distributions in the foreseeable future. We currently intend to retain and
invest future earnings to finance our operations.
Transfer Agent
Our transfer agent for our common stock is Interwest Transfer Co., Inc.,
1981 East 4800 South, Salt Lake City, Utah 84117.
53
<PAGE>
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order is information regarding shares of common
stock issued and options and warrants and other convertible securities granted
by us during the past three years. Also included is the consideration, if any,
received by us for such shares and options and information relating to the
section of the Securities Act, or rule of the SEC under which exemption from
registration was claimed.
Transactions described in Items (1) through (10) below refer to the
securities of PhotoLoft.Com, Inc., a California corporation which was the
predecessor entity of the filer of this Registration Statement, and transactions
described in Items (11) through (15) below refer to the securities of
Photoloft.com, a Nevada corporation which is the filer of this Registration
Statement.
Unless otherwise indicated, information in this Item 10 regarding shares of
our Common Stock reflect the 1.5133753 for 1 conversion ratio applied to shares
of Photoloft-California Common Stock at the time of the reorganization.
(1) From 1994 to 1998 we sold the aggregate amount of 2,275,625 shares
of Series A Preferred Stock in exchange for $430,125 valued in cash and services
provided to the Company pursuant to a private offering of our Series A Preferred
Stock. The issuances were made in reliance on Section 4(2) of the Securities
Act and/or Regulation D promulgated under the Securities Act and were made
without general solicitation or advertising. The purchasers were sophisticated
investors with access to all relevant information necessary to evaluate these
investments, and who represented to the Company that the shares were being
acquired for investment.
(2) In August 1996, we sold the aggregate amount of 150,000 shares of
our Series B Preferred Stock for $45,000 pursuant to a private offering of our
preferred stock. The issuance was made in reliance on Section 4(2) of the
Securities Act without general solicitation or advertising. The purchaser was a
sophisticated investor with access to all relevant information necessary to
evaluate the investment, and who represented to the Company that the shares were
being acquired for investment.
(3) In 1996 and 1997 we issued 67,244 shares of Common Stock to
consultants and employees of the Company in exchange for services rendered to
the company valued at $8,667. The issuances were made in reliance on Section
4(2) of the Securities Act and were made without general solicitation or
advertising. The purchasers were sophisticated investors with access to all
relevant information necessary to evaluate these investments, and who
represented to the Company that the shares were being acquired for investment.
54
<PAGE>
(4) From 1997 to 1998, the Company issued 63,384 shares of Series C
Preferred Stock in exchange for services valued at $59,500 pursuant to a private
offering of our preferred stock. The issuance was made in reliance on Section
4(2) of the Securities Act and was made without general solicitation or
advertising. The purchaser was a sophisticated investor with access to all
relevant information necessary to evaluate the investment, and who represented
to the Company that the shares were being acquired for investment.
(5) In 1998 we issued 176,006 shares of Common Stock to employees and
consultants of the Company in exchange for services rendered to the Company. The
issuances were made in reliance on Section 4(2) of the Securities Act and were
made without general solicitation or advertising. The purchasers were
sophisticated investors with access to all relevant information necessary to
evaluate these investments, and who represented to the Company that the shares
were being acquired for investment.
(6) In 1998, we issued options to purchase up to 2,690,706 shares of
Common Stock to certain employees, directors and consultants of the Company with
an exercise price of $0.48 per share pursuant to the Company's Stock Option
Plan. These issuances were made in reliance on Section 4(2) of the Securities
Act and/or Rule 701 promulgated under the Securities Act and were made without
general solicitation or advertising. The purchasers were sophisticated
investors with access to all relevant information necessary to evaluate these
investments, and who represented to the Company that the shares were being
acquired for investment.
(7) From January 1999 to July 1999 the Company issued options to
purchase the aggregate amount of 924,936 shares of Common Stock in the Company
pursuant to the Company's Stock Option Plan with exercise prices from $0.48 per
share to $5.25 per share. These issuances were made in reliance on Section 4(2)
of the Securities Act and/or Rule 701 promulgated under the Securities Act and
were made without general solicitation or advertising. The purchasers were
sophisticated investors with access to all relevant information necessary to
evaluate these investments, and who represented to the Company that the shares
were being acquired for investment.
(8) In February, 1999 we issued the aggregate amount of 2,844,112
shares of Common Stock upon the exercise of options to purchase Common Stock
which were granted to employees, directors and consultants of the Company
between 1993 and 1998 . The issuances were made in reliance on Section 4(2) of
the Securities Act and were made without general solicitation or advertising.
The purchasers were sophisticated investors with access to all relevant
information necessary to evaluate these investments, and who represented to the
Company that the shares were being acquired for investment.
(9) In February 1999, we issued 5,650,207 shares of Common Stock in
exchange and upon the conversion of shares of issued and outstanding Series A, B
and C Preferred Stock of the Company. The issuances were made in reliance on
Section 4(2) of the Securities Act and were made without general solicitation or
advertising. The purchasers were sophisticated investors with access to all
relevant information necessary to evaluate these investments, and who
represented to the Company that the shares were being acquired for investment.
55
<PAGE>
(10) In February 1999, the Company issued 85,011 shares of Common Stock
to employees and consultants of the Company in exchange for services valued at
$42,506. The issuances were made in reliance on Section 4(2) of the Securities
Act and were made without general solicitation or advertising. The purchasers
were sophisticated investors with access to all relevant information necessary
to evaluate these investments, and who represented to the Company that the
shares were being acquired for investment.
(11) In March 1999, under the terms of the Reorganization, the Company
issued the aggregate amount of 9,579,266 shares of Common Stock to the
shareholders of Photoloft.com in exchange for their shares of Common Stock of
Photoloft-California. The issuances were made in reliance on Section 4(2) of the
Securities Act and were made without general solicitation or advertising. The
purchasers were sophisticated investors with access to all relevant information
necessary to evaluate these investments, and who represented to the Company that
the shares were being acquired for investment.
(12) In March 1999, under the terms of the Reorganization, the holders
of options to purchase Common Stock of Photoloft-California exchanged their
options for options to purchase the aggregate amount of 2,795,734 shares of
Common Stock of the Company. These issuances were made in reliance on Section
4(2) of the Securities Act and/or Rule 701 promulgated under the Securities Act
and were made without general solicitation or advertising. The purchasers were
sophisticated investors with access to all relevant information necessary to
evaluate these investments, and who represented to the Company that the shares
were being acquired for investment.
(13) In March 1999, pursuant to the terms of the Reorganization
Agreement, the Company conducted a private offering of its Common stock.
Pursuant to that offering, a total of 2,000,000 shares of Common stock were sold
for total cash consideration of $1,000,000. The issuances were made in reliance
on Section 4(2) of the Securities Act and/or Regulation D promulgated under the
Securities Act and were made without general solicitation or advertising. The
purchasers were sophisticated investors with access to all relevant information
necessary to evaluate these investments, and who represented to the Company that
the shares were being acquired for investment.
(14) In March 1999, the Company issued 225,000 shares of Common Stock
upon the exercise of options to purchase Common stock held by certain employees,
directors and consultants of the Company. These options were issued in 1999 and
had exercise prices of $0.50 per share. These issuances were made in reliance on
Section 4(2) of the Securities Act and/or Rule 701 promulgated under the
Securities Act and were made without general solicitation or advertising. The
purchasers were sophisticated investors with access to all relevant information
necessary to evaluate these investments, and who represented to the Company that
the shares were being acquired for investment.
56
<PAGE>
(15) In March 1999, the Company issued 25,000 shares of Common stock to
Baytree Capital Associates pursuant to the terms of a Letter Agreement with
Baytree Capital Associates for financial business consulting services. The
issuance was made in reliance on Section 4(2) of the Securities Act and/or
Regulation D promulgated under the Securities Act and was made without general
solicitation or advertising. The purchaser was a sophisticated investor with
access to all relevant information necessary to evaluate the investment, and who
represented to the Company that the shares were being acquired for investment.
57
<PAGE>
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The descriptions in this Item and in other sections of this Registration
Statement of our securities and various provisions of our Articles of
Incorporation and our Bylaws are summaries. Statements contained in this
Registration Statement relating to such provisions are not necessarily complete,
and reference is made to the Articles of Incorporation and Bylaws, copies of
which have been filed with the SEC as exhibits to this Registration Statement,
and provisions of applicable law.
Our authorized capital stock consists of 50,000,000 shares of common stock,
par value $.001 per share, and 500,000 shares of Preferred Stock, par value
$.001. As of July 7, 1999, 12,454,266 shares of our common stock were issued
and outstanding and 3,800,000 shares of common stock were reserved for issuance
upon exercise of outstanding options. Only our common stock is being registered
under the Exchange Act pursuant to this Registration Statement. As of July 7,
1999, no shares of our Preferred Stock were issued and outstanding. See "Item
2. Financial Information--Factors Affecting Our Business, Operating Results and
Financial Condition--Anti-Takeover Provisions And Our Right To Issue Preferred
Stock Could Make A Third-Party Acquisition Of Us Difficult."
Description of Common Stock
The holders of our common stock are entitled to equal dividends and
distributions per share with respect to the common stock when, as and if
declared by the Board of Directors from funds legally available therefor. No
holder of any shares of our common stock has a pre-emptive right to subscribe
for any of our securities, nor are any common shares subject to redemption or
convertible into other of our securities. Upon liquidation, dissolution or
winding up of Photoloft, and after payment of creditors and preferred
stockholders, if any, the assets will be divided pro-rata on a share-for-share
basis among the holders of the shares of common stock. All shares of common
stock now outstanding are fully paid, validly issued and non-assessable.
Each share of common stock is entitled to one vote with respect to the
election of any director or any other matter upon which shareholders are
required or permitted to vote. Holders of the common stock do not have
cumulative voting rights, so the holders of more than 50% of the combined shares
voting for the election of directors may elect all of the directors if they
choose to do so, and, in that event, the holders of the remaining shares will
not be able to elect any members to the Board of Directors.
Anti-Takeover Effects of Various Provisions of Nevada Law and Our Articles of
Incorporation and Bylaws
58
<PAGE>
We are incorporated under the laws of the State of Nevada and are therefore
subject to various provisions of the Nevada corporation laws which may have the
effect of delaying or deterring a change in the control or management of
Photoloft.
Nevada's "Combination with Interested Stockholders Statute," Nevada Revised
Statutes 78.411-78.444, which applies to Nevada corporations like us having at
least 200 stockholders, prohibits an "interested stockholder" from entering into
a "combination" with the corporation, unless certain conditions are met. A
"combination" includes (a) any merger with an "interested stockholder," or any
other corporation which is or after the merger would be, an affiliate or
associate of the interested stockholder, (b) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of assets, in one transaction or
a series of transactions, to an "interested stockholder," having (i) an
aggregate market value equal to 5% or more of the aggregate market value of the
corporation's assets, (ii) an aggregate market value equal to 5% or more of the
aggregate market value of all outstanding shares of the corporation, or (iii)
representing 10% or more of the earning power or net income of the corporation,
(c) any issuance or transfer of shares of the corporation or its subsidiaries,
to the "interested stockholder," having an aggregate market value equal to 5% or
more of the aggregate market value of all the outstanding shares of the
corporation, (d) the adoption of any plan or proposal for the liquidation or
dissolution of the corporation proposed by the "interested stockholder," (e)
certain transactions which would have the effect of increasing the proportionate
share of outstanding shares of the corporation owned by the "interested
stockholder," or (f) the receipt of benefits, except proportionately as a
stockholder, of any loans, advances or other financial benefits by an
"interested stockholder." An "interested stockholder" is a person who (i)
directly or indirectly owns 10% or more of the voting power of the outstanding
voting shares of the corporation or (ii) an affiliate or associate of the
corporation which at any time within three years before the date in question was
the beneficial owner, directly or indirectly, of 10% or more of the voting power
of the then outstanding shares of the corporation.
A corporation to which the statute applies may not engage in a
"combination" within three years after the interested stockholder acquired its
shares, unless the combination or the interested stockholder's acquisition of
shares was approved by the Board of Directors before the interested stockholder
acquired the shares. If this approval was not obtained, then after the
three-year period expires, the combination may be consummated if all the
requirements in the Articles of Incorporation are met and either (a)(i) the
Board of Directors of the corporation approves, prior to such person becoming an
"interested stockholder," the combination or the purchase of shares by the
"interested stockholder" or (ii) the combination is approved by the affirmative
vote of holders of a majority of voting power not beneficially owned by the
"interested stockholder" at a meeting called no earlier than three years after
the date the "interested stockholder" became such or (b) the aggregate amount of
cash and the market value of consideration other than cash to be received by
holders of common shares and holders of any other class or series of shares
meets the minimum requirements set forth in Sections 78.411 through 78.443,
inclusive, and prior to the consummation of the combination, except in limited
circumstances, the "interested stockholder" will not have become the beneficial
owner of additional voting shares of the corporation.
59
<PAGE>
Nevada's "Control Share Acquisition Statute," Nevada Revised Statute
(S)78.378-78.379, prohibits an acquiror, under certain circumstances, from
voting shares of a target corporation's stock after crossing certain threshold
ownership percentages, unless the acquiror obtains the approval of the target
corporation's stockholders. The Control Share Acquisition Statute only applies
to Nevada corporations with at least 200 stockholders, including at least 100
record stockholders who are Nevada residents, and which do business directly or
indirectly in Nevada. While we do not currently exceed these thresholds, we may
well do so in the near future. In addition, although we do not presently "do
business" in Nevada within the meaning of the Control Share Acquisition Statute,
we may do so in the future. Therefore, it is likely that the Control Share
Acquisition Statute will apply to us in the future. The statute specifies three
thresholds: at least one-fifth but less than one-third, at least one-third but
less than a majority, and a majority or more, of all the outstanding voting
power. Once an acquiror crosses one of the above thresholds, shares which it
acquired in the transaction taking it over the threshold or within ninety days
become "Control Shares" which are deprived of the right to vote until a majority
of the disinterested stockholders restore that right. A special stockholders'
meeting may be called at the request of the acquiror to consider the voting
rights of the acquiror's shares no more than 50 days (unless the acquiror agrees
to a later date) after the delivery by the acquiror to the corporation of an
information statement which sets forth the range of voting power that the
acquiror has acquired or proposes to acquire and certain other information
concerning the acquiror and the proposed control share acquisition. If no such
request for a stockholders' meeting is made, consideration of the voting rights
of the acquiror's shares must be taken at the next special or annual
stockholders' meeting. If the stockholders fail to restore voting rights to the
acquiror or if the acquiror fails to timely deliver an information statement to
the corporation, then the corporation may, if so provided in its articles of
incorporation or bylaws, call certain of the acquiror's shares for redemption.
Our Articles of Incorporation and Bylaws do not currently permit us to call an
acquiror's shares for redemption under these circumstances. The Control Share
Acquisition Statute also provides that the stockholders who do not vote in favor
of restoring voting rights to the Control Shares may demand payment for the
"fair value" of their shares (which is generally equal to the highest price paid
in the transaction subjecting the stockholder to the statute).
Certain provisions of our Bylaws which are summarized below may affect
potential changes in control of Photoloft. The Board of Directors believes that
these provisions are in the best interests of stockholders because they will
encourage a potential acquiror to negotiate with the Board of Directors, which
will be able to consider the interests of all stockholders in a change in
control situation. However, the cumulative effect of these terms maybe to make
it more difficult to acquire and exercise control of Photoloft and to make
changes in management more difficult.
The Bylaws provide the number of directors of Photoloft shall be
established by the Board of Directors, but shall be no less than one. Between
stockholder meetings, the Board may appoint new directors to fill vacancies or
newly created directorships. A director may be removed from office by the
affirmative vote of 66-2/3% of the combined voting power of the then outstanding
shares of stock entitled to vote generally in the election of directors.
60
<PAGE>
The Bylaws further provide that stockholder action may be taken at a
meeting of stockholders and may be effected by a consent in writing if such
consent is signed all of the holders of common stock.
We are not aware of any proposed takeover attempt or any proposed attempt
to acquire a large block of our common stock.
The provisions described above may have the effect of delaying or deterring
a change in the control or management of Photoloft.
Application of California GCL
Although we are incorporated in Nevada, our headquarters is in the State of
California. Section 2115 of the California GCL ("Section 2115") provides that
certain provisions of the California GCL shall be applicable to a corporation
organized under the laws of another state to the exclusion of the law of the
state in which it is incorporated, if the corporation meets certain tests
regarding the business done in California and the number of its California
stockholders.
An entity such as us can be subject to Section 2115 if the average of the
property factor, payroll factor and sales factor deemed to be in California
during its latest full income year is more than 50 percent and more than
one-half of its outstanding voting securities are held of record by persons
having addresses in California. Section 2115 does not apply to corporations
with outstanding securities listed on the New York or American Stock Exchange,
or with outstanding securities designated as qualified for trading as a national
market security on NASDAQ, if such corporation has at least 800 beneficial
holders of its equity securities. Since the average of our property factor,
payroll factor and sales factor deemed to be in California during our latest
fiscal year was almost 100%, and over 60% of our outstanding voting securities
are held of record by persons having addresses in California, and our securities
do not currently qualify as a national market security on NASDAQ, we are subject
to Section 2115.
During the period that we are subject to Section 2115, the provisions of
the California GCL regarding the following matters are made applicable to the
exclusion of the law of the State of Nevada: (i) general provisions and
definitions; (ii) annual election of directors; (iii)removal of directors
without cause; (iv) removal of directors by court proceedings; (v)filling of
director vacancies where less than a majority in office were elected by the
stockholders; (vi) directors' standard of care; (vii) liability of directors for
unlawful distributions; (viii) indemnification of directors, officers and
others; (ix) limitations on corporate distributions of cash or property; (x)
liability of a stockholder who receives an unlawful distribution;(xi)
requirements for annual stockholders meetings; (xii) stockholders' right to
cumulate votes at any election of directors; (xiii) supermajority vote
requirements; (xiv) limitations on sales of assets; (xv) limitations on
mergers;(xvi) reorganizations; (xvii) dissenters' rights in connection with
reorganizations; (xviii) required records and papers; (xix) actions by the
California Attorney General; and (xx) rights of inspection.
61
<PAGE>
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The General Corporation Law of Nevada limits the liability of officers and
directors for breach of fiduciary duty except in certain specified
circumstances, and also empowers corporations organized under Nevada Law to
indemnify officers, directors, employees and others from liability in certain
circumstances such as where the person successfully defended himself on the
merits or acted in good faith in a manner reasonably believed to be in the best
interests of the corporation.
Our Articles of Incorporation, with certain exceptions, eliminate any
personal liability of a directors or officers to us or our stockholders for
monetary damages for the breach of such person's fiduciary duty, and, therefore,
an officer or director cannot be held liable for damages to us or our
stockholders for gross negligence or lack of due care in carrying out his (or
her) fiduciary duties as a director or officer except in certain specified
instances. We may also adopt by-laws which provide for indemnification to the
full extent permitted under law which includes all liability, damages and costs
or expenses arising from or in connection with service for, employment by, or
other affiliation with us to the maximum extent and under all circumstances
permitted by law.
There is presently one material pending legal proceeding to which a
director, officer and employee of ours is a party. See "Item 8 Legal
Proceedings". There is no other pending litigation or proceeding involving one
of our directors, officers, employees or other agents as to which
indemnification is being sought, and we are not aware of any pending or
threatened litigation that may result in claims for indemnification by any
director, officer, employee or other agent.
We have purchased directors and officers liability insurance to defend and
indemnify directors and officers who are subject to claims made against them for
their actions and omissions as directors and officers of Photoloft. The
insurance policy provides standard directors and officers liability insurance in
the amount of $5,000,000.
We intend to enter into indemnification agreements with our directors and
officers. These agreements will provide, in general, that we shall indemnify and
hold harmless such directors and officers to the fullest extent permitted by law
against any judgments, fines, amounts paid in settlement, and expenses
(including attorneys' fees and disbursements) incurred in connection with, or in
any way arising out of, any claim, action or proceeding (whether civil or
criminal) against, or affecting, such directors and officers resulting from,
relating to or in any way arising out of, the service of such persons as our
directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons pursuant to the
foregoing provisions or otherwise, we have has been advised that in the opinion
of the SEC, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable.
62
<PAGE>
ITEM 13. FINANCIAL STATEMENTS
Reference is made to the Financial Statements together with the notes
thereto and the report thereon from BDO Seidman, LLP appearing on pages F-1
through F-16 of this Form 10-SB.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
63
<PAGE>
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
(A) Index to Financial Statements
<S> <C> <C>
Report of Independent Certified Public Accountants, BDO Seidman, LLP F-1
Financial Statements:
Balance sheets as of March 31, 1999 (Unaudited) and December 31, 1998 F-2
Statements of operations for the three months ended March 31, 1999 and 1998 F-3
(Unaudited) and the years ended December 31, 1998 and 1997
Statements of stockholders' equity (deficiency) for the three months ended F-4
March 31, 1999 (Unaudited) and the years ended December 31, 1998 and 1997
Statements of cash flows for the three months ended March 31, 1999 and 1998 F-5
(Unaudited) and the years ended December 31, 1998 and 1997
Notes to Financial Statements F-6 - F-16
</TABLE>
64
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of
PhotoLoft.com, Inc.
We have audited the accompanying balance sheet of PhotoLoft.com, Inc. (the
Company) as of December 31, 1998, and the related statements of operations,
shareholders' equity (deficiency), and cash flows for the years ended December
31, 1998 and 1997. 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
principles. Those standards require that we plan and perform our audits 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 PhotoLoft.com, Inc. as of
December 31, 1998, and the results of its operations and cash flows for the
years ended December 31, 1998 and 1997, in conformity with generally accepted
accounting principles.
San Jose, California
April 2, 1999
F - 1
<PAGE>
<TABLE>
<CAPTION>
PHOTOLOFT.COM
BALANCE SHEETS
MARCH 31, December 31,
1999 1998
(UNAUDITED)
- --------------------------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
ASSETS (Note 6)
CURRENT ASSETS:
Cash and cash equivalents (Note 10) $ 1,081,900 $ 370,000
Note receivable, current portion (Note 2) 658,000 658,000
Prepaid expenses and other current assets 15,900 -
Deferred income taxes 337,200 183,100
- --------------------------------------------------------------------------------------- ------------ -------------
TOTAL CURRENT ASSETS 2,093,000 1,211,100
- --------------------------------------------------------------------------------------- ------------ -------------
PROPERTY AND EQUIPMENT, net (Note 3) 106,500 65,700
NOTE RECEIVABLE, less current portion (Note 2) 1,441,200 1,656,700
OTHER ASSETS 10,500 5,500
- --------------------------------------------------------------------------------------- ------------ -------------
$ 3,651,200 $ 2,939,000
======================================================================================= ============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 192,100 $ 129,500
Accrued expenses (Note 4) 64,900 73,500
Deferred revenue (Note 5) 21,800 36,300
Deferred income taxes (Note 9) 263,600 263,600
- --------------------------------------------------------------------------------------- ------------ -------------
TOTAL CURRENT LIABILITIES 542,400 502,900
DEFERRED INCOME TAXES (Note 9) 580,500 666,700
- --------------------------------------------------------------------------------------- ------------ -------------
TOTAL LIABILITIES 1,122,900 1,169,600
- --------------------------------------------------------------------------------------- ------------ -------------
COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS (Notes 1, 6, 10 and 12)
SHAREHOLDERS' EQUITY: (Notes 1, 8 and 12)
Preferred stock, $0.001 par value; 500,000 shares authorized; no shares issued
and outstanding - -
Common stock, $0.001 par value; 50,000,000 shares authorized; 12,454,268 and 6,650,145
shares issued and outstanding, respectively 12,400 6,700
Additional paid-in capital 1,761,900 648,200
Retained earnings 754,000 1,114,500
- --------------------------------------------------------------------------------------- ------------ -------------
TOTAL SHAREHOLDERS' EQUITY 2,528,300 1,769,400
- --------------------------------------------------------------------------------------- ------------ -------------
$ 3,651,200 $ 2,939,000
======================================================================================= ============ =============
</TABLE>
See accompanying notes to financial statements.
F - 2
<PAGE>
PHOTOLOFT.COM
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31, Years Ended December 31,
-------------------------- ------------------------
1999 1998 1998 1997
------------ ------------ ----------- -----------
(UNAUDITED) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES (Note 10) $ 21,800 $ 204,100 $ 674,300 $ 574,200
COST OF REVENUES 36,300 32,200 113,000 60,800
- --------------------------------------- ------------ ------------ ----------- -----------
GROSS PROFIT (LOSS) (14,500) 171,900 561,300 513,400
- --------------------------------------- ------------ ------------ ----------- -----------
OPERATING EXPENSES:
Sales and marketing 18,800 10,600 325,000 32,200
General and administrative (Note 7) 605,100 159,800 999,000 642,200
- --------------------------------------- ------------ ------------ ----------- -----------
TOTAL OPERATING EXPENSES 623,900 170,400 1,324,000 674,400
- --------------------------------------- ------------ ------------ ----------- -----------
(LOSS) INCOME FROM OPERATIONS (638,400) 1,500 (762,700) (161,000)
- --------------------------------------- ------------ ------------ ----------- -----------
OTHER INCOME (EXPENSE):
Sale of trade name (Note 2) - - 3,100,000 -
Interest income 40,100 - 76,900 -
Interest expense - - (500) -
Other (2,500) (1,200) (2,400) (3,700)
- --------------------------------------- ------------ ------------ ----------- -----------
TOTAL OTHER INCOME (EXPENSE) 37,600 (1,200) 3,174,000 (3,700)
- --------------------------------------- ------------ ------------ ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (600,800) 300 2,411,300 (164,700)
- --------------------------------------- ------------ ------------ ----------- -----------
INCOME TAX EXPENSE (BENEFIT) (Note 9) (240,300) - 748,000 800
- --------------------------------------- ------------ ------------ ----------- -----------
NET INCOME (LOSS) $ (360,500) $ 300 $1,663,300 $ (165,500)
======================================= ============ ============ =========== ===========
Basic earnings (loss) per share $ (0.04) $ 0.00 $ 0.26 $ (0.03)
======================================= ============ ============ =========== ===========
Diluted earnings (loss) per share $ (0.04) $ 0.00 $ 0.18 $ (0.03)
======================================= ============ ============ =========== ===========
Basic weighted-average common shares
outstanding 9,063,500 6,360,300 6,488,300 6,297,000
Stock options - 2,799,400 2,799,400 -
- --------------------------------------- ------------ ------------ ----------- -----------
Diluted weighted-average common shares
outstanding 9,063,500 9,159,700 9,287,700 6,297,000
======================================= ============ ============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
F - 3
<PAGE>
PHOTOLOFT.COM
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
(Accumulated
Common Stock Additional Deficit)
------------------- Paid-in Retained
Shares Amount Capital Earnings Total
-----------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------- ---------- ------- ---------- ----------- -----------
BALANCES, January 1, 1997 6,267,448 $ 6,300 $ 497,200 $ (383,300) $ 120,200
Issuance of stock for services 59,025 100 18,200 - 18,300
Net loss - - - (165,500) (165,500)
- ---------------------------------------------------------------------- ---------- ------- ---------- ----------- -----------
BALANCES, December 31, 1997 6,326,473 6,400 515,400 (548,800) (27,000)
Issuance of stock for services 323,672 300 132,800 - 133,100
Net income - - - 1,663,300 1,663,300
- ---------------------------------------------------------------------- ---------- ------- ---------- ----------- -----------
BALANCES, December 31, 1998 6,650,145 6,700 648,200 1,114,500 1,769,400
Exercise of stock options (unaudited) 3,069,112 3,000 112,300 - 115,300
Issuance of common stock for services
(unaudited) 85,011 100 42,400 - 42,500
Issuance of common stock in connection with reverse merger (unaudited) 625,000 600 4,900 - 5,500
Sale of common stock, net of stock issuance
costs of approximately $56,500 (unaudited) 2,025,000 2,000 954,100 - 956,100
Net loss (unaudited) - - - (360,500) (360,500)
- ---------------------------------------------------------------------- ---------- ------- ---------- ----------- -----------
BALANCES, March 31, 1999 (unaudited) 12,454,268 $12,400 $1,761,900 $ 754,000 $2,528,300
====================================================================== ========== ======= ========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F - 4
<PAGE>
PHOTOLOFT.COM
STATEMENTS OF CASH FLOWS
(Note 11)
<TABLE>
<CAPTION>
Three Months Ended March 31, Years Ended December 31,
1999 1998 1998 1997
- ------------------------------------------------------------ ------------ ------------ ------------ ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (360,500) $ 300 $ 1,663,300 $(165,500)
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Depreciation and amortization 7,400 2,400 13,200 8,600
Allowance for doubtful accounts - - (75,100) 82,800
Gain on sale of trade name - - (3,100,000) -
Issuance of stock for services 42,500 27,800 133,100 18,300
Deferred income taxes (240,300) - 747,200 -
Changes in operating assets and liabilities:
Accounts receivable - 2,800 170,700 (130,600)
Prepaid expenses and other current assets (15,900) 6,600 6,600 47,300
Accounts payable 62,600 (16,500) 65,000 58,100
Accrued expenses (8,600) (11,200) (21,300) 94,800
Deferred revenue (14,500) - 36,300 -
- ------------------------------------------------------------ ------------ ------------ ------------ ----------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (527,300) 12,200 (361,000) 13,800
- ------------------------------------------------------------ ------------ ------------ ------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired in purchase of business 5,500 - - -
Purchase of property and equipment (48,200) (1,500) (51,100) (12,200)
Other assets (5,000) 300 (3,200) (2,000)
- ------------------------------------------------------------ ------------ ------------ ------------ ----------
NET CASH USED IN INVESTING ACTIVITIES (47,700) (1,200) (54,300) (14,200)
- ------------------------------------------------------------ ------------ ------------ ------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal received under note receivable 215,500 - 785,300 -
Proceeds from issuances of stock 1,115,400 - - -
Payment of stock issuance costs (44,000) - - -
- ------------------------------------------------------------ ------------ ------------ ------------ ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,286,900 - 785,300 -
- ------------------------------------------------------------ ------------ ------------ ------------ ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 711,900 11,000 370,000 (400)
CASH AND CASH EQUIVALENTS, beginning of period 370,000 - - 400
- ------------------------------------------------------------ ------------ ------------ ------------ ----------
CASH AND CASH EQUIVALENTS, end of period $ 1,081,900 $ 11,000 $ 370,000 $ -
============================================================ ============ ============ ============ ==========
</TABLE>
See accompanying notes to financial statements.
F - 5
<PAGE>
1. SUMMARY OF ACCOUNTING POLICIES
The Company
PhotoLoft.com, Inc. (formerly AltaVista Technology, Inc.) (the Company) a
California corporation, was incorporated on November 17, 1993. The Company
provides users with advanced, easy-to-use technology to instantly create,
share and print Internet photo albums.
On March 1, 1999, 100% of the Company's outstanding common stock was
acquired by PhotoLoft.com (formerly Data Growth, Inc., a publicly traded
shell corporation) (PhotoLoft), a Nevada Corporation, in exchange for
9,579,268 shares of PhotoLoft's $.001 par value common stock. For
accounting purposes, the acquisition has been treated as the acquisition of
PhotoLoft, with the Company as the acquiror (reverse acquisition).
The shares held by the shareholders of PhotoLoft prior to the acquisition
(625,000 shares after reflecting a 2.46 to 1 reverse stock split effected
by PhotoLoft immediately prior to the acquisition) have been recognized as
if they were issued in connection with the acquisition of PhotoLoft by the
Company. Since PhotoLoft prior to the reverse acquisition was a public
shell corporation with no significant operations, pro forma information
giving effect to the acquisition is not presented. All shares and per share
data prior to the acquisition have been restated to reflect the stock
issuance as a recapitalization of the Company. The historical information
prior to March 1, 1999 is that of the Company.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments having original
maturities of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated economic useful lives of the
assets, generally ranging from five to seven years.
Long-Lived Assets
The Company periodically reviews its long-lived assets and certain
identifiable intangibles for impairment. When events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable, the asset was recorded at the lower of its book value or its
fair value.
F - 6
<PAGE>
Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents:
The carrying amount reported in the balance sheet for cash and cash
equivalents approximates fair value.
Note receivable:
The fair value for the note receivable is estimated based on current
interest rates available to the Company for investments with similar
terms and remaining maturities.
Short-term debt:
The fair value of short-term debt approximates cost because of the
short period of time to maturity.
As of December 31, 1998, the fair values of the Company's financial
instruments approximate their historical carrying amounts.
Revenue Recognition
The Company recognizes revenues when earned or upon product shipment,
provided no significant obligations remain, and collectibility is probable.
Advertising
The cost of advertising is expensed as incurred. Advertising costs for the
three month periods ended March 31, 1999 and 1998 aggregated $14,500 and
$3,000, respectively (unaudited). Advertising costs for the years ended
December 31, 1998 and 1997 aggregated $26,000 and $4,100, respectively.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes,
which requires an asset and liability approach. This approach results in
the recognition of deferred tax assets (future tax benefits) and
liabilities for the expected future tax consequences of temporary
differences between the book carrying amounts and the tax basis of assets
and liabilities. The deferred tax assets and liabilities represent the
future tax return consequences of those differences, which will either be
deductible or taxable when the assets and liabilities are recovered or
settled. Future tax benefits are subject to a valuation allowance when
management believes it is more likely than not that the deferred tax assets
will not be realized.
F - 7
<PAGE>
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS
No. 133 requires companies to recognize all derivatives contracts as either
assets or liabilities in the balance sheet and to measure them at fair
value. If certain conditions are met, a derivative may be specifically
designated as a hedge, the objective of which is to match the timing of
gain or loss recognition on the hedging derivative with the recognition of
(i) the changes in the fair value of the hedged assets or liabilities, that
are attributable to the hedged risk, or (ii) the earnings effect of the
hedged forecasted transaction. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of
change. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000.
Historically, the Company has not entered into derivatives contracts either
to hedge existing risks or for speculative purposes. Accordingly, the
Company does not expect adoption of the new standard to affect its
financial statements.
Earnings Per Common Share
During 1998, the Company adopted the provisions of SFAS No. 128, Earnings
Per Share. SFAS No. 128 provides for the calculation of basic and diluted
earnings per share. Basic earnings per share includes no dilution and is
computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution of securities
that could share in the earnings of an entity. For the three months ended
March 31, 1999 and the year ended December 31, 1997, options to purchase
5,796,677 and 2,844,112 shares of common stock, respectively, were excluded
from computation of diluted earnings per share since their effect would be
antidilutive. For the three months ended March 31, 1998 and the year ended
December 31, 1998, options to purchase 37,834 and 2,728,539 shares of
common stock, respectively, were excluded from the computation of diluted
earnings per share because the options' exercise price was greater than the
estimated average fair market value of the common shares.
Basis of Presentation
The accompanying balance sheet as of March 31, 1999 and the statements of
operations and cash flows for each of the three month periods ended March
31, 1999 and 1998 have not been audited. However, they have been prepared
on the same basis as the annual financial statements and, in the opinion of
management, reflect all adjustments, which include only normal recurring
adjustments, necessary for a fair presentation of the financial position
and the results of operations for the periods presented. The financial data
and other information disclosed in these notes to financial statements
related to these periods are unaudited. The results of operations for the
three months ended March 31, 1999 are not necessarily indicative of results
to be expected for any future period.
F - 8
<PAGE>
2. SALE OF TRADE NAME
On July 31, 1998, the Company sold all its rights in and to the AltaVista
mark and the internet domain name "altavista.com" to Digital Equipment
Corporation for a total of $3,100,000, payable $350,000 in cash and
$2,750,000 in a promissory note. The note, payable in 12 quarterly
installments commencing October 1, 1998, bears interest at 7% annually.
Through April 2, 1999, all scheduled payments have been received.
A summary of future minimum receipts from this note receivable, follows:
<TABLE>
<CAPTION>
Years ending December 31, Amount
----------
<S> <C>
1999 $ 768,300
2000 1,024,400
2001 749,600
----------
Future minimum receipts 2,542,300
Less amount representing interest (7.0%) 227,600
----------
Present value of future minimum receipts 2,314,700
Less current portion 658,000
----------
$1,656,700
==========
</TABLE>
3. PROPERTY AND EQUIPMENT
A summary of property and equipment follows:
<TABLE>
<CAPTION>
MARCH 31, December 31,
1999 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
Office equipment $ 137,700 $ 90,500
Furniture and fixtures 10,300 9,300
------------ -------------
148,000 99,800
Less accumulated depreciation 41,500 34,100
------------ -------------
$ 106,500 $ 65,700
============ =============
</TABLE>
4. ACCRUED EXPENSES
A summary of accrued expenses follows:
<TABLE>
<CAPTION>
MARCH 31, December 31,
1999 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
Vacation $ 24,900 $ 24,900
Consulting fees 20,000 20,000
Salaries and wages 19,900 19,900
Other 100 8,700
------------ -------------
$ 64,900 $ 73,500
============ =============
</TABLE>
5. DEFERRED REVENUE
Deferred revenue consists of quarterly and annual subscriptions for web
hosting services. Revenue from the subscriptions is recognized ratably over
the term of the subscriptions.
F - 9
<PAGE>
6. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases its facilities and certain equipment under operating
leases. The facility leases require the Company to pay certain maintenance
and operating expenses, such as utilities, property taxes and insurance
costs. Rent expense for the three month periods ended March 31, 1999 and
1998 was $31,200 and $5,900, respectively (unaudited). Rent expense related
to these operating leases for the years ended December 31, 1998 and 1997
was $39,900 and $18,700, respectively.
A summary of the future minimum lease payments required under
non-cancelable operating leases with terms in excess of one year, follows:
<TABLE>
<CAPTION>
Years ending December 31, Amount
--------
1999 $ 95,700
<S> <C>
2000 91,300
2001 51,600
2002 3,600
--------
Future minimum lease payments $242,200
========
</TABLE>
In September 1998, the Company entered into an agreement whereby the
Company acts as guarantor of a third party in a sub-lease agreement. The
sub-lease agreement expires in September 2000.
Debt Agreement
The Company maintains a $200,000 revolving line of credit with a bank that
is secured by all corporate assets, including accounts receivable,
inventory and intangible assets. The loan is limited to $100,000 until the
Company fulfills certain milestone covenants and pays an additional loan
fee. The line of credit accrues interest at 2% over the Lender's Prime
Rate. Advances against the line of credit are limited to 70% of eligible
accounts receivable. As of March 31, 1999 and December 31, 1998, the line
of credit had no outstanding balance.
7. RELATED PARTY TRANSACTIONS
During the year ended December 31, 1998, the Company paid approximately
$20,000 for consulting services from a shareholder.
8. SHAREHOLDERS' EQUITY
Preferred Stock
The Company had authorized 5,000,000 shares of Preferred Stock that may be
issued in one or more series. As of December 31, 1998, the Company had
2,489,009 Preferred shares issued and outstanding, which are Series A, B
and C. Each series of Preferred Stock was identical in respect to rights
and preferences, as follows:
Each share of Preferred Stock was entitled to receive cash dividends equal
to $.20 per share per annum, payable prior and in preference to any
distribution to the holders of Common Stock. The rights to such dividends
were not cumulative.
Each share of Preferred Stock was convertible into such number of Common
Stock as determined by dividing $.20 by the then applicable conversion
price in effect at the time of the conversion. Due to the conversion of the
Company's preferred stock into common stock and a 1.513 stock split in
February 1999, as well as the recapitalization of the Company in connection
with the reverse acquisition in March 1999, the statements of shareholders'
equity (deficiency) and per share data have been restated (Note 12).
F - 10
<PAGE>
Stock Option Plans
For its stock options, the Company applies APB Opinion No. 25, Accounting
for Stock Issued to Employees. Accordingly, compensation costs were
insignificant, as the exercise price of the options issued approximated or
was higher than the estimated fair value of the common stock at date of
grant.
While the Company continues to apply APB Opinion No. 25, SFAS No. 123,
Accounting for Stock-Based Compensation, requires the Company to provide
pro forma information regarding net income (loss) as if compensation cost
for the Company's stock option plans had been determined in accordance with
the fair value based method prescribed by SFAS No. 123. The Company
estimates the fair value of stock options at the grant date by using the
minimum value method with the following assumptions used for the grants in
1998 and 1997, respectively: dividend yield of 0; risk-free interest rate
of 6.0% and 6.6%; and an expected life of five years for all plan options.
Under the accounting provisions of SFAS No. 123, the Company's net income
(loss) would have been reduced (increased) to the pro forma amounts
indicated below:
1998 1997
----------- -----------
As reported $ 1,663,300 $ (165,500)
=========== ===========
Pro forma $ 1,317,800 $ (171,300)
=========== ===========
A summary of the status of the Company's stock option plan as of December
31, 1998 and 1997 and changes during the years then ended (restated to
reflect the 1.513 stock split in February 1999), is presented in the
following table:
<TABLE>
<CAPTION>
Options Outstanding
------------------------------------------------
December 31, 1998 December 31, 1997
----------------------- -----------------------
Wtd.-Avg. Wtd.-Avg.
------------
Shares Exer. Price Shares Exer. Price
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Beginning 2,844,112 $ 0.007 2,806,278 $ 0.001
Granted 2,690,705 $ 0.480 37,834 $ 0.480
Exercised/forfeited - - - -
Ending 5,534,817 $ 0.237 2,844,112 $ 0.007
========= ============ ========= ============
Exercisable at year-end 3,194,587 2,795,400
========= =========
Wtd.-avg. fair value of options
granted during the year $ 0.480 $ 0.480
============ ============
</TABLE>
F - 11
<PAGE>
The following table summarizes information about stock options outstanding
as of December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------ -----------------------
Wtd.-Avg.
Range of Number Remaining Wtd.-Avg. Number Wtd.-Avg.
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 12/31/98 Life Price at 12/31/98 Price
- --------- ----------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
0.001 2,806,278 5.26 years $ 0.001 2,806,278 $ 0.001
0.480 2,728,539 9.54 years $ 0.480 388,310 $ 0.480
----------- ---------- ----------- ----------
5,534,817 $ 0.237 3,194,588 $ 0.059
=========== ========== =========== ==========
</TABLE>
9. INCOME TAXES
For the years ended December 31, 1998 and 1997, income tax expense
comprises:
<TABLE>
<CAPTION>
1998 CURRENT DEFERRED TOTAL
- ------- -------- --------- --------
<S> <C> <C> <C>
FEDERAL $ - $ 628,600 $628,600
STATE 800 118,600 119,400
- ------- -------- --------- --------
$ 800 $ 747,200 $748,000
======= ======== ========= ========
1997 Current Deferred Total
- ------- -------- --------- --------
Federal $ - $ - $ -
State 800 - 800
- ------- -------- --------- --------
$ 800 $ - $ 800
======= ======== ========= ========
</TABLE>
F - 12
<PAGE>
The following summarizes the differences between the income tax expense
(benefit) and the amount computed by applying the Federal income tax rate
of 34% in 1998 and 1997 to income (loss) before income taxes:
<TABLE>
<CAPTION>
Years ended December 31, 1998 1997
---------- ---------
<S> <C> <C>
Federal income tax at statutory rate $ 819,800 $(56,000)
State income taxes, net of federal benefit 138,200 (9,400)
(Decrease) increase in valuation allowance (211,200) 65,700
Other, net 1,200 500
---------- ---------
$ 748,000 $ 800
========== =========
</TABLE>
Deferred tax assets (liabilities) comprise the following:
<TABLE>
<CAPTION>
MARCH 31, December 31,
1999 1998
------------ --------------
(UNAUDITED)
<S> <C> <C>
Loss carryforwards $ 320,700 $ 166,600
Reserves not currently deductible 16,500 16,500
------------ --------------
Total deferred tax assets $ 337,200 $ 183,100
============ ==============
Installment sale of trade name $ (833,500) $ (919,700)
Depreciation (10,600) (10,600)
------------ --------------
Total deferred tax liabilities $ (844,100) $ (930,300)
============ ==============
</TABLE>
As of December 31, 1998, the Company has net operating loss carryforwards
available to reduce future taxable income, if any, of approximately
$453,700 and $194,100 for Federal and California state tax purposes,
respectively. The benefits from these carryforwards expire in various years
through 2018.
Pursuant to the "change in ownership" provisions of the Tax Reform Act of
1986, utilization of the Company's net operating loss carryover may be
limited, if a cumulative change of ownership of more than 50% occurs within
any three-year period.
10. CONCENTRATIONS
Major Customers
During the three month periods ended March 31, 1999 and 1998 and the years
ended December 31, 1998 and 1997, the Company had no customers that
comprised more than 10% of net revenues.
Credit Risk
Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of cash and cash equivalents. The
Company places its cash and cash equivalents with high quality financial
institutions. As of December 31, 1998, the Company had deposits at one
financial institution that aggregated $350,000, of which $100,000 is
insured by the Federal Deposit Insurance Corporation.
11. STATEMENT OF CASH FLOWS
During the three month periods ended March 31, 1999 and 1998, non-cash
financing activities included the issuance of 85,011 and 67,604 shares of
common stock aggregating approximately $42,500 and $27,800, respectively
(unaudited). During the three month period ended March 31, 1999, additional
non-cash financing activities included the issuance of 25,000 shares of
common stock for the payment of stock issuance costs totaling $12,500
(unaudited). During the years ended December 31, 1998 and 1997, non-cash
financing activities included the issuance of 323,672 and 59,025 shares of
common stock for services aggregating approximately $133,100 and $18,300,
respectively.
F - 13
<PAGE>
During the three month periods ended March 31, 1999 and 1998, there were no
interest or income tax payments (unaudited). During 1998 and 1997, the
Company paid $2,800 and $3,700 for interest, respectively, and $800 for
income taxes in both years.
12. SUBSEQUENT EVENTS
In February 1999, 1,879,317 stock options were exercised for common stock,
and 56,173 shares of common stock were issued for services. Also in
February 1999, the Company converted its preferred stock into common stock
on a 1 to 1.5 basis.
Immediately following these issuances of common stock and the conversion of
preferred stock into common stock, the Company did a 1 to 1.513 stock split
in anticipation of the Company entering into an acquisition agreement with
a publicly traded shell corporation. On a retroactive basis, the conversion
and stock split resulted in the Company having 6,650,145 shares of common
stock issued and outstanding as of December 31, 1998.
Due to the conversion of the preferred stock into common stock and the
1.513 stock split, the effective exercise price of the stock options
originally granted at $0.75 was now $0.33; therefore, on March 1, 1999, the
Company adjusted the exercise price to $0.48.
As more fully described in Note 1, the Company completed a reverse
acquisition with PhotoLoft.com on March 1, 1999.
Immediately following the closing of the acquisition, the Company completed
a Private Placement of 2,000,000 shares of common stock aggregating
$1,000,000. Additionally, the Company issued 25,000 shares of restricted
common stock as payment for a portion of the underwriter's commission and
adopted the 1999 Stock Option Plan (the Plan). The Company then granted
225,000 options under the Plan, which vested immediately and were exercised
in March 1999.
In March 1999, the Company invested $10,000 in the purchase of 10,000
shares of the common stock of a high tech company.
Also in March 1999, the Company entered into an agreement to obtain public
relations services valued at a minimum of $6,000 per month through March
2000. The Company expects to amend the agreement to include an additional
$4,000 per month in services. The services provided will aggregate
approximately $100,000 over the life of the agreement.
In April 1999, the Company became aware of an unasserted claim from a
former employee and co-founder of ID 4 Life, a product of the Company. It
is the opinion of management that the outcome of this matter will not
materially affect the consolidated operations or the consolidated financial
position of the Company.
F - 14
<PAGE>
(A) EXHIBITS
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
Exhibit No. Exhibit Name
- ----------- ----------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Reorganization dated as of February 16, 1999 by and
among Data Growth, Inc. Gary B. Peterson and the Registrant.
3.1 Articles of Incorporation of the Registrant.
3.2 Certificate of Amendment to the Articles of Incorporation of the Registrant.
3.3 By-Laws of Registrant.
4.1 Sample Stock Certificate of the Registrant.
4.2 See Exhibit Nos. 3.1, 3.2 and 3.3.
10.1 Form of Series A Preferred Stock Purchase Agreement
10.2 Series B Preferred Stock Purchase Agreement dated August 1, 1996 by and
among Kris Chellam and the Registrant.
10.3 OEM/ Re-Marketing Agreement, dated November 15, 1996, by and between
ArcSoft, Inc. and the Registrant.
10.4 Software License Agreement, dated January 22, 1997 by and between Seattle
Filmworks, Inc, and the Registrant.
10.5 Online Distribution Agreement, dated April 24, 1997 by and between KC
Audio and the Registrant.
10.6 OEM License Agreement, dated May 22, 1998, by and between AITech
International and the Registrant.
10.7 Series C Preferred Stock Purchase Agreement dated June 5, 1997 by and
among Gary Kremen and the Registrant.
10.8 Distribution and Re-Publishing Agreement dated October 17, 1997 by and
between Softpool, a division of infoMedia GmbH and the Registrant.
10.9 Engagement letter dated October 24, 1997 between Gary Kremen and the
Registrant.
65
<PAGE>
10.10 Letter Agreement dated February 12, 1998 by and between Venture Banking
Group and the Registrant.
10.11 Distribution Agreement dated March, 1998 by and between Kuni Research
International Corporation and the Registrant.
10.12 Lease Agreement dated July 8, 1998 by and between The Manufacturer's
Life Insurance Company, (U.S.A.) Company, Ltd., and the Registrant.
+10.13 Agreement, dated July 31, 1998, by and between Digital Equipment
Corporation and the Registrant.
10.14 Sublease Agreement dated September 1, 1998 by and between Surefire
Verification, Inc. and the Registrant.
+10.15 Consulting Services Agreement, dated October 22, 1998 by and between
Hewlett-Packard Company and the Registrant.
10.16 Amendment to an Agreement with Infomedia, dated January 15, 1999.
10.17 Sublease Agreement dated February 1, 1999 by and between Summit
Microelectronics and the Registrant.
10.18 Amendment No. 1 to Consulting Services Agreement (Exhibit 10.15 above),
dated February 9, 1999 by and between Hewlett-Packard Company and the
Registrant
10.19 Letter Agreement, dated February 10, 1999 by and between Bay Tree Capital
Associates, LLC and the Registrant.
10.20 Employment Agreement dated February 26, 1999 by and between Mr. Jack
Marshall and the Registrant.
10.21 Stock Option Plan of the Registrant.
10.22 Form of Stock Option Agreement issued under the Stock Option Plan of the
Registrant.
10.23 Stock Option Agreement dated July 1, 1999 by and between Chris McConn
and the Registrant
10.24 Stock Option Agreement dated July 1, 1999 by and between Jack Marshall
and the Registrant
10.25 Co-Branded Marketing Agreement, dated March 8, 1999, by and between
Picture Works and the Registrant.
66
<PAGE>
10.26 Co-Branded Marketing Agreement, dated March 11, 1999 between Umax
Technologies, Inc. and the Registrant.
10.27 Internet Services and Co-Location Agreement, dated March 15, 1999 by and
between AboveNet Communications, Inc. and the Registrant.
10.28 Cowabunga Reciprocal Website Linking Agreement, dated April,1999 by and
between Cowabunga Enterprises, Inc., a wholly owned subsidiary of
Gateway 2000, Inc. and the Registrant.
10.29 Representation Agreement, dated April 26, 1999, by and between ADSmart
Network and the Registrant.
10.30 Co-Branded Marketing Agreement, dated May 3, 1999, by and between
Tribal Voice and the Registrant.
10.31 Co-Branded Marketing Agreement, dated May 12, 1999, by and between,
Netopia, Inc. and the Registrant.
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule
<FN>
+ Confidential treatment requested.
</TABLE>
67
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
PHOTOLOFT.COM
(Registrant)
Date: July 9, 1999 By: /s/ Jack Marshall
-------------------
Jack Marshall, Chief Executive
Officer, President and Treasurer
68
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
This Agreement and Plan of Reorganization (hereinafter the "Agreement") is
entered into effective as of this 16th day of February 1999, by and among Data
-----
Growth, Inc., a Nevada corporation (hereinafter "DGI"); Gary B. Peterson, a
shareholder of DGI (hereinafter "Peterson"); PhotoLoft.com, Inc., a California
corporation (hereinafter "Photo"), and the owners of the outstanding shares of
common stock of Photo (hereinafter the "Photo Stockholders").
RECITALS:
WHEREAS, the Photo Stockholders own all of the issued and outstanding
common stock of Photo (the "Photo Common Stock"). DGI desires to acquire the
Photo Common Stock solely in exchange for voting common stock of DGI, making
Photo a wholly-owned subsidiary of DGI; and
WHEREAS, the Photo Stockholders (as set forth on Exhibit "A" to be
delivered on or before Closing) desire to acquire voting common stock of DGI in
exchange for the Photo Common Stock, as more fully set forth herein.
NOW THEREFORE, for the mutual consideration set out herein and other good
and valuable consideration, the legal sufficiency of which is hereby
acknowledged, the parties agree
as follows:
AGREEMENT
---------
1. Plan of Reorganization. It is hereby agreed that the Photo Common
------------------------
Stock shall be acquired by DGI in exchange solely for DGI common voting stock
(the "DGI Shares"). It is the intention of the parties hereto that all of the
issued and outstanding shares of capital stock of Photo shall be acquired by DGI
in exchange solely for DGI common voting stock and that this entire transaction
qualify as a corporate reorganization under Section 368(a)(1)(B) and/or Section
351 of the Internal Revenue Code of 1986, as amended, and related or other
applicable sections thereunder.
<PAGE>
2. Exchange of Shares. DGI and Photo Stockholders agree that on the
--------------------
Closing Date or at the Closing as hereinafter defined, the Photo Common Stock
shall be delivered at Closing to DGI in exchange for the DGI Shares, after
giving effect to a 2.46 to 1 reverse stock split (the "DGI Reverse Stock Split")
as to all presently outstanding shares of DGI common stock, as follows:
(a) At Closing, DGI shall, subject to the conditions set forth herein,
issue an aggregate of 12,375,000 shares of DGI common stock (after giving
effect to the DGI Reverse Stock Split) for immediate delivery to the Photo
Stockholders in exchange for DGI Shares. The 12,375,000 shares shall be
inclusive of shares reserved for issuance upon exercise of options granted
by DGI to optionholders of Photo at Closing in exchange for existing Photo
options as set forth on Exhibit "A".
<PAGE>
(b) Each Photo Stockholder shall execute this Agreement or a written
consent to the exchange of their Photo Common Stock for DGI Shares.
(c) Unless otherwise agreed by DGI and Photo this transaction shall
close only in the event DGI is able to acquire at least 80% of the
outstanding Photo Common Stock; however, it is the intent of the parties to
have DGI acquire all of the Photo Common Stock.
3. PRE-CLOSING EVENTS. The Closing is subject to the completion of the
-------------------
following:
(a) DGI shall have authorized 50,000,000 shares of $.001 par value
common stock and at Closing shall amend its Articles of Incorporation to
authorize 500,000 shares of $.OO1 par value preferred stock. The preferred
stock shall be subject to issuance in such series and with such rights,
preferences and designations as determined in the sole discretion of the
board of directors.
(b) DGI shall have effectuated the DGI Reverse Stock Split at or about
the Closing, and shall have 625,000 shares of its common stock issued and
outstanding and no other shares of capital stock issued or outstanding.
(c) DGI shall demonstrate to the reasonable satisfaction of Photo that
it has no material assets and no liabilities contingent or fixed.
4. EXCHANGE OF SECURITIES. As of the Closing Date each of the following
------------------------
shall occur:
(a) All outstanding convertible preferred stock of Photo shall be
converted to Photo common stock prior to Closing and all shares of Photo
Common Stock issued and outstanding on the Closing Date shall be exchanged
for the DGI Shares (up to an aggregate amount of 12,375,000 DGI Shares to
be delivered at Closing). All such outstanding shares of Photo Common Stock
shall be deemed, after Closing, to be owned by DGI. The holders of such
certificates previously evidencing shares of Photo Common Stock outstanding
immediately prior to the Closing Date shall cease to have any rights with
respect to such shares of Photo Common Stock except as otherwise provided
herein or by law;
<PAGE>
(b) Any shares of Photo Common Stock held in the treasury of Photo
immediately prior to the Closing Date shall automatically be canceled and
extinguished without any conversion thereof and no payment shall be made
with respect thereto;
(c) The 625,000 shares of DGI common stock previously issued and
outstanding prior to the Closing, after giving effect to the DGI Reverse
Split, will remain outstanding.
5. OTHER EVENTS OCCURRING AT CLOSING. At closing, the following shall
------------------------------------
be accomplished:
2
<PAGE>
(a) DGI shall file an amendment to its Articles of Incorporation with
the Secretary of State of the State of Nevada in substantially the form
attached hereto as Exhibit "B" effecting an amendment to its Articles of
Incorporation to reflect (1) a name change, (2) authorize 500,000 shares of
preferred stock, (3) add a provision eliminating liability of officers and
directors to shareholders under Nevada law, and (4) to put of record the
DGI Reverse Stock Split as set forth in the attached Exhibit "B".
(b) The resignation of the existing DGI officers and directors and
appointment of new officers and directors as directed by Photo.
(c) DGI shall have completed a limited offering under Regulation D,
Rule 504, as promulgated by the Securities and Exchange Commission ("SEC")
under the Securities Act of 1933, as amended, of 2,000,000 shares of its
common stock at $.50 per share. The gross proceeds of this offering (the
"DGI Financing") shall be $1,000,000, which amount, less agreed upon costs,
shall be delivered to the control of new management of DGI at Closing in
good funds or shall be represented by the conversion of previous loans to
Photo arranged for by Baytree. The DGI Financing shall have been completed
in compliance with all applicable state and federal securities laws and the
securities sold shall be delivered at Closing to the investors in the DGI
Financing. Persons who have loaned money to Photo, up to $1,000,000, shall
be given the opportunity to convert the principal of said loans to the
purchase of shares in the limited offering prior to Closing upon the same
terms as other investors in the limited offering.
(d) It is recognized by the parties hereto that Photo entered into an
agreement, including all amendments thereto (the "Baytree Agreement") dated
February 9, 1998, with Baytree Capital Associates, LLC (" Baytree ")
wherein Baytree agreed to identify a public company to be involved in a
"reverse merger" with Photo, and that DGI is the public company agreed to
by Baytree and Photo. Under said Baytree Agreement, at Closing of the
transactions described herein, DGI shall issue 25,000 shares of its common
stock (after given effect to the DGI Reverse Stock Split) to Baytree. These
shares are deemed to be covered by the defined term "DGI Shares" as set
forth herein for purposes of all representations and warranties of DGI and
the legal opinion given on behalf of DGI herein. Out of the proceeds of the
DGI Financing (as further defined herein) there shall be paid at Closing, a
non-accountable expense allowance of $10,000 to Baytree and the fees and
reasonable disbursements of Acquirer's legal counsel not to exceed
$30,000.00 (to be paid from the proceeds of the DGI Financing).
Furthermore, DGI recognizes and hereby assumes, at Closing, the obligations
of Photo set forth in the Baytree Agreement including the obligation to
register shares of its common stock issued to Baytree hereunder at the
request of Baytree in accordance with the express terms and conditions of
said Baytree Agreement including 'Piggyback" registration rights.
(e) DGI shall adopt a Stock Option Plan at Closing to include up to
1,000,000 shares of its common stock. The Plan shall include "incentive"
stock options under Section 422 of the Internal Revenue Code of 1986, as
amended and other options and similar rights. DGI shall grant options
covering 225,000 shares under said plan to employees and others, at
Closing, exercisable at $.50 per share, as designated by Photo.
3
<PAGE>
6. DELIVERY OF SHARES. On or as soon as practicable after the Closing
-------------------
Date, Photo will use its best efforts to cause the Photo Stockholders to
surrender certificates for cancellation representing their shares of Photo
Common Stock, against delivery of certificates representing the DGI Shares for
which the shares of Photo Common Stock are to be exchanged at Closing.
7. REPRESENTATIONS OF PHOTO STOCKHOLDERS. Each Photo Stockholder hereby
---------------------------------------
represents and warrants each only as to its own Photo Common Stock, effective
this date and the Closing Date as follows:
(a) Except as may be set forth in Exhibit "A", the Photo Common Stock
is free from claims, liens, or other encumbrances, and at the Closing Date
said Photo Stockholder will have good title and the unqualified right to
transfer and dispose of such Photo Common Stock,
(b) Said Photo Stockholder is the sole owner of the issued and
outstanding Photo Common Stock as set forth in Exhibit "A";
(c) Said Photo Stockholder has no present intent to sell or dispose of
the DGI Shares and is not under a binding obligation, formal commitment, or
existing plan to sell or otherwise dispose of the DGI Shares.
8. REPRESENTATIONS OF PHOTO. Photo hereby represents and warrants as
---------------------------
follows, which warranties and representations shall also be true as of the
Closing Date:
(a) Except as noted on Exhibit "A", the Photo Stockholders listed on
the attached Exhibit "A" are the sole owners of record and beneficially of
the issued and outstanding common stock of Photo.
(b) Photo has no outstanding or authorized capital stock, warrants,
options or convertible securities other than as described in the Photo
Financial Statements or on Exhibit "A", attached hereto.
(c) The audited financial statements as of and for the periods ended
December 31, 1997 and 1996, and unaudited financial statements for the
period ended December 31, 1998, which have been (or will be prior
dissemination of an Information Statement by DGI) delivered to DGI
(hereinafter referred to as the "Photo Financial Statements") are complete
and accurate and fairly present the financial condition of Photo as of the
dates thereof and the results of its operations for the periods covered.
There are no material liabilities or obligations, either fixed or
contingent, not disclosed in the Photo Financial Statements or in any
exhibit thereto or notes thereto other than contracts or obligations in the
ordinary course of business; and no such contracts or obligations in the
ordinary course of business constitute liens or other liabilities which
materially alter the financial condition of Photo as reflected in the Photo
Financial Statements. Photo has good title to all assets shown on the Photo
Financial Statements subject only to dispositions and other transactions in
the ordinary course of business, the disclosures set forth herein and liens
and encumbrances of record. The Photo Financial Statements have been
4
<PAGE>
prepared in accordance with generally accepted accounting principles
consistently applied (except as may be indicated therein or in the notes
thereto) and fairly present the financial position of Photo as of the dates
thereof and the results of its operations and changes in financial position
for the periods then ended.
(d) Since the date of the Photo Financial Statements, there have not
been any material adverse changes in the financial position of Photo except
changes arising in the ordinary course of business, which changes will in
no event materially and adversely affect the financial position of Photo.
(e) Photo is not a party to any material pending litigation or, to its
best knowledge, any governmental investigation or proceeding, not reflected
in the Photo Financial Statements, and to its best knowledge, no material
litigation, claims, assessments or any governmental proceedings are
threatened against Photo.
(f) Photo is in good standing in its jurisdiction of incorporation,
and is in good standing and duly qualified, to do business in each
jurisdiction where required to be so qualified except where the failure to
so qualify would have no material negative impact on Photo.
(g) Photo has (or, by the Closing Date, will have flied) all material
tax, governmental and/or related forms and reports (or extensions thereof)
due or required to be filed and has (or will have) paid or made adequate
provisions for all taxes or assessments which have become due as of the
Closing Date.
(h) Photo has not materially breached any material agreement to which
it is a party. Photo has previously given DGI copies or access thereto of
all material contracts, commitments and/or agreements to which Photo is a
party including all relationships or dealings with related parties or
affiliates.
(i) Photo has no subsidiary corporations except as described in
writing to DGI.
(j) Photo has made all material corporate financial records, minute
books, and other corporate documents and records available for review to
present management of DGI prior to the Closing Date, during reasonable
business hours and on reasonable notice.
(k) The execution of this Agreement does not materially violate or
breach any material agreement or contract to which Photo is a party and has
been duly authorized by all appropriate and necessary corporate action
under California of other applicable law and Photo, to the extent required,
has obtained all necessary approvals or consents required by any agreement
to which Photo is a party.
5
<PAGE>
(l) All disclosure information regarding Photo which is to be set
forth in disclosure documents of DGI or otherwise delivered to DGI by Photo
for use in connection with the transaction (the "Acquisition") described
herein is true, complete and accurate in all material respects.
9. REPRESENTATIONS OF DGI AND PETERSON. DGI, and Peterson
-------------------------------------
to the best of his knowledge, hereby jointly and severally represent and warrant
as follows, each of which representations and warranties shall continue to be
true as of the Closing Date:
(a) As of the Closing Date, the DGI Shares, to be issued and delivered
to the Photo Stockholders hereunder will, when so issued and delivered,
constitute, duly authorized, validly and legally issued shares of DGI
common stock, fully-paid and nonassessable. DGI shall have completed its
reverse stock split wherein each holder of DGI Shares shall have received
one share of the DGI Shares for each 2.46 DGI Shares previously held. The
total number of DGI shares of common stock outstanding shall be 625,000. No
shares of DGI preferred stock, shall be outstanding.
(b) DGI has the corporate power to enter into this Agreement and to
perform its respective obligations hereunder. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by the board of directors of DGI. The execution
and performance of this Agreement will not constitute a material breach of
any agreement, indenture, mortgage, license or other instrument or document
to which DGI is a party and will not violate any judgment, decree, order,
writ, rule, statute, or regulation applicable to DGI or its properties. The
execution and performance of this Agreement will not violate or conflict
with any provision of the Articles of Incorporation or by-laws of DGI.
(c) DGI has delivered to Photo (or shall deliver prior to Closing) a
true and complete copy of its audited financial statements for the years
ended December 31, 1996, 1997, and 1998 (the "DGI Financial Statements"),
The DGI Financial Statements are complete, accurate and fairly present the
financial condition of DGI as of the dates thereof and the results of its
operations for the periods then ended. There are no material liabilities or
obligations either fixed or contingent not reflected therein. The DGI
Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may
be indicated therein or in the notes thereto) and fairly present the
financial position of DGI as of the dates thereof and the results of its
operations and changes in financial position for the periods then ended.
(d) Since December 31, 1998, there have not been any material adverse
changes in the financial condition of DGI except with regard to
disbursements to pay reasonable and ordinary expenses in connection with
maintaining its corporate status and pursuing the matters contemplated in
this Agreement. Prior to Closing, all accounts payable and other
liabilities of DGI shall be paid and satisfied in full and DGI shall have
no liabilities either contingent or fixed.
6
<PAGE>
(e) DGI is not a party to or the subject of any pending litigation,
claims, or governmental investigation or proceeding not reflected in the
DGI Financial Statements or otherwise disclosed herein, and there are no
lawsuits, claims, assessments, investigations, or similar matters, to the
best knowledge of Peterson, threatened or contemplated against or affecting
DGI, its management or its properties.
(f) DGI is duly organized, validly existing and in good standing under
the laws of the State of Nevada; has the corporate power to own its
property and to carry on its business as now being conducted and is duly
qualified to do business in any jurisdiction where so required except where
the failure to so qualify would have no material negative impact on it.
(g) DGI has filed all federal, state, county and local income, excise,
property and other tax, governmental and/or related returns, forms, or
reports, which are due or required to be filed by it prior to the date
hereof, except where the failure to do so would have no material adverse
impact on DGI, and has paid or made adequate provision in the DGI Financial
Statements for the payment of all taxes, fees, or assessments which have or
may become due pursuant to such returns or pursuant to any assessments
received. DGI is not delinquent or obligated for any tax, penalty,
interest, delinquency or charge.
(h) There are no existing options, calls, warrants, preemptive rights
or commitments of any character relating to the issued or unissued capital
stock or other securities of DGI, except as contemplated in this Agreement.
(i) The corporate financial records, minute books, and other documents
and records of DGI have been made available to Photo prior to the Closing
and shall be delivered to new management of DGI at Closing.
(j) DGI has not breached, nor is there any pending, or to the
knowledge of management, any threatened claim that DGI has breached, any of
the terms or conditions of any agreements, contracts or commitments to
which it is a party or by which it or its assets are is bound. The
execution and performance hereof will not violate any provisions of
applicable law or any agreement to which DGI is subject. DGI hereby
represents that it has no business operations or material assets and it is
not a party to any material contract or commitment other than appointment
documents with its transfer agent, and that it has disclosed to Photo all
relationships or dealings with related parties or affiliates.
(k) DGI common stock is currently approved for quotation on the OTC
Bulletin Board under the symbol "TFGI" and there are no stop orders in
effect with respect thereto.
(l) All information regarding DGI which has been provided to Photo or
otherwise disclosed in connection with the transactions contemplated
herein, is true, complete and accurate in all material respects. DGI and
Peterson specifically disclaim any responsibility regarding disclosures as
to Photo, its business or its financial condition.
7
<PAGE>
10. Closing. The Closing of the transactions contemplated herein shall
-------
take place on such date (the "Closing") as mutually determined by the parties
hereto when all conditions precedent have been met and all required documents
have been delivered, which Closing is expected to take place on or about
February 26, 1999, but no later than March 4, 1999, unless extended by mutual
consent of all parties hereto. The "Closing Date" of the transactions described
herein (the "Acquisition"), shall be that date on which all conditions set forth
herein have been met and the DGI Shares are issued in exchange for the Photo
Common Stock.
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PHOTO. All obligations of
--------------------------------------------------
Photo under this Agreement are subject to the fulfillment, prior to or as of the
Closing and/or the Closing Date, as indicated below, of each of the following
conditions:
(a) The representations and warranties by or on behalf of Peterson and
DGI contained in this Agreement or in any certificate or document delivered
pursuant to the provisions hereof shall be true in all material respects at
and as of the Closing and Closing Date as though such representations and
warranties were made at and as of such time.
(b) DGI shall have performed and complied with all covenants,
agreements, and conditions set forth in, and shall have executed and
delivered all documents required by this Agreement to be performed or
complied with or executed and delivered by it prior to or at the Closing.
(e) On or before the Closing, the board of directors, and shareholders
representing a majority interest the outstanding common stock of DGI, shall
have approved in accordance with applicable state corporation law the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein.
(d) On or before the Closing Date, DGI shall have delivered to Photo
certified copies of resolutions of the board of directors and shareholders
of DGI approving and authorizing the execution, delivery and performance of
this Agreement and authorizing all of the necessary and proper action to
enable DGI to comply with the terms of this Agreement including the
election of Photo's nominees to the Board of Directors of DGI and all
matters outlined herein.
(e) The Acquisition shall be permitted by applicable law and DGI shall
have sufficient shares of its capital stock authorized to complete the
Acquisition.
(f) At Closing, the existing sole officer and director of DGI shall
have resigned in writing from all positions as director and officer of DGI
effective upon the election and appointment of the Photo nominees.
(g) At the Closing, all instruments and documents delivered to Photo
and Photo Stockholders pursuant to the provisions hereof shall be
reasonably satisfactory to legal counsel for Photo.
8
<PAGE>
(h) The shares of restricted DGI capital stock to be issued to Photo
Stockholders and in the DGI Financing at Closing will be validly issued,
nonassessable and fully-paid under Delaware corporation law and will be
issued in compliance with all federal, state and applicable corporation and
securities laws.
(i) Photo and Photo Stockholders shall have received the advice of
their tax advisor, if deemed necessary by them, as to all tax aspects of
the Acquisition.
(j) Photo shall have received all necessary and required approvals and
consents from required parties and its shareholders.
(k) DGI shall have completed the DGI Financing.
(1) At the Closing, DGI shall have delivered to Photo an opinion of
its counsel dated as of the Closing to the effect that:
(i) DGI is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation;
(ii) This Agreement has been duly authorized, executed and
delivered by DGI and is a valid and binding obligation of DGI
enforceable in accordance with its terms;
(iii) DGI through its board of directors and stockholders has
taken all corporate action necessary for performance under this
Agreement;
(iv) The documents executed and delivered by DGI to Photo and
Photo Stockholders hereunder are valid and binding in accordance with
their terms and vest in Photo Stockholders, as the case may be, all
right, title and interest in and to the DGI Shares to be issued
pursuant to the terms hereof, and the DGI Shares when issued will be
duly and validly issued, fully-paid and nonassessable;
(v) DGI has the corporate power to execute, deliver and perform
under this Agreement;
(vi) Legal counsel for DGI is not aware of any liabilities,
claims or lawsuits involving DGI;
12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF DGI. All obligations of DGI
-----------------------------------------------
under this Agreement are subject to the fulfillment, prior to or at the Closing,
of each of the following conditions:
(a) The representations and warranties by Photo and Photo Stockholders
contained in this Agreement or in any certificate or document delivered
pursuant to the provisions hereof shall
9
<PAGE>
be true in all material respects at and as of the Closing as though such
representations and warranties were made at and as of such time.
(b) Photo shall have performed and complied with, in all material
respects, all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by it prior to or at the
Closing;
(c) Photo shall deliver on behalf of the Photo Stockholders a letter
commonly known as an "Investment Letter," signed by each of said
shareholders, in substantially the form attached hereto as Exhibit "C",
acknowledging that the DGI Shares are being acquired for investment
purposes.
(d) Photo shall deliver an opinion of its legal counsel to the effect
that:
(i) Photo is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation
and is duly qualified to do business in any jurisdiction where so
required except where the failure to so qualify would have no material
adverse impact on Photo;
(ii) This Agreement has been duly authorized, executed and
delivered by Photo.
(iii) The documents executed and delivered by Photo and Photo
Stockholders to DGI hereunder are valid and binding in accordance with
their terms and vest in DGI all right, tide and interest in and to the
Photo Common Stock, which stock is duly and validly issued, fully-paid
and nonassessable.
13. INDEMNIFICATION.For a period of one year from the Closing, DGI and
----------------
Peterson agree to jointly and severally indemnify and hold harmless Photo, and
Photo agrees to indemnify and hold harmless DGI and Peterson, at all times after
the date of this Agreement against and in respect of any liability, damage or
deficiency, all actions, suits, proceedings, demands, assessments, judgments,
costs and expenses including attorney's fees incident to any of the foregoing,
resulting from any material misrepresentations made by an indemnifying party to
an indemnified party, an indemnifying party's breach of covenant or warranty or
an indemnifying party's nonfulfillment of any agreement hereunder, or from any
material misrepresentation in or omission from any certificate famished or to be
@shed hereunder.
14. NATURE AND SURVIVAL OF REPRESENTATIONS. All representations,
---------------------------------------
warranties and covenants made by any party in this Agreement shall survive the
Closing and the consummation of the transactions contemplated hereby for one
year from the Closing. All of the parties hereto are executing and carrying out
the provisions of this Agreement in reliance solely on the representations,
warranties and covenants and agreements contained in this Agreement and not upon
any investigation upon which it might have made or any representation, warranty,
agreement, promise or information, written or oral, made by the other parry or
any other person other than as specifically set forth herein.
10
<PAGE>
15. DOCUMENTS AT CLOSING. At the Closing, the following documents
-----------------------
shall be delivered:
(a) Photo will deliver, or will cause to be delivered, to DGI the
following:
(i) a certificate executed by the President and Secretary of
Photo to the effect that all representations and warranties made by
Photo under this Agreement are true and correct as of the Closing, the
same as though originally given to DGI on said date;
(ii) a certificate from the jurisdiction of incorporation of
Photo dated at or about the Closing to the effect that Photo is in
good standing under the laws of said jurisdiction;
(iii) Investment Letters in the form attached hereto as Exhibit
"C" executed by each Photo Stockholder;
(iv) such other instruments, documents and certificates, if any,
as are required to be delivered pursuant to the provisions of this
Agreement;
(v) certified copies of resolutions adopted by the shareholders
and directors of Photo authorizing this transaction; and
(vi) all other items, the delivery of which is a condition
precedent to the obligations of DGI as set forth herein.
(vii) the legal opinion required by Section 12(d) hereof.
(b) DGI will deliver or cause to be delivered to Photo:
(i) stock certificates representing the DGI Shares to be issued
as a part of the stock exchange as described herein;
(ii) a certificate of the President of DGI, to the effect that
all representations and warranties of DGI made under this Agreement
are true and correct as of the Closing, the same as though originally
given to Photo on said date;
(iii) certified copies of resolutions adopted by DGI's board of
directors and DGI's Stockholders authorizing the Acquisition and all
related matters described herein;
(iv) certificate from the jurisdiction of incorporation of DGI
dated at or about the Closing Date that DGI is in good standing under
the laws of said state;
(v) opinion of DGI's counsel as described in Section 11 (I)
above;
11
<PAGE>
(vi) such other instruments and documents as are required to be
delivered pursuant to the provisions of this Agreement;
(vii) resignation of the existing officer and director of DGI;
(viii) all corporate and financial records of DGI; and
(ix) all other items, the delivery of which is a condition
precedent to the obligations of Photo, as set forth in Section 12
hereof.
16. FINDER'S FEES. DGI, represents and warrants to Photo, and
--------------
Photo represents and warrants to DGI that neither of them, or any party acting
on their behalf, has incurred any liabilities, either express or implied, to any
"broker" of "finder" or similar person in connection with this Agreement or any
of the transactions contemplated hereby other than the arrangements described in
Section 5(d) hereof. In this regard, DGI, on the one hand, and Photo on the
other hand, will indemnify and hold the other harmless from any claim, loss,
cost or expense whatsoever (including reasonable fees and disbursements of
counsel) from or relating to any such express or implied liability other than as
disclosed herein.
17. MISCELLANEOUS.
--------------
(a) Further Assurances. At any time, and from time to time, after the
-------------------
Closing Date, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to carry out the intent
and purposes of this Agreement.
(b) Waiver. Any failure on the part of any party hereto to comply with
------
any of its obligations, agreements or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
(c) Amendment. This Agreement may be amended only in writing as agreed
---------
to by all parties hereto.
(d) Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed to have been given if delivered in person or sent
by prepaid first class registered or certified mail, return receipt requested.
(e) Headings. The section and subsection headings in this Agreement
--------
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Counterparts. This Agreement may be executed simultaneously 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.
12
<PAGE>
(g) Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with the laws of the State of Nevada.
(h) Binding Effect . This Agreement shall be binding upon the parties
---------------
hereto and ixiu-re to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns.
(i) Entire Agreement. This Agreement and the attached Exhibits
------------------
constitute the entire agreement of the parties covering everything agreed upon
or understood in the transaction. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any kind as
conditions or inducements to the execution hereof.
(j) Time. Time is of the essence.
----
(k) Severability . If any part of this Agreement is deemed to be
------------
unenforceable the balance of the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
DATA GROWTH, INC.
By: s.________________
Gary B. Peterson, President
s.________________
Gary B. Peterson, individually
PHOTOLOFT.COM, INC.
By: s.________________
Jack Marshall, President
S T 0 C K H 0 L D B R S 0 F
PHOTOLOFT.COM, INC.
________________ ________________
George Perlegos Jack Marshall
________________ ________________
Gust Perlegos Gary Kremen
________________ ________________
John Marshall Mikes Sisos
13
<PAGE>
(g) Governing Law . This Agreement shall be construed and enforced in
--------------
accordance with the laws of the State of Nevada.
(h) Binding Effect . This Agreement shall be binding upon the parties
---------------
hereto and ixiu-re to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns.
(i) Entire Agreement. This Agreement and the attached Exhibits
------------------
constitute the entire agreement of the parties covering everything agreed upon
or understood in the transaction. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any kind as
conditions or inducements to the execution hereof.
(j) Time. Time is of the essence.
----
(k) Severability . If any part of this Agreement is deemed to be
------------
unenforceable the balance of the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
DATA GROWTH, INC.
By:___________________
Gary B. Peterson, President
Gary B. Peterson, individually
PHOTOLOFT.COM, INC.
By:___________________
Jack Marshall, President
S T 0 C K H 0 L D B R S 0 F
PHOTOLOFT.COM, INC.
________________ ________________
George Perlegos Jack Marshall
________________ ________________
Gust Perlegos Gary Kremen
________________ ________________
s. John Marshall Mikes Sisos
13
<PAGE>
___________
Mike Ross
_____________
Chris McConn
______________
Kay Wolf Jones
14
<PAGE>
(g) Governing Law . This Agreement shall be construed and enforced in
--------------
accordance with the laws of the State of Nevada.
(h) Binding Effect . This Agreement shall be binding upon the parties
---------------
hereto and ixiu-re to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns.
(i) Entire Agreement. This Agreement and the attached Exhibits
------------------
constitute the entire agreement of the parties covering everything agreed upon
or understood in the transaction. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any kind as
conditions or inducements to the execution hereof.
(j) Time. Time is of the essence.
----
(k) Severability . If any part of this Agreement is deemed to be
------------
unenforceable the balance of the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
DATA GROWTH, INC.
By: s._____________________
Gary B. Peterson, President
s. _____________________
Gary B. Peterson, individually
PHOTOLOFT.COM, INC.
By: s.__________________
Jack Marshall, President
S T 0 C K H 0 L D B R S 0 F
PHOTOLOFT.COM, INC.
s._______________ s._____________
George Perlegos Jack Marshall
s._______________ s._____________
Gust Perlegos Gary Kremen
s._______________ s._____________
John Marshall Mikes Sisos
14
<PAGE>
(g) Governing Law . This Agreement shall be construed and enforced in
--------------
accordance with the laws of the State of Nevada.
(h) Binding Effect . This Agreement shall be binding upon the parties
---------------
hereto and ixiu-re to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns.
(i) Entire Agreement. This Agreement and the attached Exhibits
------------------
constitute the entire agreement of the parties covering everything agreed upon
or understood in the transaction. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any kind as
conditions or inducements to the execution hereof.
(j) Time. Time is of the essence.
----
(k) Severability . If any part of this Agreement is deemed to be
------------
unenforceable the balance of the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
DATA GROWTH, INC.
By:
Gary B. Peterson, President
Gary B. Peterson, individually
PHOTOLOFT.COM, INC.
By:
s. Jack Marshall, President
S T 0 C K H 0 L D B R S 0 F
PHOTOLOFT.COM, INC.
s. George Perlegos s.Jack Marshall
s. Gust Perlegos Gary Kremen
John Marshall s. Mikes Sisos
14
<PAGE>
s. Mike Ross
----------
s. Chris McConn
-------------
s. Kay Wolf Jones
----------------
15
<PAGE>
s. Mike Ross
------------
s. Chris McConn
s. Kay Wolf Jones
15
<PAGE>
ARTICLES OF INCORPORATION
OF
DATA GROWTH, INC.
WE, THE UNDERSIGNED natural persons of the age of twenty-one (21) years or
more, acting as incorporators of a corporation under the Nevada Business
Corporation Act, adopt the following Articles of Incorporation for such
corporation.
ARTICLE I - NAME
----------------
The name of the Corporation is Data Growth, Inc.,
ARTICLE II - DURATION
---------------------
The duration of the corporation is perpetual.
ARTICLE III - PURPOSES
----------------------
The purpose or purposes for which this corporation is engaged are:
(a) To engage in the specific business of making investments, including
investment in, purchase and ownership of any and all kinds of property, assets
or business, whether alone or in conjunction with others. Also, to acquire,
develop, explore and otherwise deal inland with all kinds of real and personal
property and all related activates, and for any and all other lawful purposes.
(b) To acquire by purchase, exchange, gift, bequest, subscription, or
otherwise; and to hold, own, mortgage, pledge, hypothecate, sell, assign,
transfer, exchange, or otherwise dispose of or deal in, or with its own
corporate securities or stock or other securities including, without
limitations, any shares of stock, bonds,
<PAGE>
debentures, notes, mortgages, or other obligations, and any certificates,
receipts or other instruments representing rights or interests therein on any
property or assets created or issued by any person, firm, associate, or
corporation, or instrumentalities thereof; to make payment therefor in any
lawful manner or to issue in exchange therefor its unreserved earned surplus for
the purchase of its own shares, and to exercise as owner or holder of any
securities, any and all rights, powers, and privileges in respect thereof.
(c) To do each and everything necessary, suitable, or proper for the
accomplishment of any of the purposes or the attainment of any one or more of
the subjects herein enumerated, or which may, at any time, appear conducive to
or expedient for the protection or benefit of this corporation, and to do said
acts as fully and to the same extent as natural persons might, or could do in
any part of the world as principals, agents, partners, trustees, or otherwise,
either alone or in conjunction with any other person, association, or
corporation.
(d) The foregoing clauses shall be construed both as purposes and powers and
shall not be held to limit or restrict in any manner the general powers of the
corporation, and the enjoyment and exercise thereof, as conferred by the laws of
the State of Utah; and it is the intention that the purposes and powers
specified in each of the paragraphs
<PAGE>
of this Article III shall be regarded as independent purposes and powers.
ARTICLE IV - STOCK
------------------
The aggregate number of shares which this corporation shall have authority
to issue is 50,000,000 shares of Common Stock having a par value of $.OO1 per
share. All stock of the corporation shall be of the same class, common, and
shall have the same rights and preferences. Fully-paid stock of this
corporation shall not be liable to any further call or assessment.
ARTICLE V - AMENDMENT
---------------------
These Articles of Incorporation may be amended by the affirmative vote of
"a majority" of the shares entitled to vote on ench such amendment.
ARTICLE VI - SHAREHOLDERS RIGHTS
-----------------------------------
The authorized and treasury stock of this corporation may be issued at such
time, upon such terms and conditions and for such consideration as the Board of
Directors shall determine.
Shareholders shall not have pre-emptive rights to acquire unissued shares of the
stock of this corporation.
ARTICLE VII - CAPITALIZATION
----------------------------
This corporation will not commence business until consideration of a value
of at least $1,000 has been received for the issuance of said shares.
ARTICLE VIII - INTTIAL OFFICE AND AGENT
---------------------------------------
The Corporate Trust Company of Nevada
One East First Street
Reno, NV 89501
<PAGE>
ARTICLE IX - DIRECTORS
----------------------
The directors are hereby given the authority to do any act on behalf of the
corporation by law and in each instance where the Business Corporation Act
provides that the directors may act in certain instances where the Articles of
Incorporation authorize such action by the directors, the directors are hereby
given authority to act in such instances without specifically numerating such
potential action or instance herein.
The directors are specifically given the authority to mortgage or pledge
any or all assets of the business without stockholders' approval.
The number of directors constituting the initial Board of Directors of this
corporation is three. The names and addresses of persons who are to serve as
Directors until the first annual meeting of stockholders or until their
successors are elected and qualify, are:
NAME ADDRESS
Gary Peterson 2726 East 2500 North
Layton, Utah 84041
Melbourne Romney III 1764 Laird Avenue
Salt Lake City, Utah 84108
Josehine Rudd 12014 South Millridge Circle Sandy, Utah 84070
ARTICLE X - ICORPORATORS
--------------------------
The name and address of each Incorporator is:
NAME ADDRESS
Thomas G. Kimble 311 South State, 1440 -
Salt Lake City, UT 84111
Leon W. Crockett 311 South State, #440
Salt Lake Citv. UT 84111
Van L. Butler 311 South State, #440
Salt Lake City, UT 84111
ARTICLE XI
----------
COMNON DIRECTORS - TRANSACTIONS BENTEEN CORPORATIONS
----------------------------------------------------
No contract or other transaction between this corporation and any one or
more of its directors or any other corporation, firm, association, or entity in
which one or more of its directors or officers are financially interested, shall
be either void or voidable because of such relationship or interest, or because
such director or directors are present at the meeting of the Board of Directors,
or a committee thereof, which authorizes, approves, or ratifies such contract or
transaction, or because his or their votes are counted for such purpose if: (a)
the fact of such relationship or interest is disclosed or known to the Board of
Directors or committee which authorizes, approves, or ratifies the contract or
transaction by vote or consent 'Sufficient for the purpose without counting the
votes or consents of such interested director; or (b) the fact of such
relationship or interest is disclosed or known to the stockholders entitled to
vote and they authorize, approve, or ratify such contract or transaction by vote
or written consent, or (c) the contract or transaction is fair and reasonable to
the corporation.
Common or interested directors may be counted in de termining the presence
of a quorum at a meeting of the Board of Directors or committee thereof which
authorizes, approves, or ratifies such contract or transaction.
<PAGE>
Under penalties of perjury, we declare that these Articles of Incorporation have
been examined by us and are, to the best of our knowledge and belief, true,
correct and complete.
DATED this 21st day of January, 1986.
----
s Thomas G. Kimble
---------------------
s Leon W. Crockett
---------------------
s Van L. Butler
---------------------
STATE OF UTAH )
:ss.
COUNTY OF SALT LAKE )
On the 21st day of January, 1986, personally appeared before me, Thomas G.
----
Kimble, Leon W. Crockett and Van L. Butler, who duly acknowledged to me that
they signed the foregoing Articles of Incorporation.
__________________
NOTARY PUBLIC
Residing at: __________
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
DATA GROWTH, INC.
Pursuant to the applicable provisions of the Nevada Business Corporations
Act, Data Growth, Inc. (the "Corporation") adopts the following Articles of
Amendment to its Articles of Incorporation:
FIRST: The present name of the Corporation is Data Growth, Inc
------
SECOND: The following amendments to its Articles of Incorporation were
adopted by the board of directors and by majority consent of shareholders of the
corporation in the manner prescribed by applicable law.
(1) The Article entitled ARTICLE I - NAME, is amended to read as follows:
ARTICLE I - NAME
The name of the corporation shall be: PhotoLoft.com.
(2) The Article entitled ARTICLE IV - STOCK, is amended to read as follows:
ARTICLE IV - STOCK
Common. The aggregate number of common shares which this Corporation shall
------
have authority to issue is 50,000,000 shares of Common Stock having a par value
of $.OO1 per share. All common stock of the Corporation shall be of the same
class, common, and shall have the same rights and preferences. Fully-paid
common stock of this Corporation shall not be liable to any further call or
assessment.
Preferred. The Corporation shall be authorized to issue 500,000 shares of
---------
Preferred Stock having a par value of $.001 per share and with such rights,
preferences and designations determined by the board of directors.
(3) Article XII is hereby added and shall read as follows:
ARTICLE XII - ELIMINATION OF LIABILITY OF OFFICERS AND DIRECTORS
No officer or director of the Corporation shall have any liability to the
Corporation or its shareholders for damages for breach of fiduciary duty as an
officer of director except as an officer or director except as specifically
provided for under NRS78.037(l), and as it may be amended from time to time.
<PAGE>
THIRD: The Corporation has effectuated, effective with the commencement
------
of business on Monday, March 1, 1999, a 2.4571584 to 1 reverse stock split as to
its shares of common stock outstanding as of the opening of business on February
28, 1999, which decreases the outstanding shares as of that date from 1,535,724
shares to 625,000 shares. The reverse split shall not change the number of
shares of Common Stock authorized for issuance by the Corporation.
FOURTH: The number of shares of the Corporation outstanding and
-------
entitled to vote at the time of the adoption of said amendment was 1,535,724.
--
FIFTH: The number of shares voted for such amendments was 840,000
------
shares (55%) and no shares were voted against such amendment.
DATED this 26 day of February, 1999.
DATA GROWTH, INC.
By: s. Gary B. Peterson
-----------------------
Gary B. Peterson, President/Secretary
--------------------------------------
VERIFICATION
------------
STATE OF UTAH )
:ss.
COUNTY OF SALT LAKE )
The undersigned being first duly sworn, deposes and states: that the
undersigned is the President of Date Growth, Inc., that the undersigned has read
the Certificate of Amendment and knows the contents thereof and that the same
contains a truthful statement of the Amendment duly adopted by the board of
directors and stockholders of the Corporation.
s. Gary B. Peterson
-------------------
<PAGE>
STATE OF UTAH )
:ss.
COUNTY OF SALT LAKE )
Before me the undersigned Notary Public in and for the said County and
State, personally appeared the President and Secretary of Data Growth, Inc., a
Nevada corporation, and signed the foregoing Articles of Amendment as his own
free and voluntary acts and deeds pursuant to a corporate resolution for the
uses and purposes set forth.
IN WITNESS WHEREOF, I have set my hand and seal this 26th day of February,
1999.
____________________________
NOTARY PUBLIC
Notary Seal:
<PAGE>
BY-LAWS
OF
DATA GROWTH, INC.
ARTICLE I - OFFICES
-------------------
The principal office of the corporation in the State of Utah shall be
located in the City of Layton, County of Layton, County of Davis. The
Corporation may have such other officest either within or without the state of
incorporation as the board of directors may desig-nate or as the business of the
corporation may from time to time require.
ARTICLE II - STOCKHOLDERS
-------------------------
ANNUAL MEETING.
The annual meeting of the stockholders shall be held on the 23rd day of
January in each year, beginning with the year 19 87 at the hour three o'clock
P.M. for the purpose of electing directors and for the transaction' of such
other business as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday such meeting shall be held on the next
succeeding business day.
2. SPECIAL MEETINGS.
Special meetings of the stockholders for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the president or by the
directors, and shall be called by the president at the request of the holders of
not less than ten percent of all the outstanding shares of the corporation
entitled to vote at the meeting.
3. PLACE OF MEETING.
The directors may designate any place, either within or without the State
unless otherwise prescribed by statute, as the place of meeting for any annual
meeting or for any special meeting called by the directors. A waiver of notice
signed by all stockholders entitled to vote at a meeting may designate
By-Laws 1
<PAGE>
any placer either within or without the state unless other-wise prescribed by
statute, as the place for holding such meeting. If no designation is made, or
if a special meeting be otherwise culled, the place of meeting shall be the
principal office of the corporation.
4. NOTICE OF MEETING.
Written or printed notice stating the place, day and hour of the meeting
and, in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than Ten nor more than thirty days before
the date of the meeting, either personally or by mail, by or at the direction of
the president, or the secretary, or the officer or persons calling the meeting,
to each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon pre-paid.
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining stockholders-entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other proper purpose, the directors of the corporation
may provide that the stock transfer books shall be closed for a stated period
but not to exceed, in any case, thirty days. If the stock transfer books shall
be closed for the purpose of determining stockholders entitled to notice of or
to vote at a meeting of stockholders, such books shall be closed for at least
ten days immediately preceding such meeting. In lieu of closing the stock
transfer books the directors may fix in advance a date as the record date for
any such determination of stockholders, such date in any case to be not more
than thirty days and, in case of a meeting of stockholders, not less than ten
days prior to the date on which the particular action requiring such
determination of stockholders is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders, or stock-holders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the directors declaring
such dividend is adaptedo as the case may be, shall be the record date for such
determination of stockholders. When a determination of stockholders entitled to
vote at any meeting of stockholders
By-Laws 2
<PAGE>
has been made as provided in this section, such determination shall apply to any
adjournment thereof.
6. VOTING LISTS.
The officer or agent having charge of the stock transfer books for shares
of the corporation shall make, at least ten days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting, or any adjournment thereof arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
ten days prior to such meeting, shall be kept on file at the principal office of
the corporation and shall be subject to inspection by any stockholder at any
time during usual business hours. Such list shall also be produced And kept
open at the time and place of the meeting and shall be subject to the inspection
of any stockholder during the whole time of the meeting. The original stock
transfer book shall be prima facie evidence as to who are the stockholders
entitled to examine such list or transfer books or to vote at the meeting of
stockholders.
7. QUORUM.
At any meeting of stockholders one-third of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than said number of
the outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified. The stockholders present at a duly organized meeting may
continue to transact, business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
8. PROXIES.
At all meetings of stockholders a stockholder may vote by proxy executed in
writing by the stockholder or by his duly authorized attorney in fact. Such
proxy shall be filed with the secretary of the corporation before or at the time
of the meeting.
9. VOTING.
Each stockholder entitled to vote in accordance with the terms and provisions of
the certificate of incorporation and these by-laws shall be entitled to one
vote, in person or by
BY-Laws 3
<PAGE>
proxy for each share of stock entitled to vote held by such stockholders. Upon
the demand of any stockholders the vote for directors and upon any question
before the meeting shall be by ballot. All elections for directors shall be
decided by plurality vote; all other questions shall be decided by majority vote
except as otherwise provided by the Certificate of Incorporation or the laws of
this State.
10. ORDER OF BUSINESS.
The order of business at all meetings of the stockholders, shall be as
follows:
1. Roll Call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Reports of officers.
5. Reports of Committees.
G. Election of Directors.
7. Unfinished Business.
8. New Business.
11. INFORMAL ACTION BY STOCKHOLDERS.
Unless otherwise provided by law, any action required to be taken at a
meeting of the shareholders or any other action which may be taken at a meeting
of the shareholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.
By-Laws 4
<PAGE>
ARTICLE III - BOARD OF DIRECTORS
1. GENERAL POWERS
The business and affair of the corporation shall be managed by its board of
directors. The directors shall in all cases act as a board, and they may adopt
such rules and regulations for the conduct of their meetings and the management
of the corporation as they may deem proper, not inconsistent with these by-laws
and the laws of this State.
2. NUMBER, TENURE AND QUALIFICATIONS.
The number of directors of the corporation shall be no less than three.
Each director shall hold office until the next annual meeting of stockholders
and until his successor shall have been elected and qualified.
3. REGULAR MEETINGS.
A regular meeting of the directors shall be held without other notice than
this by-law immediately after, and at the same place as the annual meeting of
stockholders. The directors may provide, by resolution, the time and place for
the holding of additional regular meetings without other notice than such
resolution.
4. SPECIAL MEETINGS.
Special meetings of the directors may be called by or at the request of the
president or any two directors. The person or persons authorized to call
special meetings of the directors may fix the place for holding any special
meeting of the directors called by them.
S. NOTICE.
Notice of any special meeting shall be given at least three days previously
thereto by written notice delivered personally, or by telegram or mailed to each
director at his business address. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid. If notice be given by telegram such notice shall be deemed to
be delivered when the telegram is delivered to the telegraph company. The
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened.
By-Laws 5
<PAGE>
6. QUORUM.
At any meeting of the directors a majority shall constitute a quorum for the
transaction of business, but if less than said number is present at a meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice.
7. MANNER OF ACTING.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the directors.
B. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the board for any reason except the removal
of directors without cause may be filled by a vote of a majority of the
directors then in office, although less than a quorum exists. Vacancies
occurring by reason of the removal of directors without cause shall be filled by
vote of the stockholders. A director elected to fill a vacancy caused by
resignation, death or removal shall be elected to hold office for the unexpired
term of his predecessor.
9. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause by
vote of the stockholders or by action of the board. Directors may be removed
without cause only by vote of the stockholders.
10. RESIGNATION.
A director may resign at any time by giving written notice to the board, the
president or the secretary of the corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the board
or such officer, and the acceptance of the resignation shall not be necessary to
make it effective.
11. COMPENSATION.
No compensation shall be paid to directors, as such, for their services,
but by resolution of the board a fixed sum and expenses for actual attendance at
each regular or special meeting of the board may be authorized. Nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
By-Laws 6
<PAGE>
12. PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting of the directors
at which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his dissent shall be entered in the minutes
of the meeting or unless lie shall file his written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
13. EXECUTIVE AND OTHER COMMITTEES.
The board by resolution may designate from among its members an executive
committee and other committees, each consisting of three or more directors.
Each such committee shall serve at the pleasure of the board.
By-Laws 7
<PAGE>
ARTICLE IV OFFICERS
1. NUMBER.
The officers of the corporation shall be a president, a vice-president, a
secretary and a treasurer, each of whom shall be elected by the directors. Such
other officers and assistant officers as may be deemed necessary may be elected
or appointed by the directors.
2. ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the directors shall be
elected annually at the first meeting of the directors held after each annual
meeting of the stockholders. Each officer shall hold office until his successor
shall have been duly elected and shall have qualified or until his death, or
until he shall resign or shall have been removed in the manner hereinafter
provided.
3. REMOVAL.
Any officer or agent elected or appointed by the directors may be removed
by the directors whenever in their judgment the best interests of the
corporation would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
4. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the directors for the unexpired
portion of the term.
S. PRESIDENT.
The president shall be the principal executive officer of the corporation
and subject to the control of the directors, shall in general supervise and
control all of the business and affairs of the corporation. He shall, when
present, preside at all meetings of the stockholders and of the directors. He
may sign, with the secretary or, any other proper officer of the corporation
thereunto authorized by the directorship certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the directors have authorized to be executed except in cases where the signing
and execution thereof shall be expressly delegated by the directors or by these
by-laws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall
By-Laws 8
<PAGE>
perform all duties incident to the office of president and such other duties as
may be prescribed by the directors from time to time.
6. VICE-PRESIDENT.
In the absence of the president or in event of his death, inability or
refusal to act, the vice-president shall perform the duties of the president,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the president. The vice-president shall perform such other
duties as from time to time may be assigned to him by the President or by the
directors.
7. SECRETARY.
The secretary shall keep the minutes of the stockholders' and of the
directors', meetings in one or more books provided for that purpose, see that
all notices are duly given in accordance with the provisions of these by-laws or
as required, be custodian of the corporate records and of the seal of the
corporation and keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder, have general
charge of the stock transfer books of the corporation and in general perform all
duties incident to the office of secretary and such other duties as from time to
time may be assigned to him by the president or by the directors.
8. TREASURER.
If required by the directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the directors shall determine. He shall have charge and custody of and be
responsible for all funds and securities of the corporation; receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with these by-laws and in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the directors.
9. SALARIES.
The salaries of the officers shall be fixed from time to time by the
directors and no officer shall be prevented from receiving such salary by reason
of the fact that he is also a director of the corporation.
By-Laws 9
<PAGE>
ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS
1. CONTRACTS.
The directors may authorize any officer or officers, agent or agents to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authority may be general or confined to
specific instances.
2. LOANS.
No loans shall be contracted on behalf of the corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution of
the directors. Such authority may be general or confined to specific instances.
3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of moneys notes or other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation and in such
manner as shall from time to time be deter-mined by resolution of the directors.
4. DEPOSITS.
All funds of the corporation not otherwise employed shall be deposited from
time to time to the credit of the corporation in such banks trust companies or
other depositories as the directors may select.
ARTICLE VI CERTIFICATES FOR SHARES AND THEIR TRANSFER
1. CERTIFICATES FOR SHARES.
Certificates representing shares of the corporation shall be in such form
as shall be determined by the directors. Such certificates shall be signed by
the president and by the secretary or by such other officers authorized by law
and by the directors. All certificates for shares shall be consecutively
numbered or otherwise identified. The name and address of the stockholders the
number of shares and date of issue, shall be entered on the stock transfer books
of the corporation. All certificates surrendered to the corporation for
transfer shall be canceled and no new certificate shall be issued until the
By-Laws 10
<PAGE>
former certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and indemnity to the corporation
as the directors may prescribe.
2. TRANSFERS OF SHARES.
(a) upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered on
the transfer book of the corporation which shall be kept at its principal
office.
(b) The corporation shall be entitled to treat the holder of record of
any share as the holder in fact thereof, and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of this state.
ARTICLE VII FISCAL YEAR
The fiscal year of the corporation shall begin on the last day of the month
in each year as elected by the Directors.
ARTICLE VIII - DIVIDENDS
The directors may from time to time declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE IX - SEAL
The directors shall provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the corporation, the state of
incorporation, year of incorporation and the words, "Corporate Seal".
By-Laws 11
<PAGE>
ARTICLE X WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any stockholder or director of the corporation under the provisions of
these by-laws or under the provisions of the articles of incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE XI AMENDMENTS
These by-laws may be altered, amended or repealed and new by-laws may be
adopted by a vote of the stockholders representing a majority of all the shares
issued and outstanding, at any annual stockholders' meeting or at any special
stockholders' meeting when the proposed amendment has been set out in the notice
of such meeting.
By-Laws 12
<PAGE>
[PHOTOLOFT.COM LOGO]
CUSIP NO - 719348 10 4
----------------------
NUMBER SHARES
------------ ------------
/ 5275 / / /
------------ ------------
AUTHORIZED COMMON STOCK: 50,000,000 SHARES
PAR VALUE: $ .001
THIS CERTIFIES THAT
SPECIMEN
IS THE RECORD HOLDER OF
- Shares of PHOTOLOFT.COM common stock -
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Date:
-----------
/s/ Lisa Marshall /s/ Jack Marshall
- ------------------- -------------------
Secretary President
[PHOTOLOFT.COM
CORPORATE SEAL
NEVADA]
<PAGE>
Notice: Signature must be guaranteed by a firm which is member of a
registered national stock exchange, or by a bank (other than a saving bank), or
a trust company. The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - patents in common UNIF GIFT MIN ACT - . . Custodian . .
TEN ENT - As tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under uniform Gifts to Minors
Survivorship and not as tenants Act . . . . . .. . . . . . .
In common (State)
Additional abbreviations may also be
used thoughnot in the above list.
FOR VALUE RECEIVED, __________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -------------------------------------
/ /
- -------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
Of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
- ----------------------------------------------------------------------- Attorney
To transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ______________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT AFTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER
SPECIMEN
<PAGE>
ALTAVISTA TECHNOLOGY, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
NOV 23, 1993
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SECTION 1 AUTHORIZATION AND SALE OF SERIES A PREFERRED STOCK
1.1 Authorization
1.2 Sale of Preferred
SECTION 2 CLOSING DATE; DELIVERY
2.1 Closing Date
2.2 Delivery
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Organization and Standing; Articles and Bylaws
3.2 Corporate Power
3.3 Subsidiaries
3.4 Capitalization
3.5 Authorization
3.6 Litigation, etc.
3.7 Compliance with Other Instruments, None Burdensome, etc.
3.8 Governmental Consent, etc.
SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.1 Experience
4.2 Investment
4.3 Rule 144
4.4 No Public Market
4.5 Access to Data
4.6 Authorization
4.7 Brokers or Finders
4.8 Tax Liability
SECTION 5 PURCHASERS' CONDITIONS TO CLOSING
5.1 Representations and Warranties Correct
5.2 Covenants
5.3 Blue Sky
5.4 Restated Articles
5.5 Registration and Information Rights Agreement
5.6 Compliance Certificate
SECTION 6 CONDITIONS TO CLOSING OF COMPANY
6.1 Representations
6.2 Covenants
6.3 Blue Sky
6.4 Restated Articles
6.5 Legal Matters
SECTION 7 MISCELLANEOUS
7.1 Governing Law
7.2 Successors and Assigns
7.3 Entire Agreement; Amendment
7.4 Notices, etc.
7.5 Delays or Omissions
7.6 California Corporate Securities Law
7.7 Counterparts
7.8 Severability
7.9 Titles and Subtitles
</TABLE>
<PAGE>
ALTAVISTA TECHNOLOGY, INC.
SERIES APREFERRED STOCK PURCHASE AGREEMENT
This Agreement is made as of June 5, 1997 by and among AltaVista Technology,
Inc., a California corporation (the "Company"), the individuals and entities set
forth on the Schedule of Purchasers attached hereto as Exhibit A (the
----------
"Purchasers"), and any other person or persons who shall have executed this
Agreement in connection with their purchase of Additional Shares, as defined
below (such persons listed on the Schedule of Purchasers and such persons who
shall have purchased Additional Shares collectively being referred to as
"Purchasers"), which person or persons shall be added to the Schedule of
Purchasers at such time as they shall purchase such Additional Shares pursuant
hereto.
SECTION 1
AUTHORIZATION AND SALE OF SERIES A PREFERRED STOCK
--------------------------------------------------
1.1 AUTHORIZATION. The Company will authorize the sale and issuance of
--------------
up to 1,500,000 shares of its Preferred Stock (the "Shares"), having the
rights, preferences, privileges and restrictions as set forth in the Amended and
Restated Articles of Incorporation ("Restated Articles") in substantially the
form attached hereto as Exhibit B.
----------
1.2 SALE OF PREFERRED. Subject to the terms and conditions hereof, the
--------------------
Company will issue and sell to the Purchasers, and the Purchasers will purchase
severally, and not jointly, from the Company, up to all of the Shares, (i) of
which not less than 10,000 of the Shares (the "Initial Shares') will be sold to
the Purchasers at the Initial Closing, as defined below, in the amounts
specified opposite the name of each such Purchaser in the column designated
"Initial Shares" on the Schedule of Purchasers, at a per share purchase price of
$.30, and (ii) of which up to 1,490,000 Shares (the "Additional Shares") may, at
the election of the Company, be sold to the Purchasers at one or more additional
closings subsequent to the Initial Closing (the "Subsequent Closing(s)'), in the
amounts as shall be specified opposite the name of each such Purchaser in the
column designated "Additional Shares" on the Schedule of Purchasers, at a per
share purchase price of $.30.
SECTION 2
CLOSING- DATE: DELIVERY
-----------------------
2.1 CLOSING DATE. The closing of the purchase and sale of the Initial
-------------
Shares hereunder (the "Initial Closing") shall be held at the offices of Wilson,
Sonsini, Goodrich & Rosati, Two Palo Alto Square, Palo Alto, California, at
10:00 a.m. on January _, 1994, or at such other time and place upon which the
Company and the Purchasers shall agree. The Subsequent Closing(s), if any,
shall be held at the offices of Wilson, Sonsini, Goodrich & Rosati, Two Palo
Alto Square, Palo Alto, California at such time(s) and date(s) as the Company
shall specify. The date(s) of the Subsequent Closing(s) shall hereinafter be
referred to as the "Subsequent Closing Date(s)." The Initial Closing and the
Subsequent Closing(s) are sometimes hereinafter referred to as the "Closings.'
The Initial Closing Date and the Subsequent Closing Date(s) are sometimes
hereinafter referred to as the "Closing Dates."
2.2 DELIVERY. At the Initial Closing, the Company will deliver to each
---------
Purchaser a certificate or certificates representing the number of Shares set
forth opposite such Purchaser's name in the column designated "Shares' on the
Schedule of Purchasers against payment of the purchase price therefor by check
payable to the Company or by wire transfer made pursuant to the Company's
instructions. At the Subsequent Closing(s), the Company will deliver to each
<PAGE>
Additional Purchaser who shall have executed this Agreement a certificate or
certificates representing the number of shares as shall be specified opposite
the name of each Purchaser in the column designated "Additional Shares" on the
Schedule of Purchasers, against payment of the purchase price therefor, by check
payable to the Company or by wire transfer made pursuant to the Company's
instructions. At each Subsequent Closing, if any, a Supplemental Schedule of
Purchasers shall be added to this Agreement as Exhibit A. 1. At each Subsequent
------------
Closing, if any, the Purchaser purchasing Additional Shares therein shall
execute a signature page to this Agreement.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
Except as set forth on Exhibit C attached hereto, the Company represents and
---------
warrants to the Purchasers as follows:
3.1 ORGANIZATION AND STANDING: ARTICLES AND BYLAWS. The Company is a
---------------------------------------------------
corporation duly organized and existing under, and by virtue of, the laws of the
State of California and is in good standing under such laws. The Company has
requisite corporate power and authority to own and operate its properties and
assets, and to carry on its business as presently conducted and as proposed to
be conducted. The Company is not presently qualified to do business as a
foreign corporation in any jurisdiction, and the failure to be so qualified will
not have a material adverse effect on the Company's business as now conducted.
The Company has furnished each Purchaser with copies of the Restated Articles
and of its Bylaws, which are true, correct and complete and contain all
amendments through the Closing Date.
3.2 CORPORATE POWER. The Company will have at the Closing Date all
-----------------
requisite legal and corporate power and authority to execute and deliver this
Agreement and the Registration and Information Rights Agreement in substantially
the form attached hereto as Exhibit D (the "Registration and Information Rights
---------
Agreement"), to sell and issue the Shares hereunder, to issue the Common Stock
issuable upon conversion of the Series A Preferred Stock, a and to carry out and
per-form its obligations under the terms of this Agreement and the Registration
and Information Rights Agreement (together the "Agreements").
3.3 SUBSIDIARIES. The Company has no subsidiaries or affiliated
------------
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
3.4 CAPITALIZATION. The authorized capital stock of the Company, upon
--------------
the filing of the Restated Articles, consists of 10,000,000 shares of Common
Stock, of which 500,000 shares are issued and outstanding, and 10,000,000 shares
of Preferred Stock, of which 1,500,000 shares have been designated Series A
Preferred Stock ("Series A Preferred'), none of which are issued and outstanding
stock immediately prior to the Initial Closing. The Series A Preferred shall
have the rights, preferences, privileges and restrictions set forth in the
Restated Articles. The currently outstanding shares of Common Stock have been
duly authorized and validly issued, and are fully paid and nonassessable, and
have been issued in compliance with applicable securities laws. The shares of
Series A Preferred to be issued and sold to the Purchaser have been duly
authorized and, when issued in accordance with this Agreement and the Restated
Articles, will be validly issued, fully paid and nonassessable. The Company has
reserved 1,500,000 shares of Series A Preferred for issuance hereunder,
1,500,000 shares of Common Stock for issuance upon conversion of the Series A
Preferred and 5,000,000 shares of its Common Stock for issuance to officers,
directors, employees and consultants of the Company pursuant to the 1993 Stock
Plan or other arrangements approved by the Board. Except as set forth above,
there are no options, warrants, subscriptions, calls, puts, claims, commitments,
convertible securities or other agreements or arrangements under which the
Company is or may be obligated to issue or purchase, as the case may be, shares
of the Company's capital stock.
3.5 AUTHORIZATION. All corporate action on the part of the Company, its
-------------
directors and shareholders necessary for the authorization, execution, delivery
and performance of the Agreements by the Company, the authorization, sale,
issuance and delivery of the Series A Preferred (and the Common Stock issuable
upon conversion of the Series A Preferred), and the performance of all of the
Company's obligations hereunder has been taken or will be taken prior to each
Closing. The Agreements, when executed and delivered by the Company, shall
<PAGE>
constitute valid and binding obligations of the Company, enforceable in
accordance with their respective terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
The Shares, when issued in compliance with the provisions of this Agreement,
will be validly issued, fully paid and nonassessable, and will have the rights,
preferences and privileges described in the Restated Articles; the Common Stock
issuable upon conversion of the Shares has been duly and validly reserved and,
when issued in compliance with the provisions of the Restated Articles, will be
validly issued, and will be fully paid and nonassessable; and the Shares and
such Common Stock will be free of any liens or encumbrances, assuming each
Purchaser takes the Shares with no notice thereof, other than any liens or
encumbrances created by Purchaser; provided, however, that the Shares (and the
Common Stock issuable upon conversion thereof) may be subject to restrictions on
transfer under state or federal securities laws as set forth in this Agreement
and the exhibits hereto. The Shares (and the Common Stock issuable upon the
conversion thereof) are not subject to any preemptive rights or rights of first
refusal.
3.6 LITIGATION, ETC. There are no actions, suits, proceedings or
----------------
investigations pending or, to the Company's knowledge, threatened against the
Company or its properties before any court or governmental agency other than the
suit filed by Digital Equipment is United States District Court for the District
of Massachusetts (civil action 96-12192NG).
3.7 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The Company
-------------------------------------------------------
is not in violation of any term of the Restated Articles or its Bylaws or any
mortgage, indebtedness, indenture, judgment or decree, or in any material
respect of any term or provision of any material contract, agreement or
instrument, and to the best of its knowledge is not in violation of any order,
statute, rule or regulation applicable to the Company. The execution, delivery
and performance of and compliance with the Agreements, and the issuance of the
Series A Preferred and the Common Stock issuable upon conversion of the Series A
Preferred, have not resulted and will not result in any violation of, or
conflict with, or constitute a default under, the Restated Articles or the
Company's Bylaws, nor will it result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the Company.
3.8 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
--------------------------
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of the Agreements, or the offer, sale or issuance of the Series A
Preferred (and the Common Stock issuable upon conversion of the Series A
Preferred), or the consummation of any other transaction contemplated hereby or
thereby, except (a) filing of the Restated Articles in the office of the
California Secretary of State, (b) qualification (or taking such action as may
be necessary to secure an exemption from qualification, if available) of the
offer and sale of the Series A Preferred (and the Common Stock issuable upon
conversion of the Series A Preferred) under the California Corporate Securities
Law of 1968, as amended, and other applicable Blue Sky laws, which filings and
qualifications, if required, will be accomplished in a timely manner, and (c)
filing of a notice, if required, pursuant to Regulation D of the Securities Act,
which filing will be accomplished in a timely manner.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
Each Purchaser hereby represents and warrants to the Company with respect to the
purchase of the Shares as follows:
4.1 EXPERIENCE. It has substantial experience in evaluating and
----------
investing in private transactions of securities in companies similar to the
Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests and
bear the risk of loss of its entire investment.
<PAGE>
4.2 INVESTMENT. It is acquiring the Series A Preferred and the
underlying Common Stock for investment for its own account, not as a nominee or
agent, and not with the view to, or for resale in connection with, any
distribution thereof. It understands that the Series A Preferred to be
purchased and the underlying Common Stock have not been, and will not be,
registered under the Securities Act by reason of a specific exemption from the
registration provisions of the Securities Act, the availability of which depends
upon, among other things, the bona fide nature of the investment intent and the
---------
accuracy of such Purchaser's representations as expressed herein. It is an
"accredited investor' within the meaning of Regulation D, Rule 501(a),
promulgated by the Securities and Exchange Commission.
4.3 RULE 144. It acknowledges that the Series A Preferred and the
----------
underlying Common Stock must be held indefinitely unless subsequently registered
under the Securities Act or unless an exemption from such registration is
available. It is aware of the provisions of Rule 144 promulgated under the
Securities Act which permit limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things, the existence of a public market for the shares, the availability
of certain current public information about the Company, the resale occurring
not less than two years after a party has purchased and paid for the security to
be sold, the sale being effected through a "broker's transaction" or in
transactions directly with a "market maker', and the number of shares being sold
during any three-month period not exceeding specified limitations.
4.4NO PUBLIC MARKET. IT UNDERSTANDS THAT NO PUBLIC MARKET NOW EXISTS FOR ANY OF
-----------------------------------------------------------------------------
the securities issued by the Company and that no assurances can be made that a
public market
will ever exist for the Company's securities.
4.5 ACCESS TO DATA. It has had an opportunity to discuss the
-----------------
Company's business,
management and financial affairs with its management and the opportunity to
review the Company's facilities and has had access to all other information
about the Company it deemed necessary in connection with the purchase of the
Series A Preferred. It has also had an opportunity to ask questions of officers
of the Company. It understands that such discussions, as well as any written
information issued by the Company, were intended to describe certain aspects of
the Company's business and prospects but were not a thorough or exhaustive
description.
4.6 AUTHORIZATION. The Agreements, when executed and delivered by
--------------
Purchaser, will constitute a valid and legally binding obligations of each
Purchaser, enforceable in accordance with their respective terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies.
4.7 BROKERS OR FINDERS. The Company has not, and will not, incur,
---------------------
directly or indirectly, as a result of any action taken by such Purchaser, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement.
4.8 TAX LIABILITY. It has reviewed with its own tax advisors the
--------------
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. It relies solely on such advisors
and not on any statements or representations of the Company or any of its
agents. It understands that it (and not the Company) shall be responsible for
its own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.
<PAGE>
SECTION 5
PURCHASERS' CONDITIONS TO CLOSING
- ------------------------------------
The Purchasers' obligation to purchase the Shares at the Closing is, at the
option of Purchasers, subject to the fulfillment of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
--------------------------------
made by the Company in Section 3 hereof shall be true and correct in all
material respects as of the Closing Date.
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects, unless
waived in writing by the Purchaser.
5.3 BLUE SKY. Me Company shall have obtained all necessary Blue Sky law
----------
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the
offer and sale of the Series A Preferred and the Common Stock issuable upon
conversion of the Series A Preferred.
5.4 RESTATED ARTICLES. The Restated Articles shall have been filed with
-------------------
the California Secretary of State.
5.5 REGISTRATION AND INFORMATION RIGHTS AGREEMENT The Company shall have
----------------------------------------------
executed the Registration and Information Rights Agreement in substantially the
form attached hereto as Exhibit D.
5.6 COMPLIANCE CERTIFICATE The Company shall have delivered to the
-----------------------
Purchasers a
certificate of the Company in substantially the form attached hereto as Exhibit
E, executed by the President of the Company, dated the Closing Date, and
certifying, among other things, the fulfillment of the conditions specified in
Sections 5.1, 5.2 and 5.4 of this Agreement.
SECTION 6
CONDITIONS TO CLOSING OF COMPANY
--------------------------------
The Company's obligation to sell and issue the Shares at the Closing Date is, at
the option of the Company, subject to the fulfillment as of the Closing Date of
the following conditions:
6.1 REPRESENTATIONS. The representations made by the Purchasers in
---------------
Section 4 hereof shall be true and correct as of the Closing Date.
6.2 COVENANTS. All covenants, agreements, and conditions contained in
---------
this Agreement to be performed by the Purchasers on or prior to the Closing Date
shall have been performed or complied with in all material respects unless
waived in writing by the Company.
6.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
--------
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the offer and sale of the Series A Preferred and the
Common Stock issuable upon conversion of the Series A Preferred.
6.4 RELATED ARTICLES. The Restated Articles shall have been filed with
-----------------
the California Secretary of State.
6.5 LEGAL MATTERS. All material matters of a legal nature which pertain
---------------
to this
Agreement, and the transactions contemplated hereby, shall have been reasonably
approved by
counsel to the Company.
<PAGE>
SECTION 7
MISCELLANEOUS
-------------
7.1 GOVERNING LAW. This Agreement shall be governed in all respects by
--------------
the internal laws of the State of California.
7.2 SUCCESSORS ANDASSIGNS. Except as otherwise provided herein, the
---------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of the Purchasers to purchase the Series A
Preferred shall not be assignable without the consent of the Company.
7.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
----------------------------
delivered pursuant hereto at each Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
7.4 NOTICES, ETC. All notices and other communications required or
--------------
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to a Purchaser, at the address set forth on the Schedule of
Purchasers attached hereto as Exhibit A, or at such other address as such
Purchaser shall have furnished to the Company in writing, or (b) if to the
Company, one copy should be sent AltaVista Technology, Inc. 1671 Dell Ave.,
Suite 209, Campbell, California 95008 and addressed to the attention of the
President, or at such other address.-as the Company shall have furnished to the
Purchaser, and one copy should be sent to Wilson, Sonsini, Goodrich & Rosati,
Two Palo Alto Square, Palo Alto, California 94306, to the attention of Bruce D.
Bower, Esq. Each such notice or other communication shall, for all intents and
purposes of this Agreement, be treated as effective or having been given when
delivered if delivered personally, or, if sent by mail, at the earlier of its
receipt or 72 hours after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid.
7.5 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay
---------------------
or omission to exercise any right, power or remedy accruing to the Purchasers,
upon any breach or default of the Company under this Agreement, shall impair any
such right, power or remedy of the Purchasers nor shall it be construed to be a
waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
thereto fore or thereafter occurring. Any waiver, permit, consent or approval
of any kind or character on the part of the Purchasers, or any waiver on the
part of the Purchasers of any provisions or conditions of this Agreement, must
be in writing and shall be effective only to the extent specifically set forth
in such writing. All remedies, either under this Agreement or by law or
otherwise afforded to the Purchasers, shall be cumulative and not alternative.
7.6 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
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
7.7 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which shall be enforceable against the party actually
executing such counterpart, and all of which together shall constitute one
instrument.
<PAGE>
7.8 SEVERABILITY. In the event that any provision of this Agreement
-------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision, provided that no such severability shall be effective if
it materially changes the economic BENEFIT of this Agreement to any party.
7.9 TITLES AND SUBTITLES. The titles and subtitles used in this
-----------------------
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASERS
<PAGE>
ALTAVISTA TECHNOLOGY, INC.
SERIES B PREFERRED STOCK PURCHASE
AGREEMENT
AUG 1, 1996
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SECTION I AUTHORIZATION AND SALE OF SERIES B PREFERRED STOCK
1.1 Authorization
1.2 Sale of Preferred
SECTION 2 CLOSING DATE; DELIVERY
2.1 Closing Date
2.2 Delivery
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Organization and Standing; Articles and Bylaws
3.2 Corporate Power
3.3 Subsidiaries
3.4 Capitalization
3.5 Authorization
3.6 Litigation, etc.
3.7 Compliance with Other Instruments, None Burdensome, etc.
3.8 Governmental Consent, etc.
SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.1 Experience
4.2 Investment
4.3 Rule 144
4.4 No Public Market
4.5 Access to Data
4.6 Authorization
4.7 Brokers or Finders
4.8 Tax Liability
SECTION 5 PURCHASERS' CONDITIONS TO CLOSING
5.1 Representations and Warranties Correct
5.2 Covenants
5.3 Blue Sky
5.4 Restated Articles
5.5 Registration and Information Rights Agreement
5.6 Compliance Certificate
SECTION 6 CONDITIONS TO CLOSING OF COMPANY
6.1 Representations
6.2 Covenants
6.3 Blue Sky
6.4 Restated Articles
6.5 Legal Matters
SECTION 7 MISCELLANEOUS
7.1 Governing Law
7.2 Successors and Assigns
7.3 Entire Agreement; Amendment
7.4 Notices, etc.
7.5 Delays or Omissions
7.6 California Corporate Securities Law
7.7 Counterparts
7.8 Severability
7.9 Titles and Subtitles
</TABLE>
<PAGE>
ALTAVISTA TECHNOLOGY, INC.
SERIES BPREFERREI) STOCK PURCHASE AGREEMENT
This Agreement is made as of June 5, 1997 by and among AltaVista Technology,
Inc., a California corporation (the "Company"), the individuals and entities set
forth on the Schedule of Purchasers attached hereto as Exhibit A (the
----------
"Purchasers"), and any other person or persons who shall have executed this
Agreement in connection with their purchase of Additional Shares, as defined
below (such persons listed on the Schedule of Purchasers and such persons who
shall have purchased Additional Shares collectively being referred to as
"Purchasers"), which person or persons shall be added to the Schedule of
Purchasers at such time as they shall purchase such Additional Shares pursuant
hereto.
SECTION I
AUTHORIZATION AND SALE OF SERIES 8 PREFERRED STOCK
--------------------------------------------------
1.1 AUTHORIZATION. The Company will authorize the sale and issuance of
--------------
up to 1,500,000 shares of its Preferred Stock (the "Shares"), having the rights,
preferences, privileges and restrictions as set forth in the Amended and
Restated Articles of Incorporation ("Restated Articles") in substantially the
form attached hereto as Exhibit B.
-----------
1.2 SALE OF PREFERRED. Subject to the terms and conditions hereof, the
--------------------
Company will issue and sell to the Purchasers, and the Purchasers will purchase
severally, and not jointly, from the Company, up to all of the Shares, (i) of
which not less than 10,000 of the Shares (the "Initial Shares') will be sold to
the Purchasers at the Initial Closing, as defined below, in the amounts
specified opposite the name of each such Purchaser in the column designated
"Initial Shares" on the Schedule of Purchasers, at a per share purchase price of
$.30, and (ii) of which up to 1,490,000 Shares (the "Additional Shares") may, at
the election of the Company, be sold to the Purchasers at one or more additional
closings subsequent to the Initial Closing (the "Subsequent Closing(s)'), in the
amounts as shall be specified opposite the name of each such Purchaser in the
column designated "Additional Shares" on the Schedule of Purchasers, at a per
share purchase price of $.30.
SECTION 2
CLOSING- DATE: DELIVERY
-----------------------
2.1 CLOSING DATE. The closing of the purchase and sale of the Initial
--------------
Shares hereunder (the "Initial Closing") shall be held at the offices of Wilson,
Sonsini, Goodrich & Rosati, Two Palo Alto Square, Palo Alto, California, at
10:00 a.m. on January _, 1994, or at such other time and place upon which the
Company and the Purchasers shall agree. The Subsequent Closing(s), if any,
shall be held at the offices of Wilson, Sonsini, Goodrich & Rosati, Two Palo
Alto Square, Palo Alto, California at such time(s) and date(s) as the Company
shall specify. The date(s) of the Subsequent Closing(s) shall hereinafter be
referred to as the "Subsequent Closing Date(s)." The Initial Closing and the
Subsequent Closing(s) are sometimes hereinafter referred to as the "Closings.'
The Initial Closing Date and the Subsequent Closing Date(s) are sometimes
hereinafter referred to as the "Closing Dates."
<PAGE>
2.2 DELIVERY. At the Initial Closing, the Company will deliver to each
---------
Purchaser a certificate or certificates representing the number of Shares set
forth opposite such Purchaser's name in the column designated "Shares' on the
Schedule of Purchasers against payment of the purchase price therefor by check
payable to the Company or by wire transfer made pursuant to the Company's
instructions. At the
<PAGE>
Subsequent Closing(s), the Company will deliver to each Additional Purchaser who
shall have executed this Agreement a certificate or certificates representing
the number of shares as shall be specified opposite the name of each Purchaser
in the column designated "Additional Shares" on the Schedule of Purchasers,
against payment of the purchase price therefor, by check payable to the Company
or by wire transfer made pursuant to the Company's instructions. At each
Subsequent Closing, if any, a Supplemental Schedule of Purchasers shall be added
to this Agreement as Exhibit A. 1. At each Subsequent Closing, if any, the
Purchaser purchasing Additional Shares therein shall execute a signature page to
this Agreement,
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
Except as set forth on Exhibit C attached hereto, the Company represents and
---------
warrants to the Purchasers as follows:
3.1 ORGANIZATION AND STANDING: ARTICLES AND BYLAWS. The Company is a
---------------------------------------------------
corporation duly organized and existing under, and by virtue of, the laws of the
State of California and is in good standing under such laws. The Company has
requisite corporate power and authority to own and operate its properties and
assets, and to carry on its business as presently conducted and as proposed to
be conducted. The Company is not presently qualified to do business as a
foreign corporation in any jurisdiction, and the failure to be so qualified will
not have a material adverse effect on the Company's business as now conducted.
The Company has furnished each Purchaser with copies of the Restated Articles
and of its Bylaws, which are true, correct and complete and contain all
amendments through the Closing Date.
3.2 CORPORATE POWER. The Company will have at the Closing Date all
-----------------
requisite legal and corporate power and authority to execute and deliver this
Agreement and the Registration and Information Rights Agreement in substantially
the form attached hereto as Exhibit D (the "Registration and Information Rights
---------
Agreement"), to sell and issue the Shares hereunder, to issue the Common Stock
issuable upon conversion of the Series B Preferred Stock, a and to carry out and
perform its obligations under the terms of this Agreement and the Registration
and Information Rights Agreement (together the "Agreements").
3.3 SUBSIDIARIES. The Company has no subsidiaries or affiliated
-------------
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
3.4 CAPITALIZATION. The authorized capital stock of the Company, upon
---------------
the filing of the Restated Articles, consists of I 0,000,000 shares of Common
Stock, of which 500,000 shares are issued and outstanding, and 10,000,000 shares
of Preferred Stock, of which 1,500,000 shares have been designated Series B
Prefer-red Stock ("Series B Preferred'), none of which are issued and
outstanding stock immediately prior to the Initial Closing. The Series B
Preferred shall have the rights, preferences, privileges and restrictions set
<PAGE>
forth in the Restated Articles. The currently outstanding shares of Common
Stock have been duly authorized and validly issued, and are fully paid and
non-assessable, and have been issued in compliance with applicable securities
laws. The shares of Series B Preferred to be issued and sold to the Purchaser
have been duly authorized and, when issued in accordance with this Agreement and
the Restated Articles, will be validly issued, fully paid and non-assessable.
The Company has reserved 1,500,000 shares of Series B Preferred for issuance
hereunder, 1,500,000 shares of Common Stock for issuance upon conversion of the
Series B Preferred and 5,000,000 shares of its Common Stock for issuance to
officers, directors, employees and consultants of the Company pursuant to the
1993 Stock Plan or other arrangements approved by the Board. Except as set
forth above, there are no options, warrants, subscriptions, calls, puts, claims,
commitments, convertible securities or other agreements or arrangements under
which the Company is or may be obligated to issue or purchase, as the case may
be, shares of the Company's capital stock.
3.5 AUTHORIZATION. All corporate action on the part of the Company, its
--------------
directors and shareholders necessary for the authorization, execution, delivery
and performance of the Agreements by the Company, the authorization, sale,
issuance and delivery of the Series B Preferred (and the Common Stock issuable
upon conversion of the Series B Preferred), and the performance of all of the
Company's obligations
<PAGE>
hereunder has been taken or will be taken prior to each Closing. The
Agreements, when executed and delivered by the Company, shall constitute valid
and binding obligations of the Company, enforceable in accordance with their
respective terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies. The Shares, when
issued in compliance with the provisions of this Agreement, will be validly
issued, fully paid and non-assessable, and will have the rights, preferences and
privileges described in the Restated Articles; the Common Stock issuable upon
conversion of the Shares has been duty and validly reserved and, when issued in
compliance with the provisions of the Restated Articles, will be validly issued,
and will be fully paid and non-assessable; and the Shares and such Common Stock
will be free of any liens or encumbrances, assuming each Purchaser takes the
Shares with no notice thereof, other than any liens or encumbrances created by
Purchaser; provided, however, that the Shares (and the Common Stock issuable
upon conversion thereof) may be subject to restrictions on transfer under state
or federal securities laws as set forth in this Agreement and the exhibits
hereto. The Shares (and the Common Stock issuable upon the conversion thereof)
are not subject to any preemptive rights or rights of first refusal.
3.6 LITIGATION, ETC. There are no actions, suits, proceedings or
-----------------
investigations pending or, to the Company's knowledge, threatened against the
Company or its properties before any court or governmental agency other than the
suit filed by Digital Equipment is United States District Court for the District
of Massachusetts (civil action 96-12192NG).
3.7 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The Company
--------------------------------------------------------
is not in violation of any term of the Restated Articles or its Bylaws or any
mortgage, indebtedness, indenture, judgment or decree, or in any material
respect of any term or provision of any material contract, agreement or
instrument, and to the best of its knowledge is not in violator) of any order,
statute, rule or regulation applicable to the Company. The execution, delivery
and performance of and compliance with the Agreements, and the issuance of the
Series B Prefer-red and the Common Stock issuable upon conversion of the Series
B Preferred, have not resulted and will not result in any violation of, or
conflict with, or constitute a default under, the Restated Articles or the
Company's Bylaws, nor will it result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the Company.
3.8 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
---------------------------
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of the Agreements, or the offer, sale or issuance of the Series B
Preferred (and the Common Stock issuable upon conversion of the Series B
Preferred), or the consummation of any other transaction contemplated hereby or
thereby, except (a) filing of the Restated Articles in the office of the
California Secretary of State, (b) qualification (or taking such action as may
be necessary to secure an exemption from qualification, if available) of the
offer and sale of the Series B Preferred (and the Common Stock issuable upon
<PAGE>
conversion of the Series B Preferred) under the California Corporate Securities
Law of 1968, as amended, and other applicable Blue Sky laws, which filings and
qualifications, if required, will be accomplished in a timely manner, and (c)
filing of a notice, if required, pursuant to Regulation D of the Securities Act,
which filing will be accomplished in a timely manner.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
Each Purchaser hereby represents and war-rants to the Company with respect to
the purchase of the Shares as follows:
4.1 EXPERIENCE. It has substantial experience in evaluating and
-----------
investing in private transactions of securities in companies similar to the
Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests
and bear the risk of loss of its entire investment.
<PAGE>
4.2 INVESTMENT. It is acquiring the Series B Preferred and the
-----------
underlying Common Stock for investment for its own account, not as a nominee
-
or agent, and not with the view to, or for resale in connection with, any
distribution thereof It understands that the Series B Preferred to be purchased
and the underlying Common Stock have not been, and will not be, registered under
the Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
---------
such Purchaser's representations as expressed herein. It is an "accredited
investor' within the meaning of Regulation D, Rule 501 (a), promulgated by the
Securities and Exchange Commission.
4.3 RULE 144. It acknowledges that the Series B Preferred and the
----------
underlying Common Stock must be held indefinitely unless subsequently registered
under the Securities Act or unless an exemption from such registration is
available. It is aware of the provisions of Rule 144 promulgated under the
Securities Act which permit limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things, the existence of a public market for the shares, the availability
of certain current public information about the Company, the resale occurring
not less than two years after a party has purchased and paid for the security to
be sold, the sale being effected through a "broker's transaction" or in
transactions directly with a "market maker', and the number of shares being sold
during any three-month period not exceeding specified limitations.
4.4 NO PUBLIC MARKET. It understands that no public market now exists
------------------
for any of the securities issued by the Company and that no assurances can be
made that a public market will ever exist for the Company's securities.
4.5 ACCESS TO DATA. It has had an opportunity to discuss the Company's
-----------------
business, management and financial affairs with its management and the
opportunity to review the Company's facilities and has had access to all other
information about the Company it deemed necessary in connection with the
purchase of the Series B Preferred. It has also had an opportunity to ask
questions of officers of the Company. It understands that such discussions, as
well as any written information issued by the Company, were intended to describe
certain aspects of the Company's business and prospects but were not a thorough
or exhaustive description.
4.6 AUTHORIZATION. The Agreements, when executed and delivered by
--------------
Purchaser, will constitute a valid and legally binding obligations of each
Purchaser, enforceable in accordance with their respective terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies.
4.7 BROKERS OR FINDERS. The Company has not, and will not, incur,
---------------------
directly or indirectly, as a result of any action taken by such Purchaser, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement.
<PAGE>
4.8 TAX LIABILITY. It has reviewed with its own tax advisors the
---------------
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. It relies solely on such advisors
and not on any statements or representations of the Company or any of its
agents. It understands that it (and not the Company) shall be responsible for
its own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.
<PAGE>
SECTION 5
PURCHASERS' CONDITIONS TO CLOSING
---------------------------------
The Purchasers' obligation to purchase the Shares at the Closing is, at the
option of Purchasers, subject to the fulfillment of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
---------------------------------
made by the Company in Section 3 hereof shall be true and correct in all
material respects as of the Closing Date.
5.2 COVENANTS. All covenants, agreements and conditions contained in
----------
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects, unless
waived in writing by the Purchaser.
5.3 BLUE SKY. Me Company shall have obtained all necessary Blue Sky law
----------
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the offer and sale of the Series B Preferred and the
Common Stock issuable upon conversion of the Series B Preferred.
5.4 RESTATED ARTICLES. The Restated Articles shall have been filed with
-------------------
the California Secretary of State.
5.5 REGISTRATION AND INFORMATION RIGHTS AGREEMENT The Company shall have
---------------------------------------------
executed the Registration and Information Rights Agreement in substantially the
form attached hereto as Exhibit D.
5.6 COMPLIANCE CERTIFICATE The Company shall have delivered to the
-----------------------
Purchasers a certificate of the Company in substantially the form attached
hereto as Exhibit E, executed by the President of the Company, dated the Closing
Date, and certifying, among other things, the fulfillment of the conditions
specified in Sections 5.1, 5.2 and 5.4 of this Agreement.
SECTION 6
CONDITIONS TO CLOSING OF COMPANY
--------------------------------
The Company's obligation to sell and issue the Shares at the Closing Date is, at
the option of the Company, subject to the fulfillment as of the Closing Date of
the following conditions:
6.1 REPRESENTATIONS. The representations made by the Purchasers in
----------------
Section 4 hereof shall be true
and correct as of the Closing Date.
<PAGE>
6.2 COVENANTS. All covenants, agreements, and conditions contained in
----------
this Agreement to be performed by the Purchasers on or prior to the Closing Date
shall have been performed or complied with in all material respects unless
waived in writing by the Company.
6.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
---------
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the offer and sale of the Series B Preferred and the
Common Stock issuable upon conversion of the Series B Preferred.
6.4 RELATED ARTICLES. The Restated Articles shall have been filed with
------------------
the California Secretary of State.
6.5 LEGAL MATTERS. All material matters of a legal nature which pertain
---------------
to this Agreement, and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Company.
<PAGE>
SECTION 7
MISCELLANEOUS
-------------
7.1 GOVERNING LAW. This Agreement shall be governed in all respects by
---------------
the internal laws of the State of California.
7.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
-------------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of the Purchasers to purchase the Series B
Preferred shall not be assignable without the consent of the Company.
7.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
-----------------------------
delivered pursuant hereto at each Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
7.4 NOTICES, ETC. All notices and other communications required or
--------------
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to a Purchaser, at the address set forth on the Schedule of
Purchasers attached hereto as Exhibit A, or at such other address as such
Purchaser shall have furnished to the Company in writing, or (b) if to the
Company, one copy should be sent AltaVista Technology, Inc. 1671 Dell Ave.,
Suite 209, Campbell, California 95008 and addressed to the attention of the
President, or at such other address.-as the Company shall have furnished to the
Purchaser, and one copy should be sent to Wilson, Sonsini, Goodrich & Rosati,
Two Palo Alto Square, Palo Alto, California 94306, to the attention of Bruce D.
Bower, Esq. Each such notice or other communication shall, for all intents and
purposes of this Agreement, be treated as effective or having been given when
delivered if delivered personally, or, if sent by mail, at the earlier of its
receipt or 72 hours after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid.
7.5 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay
----------------------
or omission to exercise any right, power or remedy accruing to the Purchasers,
upon any breach or default of the Company under this Agreement, shall impair any
such right, power or remedy of the Purchasers nor shall it be construed to be a
waiver of any, such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
thereto fore or thereafter occurring. Any waiver, permit, consent or approval
of any kind or character on the part of the Purchasers, or any waiver on the
part of the Purchasers of any provisions or conditions of this Agreement, must
be in writing and shall be effective only to the extent specifically set forth
in such writing. All remedies, either under this Agreement or by law or
otherwise afforded to the Purchasers, shall be cumulative and not alternative.
<PAGE>
7.6 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
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100,25102, OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
<PAGE>
7.7 COUNTERPARTS. This Agreement may be executed in any number of
-------------
counterparts, each of which shall be enforceable against the party actually
executing such counterpart, and all of which together shall constitute one
instrument.
7.8 SEVERABILITY. In the event that any provision of this Agreement
-------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision, provided that no such severability shall be effective if
it materially changes the economic BENEFIT of this Agreement to any party.
7.9 TITLES AND SUBTITLES. The titles and subtitles used in this
----------------------
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASERS
Number of Series C Preferred
Name and Address Shares
Kris Chellam 150,000
2325 Orchard Parkway
San Jose, CA 95131
<PAGE>
[SERIES A PURCHASE AGREEMENT]
The foregoing agreement is hereby executed as of the date first written above.
"COMPANY"
ALTAVISTA TECHNOLOGY, INC.
BY:
Jack Marshall
President
"PURCHASERS"
Chris Chellam
- --------------
<PAGE>
OEM / REMARKETING AGREEMENT
This Remarketing Agreement ("Agreement") is made this November 15, 1996, by
and between ArcSoft, Inc. ("OEM"), having principal place of business at 4015
Clipper Court, Fremont, CA 94538 and AltaVista, Inc.("Company"), having its
principal place of business at 50 Curtner Avenue, Suite 2, Campbell CA 95008 and
RECITALS
Whereas, AttaVista manufactures computer software that consists of
PHOTOEXPRESS ("Software"). Whereas, ArcSoft, Inc. desires to package
AltaVista's computer software along with other software and computer equipment
(the "OEM Package") and market the OEM Package to consumers.
Now, therefore, in consideration of the foregoing premises and the mutual
covenants in this Agreement, the parties agree as follows:
1. GRANT OF LICENSE
1.1 SOFTWARE. AltaVista hereby grants to ArcSoft a non-exclusive license to
copy and distribute the Software when included as object code in conjunction to
Photolmpression and/or PhotoStudio, to end-users worldwide.
2. ROYALTY. ArcSoft hereby agrees to pay AltaVista a royalty for each
Software transferred or distributed by ArcSoft. The parties agree upon the
following royalty payment structure: $1.50US/unit of licensed PHOTOEXPRESS.
Royalty payments shall be made quarterly as they are shipped. ArcSoft shall
allow AltaVista the right to examine its books and records relating to the
transfer or distribution of PHOTOEXPRESS upon written request of AltaVista and
at reasonable times.
3. PAYMENT. ArcSoft shall make an initial payment of $5,000 upon delivery of
the Golden Master to be applied against the initial 3,333 unit order. Any
additional Royalties shall be paid 30 days following the quarter ArcSoft ships
the 3,334th unit. ArcSoft shall make payment to AltaVista for all Software
purchased under this Agreement net thirty (30) days from the end of each
quarterly shipping report.
3.1 EXPENSES. AltaVista is under no obligation or requirement to reimburse
the ArcSoft for any expenses relating to the development, marketing or sale of
the ArcSoft Packages. Any costs and expenses incurred by ArcSoft shall be the
sole responsibility of ArcSoft. Any costs and expenses incurred by AltaVista
relating to Gold Master CD's, web services, and/or tech support shall remain
that of AltaVista.
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3. 1.1 Should AltaVista cause any event which is considered a material breach
of its obligations under this Agreement which causes ArcSoft undue harm,
financial or otherwise, AltaVista then becomes fully responsible for all
reparations caused by such actions.
4. TECHNICAL SUPPORT
4.1 ALTAVISTA SUPPORT. AltaVista shall provide initial technical support and
training to the ArcSoft's technical personnel relating to PhotoExpress.
4.2 ALTAVISTA SUPPORT TO END USERS. AltaVista shall provide technical support
to the end users for PhotoExpress should basic technical support issues go
beyond the training or resources of ArcSoft's technical support staff.
5. ALTAVISTA LIMITED WARRANTIES
5.1 SOFTWARE WARRANTY. AltaVista warrants that the computer equipment
delivered under this Agreement will be free from defect in materials and
workmanship under normal use and service. ArcSoft, Inc. may pass this warranty
on to end users.
5.2 SOLE WARRANTY. ArcSoft acknowledges and agrees that the provisions of
this Section 5 warranty constitute the sole and exclusive remedy available to it
regarding defective products. Except for the express warranties provided in
this section, all warranties, whether express our implied, all guaranties and
all representations as to performance, including all warranties that, but for
this provision, might arise from the course of dealing or custom of trade and
including all implied warranties of merchantability or fitness for a particular
purpose, with respect to the computer equipment and software furnished by
AltaVista are hereby expressly excluded and disclaimed by AltaVista.
The exclusive remedy of ArcSoft and any end user for breach of the
foregoing warranties shall be to seek repair or replacement of the affected
Software at the expense of AltaVista.
6. INDEMNIFICATION
6.1 BY ALTAVISTA. AltaVista hereby indemnities and holds harmless ArcSoft
from and against any claims, actions, or demands alleging that the computer
equipment or Programs infringe any patent, trademark, copyright, or other
intellectual property right of any third party. ArcSoft shall permit AltaVista
to replace or modify any affected computer equipment or software so to avoid
infringement, or to procure the right for ArcSoft to continue use and
remarketing or such items. If neither or such alternatives is reasonably
possible, the infringing items shall be returned to AltaVista and AltaVista's
sole liability shall be to refund amounts paid, by ArcSoft. AltaVista shall
have no
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obligation for or with respect of claims, actions, or demands alleging
infringement that arise by reason of combination of non-infringing items with
any items not supplied by AltaVista.
6.3 NOTICE REQUIREMENT. The foregoing indemnities are conditioned on prompt
written notice of any claim, action, or demand for which indemnity is claimed;
complete control of the defense and settlement by the indemnifying party; and
cooperation of the other party in such defense.
7. TERMINATION
7.1 TERMINATION. This Agreement may be terminated as follows:
7.1.1 Should either party commit a material breach of its obligations under this
Agreement, or should any of the representations of either party in this
Agreement prove to be untrue in any material respect, the other party may, at
its option, terminate this Agreement, by 120 days' written notice of
termination, that notice shall identify and describe the basis for such
termination. If, prior to expiration of such period, the defaulting party cures
such default, termination shall not take place.
7.1.2 Either party may, at its option and without notice, terminate this
Agreement, effective immediately, should the other party (1) admit in writing
its inability to pay its debts generally as they become due; (2) make a general
assignment for the benefit of creditors-, (3) institute proceedings to be
adjudicated a voluntary bankrupt, or consent of the filing of a petition of
bankruptcy against it; (4) be adjudicated by a court of competent jurisdiction
as being bankrupt or insolvent; (5) seek reorganization under any bankruptcy
act, or consent to the filing or a petition seeking such reorganization, or (6)
have a decree entered against it by a court of competent jurisdiction appoint a
receiver, liquidator, trustee, or assignee in bankruptcy or in insolvency
covering all or substantially all of such party's property or providing for the
liquidation of such party's property or business affairs.
7.1.3 Termination of this Agreement shall not relieve either party of the
obligations incurred under this Agreement, except that Section 8.5 shall survive
termination.
7.1.4 On termination of this Agreement, no additional computer equipment or
software shall be shipped to ArcSoft unless AltaVista is the breaching party.
Otherwise, ArcSoft shall, at AltaVista's option, (1) return to AltaVista all
computer equipment purchased by and delivered to ArcSoft, including all copies,
whereupon AltaVista shall refund amounts paid with respect thereto by ArcSoft;
or (2) dispose of any remaining OEM Packages embodying the computer equipment
and programs obtained from AltaVista in accordance with the requirements of this
Agreement.
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8. GENERAL PROVISIONS
8.1 ASSIGNMENT. Except as set forth in this Agreement, neither this Agreement
nor any rights within it, in whole or in part, shall be assignable or otherwise
transferable by either party without the express written consent of the other
party; any such attempt by either party to assign any of its rights or delegate
any of its duties without the prior written consent of the other party shall be
null and void. Subject to the above, this Agreement shall be binding upon and
inure the benefit of the successors and assigns of the parties hereto.
8.2 WAIVER, AMENDMENT, MODIFICATION. No waiver, amendment or modification,
including by custom, usage of trade, or course of dealing, of any provision of
this Agreement will be effective unless in writing and signed by the party
against whom such waiver, amendment or modification is sought to be enforced.
No waiver by any party of any default in performance on the part of the other
party under this Agreement or of any breach or series of breaches by the other
party of any of the terms or conditions of this Agreement shall constitute a
waiver of any subsequent default in performance under this Agreement or any
subsequent breach of any terms or conditions within. Performance of any
obligation required of a party under this Agreement may be waived only by a
written waiver signed by a duly authorized officer of the other party, that
waiver shall be effective only with respect to the specific obligation described
therein.
8.3 FORCE MAJEURE. Neither party will be deemed in default of this Agreement
of the extent that performance of its obligations, or attempts to cure any
breach, are delayed or prevented by reason of circumstance beyond its reasonable
control, including without limitation fire, natural disaster, earthquake,
accident or other acts of God ("Force Majeure"), provided that the party seeking
to delay its performance gives the other written notice of any such Force
Majeure within 15 days after the discovery, and further provided that such party
uses its good faith efforts to cure the Force Majeure. This Article shall not
be applicable to any payment obligations of either party.
8.4 PROPRIETARY INFORMATION. Each party acknowledges that it may be furnished
with or may otherwise receive or have access to information or material that
relates to past, present or future products, software (including source code and
object code), research development, inventions, processes, techniques, designs
or technical information and data, and marketing plans. (The "Proprietary
Information"). Each party agrees to preserve and protect the confidentiality of
the Proprietary Information and all physical forms, whether disclosed to the
other party before this Agreement is signed or afterward. In addition, a party
shall not disclose or disseminate the Proprietary Information for its own
benefit or for the benefit or any third party unless otherwise provided in this
Agreement. The foregoing obligations do not apply to any information that (1)
is publicly known; (2) is given to a party by someone else who is not obligated
to maintain confidentiality; or (3) a party had already developed prior to the
day this
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Agreement is signed, as evidenced by documents unless, otherwise provided
herein. Neither party shall take our cause to be taken any physical forms of
Proprietary Information (nor make copies of same) without the other party's
written permission. Within three (3) days after the termination of this
Agreement (or any other time at the other party's request), a party shall return
to the other party all copies of Proprietary Information in tangible form.
Despite any other provisions of this Agreement, the requirements of this section
shall survive termination of this Agreement.
8.5 INDEPENDENT CONTRACTOR. Nothing contained in this Agreement will be
deemed to place the parties in the relationship of employer/employee, partners,
or joint venturers. Neither party shall have any right to obligate or bind the
other in any manner. Each party agrees and acknowledges that it shall not hold
itself out as an authorized agent with the power to bind the other party in any
manner. Each party will be responsible for any withholding taxes, payroll
taxes, disability insurance payments, unemployment taxes, and other similar
taxes or charges with respect to its activities in relation to performance of
its obligations under this Agreement.
8.6 CUMULATIVE RIGHTS. Any specific right or remedy provided in this
Agreement shall not be exclusive, but shall be cumulative upon all other
rights and remedies set forth in this Agreement and allowed under applicable
law.
8.7 GOVERNING LAW. This Agreement shall be governed by the laws of the State
of California applicable to Agreements made and fully performed in California by
California residents.
8.8 ENTIRE AGREEMENT. The parties acknowledge that this Agreement expresses
their entire understanding and Agreement, and that there have been no
warranties, representations, covenants or understandings made by either party to
the other except such as are expressly set forth in this Agreement. The parties
further acknowledge that this Agreement or contracts, whether written or oral,
entered into between ArcSoft, Inc. and AltaVista with respect to the matters
expressly set forth in this Agreement.
8.9 COUNTERPARTS. This Agreement may be executed in multiple counterparts,
any of which will be deemed an original, but all of which shall constitute one
and the same instrument.
8.10 ATTORNEY FEES. In the event that either party is required to retain the
services of any attorney to enforce or otherwise litigate or defend any matter
or claim arising out of or in connection with this Agreement, the prevailing
party shall be entitled to recover from the other party, in addition to any
other relief awarded or granted, its reasonable costs and expenses (including
attorneys' fees) incurred in the proceeding.
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8.11 COMPLIANCE WITH LAW. Both parties agree to comply with all applicable
federal, state, and local laws and regulations in performing their duties.
8.12 RECORDS. ArcSoft, Inc. shall maintain for at least 1 year from the date
of creation all records, contracts, and accounts relating to PHOTOEXPRESS
production and distribution), and shall permit examination by authorized
representatives of AltaVista at all reasonable times and at the latter's expense
in order that it may verify compliance of this Agreement.
8.13 SEVERABILITY. In the event that any provision of this Agreement is found
invalid or unenforceable pursuant to judicial decree or decision, the remainder
shall remain valid and enforceable according to its terms. Without limiting the
foregoing, it is expressly understood and agreed that each and every provision
of this Agreement that provides for a limitation of liability, disclaimer of
warranties, or exclusion of damages is intended by the parties to be severable
and independent of any other provision and to be enforced as such. Further, it
is expressly understood and agreed that in the event any remedy in this
Agreement is determined to have failed of its essential purpose, all other
limitations of liability and exclusion of damages set forth herein shall remain
in full force and effect.
8.14 NOTICES. All notices, demands or consents required or permitted in this
Agreement shall be in writing and shall be delivered or mailed certified return
receipt requested to the respective parties at the addresses stated above or at
any other address the party shall specify to the other party in writing. Any
notice required or permitted to be given by the provisions of this Agreement
shall be conclusively deemed to have been received on the day it is delivered to
that party by U.S. Mail with Acknowledgment of Receipt or by any commercial
courier providing equivalent acknowledgment of receipt.
9.1 DEVELOPMENT. Any development which ArcSoft supports specifically for the
advancement of the PHOTOEXPRESS product shall remain an exclusive element within
PHOTOEXPRESS and shall not become available to other AltaVista customers without
the express written consent of ArcSoft. ArcSoft will notify AltaVista of this
exclusivity via written memorandum.
10.1 FREE GOODS. AltaVista hereby authorizes ArcSoft to freely produce and
distribute no more than 1,000 units of PHOTOEXPRESS for marketing and
internal/external testing purposes.
Captions and section headings used in this Agreement are for convenience
only and are not a part of this Agreement and shall not be used in construing
it.
We have carefully reviewed this contact and agree to and accept its terms and
conditions.
We are executing this Agreement as of the day and year first above written.
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First Second Party
By By
TITLE
Date
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Exhibit A
AltaVista Software DESCRIPTION Initial Unit Price
PhotoExpress Multimedia/Web $1.50/unit
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SOFTWARE LICENSE AGREEMENT
THIS AGREEMENT is entered into as Jan 22,1997, by and between SEATTLE FILMWORKS,
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INC., a Washington corporation ("SFW") and ALTAVISTA Technology, Inc., a
California corporation,("Software Publisher").
WHEREAS, ALTAVISTA Technology, Inc. owns rights in a certain software
program known as Howdy!" (the "Software"); and
WHEREAS, SFW desires to obtain, and ALTAVISTA Technology, Inc. desires to
grant, a license to duplicate, distribute and license copies of the encrypted
Software as one of the products distributed on the SFW Master CD, on the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1 . GRANT OF LICENSE.
1.1 Software Publisher hereby grants to SFW a nonexclusive license (the
'License") to duplicate, distribute and license encrypted copies of the program
files and support files of the Software pursuant to the terms of this Agreement,
The documentation which is part of the Software may also be distributed in
writing. SFW agrees that it will not reverse engineer, translate, disassemble,
or decompile the Software, in whole or in part, modify, edit, revise or enhance
the Software, or obscure, alter or remove any copyright, trademark or other
proprietary rights notices contained therein. The Software as delivered to SFW
hereunder is the proprietary and copyrighted property of ALTAVISTA Technology,
Inc., and all title thereto shall remain with ALTAVISTA Technology, Inc. SFW
shall have no right to grant sublicenses of any of its rights hereunder except
that SFW may authorize persons to whom it distributes the Software in accordance
with this Agreement to use the Software.
1.2 Software Publisher shall prepare and deliver to SFW a CD containing
complete program and support files for the Software so that said Software can be
loaded from the SFW Master CD by a user to provide a fully functioning product.
1.3 Software will be encrypted by SFW with a locking code which
prevents user from unauthorized use. SFW will employ all measures it deems
practical within its technical expertise to make sure the Software is secure
from unauthorized use, duplication and distribution. However, SFW makes no
claim and in no way warrants that Software which is encrypted on the SFW Master
CD is 100% secure from such unauthorized use. Once user has paid SFW for
Software, SPW will provide user with a code key to unlock Software and load the
program to user's computer.
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1.4 SFW shall pay Software Publisher a royalty of 20% of net paid sales
excluding shipping, handling and taxes for each copy of Software sold. Net paid
sales is defined herein as the net amount paid by user for the Software less any
returns and will not be subject to sales and administrative expenses. The
selling price of the Software mutually agreed upon by SFW and Software Publisher
will be $14.95. SFW agrees that it will distribute to its first time buyers of
Pictures On Disk the encrypted Software without charge to Software Publisher,
and that all necessary support relative to the installation and basic use of the
software will be provided by SFW customer service. To facilitate SFW customer
support of the Software, Software Publisher agrees to provide each customer
service representative a gratis copy of the Software and including the HELP file
in text form or at least with the browse function turned on.
1.5 The term of the License shall commence on the date of this fully
executed Agreement and continue until terminated as provided herein. SFW may
terminate this License at any time in its sole discretion by delivery of 30 days
written notice to Software Publisher. In addition, if Software Publisher fails
to comply with any of the terms of this Agreement, SFW may, in addition to its
other available remedies, terminate the License immediately upon delivery of
written notice to Software Publisher. Upon termination of the License, SFW
shall return the Software Publisher's master disk to Software Publisher with a
certificate signed by an officer stating that the Software will no longer be
duplicated. All remaining copies in inventory of the Software as embedded in
the SFW Master CD may be sold by SFW. Any such residual sales will be credited
to Software Publisher as per the royalty terms of this Agreement.
2. DELIVERY. Software Publisher shall deliver to SFW within ten days
of the date of this fully executed Agreement one complete copy of the Software,
including all support files.
3. REPORTS AND PAYMENTS: REPORTS AND PAYMENTS: During the term of
this Agreement, SFW shall deliver a written quarterly report to Software
Publisher on or before the 1 5" day of each month following each calendar year
quarter (i.e., March, June, September and December), setting forth the number of
copies of the Software sold on behalf of Software Publisher in the previous
three-month period and the net paid sales for those units. Each such report
will be accompanied by the royalty payment and a list containing the names and
addresses of those who have purchased the Software. Such list will be on a
floppy disk in a form easily read by Software Publisher.
4. SUPPORT AND SERVICE. SFW shall not be obligated to prepare any bug
fixes or other updates to, or any new versions of, the Software. Any such
updates or new versions or fixes, if and when provided to SFW, shall be deemed
to be part of the Software as defined herein, and shall be governed by all
rights and restrictions applicable to the Software hereunder. Software
Publisher shall not be obligated to provide any service or support for the
Software to SFW or any of its customers. Software Publisher will promptly
notify SFW of any bugs or errors in the Software that Software Publisher becomes
aware of.
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5. Warranty by Software Publisher. Software Publisher warrants that
the Software delivered to SFW will be free of defects and bugs and contain no
significant reproducible errors or viruses.
6. NO WARRANTY BY SFW. SFW assumes no responsibility for the Software
to achieve SFW' and its customers' intended results, and for the use of and
results obtained by SFW customers from the Software.
7. CONFIDENTIALITY. Software Publisher agrees that all sales data
provided by SFW will remain confidential.
8. NO ASSIGNMENT. The rights and obligations of Software Publisher
hereunder are personal to Software Publisher under its current ownership and
shall not be assigned, sublicensed or transferred to any third party, whether
voluntarily or by operation of law (including without limitation any merger or
other transaction which transfers control of Software Publisher to new owners)
without the prior, written consent of SFW which shall not be unreasonably
withheld in each instance. Any attempted assignment, sublicense or transfer in
violation of this Section shall be void.
9. INDEMNIFICATION. Software Publisher shall defend, indemnify and hold
SFW harmless from and against any and all claims, actions, losses, damages,
liabilities, obligations, costs and expenses (including without limitation
reasonable attorney fees) arising from or based upon (1) use by SFW or any of
its customers of Software warranties, (2) any failure of the Software to meet
any express or implied warranties made by Software Publisher or to satisfy the
needs of any customer of SFW, or (3) any claims, that Software infringes any
copyright, trademark or other legal rights of others.
10. LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED HEREIN, SFW SHALL NOT UNDER ANY CIRCUMSTANCES BE LIABLE FOR ANY THIRD
PARTY CLAIMS OR FOR ANY INCIDENTAL, CONSEQUENTIAL, INDIRECT OR SPECIAL DAMAGES,
INCLUDING ANY LOST PROFITS OR SAVINGS, ARISING FROM THE PERFORMANCE OR BREACH OF
ANY PROVISION OF THIS AGREEMENT OR THE USE OR INABILITY TO USE THE SOFTWARE, OR
ANY PORTION THEREOF, EVEN IF SFW HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, IN NO EVENT SHALL SFW'S LIABILITY, WHETHER IN TORT (INCLUDING
NEGLIGENCE), CONTRACT, OR OTHERWISE, EXCEED $1,000.
11. GENERAL.
11.1 This Agreement is the complete and exclusive statement of the
agreement between the parties and supersedes any and all prior or
contemporaneous oral or written communications with respect to the subject
matter hereof. Each party is not relying on any representation or warranty
which is not expressly contained in this Agreement. Any provisions or
conditions of any purchase order or other Software Publisher document shall be
inapplicable and not binding upon SFW. No modification, waiver, or amendment
hereof shall be binding unless stated in a writing signed by both parties, and
no waiver of a right in any instance shall constitute a waiver of the same or
any other right in any other instance.
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11.2 In construing this Agreement, no weight or relevance shall be
given to the fact that it or any particular provision of it may have been
drafted by one or the other of the parties, the parties having had adequate
opportunity to negotiate all provisions hereof.
11.3 This Agreement shall be governed and construed in accordance with
the laws of the State of Washington and the United States of America, without
regard to the rules relating to the conflict of laws. Any litigation between
the parties concerning this Agreement shall be brought exclusively in King
County, Washington. Software Publisher consents to the jurisdiction of the
state and federal courts sitting in the State of Washington and service of
process by registered or certified mail or such other methods permitted under
the applicable long-arm statute.
11.4 If any provision of this Agreement is held to be invalid, illegal
or unenforceable, such provision shall be enforced to the maximum extent
permitted by law and the parties' fundamental intentions hereunder, and the
remaining provisions shall not be affected.
11.5 Notices under this Agreement shall be sufficiently given if
delivered in person or sent by mail or reputable courier service to the
respective addresses stated below (or to such other address as a party may by
notice specify for notices to it), and shall be effective upon the earlier of
actual delivery or the third day after mailing.
THE PARTIES AFFIRM THAT THEY HAVE READ AND UNDERSTOOD THIS ENTIRE AGREEMENT,
INCLUDING THE EXCLUSIONS OF WARRANTIES AND LIMITATIONS OF REMEDIES STATED
HEREIN, AND ACKNOWLEDGE THAT THE SAME CONSTITUTE AN AGREED ALLOCATION OF RISK
REFLECTED IN THE PRICING OF THE LICENSE.
SEATTLE FILMWORKS, INC. ALTAVISTA Technology, Inc., Inc:
Address: 1260 16th Ave West Address: 1671 Dell Ave.
Seattle, WA 98119 Suite 209
Campbell, CA 95008
By: By: /s/ Jack Marshall
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Its: Its: President
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Date: 1-14-97 Date: 1-22-97
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ALTAVISTA TECHNOLOGY, INC. ON-LINE DISTRIBUTION AGREEMENT
This on-lineAgreement ("Agreement") is entered into as of___April 24,1999 by
and between _____KC Audio with offices at Aptos Caalifornia ("Content
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Developer"), and AltaVista Technology, Inc. with offices at 1671 Dell Ave.
Suite #209 Campbell, CA 95008("AVT").
Recitals:
Pursuant to an agreement between Content Developer and AVT, Content Developer
has created original content for Howdy Me-Mail plug-ins called "Howdios"
described in Exhibit A, which will also include any Exhibits and attachments
which Content Developer and AVT desire to distribute from the AltaVista
Technology, Inc. Web site.
Agreement : NOW, THEREFORE, in consideration of the premises, conditions,
covenants and warranties herein contained, the parties hereby agree to the
following:
1. DEFINITIONS
1.1 "Content" shall mean digital content such as images, audios, text,
poems, videos, animations, other items or any combination of the above that
the Content Developer shall deliver to AVT in accordance to the terms
of this agreement.
1.2 "Howdios" shall mean copies the content bundled with other content and
software from AVT or third party. Each Howdio is detailed in a Delivery
Schedule and attached to this agreement once approved by AVT as specified
herein.
1.3 "Net Revenue" shall mean the price of a Howdio as listed in each
attached Delivery Schedule.
1.4 "Territory" shall mean AVT's Internet Web page which is available
throughout the world.
1.5 "Deliverable Item" shall mean each of the content components,
materials, computer files or designs set forth in the relevant Delivery
Schedule that Content Developer shall deliver to AVT in accordance with this
Agreement.
1.6 "Deliverable Schedule" shall mean the schedule of Deliverable Items set
forth in Exhibit A.
2. PROPRIETARY RIGHTS AND GRANT OF LICENSE
2.1 All rights to the Content, including but not limited to the copyrights,
shall be the property of Content Developer.
2.2 Content Developer hereby grants to AVT, its successors and assigns,
subject to the terms set forth herein, the perpetual and exclusive right,
license and privilege throughout the Territory to :
2.2.1 produce, reproduce, manufacture, distribute, export, import, promote,
advertise, market, rent, sell and exploit the Content including derivative
works throughout the Territory;
2.2.2 translate the Content at into any non-English language, using
whatever means, developers, contractors or sub-licensees deemed appropriate
by AVT, and exercise the rights granted in Section 2.2.1 above in connection
with the translated versions of the Content. Any expense incurred by AVT in
the translating of the Content in to other languages shall be considered
additional Advance against royalties to be recouped by AVT from the first
dollar revenues of said translated content prio to the payment of royalties
to Content Developer. AVT shall own the copyright in any such translations;
2.2.3 publicly display or perform and/or authorize others to display and
perform the Content and any prototypes or demonstration versions of the
Content, or any part thereof, solely in connection with the advertising,
publicizing, marketing and distribution of the Content. Not withstanding
anything contained here in to the contrary, it is understood and agreed that
AVT retains exclusive rights to all content delivered during the life of
this agreement.
2.2.4 Sub-license others to exercise any of the rights set forth in sections
2.2.1 through 2.2.3 above.
3. ROYALTIES
3.1 ROYALTIES ON THE CONTENT. AVT shall pay or credit Content Developer
royalties as set forth in Exhibit A.
3.2 AVT will provide to Content Developer on a quarterly basis, within
forty-five (45) days after the end of each calendar quarter during which
the Content was sold, a written statement of royalties due to Content
Developer with respect to such Content. Such statement shall be accompanied
by a remittance of the amount due, if any. Content Developer shall have the
right, upon reasonable notice, but no more than once per calendar year, to
audit those records of AVT necessary to verify the royalties paid. Any such
audit will be conducted at Content Developers expense, by certified public
accountants, and at such times and in such a manner as to not unreasonably
interfere with AVT's normal operations and Content Developer and its auditor
shall be required to treat information revealed during the audit as
Confidential Information. Should deficiency be shown by such audit, AVT and
Content Developer shall immediately meet to resolve the conflict.
4. DEVELOPMENT AND APPROVAL PROCESS
4.1 Content Developer agrees to develop the Content in accordance with the
terms of this and to deliver the Content and the Deliverable Items to AVT
for approval, said approval to be at AVTs sole discretion , in a manner and
on the dates specified in Delivery Schedule.
4.2 No Deliverable Item shall be considered approved by AVT until Content
Developer has received written confirmation of such approval from AVT.
4.3 Upon receipt of the initial Content, AVT shall, within 15 business
day, provide Content Developer with either or written acceptance or a
written list of changes that must be made before AVT will accept the
Content.
4.4 If changes are required by AVT before AVT will accept the Content then
the steps outlined in Section 4.3 will be repeated until the Content is
accepted or until AVT terminates this Agreement or exercises its completion
rights. If Content Developer has not provided an acceptable Deliverable
Schedule Content Developer will have an additional 30 days to remedy the
situation. If Content Developer fails to provide an acceptable Deliverable
Item within the allocated extension, AVT, at its sole discretion, may
terminate this agreement and/or exercise its completion rights.
4.5 On or before the date on which the Content was originally due to be
delivered in accordance with the Delivery Schedule, Content Developer has
not provided an acceptable Deliverable Item within one (1) month of the date
such Deliverable Item was originally due in accordance with the Delivery
Schedule, AVT shall be entitled to terminate this agreement or exercise
its completion rights.
4.6 Content Developer shall be responsible for all development costs
associated with the Content, including but not limited to, the costs of any
fees payable for software or other licensing rights or acquiring services or
materials in connection with the Content. If any Deliverable Item contains
any non-original material, including music, poems images, pictures,
animations or text, Content Developer shall identify the material and the
owner or copyright holder thereof at the time of delivery of such
Deliverable Item, and Content Developer shall obtain, at Content Developer's
expense, all authorizations necessary to secure from the owner or copyright
holder of such material the rights for AVT granted in Section 2 above in
connection with such material without additional costs to AVT and without
restriction. In addition, Content Developer shall deliver to AVT along with
the Deliverable Item containing such material, all documentation
establishing, to AVT's satisfaction, Content Developer's and AVT's right to
use such material.
5. WARRANTIES, INDEMNIFICATION, AND REMEDIES
5.1 Content Developer represents, warrants and covenants that: it has full
right, power and authority to enter into this Agreement and to grant all
rights granted herein without violating any other agreement or commitment of
1
<PAGE>
any sort; that Content Developer has the requisite corporate authority to
enter into this Agreement and to enter into all transactions and grant all
rights contained in this Agreement; that it has no outstanding agreements or
understandings, written or oral, concerning the Content; that Content
Developer has not previously sold, licensed, encumbered or pledged the
Content or any portion thereof as security to any third party; the
Deliverable Items provided hereunder shall be original; and that the Content
does not and will not infringe or constitute a misappropriation of any
trademark, patent, copyright, trade secret or other proprietary, publicity,
or privacy right of any third party and AVT's use, reproduction, sale,
licensing and/or distribution of Content as provided in this Agreement shall
not violate any rights of any kind or nature of any third party.
5.2 Content Developer shall defend, indemnify and hold harmless AVT, its
successors, assigns, parents, subsidiaries, affiliates, licensees and
sublicensees, and their respective officers, directors, agents and
employees, from and against any action, suit, claim, damages, liability,
costs and expenses (including reasonable attorneys' fees), arising out of or
in any way connected with any breach of any representation or warranty
made by Content Developer herein or any claim that the Content infringes any
intellectual property rights or other rights of any third party. AVT shall
give Content Developer prompt notice of any such claim or of any threatened
claim and shall reasonably cooperate with Content Developer in the defense
thereof.
5.3 If AVT receives notice of any claim, demand or suit, or of any facts
which would lead a reasonable person to believe that there has been a breach
of Content Developer's representations or warranties as set forth herein,
AVT shall have the right to withhold from any payments due to Content
Developer under this Agreement reasonable amounts as security for Content
Developer's obligations hereunder, unless Content Developer posts other
security reasonably acceptable to AVT. Upon resolution of the claim, the
amount in escrow thereon shall be distributed to Content Developer after
deductions of any amounts required to be paid to AVT or third parties under
this indemnity.
5.4 AVT hereby represents, warrants and covenants that it has the full
right, power and authority to enter into this Agreement. AVT shall defend,
indemnify and hold harmless Content Developer, its successors, assigns,
parents, subsidiaries, affiliates, licensees and sublicensees, and their
respective officers, directors, agents and employees, from and against any
action, suit, claim, damages, liability, costs and expenses (including
reasonable attorneys' fees), arising out of or in any way connected with any
breach of any representation or warranty made by AVT herein. Content
Developer shall give AVT prompt notice of any such claim or of any
threatened claim, and shall reasonably cooperate in the defense thereof.
5.5 Neither Content Developer nor AVT shall agree to the settlement of any
such claim, demand or suit prior to final judgment therein without the
consent of the other party, whose consent shall not unreasonably be
withheld.
5.6 The parties' indemnification obligations set forth in the foregoing
sections shall survive termination of this Agreement.
6. TERM
6.1 This Agreement shall automatically renew without notice, 12 months
--
from the effective date first set forth above, unless the parties have
mutually agreed in writing not to renew the agreement for an additional 12
month term, which agreement must be made in writing within 45 days of the
second anniversary of the agreement.
7. TERMINATION
7.1 This Agreement shall terminate upon the earlier of (a) the thirtieth
(30th) day after one party gives the other notice of a material breach by
the other of any term of this Agreement, unless the breach is cured before
that day, or (b) the thirtieth (30th) day after AVT gives Content Developer
notice of its intention to terminate the Agreement. In the event of a
material breach of this Agreement by Content Developer, AVT shall have the
right to suspend payment of royalties from the time AVT notifies Content
Developer of a breach until the time such breach is cured by Content
Developer.
7.2 This Agreement also may be terminated by AVT immediately upon notice
pursuant to the terms of Section 4.5 above.
8. ASSIGNMENT
8.1 This Agreement may not be assigned by Content Developer without the
prior written consent of AVT. AVT may assign this Agreement without
limitation. Subject to the foregoing, this Agreement will bind, and inure
to the benefit of, the parties and their respective successors and permitted
assigns.
9. FORCE MAJEURE
9.1 If the performance of this Agreement or any obligation under it (except
payment of monies due) is prevented, restricted or interfered with by reason
of acts of God, acts of government, or any other cause not within the
control of either party, the party so affected shall be excused from such
performance, but only for so long as and to the extent that such a force
prevents, restricts or interferes with that party's performance.
Notwithstanding the foregoing, the non-affected party may terminate this
Agreement immediately upon written notice if the force majeure circumstances
continue for more than sixty (60) days.
10. INTEGRATION
10.1 This Agreement, together with all Delivery Schedule attached hereto,
sets forth the entire agreement between the parties with respect to the
subject matter hereof, and may not be modified or amended except by written
agreement executed by each of the parties hereto.
11. GOVERNING LAW
11.1 This Agreement shall be governed by the laws of the State of
California applicable to agreements made and to be wholly performed therein
(without reference to conflict of laws). Content Developer hereby consents
to the jurisdiction of the state and federal courts having jurisdiction in
San Jose, California. In any action to enforce the terms of this Agreement,
the prevailing party shall be entitled to recover its reasonable attorneys'
fees and expenses.
12. INDEPENDENT CONTRACTOR
12.1 Content Developer shall be deemed to have the status of an independent
contractor, and nothing in this Agreement shall be deemed to place the
parties in the relationship of employer-employee, principal-agent, partners
or joint ventures. Content Developer shall be responsible for any
withholding taxes, payroll taxes, disability insurance payments,
unemployment taxes and other similar taxes or charges on the payments
received by Content Developer hereunder.
IN WITNESS WHEREOF, the parties have caused this Development Agreement to be
executed on the date set forth by their duly authorized representatives.
AltaVista Technology, Inc.
------------------------
Signature: Darren Shadwick Signature:
------------------- -------------------
Name: Name:
------------------------ ------------------------
Title: Co-Owner K.C. Audio Title:
----------------------- -----------------------
Date: April 24, 1997 Date:
------------------------ ------------------------
2
<PAGE>
EXHIBIT "A" DELIVERY SCHEDULE
Attached hereto and made part here of that certain on-line Distribution
Agreement by and between _________________ Content Developer and AltaVista
Technology, Inc. dated ____________.
Howdio Name: Friend 1
---------
Total Howdio Price: $_______
Content Percentage: _______%
Content Developer Royalty: $_______
Delivery Date: ________
Content Description & Specification:
Audios3
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ALTAVISTA TECHNOLOGY, INC.
Signature: s. Jack Marshall Signature: s. Darren Chadwick
------------------- -------------------
Name: Name:
------------------------ ------------------------
Title: President Title:
----------------------- ------------------
Date: Date:
------------------------ ------------------------
Other Content Description :
Name Quantity Content Developer
1. _______________ ______ _______________
2. _______________ ______ _______________
3. _______________ ______ _______________
4. _______________ ______ _______________
5. _______________ ______ _______________
7. _______________ ______ _______________
8. _______________ ______ _______________
9. _______________ ______ _______________
10. _______________ ______ _______________
3
<PAGE>
OEM LICENSE AGREEMENT FOR ALTAVISTA TECHNOLOGY FNC.'S PRODUCTS
(Reproducing)
This Agreement (the "Agreement") is made by and between AltaVista
Technology Inc. ("AVT"), having its principal place of business at 1671 Dell
Avenue, Suite #209, Campbell, CA 95008 and AITech International ("OEM"), having
its principal place of business at 47971 Fremont Blvd, Fremont, CA 94538 for the
purpose of licensing AVT's software produces for bundling with certain of OEM's
products. The effective date of this Agreement shall be the latest date set
forth on the signature page of this Agreement (the "Effective Date").
The parties agree as follows:
1. DEFINITIONS.
-----------
1.1 Documentation is defined as (i) AVT's End User manuals, and (ii) the End
-------------
User license agreement, (iii) the End User warranty statement all of which
are intended to be provided to the End User in on-line format.
1.2 End User(s)is defined as a third party wing the Programs for ordinary
------------
and customary business or for personal purposes, and not for redistribution.
1.3 Master Copy is defined as the Program in machine readable form embodied
------------
on magnetic media to be used in making serialized reproductions of the AVT
Program.
1.4 New Release is defined as the then-current release of a particular
------------
Program designated by AVT by a change in the version number digits of the tenths
decimal place, or one decimal to the left of the decimal point.
1.5 OEM Hardware & Software is defined as the hardware and software
--------------------------
developed by OEM that is marketed by or supported by OEM
1.6 Programs are defined as the AVT proprietary computer program products
--------
listed in Exhibit A ("AVT Programs"). The list in Exhibit A ("AVT Programs")
may be amended in writing by the parties from time to time.
2. LICENSE AND OEM CERTIFICATION.
--------------------------------
2.l OEM Certification. OEM certifies that the Programs and Documentation
------------------
acquired under this Agreement we to be distributed with the OEM Hardware &
Software which is remarketed to unaffiliated third-party End Users, value-added
dealers, distributors, systems integrators, and retail dealers in the regular
course of OEM's business. OEM acknowledges that any other transfer of the
Programs and Documentation acquired pursuant to this Agreement is expressly
prohibited.
2.2 Bundling. OEM agrees to bundle the Programs and Documentation with
--------
shipments of its OEM Hardware & Software during the term of the Agreement. OEM
understands and agrees that it has no right to distribute the Programs
separately or unbundled from the OEM Hardware & Software.
2.3 Distribution License Grant. AVT hereby grants to OEM and OEM hereby
----------------------------
accepts from AVT, in accordance with the terms and conditions of this Agreement,
a non-exclusive, worldwide, non-transferable license, for the fee set forth in
Section 5 ("Royalties") to distribute the Programs and Documentation bundled
with the OEM Hardware & Software directly and indirectly through OEM's usual
channels of distribution.
<PAGE>
2.4 Reproduction.
-------------
2.4.1 Reproduction of the Program. AVT hereby grants to OEM in
-------------------------------
accordance with the terms and conditions of this Agreement, a non-exclusive,
worldwide, non-transferable license, to reproduce copies of the Programs, made
from the Master Copy. OEM may not sublicense its right to reproduce the Programs
to any third party unless AVT consents in writing to the sublicense. OEM may
use its own company label as the main label on the media containing the
Programs, provided, however, that each copy of the media embodying the Programs,
other than a hard disk, must contain (i) a label bearing the same AVT copyright
notice as contained on the label on the Master Copy received from AVT and (ii) a
label bearing the particular Program trademark.
2.5 Limited Right to Use Trademarks. AVT hereby grants to OEM a
-----------------------------------
non-exclusive, nontransferable limited right, to the extent that AVT has the
authority to grant such limited right, to use the relevant AVT trademarks on the
Programs and in OEM's product literature, promotion and advertising for the
Programs. OEM agrees that it will include the AVT trademarks on the Programs
and in any literature, Promotion or advertising concerning the Programs or
the features or functionality provided to the OEM Hardware & Software by the
Programs.
3. DELIVERY.
--------
<PAGE>
3.1 Delivery of the Master Copy. AVT shall deliver to OEM a Master Copy of
----------------------------
the particular Program(s) ten (IO)days after the execution of this Agreement.
4. MAFNTENANCE AND SUPPORT.
-------------------------
4.1 End User Support. AVT shall provide End User warranty and continuing
-----------------
support for Programs directly to End Users by telephone during normal business
hours in accordance with AVT's standard customer support policies and
then-current rates.
4.2 End User Warranty. AVT warrants the Programs only pursuant to the
-------------------
terms and conditions of the End User license agreement and warranty statement
provided with the Documentation and no warranty is extended to OEM except as an
End User.
4.3 Support to OEM. For the term of this agreement and any renewals
----------------
thereof, AVT shall, during normal business hours, provide to OEM telephone
assistance and response to written requests received by telecopy concerning
Program errors and possible work wounds for AVT's then-current release of the
Programs or the then-immediately prior release, at the same level m AVT supplies
to its End User customers under the Standard Passport Support Program.
5. ROYALTIES.
---------
5.1 Royalty The royalty rate for the Software Product shall be $0.00 per
------- -----
copy of the Howdy Software Product bundled with the Combined Product throughout
the term of this agreement. There shall be no royalty due for WebCannon. There
shall be no royalty due for my backup or replacement copies and OEM shall be
given full credit in the mount of full royalty paid by OEM for my for my
Software bundle that is returned to OEM. OEM agrees to make quarterly reports
and payments to AVT within thirty (30) days after the end of each quarter. Each
report shall specify the number of Combined Products shipped during that month,
5.3 Taxes and Fees. In addition to any other charges due under this
-----------------
Agreement, OEM agrees to pay, indemnify and hold AVT harmless from any sales,
use, excise, import or export, value added or similar tax, not based on AVT 's
net income or my other duty or fee (collectively tire "Taxes") and any penalties
or interest associated with any of the Taxes, imposed by my governmental
authority with respect to either or both of any payment to be made by OEM to
under this Agreement or any Program package to be delivered by AVT to OEM under
this Agreement.
5.4 Payment Upon Termination. Upon termination of this Agreement, the
--------------------------
payment date of all monies due AVT shall automatically be accelerated so that
they shall become due and payable on the effective date of termination, even if
longer terms had been provided previously.
5.5 Shipping Costs and Insurance. All shipping charges and insurance shall
-----------------------------
be borne by OEM, and said charges will appear on AVT's invoice OEM shall, at its
expense, make and negotiate all claims against any carrier, for any loss or
damage.
5.6 Revenue Sharing Program. AVT will pay OEM 20% of the one yen hosting fee
-----------------------
for any customer who signs up for one (1) year of hosting with AVT. The
percentage will be based on the amount of the hosting fee at the time the user
registers for the service. AVT reserves the right to change the price of the
one (1) year hosting fee at any time. Tracking is done by a private file that
is sent to AVT via e-mail by any OEM Customer that is using AVT to host their
site. Payment will only be made for customers whose e-mail contains this file.
Payments will be made to the OEM within thirty (30) days after the end of each
quarter.
<PAGE>
6. TERM OF AGREEMENT. The term of the Agreement shall commence on the
--------------------
Effective Date and unless sooner terminated in accordance with the terms of this
---
Agreement, shall continue for one (1) year (the "Initial Tem"). The Agreement
will renew automatically for successive one (1) year terms (the "Renewal Terms")
unless written notice of termination is received by either parry thirty (30)
days prior to the end of the Initial Term or any Renewal term.
7. OWNERSHIP OF PROPRIETARY RIGHTS AND RESTRICTED RIGHTS.
-----------------------------------------------------------
7.1 Proprietary Rights. OEM acknowledges that the Programs,
-------------------
Documentation, including the structure, sequence and organization of the
Programs are proprietary to AVT and that AVT retains exclusive ownership of the
Programs, Documentation and proprietary rights associated with the Programs, and
Documentation, OEM wilt take all reasonable measures to protect AVT s
proprietary rights in the Programs, Documentation including AVT's patents,
trademarks, copyrights and trade secrets. Except m provided herein, OEM is not
granted any rights to patents, copyrights, trade secrets, trade names,
trademarks (whether registered or unregistered), or any other rights, franchises
or licenses with respect to the Programs, and Documentation.
8. NON-DISCLOSURE. During the term of this Agreement, certain information
--------------
will be disclosed to OEM concerning the Programs, proposed new AVT software,
pricing, business plans and customers which is the confidential and proprietary
information of AVT and not generally known to the public (herein "Confidential
Information"). OEM agrees that during and after the term of this Agreement, it
will not use or disclose to any third parry any Confidential Information without
the prior written consent of AVT. AVT hereby consent to the disclosure of its
Confidential Information to certain employees of OEM w is reasonably necessary
in Order to allow OEM to perform Under this Agreement and to obtain the benefits
This Paragraph shall not apply to proposed new Program information after such
information is made public by AVT.
<PAGE>
9. PROPRIETARY RIGHTS INDEMNITY. AVT shall defend at its own expense my
------------------------------
claim, suit or proceeding brought against OEM insofar as it is based on a claim
that a Program constitutes a direct infringement of a U.S. copyright of a third
party. To qualify for such defense and payment OEM must- (i) give AVT prompt
written notice of my such claim; and (if) allow AVT to control and fully
cooperate with AVT in the defense and all related settlement negotiations. AVT
shall pay all damages (including reasonable attorneys' fees) finally awarded to
third panics against OEM which OEM is obligated to pay but shall not be
responsible for my compromise made without its consent. Upon notice of an
alleged infringement or if in AVT's opinion such a claim is likely, AVT shall
have the right, at its option, to obtain the right to continue the distribution
of the Programs, substitute other computer software with similar operating
capabilities, or modify the Program so that it is no longer infringing. In the
event that none of the above options we reasonably available in AVT's opinion,
OEMs sole and exclusive remedy shall be to terminate this Agreement, return all
copies of the Documentation paid for and in OEM's inventory and obtain a refund
from AVT of the fee paid by OEM for such Documentation inventory. THE FOREGOING
STATES OEM's SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO CLAIMS OF INFRINGEMENT OF
THIRD PARTY PROPRIETARY RIGHTS OF ANY KIND. AVT will have no liability to OEM
if any alleged copyright infringement or claim thereof is based upon the use of
the Programs in connection or in combination with equipment, devices or software
not delivered by AVT (if such infringement or claim would have been avoided by
the use of the Programs with other equipment, devices or software) or use of the
Programs in a manner for which they were not intended or use of other than the
most current release of the Programs if such claim would have been prevented by
the use of such most current release.
10. LIMITATIONS AND DISCLAIMER. EXCEPT FOR THE EXPRESS WARRANTY SET FORTH IN
---------------------------
THE END USER LICENSE AND WARRANTY STATEMENT, AVT MAKES NO OTHER WARRANTIES
RELATING TO THE PROGRAMS, EXPRESS, OR IMPLIED, AND EXPRESSLY EXCLUDES ANY
WARRANTY OF NON-INFRINGEMENT, FITNESS FOR A PARTICULAR PURPOSE OR
MERCFIANTABILITY. NO PERSON IS AUTHORIZED TO MAKE ANY OTHER WARRANTY OR
REPRESENTATION CONCERNING THE PROGRAMS OTHER THAN AS PROVIDED IN THE END USER
LICENSE AND WARRANTY STATEMENT. OEM SHALL MAKE NO OTHER WARRANTY, EXPRESS OR
IMPLIED, ON BEHALF OF AVT.
11. INDEMNITY. OEM agrees to indemnify and bold AVT harmless from any claim
----------
or damages (inclusive of AVT's attorneys' fees)
m
fOEMorrepresentativesofOEM. OEM shall be solely responsible for my claims,
warranties or representations made by OEM or OEM's employees or agents which
differ from the warranty provided by AVT in its End User agreement.
12. CONSEQUENTIAL DAMAGES WAIVER. AVT WILL NOT BE LIABLE FOR ANY LOSS OF
------------------------------
USE, INTERRUPTION OF BUSINESS, OR ANY INDIRECT, SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES OF ANY KIND (INCLUDING LOST PROFITS) REGARDLESS OF THE
FORM OF ACTION WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT PRODUCT
LIABILITY OR OTHERWISE, EVEN IF AVT HAS BEEN ADVISED OF THE POSSIBII.ITY OF SUCH
DAMAGES.
11. LIMITATION OF LIABILITY. Notwithstanding any other provisions of this
-------------------------
Agreement, AVT's total liability to OEM under this
Agreement shall be limited to replacement of the Programs, and
Documentation.
14. TERMINATION.
-----------
14.1 Without Cause. This Agreement may be terminated at any time by
--------------
either party without cause upon thirty (30) days prior written notice.
<PAGE>
14.2 With Cause.
-----------
14.2.1 AVT may terminate this Agreement upon thirty (30) days written notice
of a material breach of this Agreement if such breach is not cured within such
thirty (30) day period.
14.2.2 Notwithstanding the above, AVT may terminate this Agreement
immediately, upon written notice, for a material breach of Paragraph 2 ("License
and OEM Certification"), 7 ("Ownership of Proprietary Rights and Restricted
Rights"), 8 ("Non-Disclosure") or the failure to make any payments due under
this Agreement.
14.2.3 AVT may immediately terminate this Agreement after giving written
notice (i) if OEM shall become insolvent, (ii) if OEM shall fail to pay its
obligations as they arise, (iii) upon any proceeding being commenced by or
against OEM under any law providing relief to OEM as debtor, (iv) if OEM shall
make a composition with its creditors, or (v) if OEM shall have a receiver
appointed over the whole or any pan of its assets.
14.3 Rights upon Termination. Upon termination of this Agreement:
14 3.1 OEM's appointment as an authorized OEM for the AVT Programs and
Documentation shall immediately terminate.
14 3.2 OEM shall immediately discontinue all representations that it is an
authorized AVT OEM.
14.3.3 OEM shall have no further right to reproduce the Programs or to
distribute the Programs or Documentation.
14.3.4 OEM shall destroy or create all copies of the Programs and certify such
destruction to AVT in writing within ten (10) days of the termination date.
Additionally, OEM shall immediately return the Master Copy magnetic media to the
AVT.
<PAGE>
14.3.4 OEM shall have sixty (60) days from the effective date of termination
to distribute its inventory of the current versions of the Programs and
Documentation in accordance with the terms of this Agreement.
15. NOTICES. All notices permitted or required under this Agreement
-------
shall be in writing and shall be delivered @ follows with notice
deemed given as indicated: (I) by personal delivery when delivered personally,
(it) by overnight courier upon written notification of receipt, (iii) by
telecopy or facsimile transmission when continued by tclecopier or facsimile
transmission, or (iv) by certified or registered mail, return receipt requested,
five (5) days after deposit in the mail. All notices must be sent to the
address first described above or to such other address that the receiving party
may have provided for the purpose of notice in accordance with this Paragraph
15.
16. FORCE MAIEURE. Neither party shall be liable hereunder by reason of my
--------------
failure or delay in the performance of its obligations hereunder (except for the
payment of money) on account of strikes, shortages, riots, insurrection, fires,
flood, storm, explosions, acts of God, war, governmental action, labor
conditions, earthquakes, or any other cause which is beyond the reasonable
control of such party.
17. WAIVER. The failure of either party to require performance by the other
-------
party of my provision hereof shall not affect the full right to require such
performance at any time thereafter, nor shall the waiver by either party of a
breach of my provision hereof be taken or held w be a waiver of the provision
itself.
18. SEVERABILITY. In the event that any provision of this Agreement shall be
-------------
unenforceable or invalid under any applicable law or be so held by applicable
court decision, such unenforceability or invalidity shall not render this
Agreement unenforceable or invalid m a whole.
19. INJUNCTIVE RELIEF. It is expressly agreed that a material breach of
------------------
this Agreement will cause irreparable harm to AVT and that a remedy at law would
be inadequate. Therefore, in addition to any and all remedies available at law,
AVT will be entitled to an injunction or other equitable remedies in all legal
proceedings in the event of any threatened or actual violation of my or all of
the above provisions.
20. CONTROLLING LAW. This Agreement shall be governed in all respects by
---------------
the laws of the United States of America and the State of California m such laws
are applied to agreements entered into and to be performed entirely within
California between California residents. OEM and AVT acknowledge that the
United Nations Convention on Contracts for the International Sale of Goods
(1980) is specifically excluded from application to this Agreement, This
Agreement is prepared and executed in the English language only and any
translations of this Agreement into any other language shall have no effect, All
proceedings related to this Agreement shall be conducted in the English language
<PAGE>
21. NO AGENCY. Nothing contained herein shall be construed as creating any
----------
agency, partnership, or other form of joint enterprise between the parties.
22. HEADRNGS. The paragraph headings appearing in this Agreement are
---------
inserted only as a matter of convenience and in no way define, limit, construe
or describe the scope or extent of such paragraph or in any way affect such
paragraph.
23. SUBCONTRACTING AND ASSIGNMENT. This Agreement shall be binding and
-------------------------------
inure to the benefit of the parties hereto and their respective successor and
assigns, Neither part), shall assign any of its rights nor delegate my of its
obligations under this Agreement to any third party without the express written
consent of the other except to the surviving entity in a merger or consolidation
in which it participates or to a purchaser of all or substantially all of its
assets, so long @ such surviving entity or purchaser shall expressly assume in
writing the performance of all of the terms of this Agreement. Notwithstanding
the foregoing, AVT may sell, pledge or otherwise transfer its right to receive
payments under this Agreement, Any act in derogation of the foregoing shall be
null and void.
24. EXPORT. OEM acknowledges that the laws and regulations of the United
-------
States may restrict the export and re-export of certain commodities and
technical data of United States origin, including the Programs in any medium OEM
agrees that it will not export or re-export the Programs in any form without the
appropriate United States and foreign government licenses. OEM also agrees that
its obligations Pursuant to this section shall survive and continue after my
termination or expiration of rights under this Agreement.
25. SURVIVAL. The rights and obligations contained in Paragraphs 8
---------
("Non-Disclosure"), 10 ("Limitations and Disclaimer"), 12 ("Consequential
Damages-Waiver") and 14 ("Termination") shall survive any termination or
expiration of this Agreement.
26. ENTIRE AGREEMENT. This Agreement is the entire agreement between the
----------------
parties regarding its subject matter. It supersedes and its terms govern, all
prior proposals, agreements, or other communications between fire parties, oral
or written regarding such subject matter. This Agreement shall not be modified
unless done so in a writing signed by officers of both AVT and OEM.
<PAGE>
IN WITNESS WHEREOF, the duly authorized representatives of the parties have
executed this Agreement.
AVT OEM
Alta Vista Technology, Inc. AITech International
1671 Dell Ave Suite #209 47971 Fremont Blvd.
Campbell, CA 95008 Fremont, CA94538
By: s. Jack Marshall By: s. Jack Li
------------------ ------------
Name: Jack Marshall Name: Jack Li
Title: President Title: Chief Operating Officer
Date: 5-22-98 Date: 5-19-98
<PAGE>
Exhibit "A"
Programs
Howdy! 2.lx (demo)
WebCannon! 2. 1 x
AVT OEM
Alta Vista Technology, Inc. AITech International
1671 Dell Ave Suite #209 47971 Fremont Blvd.
Campbell, CA 95008 Fremont, CA94538
By: s.Jack Marshall By: s. Jack Li
-------------- ------------
Name: Jack Marshall Name: Jack Li
Title: President Title: Chief Operating Officer
Date: 5-22-98 Date: 5-19-98
<PAGE>
I
ALTAVISTA TECHNOLOGY, INC.
SERIES C PREFERRED STOCK PURCHASE
AGREEMENT
JUNE 11, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SECTION I AUTHORIZATION AND SALE OF SERIES C PREFERRED STOCK
1.1 Authorization
1.2 Sale of Preferred
SECTION 2 CLOSING DATE; DELIVERY
2.1 Closing Date
2.2 Delivery
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.t Organization and Standing; Articles and Bylaws
3.2 Corporate Power
3.3 Subsidiaries
3.4 Capitalization
3.5 Authorization
3.6 Litigation, etc.
3.7 Compliance with Other Instruments, None Burdensome, etc.
3.8 Governmental Consent, etc.
SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.1 Experience
4.2 Investment
4.3 Rule 144
4.4 No Public Market
4.5 Access to Data
<PAGE>
4.6 Authorization
4.7 Brokers or Finders
4.8 Tax Liability
SECTION 5 PURCHASERS' CONDITIONS TO CLOSING
5.1 Representations and Warranties Correct
5.2 Covenants
5.3 Blue Sky
5.4 Restated Articles
5.5 Registration and Information Rights Agreement
5.6 Compliance Certificate
SECTION 6 CONDITIONS TO CLOSING OF COMPANY
6.1 Representations
6.2 Covenants
6.3 Blue Sky
6.4 Restated Articles
6.5 Legal Matters
SECTION 7 MISCELLANEOUS
7.1 Governing Law
7.2 Successors and Assigns
7.3 Entire Agreement; Amendment
7.4 Notices, etc.
7.5 Delays or Omissions
7.6 California Corporate Securities Law
<PAGE>
7.7 Counterparts
7.8 Severability
7.9 Titles and Subtitles
</TABLE>
<PAGE>
ALTAVISTA TECHNOLOGY, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
This Agreement is made as of June 5, 1997 by and among AltaVista Technology,
Inc., a California corporation (the "Company"), the individuals and entities set
forth on the Schedule of Purchasers attached hereto as Exhibit A (the
----------
"Purchasers"), and any other person or persons who shall have executed this
Agreement in connection with their purchase of Additional Shares, as defined
below (such persons listed on the Schedule of Purchasers and such persons who
shall have purchased Additional Shares collectively being referred to as
"Purchasers"), which person or persons shall be added to the Schedule of
Purchasers at such time as they shall purchase such Additional Shares pursuant
hereto.
SECTION I
AUTHORIZATION AND SALE OF SERIES C PREFERRED STOCK
--------------------------------------------------
1.1 AUTHORIZATION. The Company will authorize the sale and issuance of
--------------
up to 1,500,000 shares of its Series C Preferred Stock (the "Shares"), having
the rights, preferences, privileges and restrictions as set forth in the Amended
and Restated Articles of Incorporation ("Restated Articles") in substantially
the form attached hereto as Exhibit B.
----------
1.2 SALE OF PREFERRED. Subject to the terms and conditions hereof, the
--------------------
Company will issue and sell to the Purchasers, and the Purchasers will purchase
severally, and not jointly, from the Company, up to all of the Shares, (i) of
which not less than 10,000 of the Shares (the "Initial Shares') will be sold to
the Purchasers at the Initial Closing, as defined below, in the amounts
specified opposite the name of each such Purchaser in the column designated
"Initial Shares" on the Schedule of Purchasers, at a per share purchase price of
$.75, and (ii) of which up to 1,490,000 Shares (the "Additional Shares") may, at
the election of the Company, be sold to the Purchasers at one or more additional
closings subsequent to the Initial Closing (the "Subsequent Closing(s)"), in the
amounts as shall be specified opposite the name of each such Purchaser in the
column designated "Additional Shares" on the Schedule of Purchasers, at a per
share purchase price of $.75.
SECTION 2
CLOSING- DATE: DELIVERY
-----------------------
2.1 CLOSING DATE. The closing of the purchase and sale of the Initial
--------------
Shares hereunder (the "Initial Closing") shall be held at the offices of Wilson,
Sonsini, Goodrich & Rosati, Two Palo Alto Square, Palo Alto, California, at I
0:00 a.m. on January , 1994, or at such other time and place upon which the
<PAGE>
Company and the Purchasers shall agree. The Subsequent Closing(s), if any,
shall be held at the offices of Wilson, Sonsini, Goodrich & Rosati, Two Palo
Alto Square, Palo Alto, California at such time(s) and date(s) as the Company
shall specify. The date(s) of the Subsequent Closing(s) shall hereinafter be
referred to as the "Subsequent Closing Date(s)." The Initial Closing and the
Subsequent Closing(s) are sometimes hereinafter referred to as the "Closings.'
The Initial Closing Date and the Subsequent Closing Date(s) are sometimes
hereinafter referred to as the "Closing Dates."
2.2 DELIVERY. At the Initial Closing, the Company will deliver to each
---------
Purchaser a certificate or certificates representing the number of Shares set
forth opposite such Purchaser's name in the column designated "Shares' on the
Schedule of Purchasers against payment of the purchase price therefor by check
payable to the Company or by wire transfer made pursuant to the Company's
instructions. At the Subsequent Closing(s), the Company will deliver to each
Additional Purchaser who shall have executed this Agreement a certificate or
certificates representing the number of shares as shall be specified opposite
the name of each Purchaser in the column designated "Additional Shares" on the
Schedule of Purchasers, against payment of the purchase price therefor, by check
payable to the Company or by wire transfer made pursuant to the Company's
instructions. At each Subsequent Closing, if any, a Supplemental Schedule of
Purchasers shall be added to this Agreement as Exhibit A. 1. At each Subsequent
Closing, if any, the Purchaser purchasing Additional Shares therein shall
execute a signature page to this Agreement.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
Except as set forth on Exhibit Cattached hereto, the Company represents and
---------
warrants to the Purchasers as follows:
3.1 ORGANIZATION AND STANDING: ARTICLES AND BYLAWS. The Company is a
---------------------------------------------------
corporation duly organized and existing under, and by virtue of, the laws of the
State of California and is in good standing under such laws. The Company has
requisite corporate power and authority to own and operate its properties and
assets, and to carry on its business as presently conducted and as proposed to
be conducted. The Company is not presently qualified to do business as a
foreign corporation in any jurisdiction, and the failure to be so qualified will
not have a material adverse effect on the Company's business as now conducted.
The Company has furnished each Purchaser with copies of the Restated Articles
and of its Bylaws, which are true, correct and complete and contain all
amendments through the Closing Date.
3.2 CORPORATE POWER. The Company will have at the Closing Date all
-----------------
requisite legal and corporate power and authority to execute and deliver this
Agreement and the Registration and Information Rights Agreement in substantially
the form attached hereto as Exhibit D (the "Registration and Information Rights
---------
Agreement"), to sell and issue the Shares hereunder, to issue the Common Stock
<PAGE>
issuable upon conversion of the Series C Preferred Stock, a and to carry out and
per-form its obligations under the terms of this Agreement and the Registration
and Information Rights Agreement (together the "Agreements").
3.3 SUBSIDIARIES. The Company has no subsidiaries or affiliated
-------------
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
3.4 CAPITALIZATION. The authorized capital stock of the Company, upon
---------------
the filing of the Restated Articles, consists of I 0,000,000 shares of Common
Stock, of which 500,000 shares are issued and outstanding, and 10,000,000 shares
of Preferred Stock, of which 1,500,000 shares have been designated Series C
Preferred Stock ("Series C Preferred'), none of which are issued and outstanding
stock immediately prior to the Initial Closing. The Series C Preferred shall
have the rights, preferences, privileges and restrictions set forth in the
Restated Articles. The currently outstanding shares of Common Stock have been
duly authorized and validly issued, and are fully paid and non-assessable, and
have been issued in compliance with applicable securities laws. The shares of
Series C Preferred to be issued and sold to the Purchaser have been duly
authorized and, when issued in accordance with this Agreement and the Restated
Articles, will be validly issued, fully paid and non-assessable. The Company
has reserved 1,500,000 shares of Series C Preferred for issuance hereunder,
1,500,000 shares of Common Stock for issuance upon conversion of the Series C
Preferred and 5,000,000 shares of its Common Stock for issuance to officers,
directors, employees and consultants of the Company pursuant to the 1993 Stock
Plan or other arrangements approved by the Board. Except as set forth above,
there are no options, warrants, subscriptions, calls, puts, claims, commitments,
convertible securities or other agreements or arrangements under which the
Company is or may be obligated to issue or purchase, as the case may be, shares
of the Company's capital stock.
3.5 AUTHORIZATION. All corporate action on the part of the Company, its
--------------
directors and shareholders necessary for the authorization, execution, delivery
and performance of the Agreements by the Company, the authorization, sale,
issuance and delivery of the Series C Preferred (and the Common Stock issuable
upon conversion of the Series C Preferred), and the performance of all of the
Company's obligations hereunder has been taken or will be taken prior to each
Closing. The Agreements, when executed and delivered by the Company, shall
constitute valid and binding obligations of the Company, enforceable in
accordance with their respective terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
The Shares, when issued in compliance with the provisions of this Agreement,
will be validly issued, fully paid and non-assessable, and will have the rights,
preferences and privileges described in the Restated Articles; the Common Stock
issuable upon conversion of the Shares has been duly and validly reserved and,
when issued in compliance with the provisions of the Restated Articles, will be
validly issued, and will be fully paid and non-assessable; and the Shares and
such Common Stock will be free of any liens or encumbrances, assuming each
Purchaser takes the Shares with no notice thereof, other than any liens or
<PAGE>
encumbrances created by Purchaser; provided, however, that the Shares (and the
Common Stock issuable upon conversion thereof) may be subject to restrictions on
transfer under state or federal securities laws as set forth in this Agreement
and the exhibits hereto. The Shares (and the Common Stock issuable upon the
conversion thereof) are not subject to any preemptive rights or rights of first
refusal.
3.6 LITIGATION, ETC. There are no actions, suits, proceedings or
-----------------
investigations pending or, to the Company's knowledge, threatened against the
Company or its properties before any court or governmental agency other than the
suit filed by Digital Equipment is United States District Court for the District
of Massachusetts (civil action 96-12192NG).
3.7 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The Company
--------------------------------------------------------
is not in violation of any term of the Restated Articles or its Bylaws or any
mortgage, indebtedness, indenture, judgment or decree, or in any material
respect of any term or provision of any material contract, agreement or
instrument, and to the best of its knowledge is not in violation of any order,
statute, rule or regulation applicable to the Company. The execution, delivery
and performance of and compliance with the Agreements, and the issuance of the
Series C Preferred and the Common Stock issuable upon conversion of the Series C
Preferred, have not resulted and will not result in any violation of, or
conflict with, or constitute a default under, the Restated Articles or the
Company's Bylaws, nor will it result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the Company.
3.8 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
---------------------------
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of the Agreements, or the offer, sale or issuance of the Series C
Preferred (and the Common Stock issuable upon conversion of the Series C
Preferred), or the consummation of any other transaction contemplated hereby or
thereby, except (a) filing of the Restated Articles in the office of the
California Secretary of State, (b) qualification (or taking such action as may
be necessary to secure an exemption from qualification, if available) of the
offer and sale of the Series C Preferred (and the Common Stock issuable upon
conversion of the Series C Preferred) under the California Corporate Securities
Law of 1968, as amended, and other applicable Blue Sky laws, which filings and
qualifications, if required, will be accomplished in a timely manner, and (c)
filing of a notice, if required, pursuant to Regulation D of the Securities Act,
which filing will be accomplished in a timely manner.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
Each Purchaser hereby represents and warrants to the Company with respect to the
purchase of the Shares as follows:
<PAGE>
4.1 EXPERIENCE. It has substantial experience in evaluating and
-----------
investing in private transactions of securities in companies similar to the
Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests and
bear the risk of loss of its entire investment.
4.2 INVESTMENT. It is acquiring the Series C Preferred and the underlying
Common Stock for investment for its own account, not as a nominee or agent, and
not with the view to, or for resale in connection with, any distribution
thereof. It understands that the Series C Preferred to be purchased and the
underlying Common Stock have not been, and will not be, registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
---------
such Purchaser's representations as expressed herein. It is an "accredited
investor' within the meaning of Regulation D, Rule 501(a), promulgated by the
Securities and Exchange Commission.
4.3 RULE 144. It acknowledges that the Series C Preferred and the
----------
underlying Common Stock must be held indefinitely unless subsequently registered
under the Securities Act or unless an exemption from such registration is
available. It is aware of the provisions of Rule 144 promulgated under the
Securities Act which permit limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things, the existence of a public market for the shares, the availability
of certain current public information about the Company, the resale occurring
not less than two years after a party has purchased and paid for the security to
be sold, the sale being effected through a "broker's transaction" or in
transactions directly with a "market maker', and the number of shares being sold
during any three-month period not exceeding specified limitations.
4.4 NO PUBLIC MARKET. It understands that no public market now exists
------------------
for any of the securities issued by the Company and that no assurances can be
made that a public market will ever exist for the Company's securities.
4.5 ACCESS TO DATA. It has had an opportunity to discuss the Company's
-----------------
business, management and financial affairs with its management and the
opportunity to review the Company's facilities and has had access to all other
information about the Company it deemed necessary in connection with the
purchase of the Series C Preferred. It has also had an opportunity to ask
questions of officers of the Company. It understands that such discussions, as
well as any written information issued by the Company, were intended to describe
certain aspects of the Company's business and prospects but were not a thorough
or exhaustive description.
<PAGE>
4.6 AUTHORIZATION. The Agreements, when executed and delivered by
--------------
Purchaser, will constitute a valid and legally binding obligations of each
Purchaser, enforceable in accordance with their respective terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief of
debtors arid rules of law governing specific performance, injunctive relief or
other equitable remedies.
4.7 BROKERS OR FINDERS. The Company has not, and will not, incur,
---------------------
directly or indirectly, as a result of any action taken by such Purchaser, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement.
4.8 TAX LIABILITY. It has reviewed with its own tax advisors the
---------------
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. It relies solely on such advisors
and not on any statements or representations of the Company or any of its
agents. It understands that it (and not the Company) shall be responsible for
its own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.
SECTION 5
PURCHASERS' CONDITIONS TO CLOSING
---------------------------------
The Purchasers' obligation to purchase the Shares at the Closing is, at the
option of Purchasers, subject to the fulfillment of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
---------------------------------
made by the Company in Section 3 hereof shall be true and correct in all
material respects as of the Closing Date.
<PAGE>
5.2 COVENANTS. All covenants, agreements and conditions contained in
----------
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects, unless
waived in writing by the Purchaser.
5.3 BLUE SKY. Me Company shall have obtained all necessary Blue Sky law
----------
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the offer and sale of the Series C Preferred and the
Common Stock issuable upon conversion of the Series C Preferred.
5.4 RESTATED ARTICLES. The Restated Articles shall have been filed with
------------------
the California Secretary of State.
5.5 REGISTRATION AND INFORMATION RIGHTS AGREEMENT The Company shall have
---------------------------------------------
executed the Registration and Information Rights Agreement in substantially the
form attached hereto as Exhibit D.
5.6 COMPLIANCE CERTIFICATE The Company shall have delivered to the
-----------------------
Purchasers a certificate of the Company in substantially the form attached
hereto as Exhibit E, executed by the President of the Company, dated the Closing
Date, and certifying, among other things, the fulfillment of the conditions
specified in Sections S. 1, 5.2 and 5.4 of this Agreement.
SECTION 6
CONDITIONS TO CLOSING OF COMPANY
--------------------------------
The Company's obligation to sell and issue the Shares at the Closing Date is, at
the option of the Company, subject to the fulfillment as of the Closing Date of
the following conditions:
6.1 REPRESENTATIONS. The representations made by the Purchasers in
----------------
Section 4 hereof shall be true and correct as of the Closing Date.
6.2 COVENANTS. All covenants, agreements, and conditions contained in
----------
this Agreement to be performed by the Purchasers on or prior to the Closing Date
shall have been performed or complied with in all material respects unless
waived in writing by the Company.
6.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
---------
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the offer and sale of the Series C Preferred and the
Common Stock issuable upon conversion of the Series C Preferred.
6.4 RELATED ARTICLES. The Restated Articles shall have been filed with
------------------
the California Secretary of State.
<PAGE>
6.5 LEGAL MATTERS. All material matters of a legal nature which pertain to
--------------
this Agreement, and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Company.
SECTION 7
MISCELLANEOUS
-------------
7.1 GOVERNING LAW. This Agreement shall be governed in all respects by
---------------
the internal laws of the State of California.
7.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
-------------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of the Purchasers to purchase the Series C
Preferred shall not be assignable without the consent of the Company.
7.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
-----------------------------
delivered pursuant hereto at each Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
7.4 NOTICES, ETC. All notices and other communications required or
--------------
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to a Purchaser, at the address set forth on the Schedule of
Purchasers attached hereto as Exhibit A, or at such other address as such
Purchaser shall have furnished to the Company in writing, or (b) if to the
Company, one copy should be sent AltaVista Technology, INC. 1671 Dell Ave.,
Suite 209, Campbell, California 95008 and addressed to the attention of the
President, or at such other address.-as the Company shall have furnished to the
Purchaser, and one copy should be sent TO Wilson, Sonsini, Goodrich & Rosati,
Two Palo Alto Square, Palo Alto, California 94306, to the attention of Bruce D.
Bower, Esq. Each such notice or other communication shall, for all intents and
purposes of this Agreement, be treated as effective or having been given when
delivered if delivered personally, or, if sent by mail, at the earlier of its
receipt or 72 hours after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid.
<PAGE>
7.5 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay
----------------------
or omission to exercise any right, power or remedy accruing to the Purchasers,
upon any breach or default of the Company under this Agreement, shall impair any
such right, power or remedy of the Purchasers nor shall it be construed to be a
waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
thereto fore or thereafter occurring. Any waiver, permit, consent or approval
of any kind or character on the part of the Purchasers, or any waiver on the
part of the Purchasers of any provisions or conditions of this Agreement, must
be in writing and shall be effective only to the extent specifically set forth
in such writing. All remedies, either under this Agreement or by law or
otherwise afforded to the Purchasers, shall be cumulative and not alternative.
7.6 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 SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100,25102, OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
7.7 COUNTERPARTS. This Agreement may be executed in any number of
-------------
counterparts, each of which shall be enforceable against the party actually
executing such counterpane and all of which together shall constitute one
instrument.
7.8 SEVERABILITY. In the event that any provision of this Agreement
-------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision, provided that no such severability shall be effective if
it materially changes the economic BENEFIT of this Agreement to any party.
7.9 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
<PAGE>
DISTRIBUTION AND REPUBLISHING AGREEMENT
CONVENED OF THE FIRST PART Softpool, - A Division of infoMedia GmbH, hereafter
named Softpool, of Berliner Strasse I01, Ratingen 40880, Germany.
OF THE OTHER PART ALTA VISTA INC., of 1671 Dell Avenue, Suite 209, Campbell, CA
95008, USA
Both parties mutually acknowledge the requisite capacity and standing to execute
this document, and hereby state as follows:
a) Softpool's business activity is concentrated on the production,
publication and marketing of all types of software.
b) ALTA VISTA'S business activity concentrates on the production,
development, promotion and sale of computer games, and it holds the exploitation
rights to the work INTERNET POSTCARTS/Howdy.
Softpool is interested in acquiring the exploitation rights to the aforesaid
work and, in this being so, both parties have agreed to sign this LICENSING
AGREEMENT, and submit to the following conditions for the purpose of regulating
it:
CONDITIONS
1. DEFINITIONS
The words and expressions mentioned below shall have the following meanings for
the purposes of this agreement:
INTERNET Postcarts A work to be distributed by Softpool consisting of a
CD-ROM containing intemet utility software, bookmarks and intemet access
software.
Unit sold: Unit actually invoiced by Softpool, except those which can be
delivered as samples of no value (not for resale), and those returned by
customers.
Stocks: Units of the INTERNET POSTCARTS/Howdy work manufactured and not sold
by Softpool until the expiry date of the effective period of this agreement.
Launch: Day on which the work INTERNET POSTCARTS/Howdy is available for
purchase by consumers at any points of sale.
<PAGE>
2. OBJECT OF THE AGREEMENT
Under this agreement ALTA VISTA assigns to Softpool exclusively during a period
of 18 months, for the territories of Germany, Austria and Switzerland, the
rights to distribute, republish, bundle and sublicense the work called "INTERNET
POSTCARTS/Howdy " and in particular those of transformation, reproduction,
compilation and distribution for said product.
<PAGE>
3. INTELLECTUAL PROPERTY RIGHTS
ALTA VISTA will remain the holder of all the intellectual property rights to the
work INTERNET POSTCARTS/Howdy. ALTA VISTA grants, that there are no rights
payable to GEMA or any other organization by using the music, videos and
pictures from the CD and by using any INTERNET POSTCARTS created with the work.
Softpool will be required to include in the INTERNET POSTCARTS/Howdy work the
ALTA VISTA name and logotype, and also the copyright message, all in relation to
the INTERNET POSTCARTS/Howdy.
4. FINANCIAL CONSIDERATION
As financial consideration for the assignment which is the object of this
agreement, Softpool shall deliver to ALTA VISTA as fees for rights payments 2 DM
per unit from retail product and from bundling and licensing.
For these purposes, a minimum advance on royalties is established in the amount
of DM 4,000. This amount will be invoiced on signature of this agreement, and
is payable on invoice, directly to InterActiv Arts, based in UK. Bank details
to be supplied.
The launch date must be no later than 30 October 1997.
The future royalty payments will be made direct to ALTA VISTA, after delivery of
the corresponding invoice, by a bank transfer. ALTA VISTA must provide
appropriate bank details.
5. DECLARATION OF FEES
Softpool will be required to make quarterly declarations of fees. The said
declarations will include the product identification details, the units sold and
where applicable the amount of fees accrued in favour of ALTA VISTA.
Declarations will be made within 15 days of the end of the quarter.
When each declaration has been made and upon presentation by ALTA VISTA of the
corresponding invoice. Softpool will pay this by bank transfer.
In the event of a discrepancy in the determination of fees, the parties
undertake to appoint an external auditor to verify the declarations made. The
expenses will be charged to the party requesting the verification. Should a
discrepancy of more than 10% be discovered, Softpool will pay the auditor costs,
and any additional owed royalties.
6. LIQUIDATION
If, after a certain period of time, the units sold of the product decrease to
under 100 units per month, then both parties may mutually agree to consider
liquidation of any remaining stocks. In this case the Licensor will not pay a
license fee, until the production costs have been recovered. If there is any
profit exceeding the production cost, both partners will share that equally.
<PAGE>
6. LOCALISATION
In addition to all the obligations derived from the exact fulfillment of this
agreement and contractual good faith, ALTA VISTA undertakes to ensure technical
guidance is provided where required for localization, as long as Softpool has
sought and received approval from ALTA VISTA where required.
8. MARKETING OF THE PRODUCT
ALTA VISTA authorizes lnfomedia to market, sell and sub-license the work using
all the distribution channels available to it within the assigned territory,
both traditional and non-traditional, and to promote this in any medium of
communication.
<PAGE>
9. EFFECTIVE PERIOD
This agreement will be valid for 18 months from its signature, renewed
automatically for a further 12 months, unless otherwise notified by either
party, in writing, 3 months prior to expiration. Upon expiry of the validity
period, InfoMedia will have a period of 3 months in which to liquidate stocks.
10. CONFIDENTIALITY
The details supplied relating to the activity of InfoMedia and ALTA VISTA, and
in particular all the elements which might come to the knowledge of the parties
within the framework of this agreement are understood to be confidential and
they must be safeguarded.
II. COMMUNICATION BETWEEN THE PARTIES
In order to have full contractual effects, communications between the parties
must be sent (i) by registered post with advice of receipt. ii)by overnight
courier delivery with advice of receipt, iii) by fax transmission, or iv) by
electronic mail, to the addresses and telephone numbers of the parties which
appear in this agreement, or those which may validly replace them.
12. THIRD PARTY CLAIMS
ALTA VISTA declares to InfoMedia that it is duly empowered for the assignment
formalized, undertaking for this reason to hold harmless from any claim based on
the infringement or alleged infringement of any intellectual property right
existing on the INTERNET POSTCARTS/Howdy, as long as InfoMedia has sought and
received approval from ALTA VISTA where required.
13. TERMINATION OF THE AGREEMENT.
The total or partial default by either party of what is agreed in this agreement
will empower the other party to terminate it, in addition to requiring the
indemnity for damage and losses suffered.
14. SETTLEMENT OF DIFFERENCES.
For the better settlement of any differences existing in the fulfillment and
interpretation of this agreement, the parties agree to submit to arbitration.
And as proof of agreement, both parties sign this agreement in duplicate as
below:
<PAGE>
Jack Marshall
- --------------
ALTA VISTA Softpool
10/17/99 8/27/97
- -------- -------
Date Date
<PAGE>
AMENDMENT TO THE DISTRIBUTION AND REPUBLISHING AGREEMENT COVERING THE PRODUCT
"HOWDY" DATED THE 17.10.97
Between
infoMedia Software Publishing GmbH, Heltorfer Str. 12; 40472 D sseldorf
hereafter referred to as the "licensee"
and
PhotoLoft.com Inc., of 300 Orchard City Drive, Suite 142, Campbell, CA 95008,
USA, hereafter referred to as the "Licensor"
1.0 EXTENSION OF TERM
The duration of the term has been extended for a further 24 month.
2.0 FINANCIAL CONSIDERATION
For bundling and sub-licensing purposes infoMedia shall deliver to licensor 40%
of the net profits gained from such a deal.
All other matters arising out of this agreement are covered in the main contract
and those are applicable at all times.
NAME:____________________________
Date: ____12 Feb. 99
----------------
InfoMedia Software Publishing GmbH.
NAME: s. Jack Marshall
------------------
Date: 2/25/99
-------
PhotoLoft.com Inc
<PAGE>
AMENDMENT TO THE DISTRIBUTION AND REPUBLISHING AGREEMENT COVERING THE PRODUCT
"HOWDY" DATED THE 17.10.97
Between
infoMedia Software Publishing GmbH, Heltorfer Str. 12; 40472 D sseldorf
hereafter referred to as the "licensee"
and
PhotoLoft.com Inc., of 300 Orchard City Drive, Suite 142, Campbell, CA 95008,
USA, hereafter referred to as the "Licensor"
1.0 EXTENSION OF TERM
The duration of the term has been extended for a further 24 month.
2.0 FINANCIAL CONSIDERATION
For bundling and sub-licensing purposes infoMedia shall deliver to licensor 40%
of the net profits gained from such a deal.
All other matters arising out of this agreement are covered in the main contract
and those are applicable at all times.
NAME:____________________
Date: ___________________________
infoMedia Software Publishing GmbH.
NAME: s. Jack Marshall
------------------
Date: 2/4/99
------
PhotoLoft.com Inc
<PAGE>
October 24, 1997
Mr. Jack Marshall
AltaVista Technologies, Inc.
1671 Dell Avenue, Suite 209
Campbell, CA 95008
Engagement Letter
Business Development Services
Situation and Objectives
AltaVista Technologies, Inc. (the "Client") would like Kremen, Father & Partners
(the "Firm") to help develop the Client and refer potential investors to the
Client.
Study Plan
The Firm will use Client materials such as the business plan, publications, and
other materials and Firm contacts to identify and introduce potential investors
tot he Client.
The firm will provide business plan and development advice to the Client. From
time-to-time, the firm will assist the Client's Officers with advice on business
structure, markets, and communications with potential investors. Upon
commencement, the Firm will suggest revisions in the business plan to facilitate
investor referrals.
The Firm is not obligated to cultivate any specific investors nor is the Client
obligate to communicate with or accept any specific investor introduced by the
Firm. The Firm does not warrant the qualifications or legal acceptability of
potential investors. The Client will be responsible for all accounting, legal,
and financing activities. The Client will be responsible for all requirements
and liabilities of relationships with parties that invest in the Client.
Structure and Fees
<TABLE>
<CAPTION>
<S> <C>
Engagement Number: VC01
Engagement Director: Jack Marshall
Team Members: Kremen, Father & Partners and others as required by the Firm
Subject Matter: Business Development Services
Billing Rate: For the cash component of the following, retroactive to August 1, 1977: $3,000
in reduction of amount per month due for the past purchase of $50,000 of Alta
vista Series C stock. Additionally "bargain" options to purchase 1% of the
Company on a fully diluted for every three months of successful work (if not
fully successful on a vested on a pro-rata weighted average). A work list will be
provided (to be agreed upon mutually) for November 1997 and every month
beyond. With respect to find raising, We are to be compensated on a standard
Lehman compensation formula (attached in finders agreement). With respect to
partner finding, we are to be compensated as according to a standard
independent sales agreement (attached).
Expenses: Due in cash as described in the Firm's then current Expense Policy.
Additional Terms: The Firm will seek prior oral approval from the ED for single expense items
over $250.00 or monthly expenses over $500.00
<PAGE>
The Firm may choose to bill the Client in order to time bills for collection at
financial closings, meet management needs, improve collection, and meet other
needs of the Firm. The Firm may designate individual owners of common stock
or options due the Firm as payment for fundraising and consulting services. The
Client agrees to issue such instruments in the names designated by the Firm
provided the designees accept and agree to the Client's standard subscription
agreement.
</TABLE>
Acceptance
s. Gary Kremen Date: 10-31-97
- ----------------
Gary Kremen
Kremen, Father & Partners
843 Montgomery, Suite 300
San Francisco, CA 94133
Client warrants that it has read this entire engagement letter, fully
understands the engagement letter, agrees to all terms and conditions herein,
and authorizes the work described herein.
s. Jack Marshall Date: 10-30-97
- ------------------
Mr. Jack Marshall
AltaVista Technologies, Inc.
1671 Dell Avenue, Suite 209
Campbell, CA 95008
<PAGE>
VENTURE
BANKING GROUP
February 12, 1998
Alta Vista Technology, Inc. dba Magicbit
1671 Dell Avenue, Suite 209
Campbell, CA. 95008
Attn: Jack Marshall
President
Re: Revolving Line of Credit
Dear Jack:
We are pleased to commit to you the following credit facility ("Credit
Facility") subject to the terms and to the prior satisfaction of the conditions
set forth below. This commitment letter agreement is not meant to be, nor shall
it be construed as, an attempt to define all of the terms and conditions
involved in this financing. Rather, it is intended only to outline certain of
the basic points of our understanding around which the final terms and
documentation are to be structured. Further negotiations adding to or modifying
the general scope of these major terms shall not be precluded by the issuance of
this commitment letter agreement and its acceptance by you.
I. PARTIES
Lender: CUPERTINO NATIONAL BANK & TRUST ("Lender")
Borrower: Alta Vista Technology ("Borrower")
II. THE CREDIT FACILITY
Amount: Up to $200,000
Loan Cap: Borrowings under the line will be limited to $100,000 until
fulfillment of the milestone covenants and payment of the
additional loan fee.
A DIVISION OF CUPERTINO NATIONAL BANK
Three Palo Alto Sqare. Suite 150. Palo Alto, CA 94306. 415.813.3819. Fax 415.
843. 6969. Website: www.venlen.com
<PAGE>
Alta Vista Technology, Inc.
Commitment Letter
February 12, 1998
Page 2
<TABLE>
<CAPTION>
<S> <C>
Purpose: To supplement short term working capital needs.
Maturity: The loan under the Credit Facility shall have a maturity date of one
year from the date of documents.
Interest Rate: Interest shall accrue at the rate of 2.0% over Lender's
Prime Rate. Interest shall be calculated on the basis of a
360 day year, actual days lapsed. Upon fulfillment of the
milestone covenants and payment of the additional fee, the
interest shall accrue at the rate of 1.0% over Lenders Prime
Rate.
Loan Fee: $1,000
Additional Loan Fee: An additional $500 loan fee will be paid upon fulfillment of
The milestone covenants to remove the loan cap.
Repayment: Advances under the Credit Facility shall be repaid on or
Before maturity with interest payable monthly.
Loan Documentation: The terms and conditions of the Credit Facility shall be set
Forth in the loan agreement and, and the indebtedness shall be
evidenced by a promissory note.
III.SUPPORT
Security: The Borrower shall grant a first priority security interest in all of
its corporate assets, including but not limited to, accounts
receivable inventory with proceeds thereof, equipment and all
other tangible and intangible assets.
</TABLE>
IV.REPRESENTATINOS, WARRANTIES, COVENANTS AND CONDITIONS
Specifically included, without limitation, will be the following:
Advances against the borrowing base shall not exceed 70% of eligible accounts
receivable, not to exceed $100,000. Upon fulfillment of the milestone covenants
and
payments of the additional
<PAGE>
AltaVista Technology, Inc.
Commitment Letter
February 12, 1998
Page 3
loan fee, the Loan Cap will be removed and advances against the borrowing base
shall not exceed 70% of eligible accounts receivable, not to exceed $200,000.
Loan advances are subject to a "satisfactory" initial A/R examination. Bank to
perform A/R exams at Borrower's expense on an annual basis, or at any time the
Bank deems appropriate.
Bank shall remain the primary bank depository.
Borrower shall provide CPA-audited financial statements to the Bank annually
within 120 days of each fiscal year-end.
Borrower shall provide monthly financial statements in form and substance
satisfactory to the Bank within 30 days of each Fiscal month-end.
Borrower shall provide the Bank with monthly A/R and A/P agings within 15 days
of monthend, with supporting Borrowing Base Certificates.
The following financial covenants shall be tested monthly unless otherwise
noted.
Financial Covenants
- --------------------
Minimum Quick Ratio (Cash plus Accounts Receivable) of 1.20.
Minimum Tangible Net Worth (TNW) of $75,000.
Maximum Debt to TNW (Total Liabilities to Tangible Net Worth) of 2.50.
Borrower shall maintain quarterly profitable operations under the following
schedule:
<TABLE>
<CAPTION>
<S> <C>
Net Profit after tax for the quarter ended March 31, 1998 of greater than $20,000.
Net Profit after tax for the quarter ended June 30, 1998 of greater than $30,000.
Net Profit after tax for the quarter ended September 30, 1998 of greater than $50,000.
Net Profit after tax for the quarter ended December 31, 1998 of greater than $75,000.
</TABLE>
Upon achievement of the following milestone covenants, Borrower may elect to
remove the Loan Cap after payment of the additional fee.
Milestone Covenants
- --------------------
Minimum Quick Ratio (Cash plus Accounts Receivable) of 1.50.
Minimum Tangible Net Worth (TNW) of $600,000.
Maximum Debt to TNW (Total Liabilities to Tangible Net Worth) of 1.50.
<PAGE>
AltaVista Technology, Inc.
Commitment Letter
February 12, 1998
Page 4
Minimum Quarterly Net Profit After Tax of greater than zero.
Note: Tangible Net Worth is calculated excluding existing Shareholder and
Employee Notes Receivable as intangible.
Borrower shall maintain adequate hazard insurance with the Bank named as "Loss
Payee".
Borrower shall not make further shareholder loans or employee advances without
prior written Bank Approval.
Borrower shall notify the Bank immediately if it becomes involved in any
litigation.
Borrower shall not declare or pay any cash dividend on the capital stock of
Borrower, or purchase or acquire in any way for consideration, any shares of
such capital stock.
Borrower shall not acquire through stock purchases, or otherwise, the assets or
business of any other person or entity, and not liquidate or dissolve, merge or
consolidate with any other person or entity by purchase, sale or otherwise.
Borrower shall not change the present character of the business.
Conditions: The obligations of the Lender to advance under the Credit
Facility shall be subject to the prior and continuing
satisfaction of certain conditions including:
i) Receipt by the Lender from the Borrower of reasonable certificates,
authorizations and closing documentation's evidencing the
satisfaction or the ability to satisfy the requirements of the
Credit Facility.
ii) Execution and recordation of the security documents.
iii) No material adverse changes in the financial conditions or results
of Operations of the Borrower.
This commitment letter agreement is provided to you solely for the purpose
described herein and may not be disclosed to or relied upon by any other part
without the Lender's prior written consent.
<PAGE>
AltaVista Technology, Inc.
Commitment Letter
February 12, 1998
Page 5
Upon default by you under any of the conditions of this agreement, or any other
documents executed by you in connection with this credit accommodation, the
credit shall, at the option of the Bank, immediately terminate and all sums of
interest and principal remaining unpaid on loans made and notes issued shall
become immediately due and payable without notice.
No failure or delay on the part of the Bank to exercise any power or right under
this agreement or declare a default hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any other right.
This agreement, and all other documents executed in connection with the credit,
shall be governed and construed under the laws of the State of California.
Borrower shall reimburse Bank for all costs, expenses and reasonable attorney's
fees incurred by Bank in enforcing this agreement or in collecting any sum which
becomes due Bank on any loan made or note issued hereunder.
<PAGE>
AltaVista Technology, Inc.
Commitment Letter
February 12,1998
Page 6
If the foregoing terms and conditions are satisfactory to you, please indicate
your acceptance of this commitment by signing and returning the enclosed copy of
this letter. In reliance upon such acceptance we shall thereafter commence
documentation of the Credit Facility on the understanding that our expense,
including fees of our counsel, incurred after the date of your acceptance will
be immediately reimbursed by you whether or not this Credit Facility is
consummated.
Your agreement to borrow and our agreement to lend are subject to your and our
acceptance and execution of the Note. The commitment set forth in this letter
will expire unless your acceptance has been received by us prior to 5:00 p.m. on
February 20, 1998 commitment set forth in this letter will expire even after
your acceptance, if the loan documents and instructions have not been executed
and delivered prior to 5:00 P.M. on March 13, 1998.
We appreciate the opportunity to make this proposal to you and hope it lays the
foundation for a long and mutually satisfactory relationship.
Very truly yours,
CUPERTINO NATIONAL BANK & TRUST
s. Guy A. Syty
- -----------------
Guy A. Syty
Commercial Lender
Venture Banking Group
The undersigned has read the foregoing letter, understands its terms and
conditions, and agree that Borrower, Alta Vista Technology, Inc. shall be bound
in accordance thereby.
s. Jack Marshall
- ------------------
Jack Marshall
Alta Vista Technology, Inc.
Date February 20,1998
<PAGE>
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (this "Agreement") is made
and entered into this ___ day of March, 1998, by and between AltaVista
Technology Inc., a California corporation with its principal executive offices
located at 1671 Dell Avenue, Suite 209; Campbell, CA 95008 ("AVT"), and Kuni
Research International Corporation, a Corporation incorporated in Japan with its
principal executive offices located at Ebodori Center Building, 11F, 2-1-1
Ebodori, Nishi-Ku, Osaka, Japan ("Kuni").
RECITALS
--------
WHEREAS, AVT. which operates a division known as "Magic Bit", provides a
multimedia email tool to send personalized Valentine cards complete with
pictures, audio and text on-line throughout the World Wide Web;
WHEREAS, AVT's technological core is the ME-Mail(TM) engine (i.e.,
Multimedia E-mail) which allows any ME-Mail message to be sent directly to an
end user or sent to the Magic Bit web server where it will instantly be
converted into a series of web pages and posted "live" on the Internet;
WHEREAS, AVT is the registered owner of all right, title, and interest in
and to the trademarks and any and all trade dress, labels, and designs
associated therewith, together with the goodwill of the business symbolized
thereby in connection with the Products (as defined below);
WHEREAS, Kuni has substantial resources for the localization, advertising
and promotion of AVT's Products in the Territory;
WHEREAS, Kuni desires to obtain from AVT, and AVT is wining to grant to
Kuni and its affiliates, an exclusive right and license in the AVT products and
services for the purposes of enabling Kuni to distribute the AVT Products (as
defined below) and services in the Territory; and
WHEREAS, AVT and Kuni mutually desire to enter into this Agreement,
pursuant to which AVT grants certain rights to Kuni for the localization,
translation, production, distribution, packaging and marketing of the Products
(as defined below) in accordance with the provisions hereof.
NOW, THEREFORE, in consideration of the foregoing promises and the mutual
representations and agreements set forth herein, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:
1
<PAGE>
AGREEMENT
---------
1. Definitions. For the purposes of this Agreement, the following
terms shall have the respective meanings indicated below:
"Affiliate" shall mean any corporation, limited liability company,
partnership or other entity (collectively, an "Entity"): (1) that is controlled
by or controls a party (collectively, a "Controlled Entity"); or (2) that is
controlled by or controls any such Controlled Entity, in each instance of clause
(1) or (2) for so long as such control continues. For purposes of this
definition, "control" shall mean the possession, directly or indirectly, of
power to direct or cause the direction of the management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise). Without limiting the foregoing, joint control of an
Entity with one or more other persons or Entities shall be deemed to constitute
control for purposes
hereof,
"Code" means computer programming code. If not otherwise specified, Code
shall include both Object Code and Source Code. Code shall include Maintenance
Modifications and Upgrades thereto if, when, and to the extent such Maintenance
Modifications and/or Upgrades are delivered to Kuni by AVT under this Agreement
or under any other agreement or arrangement between the parties.
"Competitive Products" means any products that are competitive with the
Products or Kuni Derivative Works.
"Confidential Information' means any data or information, oral or written,
treated as confidential that relates to either party's (or, if either party is
bound to protect the confidentiality of any other person's information, such
other person's) past, present, or future research, development or business
activities, including any unannounced products and services, and including any
information relating to services, developments, inventions, processes, plans,
proposals, projects, financial information, customer and supplier lists,
forecasts and projections. Confidential Information shall also include the
terms of this Agreement. Notwithstanding the foregoing, Confidential
Information shall not be deemed to include information that (1) is publicly
available or in the public domain at the time disclosed; (2) is or becomes
publicly available or enters the public domain through no fault of the party
receiving such information; (3) is rightfully communicated to the recipient by
persons not bound by confidentiality obligations with respect thereto; (4) is
already in the recipient's possession free of any confidentiality obligations
with respect thereto at the time of disclosure; (5) is independently developed
by the recipient; or (6) is approved for release or disclosure by the disclosing
party without restriction.
"Corporate License Agreements" means the AVT form corporate license
agreements set forth in Exhibit B1 hereto granted to corporate End Users to
-----------
2
<PAGE>
reproduce and install the Kuni Derivative Works for internal use as may be
amended by AVT from time to time;
"Dealer" means and includes all subdistributors, dealers, authorized
sublicensees, agents or other representative of K@, other than End Users.
"Derivative Work" means a work that is based upon one or more preexisting
works, such as a revision, modification, translation, abridgement, condensation,
expansion, of any other form in which such preexisting works may be recast,
transformed, or adapted, and that, if prepared without authorization of the
owner of the copyright in such preexisting work, would constitute a copyright
infringement. For the purposes hereof, a Derivative Work shall also include any
localization of a pre-existing product.
"Development Environment" means any devices, programming or documentation,
including compilers and higher level languages used by AVT for the development,
maintenance, and implementation of the Products, but only to the extent that the
device, programming, or documentation so used would be necessary for the
preparation of the Kuni Localized Japanese Versions, the Kuni Derivative Works
and Maintenance Modifications and Upgrades thereof.
"Documentation" means user manuals and other written materials that relate
to the Products. Documentation shall include Maintenance Modifications and
Upgrades thereto, if, when, and to the extent such Maintenance Modifications
and/or Upgrades are delivered to Kuni by AVT under this Agreement or under any
other agreement or arrangement between the parties.
"End User(s)" means any person or entity that obtains copies of the Kuni
Derivative Works solely to fulfil its own internal data processing needs.
"End User License Agreement" means the AVT form End User license agreements
set forth in Exhibit B2 hereto granted to End Users to use the Kuni Derivative
----------
Works -solely to fulfil their own internal data processing needs as may be
amended from time to time by AVT.
"Intellectual Property Rights" means the intangible legal rights or
interests evidenced by or embodied in (1) any idea, design, concept, technique,
invention, discovery, or improvement, regardless of patentability, but including
patents, patent applications, trade secrets and know-how; (2) any work of
authorship, regardless of copyrightability, but including copyrights and any
moral rights recognized by law; and
(3) any other similar rights, including trademarks, in each case on a
worldwide basis.
"Kuni Bundle" means a bundle or package sold or distributed by Kuni in a
single sales transaction comprising any of the Products or Kuni Derivative Works
and any other Kuni Product(s).
3
<PAGE>
"Kuni Derivative Work" means a Japanese Localized Version packaged with other
material that is created by Kuni and approved in advance by AVT.
"Kuni Localized Japanese Versions" means versions of the Products localized
by Kuni, to the extent necessary or appropriate, to operate solely on Japanese
language localized computers and operating systems used in the Territory.
"Kuni Products' means all current and future products distributed or to be
distributed by Kuni.
"Licensed Marks" means "AVT" and any and all trade dress, labels, and
designs associated therewith, together with the goodwill of the business
symbolized thereby in connection with the Products.
"Maintenance Modifications" means modifications, Upgrades or revisions made
by AVT to the Products that correct errors or support new releases of operating
systems.
"Minimum Revenue Quota" means ten percent (10%) of AVT's Net Revenue
generated within the United States for that Product during the preceding six (6)
month period.
"Net Revenue" means revenue less returns and taxes withheld under Section
3.6 of this Agreement.
"Object Code" means Code in machine-readable form.
"Other Products" shall mean any product other than any of the Products
created, developed, localized or licensed by AVT.
"Products" means those AVT software products listed in Exhibit A.
"Royalties" shall have the meaning ascribed to it in Section 3.1 hereof.
"Source Code' means Code in human readable programming languages plus all
related development documents.
"Territory" shall not mean or include any specific geographical or physical
to and include all dialects or variations of the Japanese, Chinese and Korean
languages, individually or collectively.
"Upgrade" means revised versions of the Products that result in (1)
substantial performance, structural or functional improvements or additions,
including the substantial redesign or replacement of any part of the Source Code
and (2) a change in the Version number (including any changes to the number to
the right of the decimal point) of the Product.
4
<PAGE>
2. Grant of License
----------------
2.1 License. Subject to all of the terms and conditions set forth in
this Agreement, AVT hereby grants to Kuni, and Kuni hereby accepts from AVT,
non-transferable licenses to engage in the following activities:
(a) to create the Kuni Localized Japanese Versions of the Products set
forth on Exhibit A ("Localization License");
----------
(b) to distribute physical packages of the Kuni Derivative Works to End
Users and to Dealers in the Territory for further distribution to other End
Users or Dealers in the Territory (the "Package Distribution License");
(c) to reproduce the Kuni Derivative Works in physical packages for the
sole purpose of exercising its license under Section 2.1 (b) (the Package
Reproduction License');
(d) to place the Kuni Derivative Works on one or more servers owned or
controlled by Kuni and to electronically transmit copies of such Kuni Derivative
Works to End Users in Territory (the "Electronic Transmission License");
(e) to grant licenses to End Users to reproduce and install the Kuni
Derivative Works for internal use pursuant to the terms and conditions of the
Corporate License Agreements and End User License Agreements; and
(f) to use the Licensed Marks solely in connection with and solely to
the extent reasonably necessary for, the marketing, distribution, and support of
the Kuni Derivative Works in the Territory.
2.2 Mutual Right to Enter Into OEM Arrangements. Kuni and have a
-------------------------------------------------
co-exclusive right to enter into OEM arrangements with third-parties world-wide
with respect to the Products. Each to this Agreement may exercise such right
provided that the other party gives its prior written agreement that the
exercise of such right is consistent with the terms of this Agreement. Such
prior written agreement to the exercise of such right shall not be unreasonably
withheld by ether non-exercising party.
2.3 Exclusivity. (a) During the term of this Agreement, AVT shall not
-----------
grant (i) any similar rights to license and/or support, whether exclusive or
non-exclusive, to any person or entity to use, display, reproduce, modify, and
customize, for the purpose of developing, creating, operating, maintaining,
marketing, promoting, distributing, or otherwise commercially exploiting a
version of any Product that is customized, or localized for the Territory (i.e.,
the Kuni Localized Japanese Versions) or (ii) any similar rights to license,
localize or support other versions of the Products for use on Japanese, Korean
or Chinese language localized computers and operating systems used in the
Territory, to any other person or entity.
5
<PAGE>
2.4 Independent Contractor Relationship. The relationship of AVT and
--------------------------------------
Kuni established by this Agreement is of licensor licensee or independent
contractors and nothing in this Agreement shall be construed: (i) to give either
party the power to direct or control the daily activities of the other party, or
(ii) to constitute the parties as principal and agent, employer and employee,
partners, joint ventures, co-owners or otherwise as participants in a joint
undertaking. AVT and Kuni understand and agree that, except as specifically
provided for in this Agreement, AVI does not grant Kuni the power or authority
to make or give any agreement, statement, representation, warranty or other
commitment on behalf of AVT, or to enter into any contract or otherwise incur
any liability or obligation, express or implied, on behalf of AVT, or to
transfer, release or waive any right, title or interest of AVT. Likewise, AVT
and Kuni understand and agree that, except as specifically provided for in this
Agreement, Kuni does not grant AVT the power or authority to make or give any
agreement, statement, representation, warranty or other commitment on behalf of
Kuni, or to enter into any contract or otherwise incur any liability or
obligation, express or implied, on behalf of Kuni, or to transfer, release or
waive any right title or interest of Kuni.
2.5 Reservation of Rights. All rights not specifically granted to Kuni
---------------------
hereunder are reserved by AVT. Except as provided in this Agreement, Kuni shall
have no right whatsoever to utilize, receive, review, or otherwise have access
to the source code for the Products distributed by AVT in object code form only.
2.6 Changes in products and Support. AVT reserves the right at any
-----------------------------------
time without liability or prior notice to (i) determine what constitutes each
Product, including, but not limited to its features, characteristics,
documentation and related materials; (ii) discontinue its distribution of any or
all Products or discontinue distribution of any Product to the retail channel,
which may include, but not be limited to, discontinuation due to the grant to a
third party of the copyright or exclusive distribution or marketing rights to
one or more Products; (iii) change or terminate any of the features of the
Products, or (iv) change or terminate the level or type of support or service
which AVT makes available for each Product.
2.7 Other Products. In the event that AVT creates, develops,
---------------
localizes, obtains or licenses any Other Product, the parties agree that AVT
will automatically grant to Kuni non-transferable licenses to engage in the
those activities set forth in Section 2.3 above with respect to such Other
Product and upon the acceptance by Kuni, at its sole option of those
non-transferable licenses, such Other Product shall become a Product and, as a
result, each of the parties hereto shall enjoy all of the rights and obligations
created hereunder with respect to that new Product. In the event that Kuni
determines not to accept such non-transferable license to distribute the Other
Product, then Kuni shall notify AVT in writing and AVT shall be entitled to
license such Other Product for distribution in the Territory to a third party
that which is acceptable to Kuni.
2.8 Affiliates of Kuni. Kuni may transfer, assign, or sublicense the
--------------------
rights and licenses granted hereunder to one or more of its Affiliates, and each
6
<PAGE>
such Affiliate may correspondingly transfer, assign, or sublicense such rights
and licenses to any other subsidiaries of Kuni, provided in each case that such
Affiliates agree to be bound by the terms of this Agreement.
2.9 Ancillary Rights. The rights and licenses granted hereunder shall
include the right and license to copy and display all pictorial, graphic, or
audio-visual works created as a result of the development or preparation of the
Products, even if such pictorial, graphic, or audio-visual works are created by
or with other programming or through other means, provided, however, that it is
understood by the parties hereto that AVT is not transferring any rights to Kuni
pertaining to any third party content of AVT in using a Product.
2.10 Patent Rights. AVT further grants to Kuni, its successors, and
---------------
assigns, and any sublicensees and customers, a world-wide. royalty-free,
irrevocable and non-exclusive immunity from suit under any patents owned or
licensable by Kuni at any time during the term of this Agreement and solely with
respect to any changes made by Kuni to AVT's Products pursuant to this
Agreement, as necessary for Kuni to exercise any other rights and licenses
granted under this Agreement.
3. Royalties and Payments.
------------------------
3.1 Royalties. Kuni shall pay AVT a royalty payment (the "Royalties")
---------
of twenty percent (20%) of its Net Revenue derived from its exercise of the
license rights set forth in Section 2 above. If Kuni is distributing any
Product or Kuni Derivative Work in a Kuni Bundle, the Royalty payable by Kuni to
AVT shall be calculated as follows:
where: r is the Royalty payable by Kuni to AVT
a is the AVT Web Site List Price of the Product(s) or Kuni
Derivative Work(s),
b is the total AVT Web List Price of all the Kuni Products in
the Kuni Bundle, including the Product(s) and the Kuni
Derivative Work(s), and
c is the total Net Revenue received by Kuni from the sale and
distribution of the Kuni Bundle.
(b) AVT has represented to Kuni that AVT has entered into distribution
agreements with each of Hewlett Packard Company, Arcsoft, Inc., SyQuest
Technology, Inc., Creative Labs, Inc., New Media Corporation, Sony Inc., Seattle
Filmworks, Inc and Visioneer, Inc. Furthermore, each party hereto recognizes
that such party may enter into binding distribution agreements with
manufacturers (collectively, "OEMs") and software development companies
(collectively, "Developers"), and that certain provisions of such OEMs and/or
Developers may come into conflict with the
7
<PAGE>
restrictions set forth in Section 2.3 above (collectively, the "Developers
Agreements"). In such event the parties agree that notwithstanding the formula
set forth in subparagraph (a) above, upon the sale, distribution or marketing of
any Kuni Localized Version of any Product by any OEM or Developer in the
Territory then (i) if the proceeds of such sale are recouped by Kuni then Kuni
shall be obligated to disburse to AVT an amount equal to twenty percent (20.0%)
of the moneys earned by Kuni under such Developers Agreements from the sale of
any Kuni Localized Version of any Product in the Territory and (ii) if the
proceeds of such sale are recouped by AVT then AVT shall be obligated to
disburse to Kuni an amount equal to eighty percent (90.0%) of the moneys earned
by AVT under such Developers Agreements from the sale of any Kuni Localized
Version of any Product in the Territory.
3.2 Guarantee of Minimum Revenue. Kuni agrees that during each
successive six (6) month period after the effective date of this Agreement, it
will achieve the Minimum Revenue Quota. If Kuni fails to achieve the Minimum
Revenue Quota in any six month period, AVT will give Kuni notice thereof and
Kuni may, within 30 days of receipt of such notice, elect to make payment to AVT
of such shortfall. In the event that Kuni elects not to make such shortfall
payment, AVT may terminate the exclusivity portion of this Agreement (Section
2.3) upon giving Kuni thirty days written notice thereof and Kuni shall become a
non-exclusive distributor of the AVT Products in the Territory with the right
(i) to continue to distribute the Products in the Territory for the duration of
the Agreement or (ii) terminate the Agreement and the provisions of Section 11.2
shall apply.
3.3 Kuni shall pay to AVT the Royalties together with a statement
detailing such payment within thirty (30) days after the end of-each calendar
quarter ending March 31, June 30, September 30 and December 31 during the term
of this Agreement.
3.4 Promotional Materials and Advertising. Kuni shall use its
-----------------------------------------
commercially reasonable efforts to maximize customer sales of the Products by
providing marketing support, product promotion, and local customer service,
including a Japan-based sales training program and Japanese-language literature
for the Kuni Derivative Work.
3.5 Currency. Kuni shall pay AVT the Royalties in United States
--------
currency, in cash or demand draft, at AVT's United States offices. In the event
that the Royalties payable to AVT hereunder are determined on the basis of the
suggested list prices in the currency of Japan, the rate of exchange shall be
the rate in effect on the date such payment is due. In the event that any
currency controls imposed by the government of Japan do not allow payment to be
made by Kuni to AVT in United States dollars, Kuni shall notify AVT of the same
immediately, and if so instructed by AVT, deposit all monies due to AVT to AVT's
account in a bank in Japan of AVT's choice. If any currency legislation or
exchange controls under applicable law preclude Kuni from making payments to AVT
in United States dollars for a period exceeding ninety (90) days, AVT shall have
right to terminate this Agreement; provided, however, that such
8
<PAGE>
termination shall not relieve Kuni of its Payment Obligations hereunder.
Notwithstanding the foregoing, AVT shall have the unqualified right, at any time
or times, to notify Kuni in writing to make any Royalty payment due and payable,
or any part thereof, to be paid to AVT in an alternative manner, form or
currency, and Kuni shall comply with such notice subject to Kuni's necessary
compliance with the laws of Japan and/or any other applicable laws.
3.6 Withholding. In the event that Kuni is required to taxes on amounts
payable to AVT in accordance with this Agreement put laws and regulations of
Japan, Kuni shall be entitled to deduct and withhold( unless AVT shall furnish
to Kuni duly executed forms sufficient under the laws of Japan to exempt sums
payable to AVT hereunder from such taxes, in withhold herein provided, Kuni
shall furnish AVT with a certificate of deduction an and a true copy of the
governmental receipt establishing the payment thereof. Kuni shall further
obtain and furnish to AVT on a timely basis official tax receipts or such other
evidence of payment as AV-r may be required to submit in order to establish
AVT's right to a foreign tax credit with respect to its United States federal
income tax liability.
4. Duties of AVT
4.1 Delivery of Products and Development Environment. AVT shall deliver
to Kuni a complete and updated version of the Products including all Source Code
to the Code portion of the Products and the Development Environment within
thirty (30) days after the execution of the Agreement.
4.2 On-going Training AVT shall provide to Kuni's software engineers
------------------
reasonable on-going support and training during the term of this Agreement. In
particular, Kuni's software engineers must be trained concerning any Upgrades to
the Products within thirty (30) days of such implementation, Such training shall
be provided at the offices of AVT and in the event that Kuni requires such
initial training to be conducted in Japan instead, Kuni shall be responsible for
any additional costs of conducting such training in Japan.
4.3 Third Party Assistance. AVT shall have no objection to the
provision of technical assistance regarding the Products to Kuni by a third
party not located within the United States. Kuni shall contract directly with
such third Party and shall be responsible for all payments to the third party
for such technical assistance.
4.4 On-going commitment. AVT shall during the term of this Agreement,
provide Kuni with timely supply of high quality Upgrades or Maintenance
Modifications to the Products. AVT shall further use its commercial best
efforts to provide new products and develop product improvements and extensions
5. Duties of Kuni.
----------------
9
<PAGE>
5.1 Development of Japanese Localized Versions. Kuni shall use
--------------------------------------------
reasonable efforts to obtain and use Code necessary for the use, production and
development of the Japanese Localized Versions of the Products and the Kuni
Derivative Works. The Japanese Localized Versions and the Kuni Derivative Works
shall be based upon the Products or well known standards and techniques used for
the Products that have been published by AVT.
5.2 Marketing Materials Kuni shall use best efforts to publicize and
--------------------
market the Kuni Derivative Works, including the creation and distribution of,
among other things, Japanese literature and customary marketing and promotional
materials therefor. Without limiting the generality of the foregoing, Kuni will
advertise the Kuni Derivative Works in appropriate media and participate in
trade shows, conferences, expositions, and promotional seminars, all with due
consideration for the local marketing environment in Japan. Kuni shall conduct
its marketing activities in a lawful manner with the highest standards of fair
trade, fair competition, and business ethics, and shall cause its employees to
do the same.
5.3 Personnel. Kuni shall use reasonable efforts to train salesmen and
customer support personnel in the maintenance, support and use of the Products
including providing at least one (1) manager or specialist whose duties shall be
solely to manage and service the Products.
5.4 Program Reproduction and Distribution. Kuni shall be responsible
---------------------------------------
for reproduction (including all costs related thereto) of the Kuni Derivative
Works, as well as the AVT End User license agreement, registration card and such
other inserted materials as may be reasonably requested by AVT. From time to
time as reasonably requested by AVT, Kuni shall provide to AVT (Attention:
Business Development) sample packages and promotional materials relating
thereto, so that AVT can verify that the quality of Kuni's reproduction, use of
AVT's trademarks, and application of the proprietary notices required hereunder,
is comparable to that of AVT's own reproduction and use or otherwise complies
with the terms hereof. Kuni agrees to treat all AVT Products at least as
favorably as it treats any other products distributed by Kuni that are
competitive with any AVT Product. Specifically, Kuni agrees that it will not
market or promote any AVT Product or any other product in a manner that states
or could be reasonably interpreted to imply that the AVT Product is inferior or
secondary to the other product. For example, Kuni will not market or promote
any other product as "preferred", "premier', "primary" or the like as compared
with the AVT Products.
5.5 After Sales Support. Kuni shall have the sole responsibility for
---------------------
all after sales and support services for the Kuni Derivative Works distributed
by Kuni, and shall provide comprehensive technical assistance to the End Users
thereof. Kuni shall perform and provide to End Users such warranty and other
maintenance services as reasonably specified by AVT from time to time.
5.6 Quarterly Reports. Kuni shall provide AVT with quarterly
------------------
financial reports with respect to the calculation and payment of the Royalties
by Kuni
10
<PAGE>
together with the payment of Royalties to which it relates. In addition to such
financial reports, Kuni shall provide AVT with a list of all registered End
Users of the Kuni Derivative Works, so far as such information is available to
Kuni. Kuni shall also provide AVT with a written or oral summary of its
marketing activities with respect to the Kuni Derivative Works, of competing
products and activities in the Territory, and, upon the reasonable request of
AVT, any additional information concerning the distribution of Kuni Derivative
Works within the Territory.
5.7 Competing Products. For the term of this Agreement, Kuni will
-------------------
refrain from distributing, marketing or promoting any Competitive Products,
provided, however, that nothing in this Section 5.7 shall prohibit or restrict
-------
Kuni from distributing any Competitive Products that are packaged or "bundled"
with other products such as personal computers, printers, add-on boards, modems,
and other computer hardware or with value added application, utility or software
or with books and other publications of any other entity with whom (i) Kuni has
an existing relationship, or (ii) with whom Kuni forms a relationship after the
execution of this Agreement if at the time that such relationship is formed,
such entity is not the owner or developer of a Competitive Product.
6. Proprietary Protection. Kuni acknowledges that the Source Code
-----------------------
Documentation and the Development Environment consist of Confidential
Information of AVT. Kuni shall treat the Confidential Information in confidence
and shall not use, copy, or disclose them, nor permit any of its personnel to
use, copy, or disclose them, for any purposes that are not specifically
contemplated by this Agreement,
7. Representations and Warranties.
--------------------------------
7.1 Right and Authority. AVT represents and warrants that (i) it is the
-------------------
owner of the Products, including, without limitation, the Code, Documentation,
and Development Environment, including all intellectual property rights therein
under copyright, patent, trademark, @e secret, and other applicable law; (ii) it
has the fall and sufficient right and authority to grant the rights and licenses
granted here, (iii) the Code and Documentation have not been published under
circumstances that have caused loss of any U.S. or other patent or copyright
therein; and (iv) the Code, Documentation and Development Environment, to the
best of AVT's knowledge, do not infringe any patent, copyright or other
intellectual property right of any third party.
7.2 Adequacy of Source Code and Development Environment. AVT
---------------------------------------------------------
represents and warrants that, to the best of its knowledge, (i) the Source Code,
it and the Development Environment delivered to Kuni are and shall be
understandable and usable by trained computer-programming personnel; (ii) such
Code does not involve any proprietary languages or programming components that
such personnel could not reasonably be expected to understand; and (iii) such
Source Code, Documentation and the Development Environment include all of the
devices, programming and documentation necessary used by AVT in the development
of the products.
11
<PAGE>
7.3 Conformity, Performance and Compliance. AVT represents and
-----------------------------------------
to the best of its knowledge, (i) the Code and Documentation to be delivered to
AVT hereunder have been prepared in a workmanlike manner and with professional
diligence and skill: (ii) such Code and Documentation will function on the
machines and with operating systems for which they are designed and (iii) the
Code and Documentation when delivered to Kuni conform to their specifications in
all material respects, and are free from defects in materials and workmanship.
7.4 Scope of Warranty and Representations.
------------------------------------------
(a) Except as set forth in this Section 7.1, 7.2, 7.3 and in Section
12.1 hereof, AVT makes no warranties or representations as to the performance of
the Product(s) to Kuni or to any other person, except as set forth in AVTs form
limited warranty (the "Limited Warranty") which is included with Alta Vista's
End User product packages. AVT reserves the right to change the warranty and
service policy set forth in such Limited Warranty, or otherwise, at any time,
without further notice and without liability to Kuni or any other person.
(b) AVT does not warrant the output of the Product(s) to meet the
standards or requirements that may be applicable to any End User's business.
Except as herein provided, AVT does not make or give any representation or
warranty with respect to the usefulness or the efficiency of the Product(s), it
being understood that the degree of success with which equipment, software
programs and materials can be applied to data processing is dependent upon many
factors, many of which are not under AVT's control.
7.5 Kuni Representation. Kuni represents and warrants that it has had
--------------------
a fall opportunity to test the operation of each Product and to verify that such
Product runs properly on Japanese operating platforms. AVT makes no
representation or warranty that the Product(s) will run on Japanese operating
platforms or that the Product(s) will run on the Japanese operating platforms
fully in accordance with the End User Documentation specifications.
8. Audit Rights. Each party shall have the right during the term of
this Agreement, to engage an independent auditor to review the books and records
of the other party to determine the accuracy of the Royalties set forth above
and otherwise to verify the audited party's Net Revenue for the purpose of
verifying the auditing and the audited parties' performance of their obligations
hereunder, upon five (5) days written notice to the party to be audited. The
cost of such audits shall be home by the auditing party. Any audit shall be
conducted during customary business hours at any premises where the relevant
books and records may be located. In addition, each party agrees to maintain
accurate books and records concerning all transactions relating to their
respective obligations and duties under this Agreement for a period of two (2)
years following the expiration or termination of this Agreement. Each party
shall have the right for up to two (2) years after the termination of this
Agreement, to audit the other party's books and records.
12
<PAGE>
9. Intellectual Property Rights
------------------------------
9.1 Owndership of Intellectual Property Rights. Kuni acknowledges AVT's
-------------------------------------------
exclusive right, title and interest in and to any and all Intellectual Property
Rights in and to the Products and Licensed Marks, and Kuni will not at any time
do or cause to be done any act or thing impairing or tending to impair any part
of said right, title and interest. Kuni acknowledges and agrees that all of
such Intellectual Property Rights shall remain the exclusive property of AVT.
AVT agrees that Kuni shall own all right, title and interest in and to any and
all Intellectual Property Rights in or relating to any software or other
materials added to the Products that were necessary to create the Kuni Localized
Japanese Versions or Kuni Derivative Works ("New Kuni Matter"). Upon the
expiration or termination of this Agreement, AVT may at its option, purchase any
or all of the New Kuni Matter at a price (the "Purchase Price") to be determined
as set forth herein,
Purchase Price=x(1.15)^a
- -------------------------
WHERE X IS THE AGGREGATE COST INCURRED BY KUNI IN DEVELOPING CREATING THE NEW
KUNI MATTER AND A IS THE NUMBER OF ROUNDED UP TO A WHOLE NUMBER, OF THE TERM OF
THIS AGREEMENT PRIOR TO TERMINATION.
9.2 Copyright Notices. Kuni agrees to include AVT's copyright notices
-------------------
and/or trademark notices in the Kuni Derivative Works and shall not market or
license the Products under any other name, sign or logo. Kuni also agrees that
during the term of this Agreement or at any time thereafter it will not register
or use any of AVT's trademarks or trade names or any word, symbol or design
confusingly similar thereto, as part of its corporate name.Kuni will assist AVT
in obtaining registration of the tradenames and trademarks in AVT's name or, if
necessary, Kuni's rights to make use of AVT's tradenames and trademarks as part
of Kuni's marketing activities.
10. Prosecution and Defense of Infringement Claims
---------------------------------------------------
10.1 Notice and Prosecution of Infringement of Licensed Marks . AVT and
--------------------------------------------------------
Kuni shall each provide the other with prompt notice of any apparent
infringement of the Licensed Marks including any Kuni Derivative Work thereof,
any petition to cancel any registration of any of the Licensed Marks, or
attempted use of or any application to register any mark confusingly similar to,
or a colorable imitation of, any of the Licensed Marks of which it becomes
aware. AVT shall have primary responsibility to:
(a) Institute and prosecute any actions for such infringement of the
Licensed Marks;
(b) Defend any petition to cancel any registration of any of the
Licensed Marks; and
13
<PAGE>
(c) Oppose any attempted use of or any application to register any mark
confusingly similar to, or a colorable imitation of, any of the Licensed Marks.
Any damages and costs recovered through such proceedings shall belong
-------
exclusively to AVT and AVT shall be solely responsible for all costs and
expenses (including attorney's fees) of prosecuting such actions; provided,
however, that if AVt recovers damages in an action for infringement of the
Licensed Marks, Kuni shall be entitled to receive an equitable share of the
damages recovered and, provided it exercises such entitlement, Kuni shall be
obligated to contribute its proportionate share of the costs and expenses
(including attorney fees) incurred in connection with the recovery of damages,
which sums shall be deducted from such recovered damages and paid to AVT. Kuni
shall provide AVT with reasonably requested assistance in connection with such
proceedings, and AVT shall reimburse Kuni's reasonable out-of-pocket costs of
providing such assistance. AVT shall keep Kuni informed of the status of any
proceeding and supply Kuni with any reasonably requested documents regarding
such proceedings.
10.2 Kuni Right to Institute Infringement Actions. In the event AVT
does not institute and prosecute any action for infringement of the Licensed
Marks, defend any petition to cancel any registration of any of the Licensed
Marks, or oppose any attempted use of or any application to register any mark
confusingly similar to, or a colorable imitation of, any of the Licensed Marks
within a reasonable period of time (having due regard for the protection of the
Licensed Marks), Kuni shall have the right to do so, but only in the Territory,
but shall not be obligated to, either in its own name or in the name of AVT.
Any damages or costs recovered through such proceeding shall belong exclusively
to Kuni, and Kuni shall be solely responsible for all costs and expenses
(including attorney's fees) of prosecuting such proceeding. If Kuni elects to
prosecute an alleged infringement, Kuni shall obtain AVT's approval before
entering into any compromise, settlement or stipulation with respect to such
proceeding, which approval AVT shall not unreasonably withhold.
11. Term and Termination.
----------------------
I1.1 Term of Agreement and Renewal. This Agreement shall become
------------------------ --------
effective on the first day that it has been executed by both parties and, unless
sooner terminated hereunder, shall remain in force for a period of five (5)
years. This Agreement may be further renewed for such period as the parties may
mutually agree. Nothing contained herein shall be interpreted as requiring
either party to renew or extend this Agreement. Notwithstanding other
provisions of this Section 11, or any other provisions of this Agreement, and in
addition to any other rights to terminate set forth in this Agreement, this
Agreement may be terminated prior to the expiration of its stated term as set
forth below.
14
<PAGE>
11.2 Termination. Either party may also terminate this Agreement, by
giving written notice to the other party upon the occurrence of any of the
following events:
(a) Material breach of this Agreement by either party;
(b) The enactment of any law, decree, or regulation by any governmental
unit within the Territory or the United States which would impair or restrict
(i) the right of either party to terminate or elect not to renew this Agreement
as herein provided, (ii) either party's right, title or interest in the
Intellectual Property Rights as provided herein, or (iii) AVT's rights to
receive the royalties as set forth in Section 3 of this Agreement; or
(c) Upon the acquisition of direct or indirect control of Kuni by any
person which manufactures or markets products competing or likely to compete
with the Products or the Kuni Derivative Works.
11.3 Automatic Termination. This Agreement terminates automatically,
---------
with no further action by either party, if a receiver is appointed for either
party or its property, either party makes an assignment for the benefit of its
creditors, any proceedings are commenced by, for or against either party under
any bankruptcy, insolvency or debtor's relief law or either party is liquidated
or dissolved.
11.4 Effect of Termination.
-----------------------
(a) Upon the expiration or termination of this Agreement, regardless of
the cause thereof, the parties shall abide by and uphold any rights or
obligations accrued or existing on the date of termination or expiration, and
the parties agree to continue to cooperate with each other and to carry out an
orderly termination of their relations.
(b) Without limiting the generality of Section 11.4(a), within thirty
(30) days after such termination or expiration, (i) Kuni shall pay to AVT all
sums then due and owing, (ii) the due date of all outstanding invoices, if any,
will automatically be accelerated so that they become due and payable on the
effective date of termination, even if longer terms had been provided
previously, (iii) Kuni shall promptly pay to AVT any other sums that shall
become subsequently due and owing as they become due and owing, and (iv) all
orders for the Product or portions thereof remaining undelivered to Kuni as of
the effective date of termination shall automatically be cancelled, unless Kuni
is obligated to deliver such order to a Dealer or End User under an existing
written purchase order.
(c) Upon such termination or expiration, (i) Kuni will cease all
display, advertising and use of the Licensed Marks and will not thereafter use,
advertise or display any of the Licensed Marks; (ii) Kuni shall discontinue
marketing and reproduction of the Kuni Derivative Works and shall promptly
return and make no
15
<PAGE>
further use of property, materials and other items and all copies thereof
belonging to AVT relating to this Agreement, and (iii) Kuni shall destroy all
copies of Kuni Derivative Works reproduced hereunder and not yet distributed,
and shall furnish to AVT an affidavit signed by an officer of Kuni certifying
that, to the best of its knowledge, such return or destruction, has been fully
effected. Notwithstanding the foregoing, and provided Kuni fulfils its
obligations specified in this Agreement with respect to such materials, Kuni may
continue to use and retain copies of the Kuni Derivative Works and the Products
to the extent, but only to the extent, necessary to support the Kuni Derivative
Works rightfully distributed to End Users by Kuni prior to the termination of
this Agreement. Upon such termination or expiration, and upon AVT's request,
Kuni shall return any confidential information provided by AVT hereunder.
(d) Notwithstanding termination or expiration of this Agreement, Or any
Addendum hereto, all End User License Agreements which have been properly
granted pursuant to Section 2.1(e) of this Agreement prior to such termination
or expiration shall survive.
(e) Upon expiration or termination of this Agreement, for any reason
whatsoever, neither party shall have any further obligations to the other party
other than those set forth in this Section 11. Without limiting the
generality of the foregoing, neither party shall not be liable to the other
party for, and each party hereby expressly waives all rights to, compensation or
damages of any kind, in connection with the expiration or termination of this
Agreement, whether on account of the loss by such party of present or
prospective profits, commissions, anticipated orders, expenditures, investments,
or commitments made in connection with this Agreement, goodwill created, or on
account of any other reason whatsoever.
12. Indemnification.
---------------
12.1 Scope of AVT's Indemnification. AVT hereby indemnifies and holds
-------------------------------
harmless Kuni, its successors and assigns, including any customers, from any
loss, liability, claim or damage regarding the Code, Documentation or
Development Environment supplied hereunder, based on any actual or alleged
infringement of a patent, copyright, @e secret, or other intellectual
proprietary right of any third party. If such claim arises, or if in AVT's
judgment is likely to arise, Kuni agrees to allow AVT, at AVT's option, to
procure the right for Kuni to continue to exercise its rights and licenses
granted herein, or to replace or modify them in a functionally equivalent manner
so they become noninfringing. The foregoing remedial actions, however, shall
not relieve AVT of its indemnity obligations with respect to any loss,
liability, or damage that may be incurred with respect to the Products unless
such loss, liability or damage arises from or is based upon (a) use of other
than the current unaltered release of any of the Products, or (b) the
combination, operation or use of any of the Products with equipment, data or
programming not supplied by AVT, if such loss, liability or damage would have
been avoided but for such use, operation or combination.
16
<PAGE>
12.2 Scope of Kuni's Indemnification. Kuni shall indemnify and hold AVT
-------------------------------
and its shareholders, managers, officers, directors, agents and employees
harmless against any and all losses, damages, liabilities, costs and expenses
(including reasonable attorneys' fees) resulting from (i) any breach by Kuni of
this Agreement or any duty, warranty or obligation hereunder; (ii) any breach by
any Dealer of the sub-license and subdistribution agreement with Kuni or any
duty, warranty or obligation thereunder; (iii) any claim that may be made by
reason of any act or omission of Kuni or any of its shareholders, managers,
officers, directors, agents, employees subdistributors and representatives; or
(iv) any claim of any Dealer made against AVT for any reason whatsoever.
13. Miscellaneous.
-------------
13.1 Survival of Warranties. The warranties. representations, and
------------------------
covenants of the parties hereto contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and shall in no way
be affected by any investigation of the subject matter thereof made by or on
behalf of the parties hereto.
13.2 Successors and Assigns. Neither party hereto may assign this
------------------------
Agreement or any of its rights or obligations hereunder (including without
limitation its rights and duties of performance) to any third party Or entity,
and this Agreement may not be involuntarily assigned or assigned by operation of
law or change of control, without the prior written consent of the other party,
which consent shall be given or withheld by such non-assigning party in the
exercise of its sole discretion. The foregoing shall be interpreted as
including, but not being limited to, the right of AVT to withdraw from the
market one or more Products in Exhibit A attached hereto from this Agreement.
---------
This Agreement shall be binding upon and inure to the benefit of each of the
parties hereto and, except as otherwise provided herein, its respective legal
successors and permitted assigns, 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 right, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
13.3 Governing Law. This Agreement shall be governed by and construed
--------------
under the laws of the State of California.
13.4 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.
13.5 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.
13.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively
17
<PAGE>
given upon personal delivery to the party to be notified or five (5) days
following deposit with the United States Post Office, or ten (10) days following
deposit with the Japanese Postal Service, as applicable, by registered or
certified mail, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other party.
13.7 Finder's Fee. Each party represents that it neither is nor will be
obligated for any finder's or broker's fee or commission in connection with this
transaction.
13.8 Expenses/Attorneys' Fees. Each party shall pay all costs and
--------------------------
expenses that it incurs with respect to the negotiation, execution, delivery,
and performance of this Agreement. 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.
13.9 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 each of the parties hereto. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder of
any securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), and each future holder
of all such securities.
13.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision was so excluded and shall be enforceable in accordance with its
terms. WITHOUT LIMITING THE FOREGOING, IT IS EXPRESSLY UNDERSTOOD AND AGREED
THAT EACH AND EVERY PROVISION OF THIS AGREEMENT WHICH PROVIDES FOR A LMTATION OF
LIABILITY, DISCLAIMER OF WARRANTIES OR EXCLUSION OF DAMAGES IS INTENDED BY THE
PARTIES TO BE SEVERABLE AND INDEPENDENT OF ANY OTHER PROVISION AND TO BE
ENFORCED AS SUCH. FURTHER, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT IN THE
EVENT ANY REMEDY HEREUNDER IS DETERMINED TO HAVE FAILED OF ITS ESSENTIAL
PURPOSE, ALL LIMITATIONS OF LIABILITY AND EXCLUSION OF DAMAGES SET FORTH HEREIN
SHALL REMAIN IN FULL FORCE AND EFFECT.
13.11 Entire Agreement. This Agreement and the documents referred to
-----------------
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
18
<PAGE>
13.12 Confidentiality. Each of AVT and Kuni hereby agrees to maintain
---------------
the confidentiality of the terms and conditions of this Agreement and of the
facts, contentions, and allegations of the parties related to this Agreement,
and shall not disclose, discuss, or comment on the same to any third party
except as may be necessary for the implementation of this Agreement or as may be
otherwise required by the order of any judicial or administrative tribunal, or
as may be required to comply with applicable laws, regulations or requirements
of any self regulatory organization.
13.13 Arbitration. In the event of any future dispute, controversy or
claim between the parties arising from or relating to this Agreement, its
breach, or any matter addressed by this Agreement, it will be resolved through
binding confidential arbitration to be conducted by the American Arbitration
Association in San Francisco, California, pursuant to its Commercial Arbitration
Rules, and judgment upon the award Tendered by the Arbitrator(s) may be entered
by any court having jurisdiction of the matter. This paragraph shall not alter
the right of the parties hereto to seek and obtain injunctive relief from a
court of law.
13.14 Freely Executed. In entering into this Agreement, the parties
----------------
represent and warrant that they do so freely and voluntarily, after having had
the opportunity to meet and confer with their respective attorneys regarding the
contents and legal effect of this Agreement.
13.15 English Version to be conclusive. 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.
13.16 Governmental Approvals. Kuni undertakes full responsibility for
-----------------------
obtaining all Japanese governmental approvals necessary for each party to
perform its obligations hereunder. Kuni agrees to indemnify AVT against any and
all claims, demands, actions, proceedings, investigations, losses, liabilities,
costs or expenses suffered or incurred by AVT wising out of or relating to any
failure (whether intentional or unintentional) by Kuni or any of its customers
to obtain any such governmental approvals.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date fust
above written.
"AVT"
ALTAVISTA TECHNOLOGY, INC.
a Califomia corporation
By: /S/ Jack Marshall
-------------------------
Jack Marshall, President:
"KUNI"
KUNI RESEARCH NTERNATIONAL CORPORATION
a Japan corporation
By: /S/ Iwao Deguchi
-------------------------
Iwao Deguchi, President
20
<PAGE>
EXHIBIT A
---------
List of Products
All past, current and future AVT multimedia email and web authoring software,
including, without limitation, Howdy!, the multimedia Internet postcard maker.
------
2. WebCannon, AVT's Web site authoring software
3. All Other Web Sites that host images that AVT Code creates
21
<PAGE>
EXHIBIT DI
----------
Corporate License Agreement
22
<PAGE>
EXHIBIT-B2
---------
End User License Agreement
23
<PAGE>
LEASE AGREEMENT
Between
THE MANUFACTURERS LIFE INSURANCE COMPANY, (U.S.A.)
Company, Ltd.,
As Landlord
And
Alta vista Technology, Inc., a California Corporation
As Tenant
Dated as of
July 8, 1998
Property:
3oo Orchard City Drive
Campbell, California
Property Number. 566
<PAGE>
INDEX
Page
1. LEASED PREMISES
2. TERM
(a) Term
(b) Delay in Occupancy
(c) Overholding
3. RENT
(a) Basic Rent
(b) Additional Rent
(c) Payment - Additional Rent
(d) Recovery of Rent
(e) Accrual of Rent
(f) Limitations
4. SECURITY DEPOSIT
5. GENERAL COVENANTS
4 (a) Landlord's Covenant
(b) Tenant's Covenant
6. USE AND OCCUPANCY
(a) TJ@
(b) Waste, Nuisance, etc
(c) Insurance Risks
(d) Compliance with Law
(e) Environmental Compliance
(f) Rules and Regulations
7. ASSIGNMENT AND SUBLETTNG
(a) No Assignment and Subletting
(b) Assignment, Subletting Procedures
(c) Excess Transfer Rent
(d) Assumption of obligations
(e)Tenant's Continuing obligations
(f) Change of Control
<PAGE>
8. REPAIR AND DAMAGE
(a) Landlord's Repairs to Building and Property
(b) Landlord's Repairs to the Leased Premises6
(c) Tenant's Repairs
(d) Indemnification
(e) Damage and Destruction
9. INSURANCE AND LIABILITY
(a) Landlords Insurance
(b) Tenant's Insurance
(c) Litigation of Landlord's Liability
(d) Indemnity of Landlord
(e) Definition of "Insured Damage"
(I)
INDEX
Page
10. EVENTS OF DEFAULT AND REMEDIES
(a) Events of Default and Remedies 9
(b) Payment of Rent etc. on Termination 10
ADDITIONAL PROVISIONS
11. Common Areas 11
12. Relocation of Leased Premises 11
13. Subordination and Attornment 11
14. Certificates 11
15. Inspection of and Access to the Leased Premises 12
16. Delay 12
17. Waiver 12
18. Sale, Demolition and Renovation 12
19. Public Taking 13
20. Registration of Lease 13
21. Lease Entire Agreement 13
22. Notices 13
23. Interpretation 13
24. Extent of Lease Obligations 14
25. Use and Occupancy Prior to Term 14
26, Limitation on Landlord Liability 14
27. Waiver of jury Trial 15
28. Choice of Law 15
29. Schedules 15
<PAGE>
Definitions of Principal Terms Paragraph Page
Additional Rent 3 (b) 2
Additional Services 4 (b) D-2
Basic Rent 3 (a) 2
Building 1 1
Debts, Liabilities & Obligations 4 3
Fiscal Period 3 (c) 2
Insured Damage 9 (e) 9
Landlord 1,11
Landlord's Taxes 2 (a) C-1
Leased Premises 1 1
Leasehold Improvements 1 F-1
Landlord's Work 2 F-1
Operating Costs 5 D-2
Property 1 1
Public Taking 19 13
Rent 3 (d) 3
Taxes 2 (b) C-1
Tenant 1
Tenant's Proportionate Share 2(d) C-2
Tenants Proportionate Share 7 D-3
Tenant's Taxes 2 (e) C-1
Team 2 (a) 1
<PAGE>
THIS AGREEMENT made this 8th day of July 1998.
BETWEEN:
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.), a company domiciled
in the State of Michigan and having an office at 200 Bloor Street
East, Toronto, Ontario M4W lE5, and having a local office at 865 South
Figueroa Street, Suite 2,300 in the City of Los Angeles, California
(hereinafter called the "Landlord")
OF THE FIRST PART,
--- and --
Alta Vista Technology, Inc., a California Corporation
having an office at
1500 Dell Avenue in the City
of Campbell, CA 95008
(hereinafter called the tenant")
OF THE SECOND PART,
In consideration of the rents, covenants and agreements hereinafter contained,
the Landlord and Tenant hereby agree as follows:
1. LEASED PREMISES
LEASED PREMISES The Landlord does demise and lease to the Tenant the premises
(the "Leased Premises") located in A building (the "Building") having a
municipal address of 300 Orchard City Drive in the City of Campbell and
known as Suite 142, Water Tower a) (the Leased Premises, the Building,
together with the lands described in Schedule "A" attached hereto and
present and future improvements, additions and changes thereto being herein
called the "Property"). The Leased Premises are located on the first list)
floor(s) and the approximate location is outlined in heavy black and cross
hatched on the plan or plans marked Schedule(s) "B1" attached hereto. The
parties agree that the Rentable Area of the Leased Premises is two thousand
six hundred twenty-eight square feet (2,628 square feet) and has been
measured in accordance with the provisions of Schedule "B' attached hereto.
2. TERM
(a) TO HAVE AND TO HOLD the Leased Premises for and during the term of
three(3)years and zero (0) days (the "Tem") to be computed from the far day
of September 1998, and to be fully complete and ended on the 31st day of
August 2001, unless otherwise terminated.
(b) If the Leased Premises or any part thereof are not ready for occupancy
on the date of commencement of the Term, no part of the "Rent" (as
hereinafter defined) or only a proportionate part thereof, in the event
that the Tenant shall occupy a part of the Leased Premises, shall be
payable for the period prior to the date when the entire Leased Premises
are ready for occupancy and the full Rent shall accrue only after such last
mentioned date. The Tenant agrees to accept any such abatement of Rent in
full settlement of all claims
<PAGE>
which the Tenant might otherwise have by reason of the Leased Premises not
being ready for occupancy on the date of commencement of the Term, provided
that when the Landlord has completed contraction of such part of the Leased
Premises as it is obliged hereunder to construct, the Tenant shall not be
entitled to any abatement of Rent for any delay in occupancy due to the
Tenant's failure or delay to provide plans or to complete any special
installations or other work required for its purposes or due to any other
reason, nor shall the Tenant be entitled to any abatement of Rent for any
delay in occupancy if the Landlord has been unable to complete construction
of the Leased Premises by reason of such failure or delay by the Tenant. A
certificate of the Landlord as to the date the Leased Premises were ready
for occupancy and such construction as the Landlord is obliged to complete
is substantially completed, or as to the date upon which the same would
have been ready for occupancy and completed respectively but for the
failure or delay of the Tenant, shall be conclusive and binding on the
Tenant and Rent in full shelf seems and become payable from the date set
out in the said certificate. Notwithstanding any
<PAGE>
delay in occupancy, the expiry date of this Lease shall remain unchanged.
(e) If at the expiration of the Term or sooner termination hereof, the
Tenant shall remain in possession without any further written agreement or
in circumstances where a tenancy would thereby be created by implication of
law or otherwise, a tenancy from year to year shall not be created by
implication of law or otherwise, but the Tenant shall be deemed to be a
monthly tenant only, at double "Basic Rent' (as hereinafter defined)
payable monthly in advance plus "Additional Rene, (as hereinafter defined)
and otherwise upon and subject to the same terms and conditions as herein
contained, excepting provisions for renewal (if any) and leasehold
improvement allowance (if any), contained herein, and nothing, including
the acceptance of any Rent by the Landlord, for periods other than monthly
periods, shall extend this Lease to the contrary except an agreement in
writing between the Landlord and the Tenant and the Tenant hereby
authorizes the Landlord to apply any moneys received from the Tenant in
payment of such monthly Rent, Notwithstanding the foregoing, in the event
that the Tenant shall field over after the expiration of the Term and the
Landlord shall desire to regain possession of the Leased Premises promptly
at the expiration of the Term, then the Landlord, at its sole option, may
forthwith re-enter and take possession of the Leased premises without
process, or by any legal process in force, Tenant hereby expressly waiving
any and all notices to cure or vacate or to quit the Leased Premises
provided by current or future law (except for those notices specifically
outlined in this Lease).
3. RENT
BasicRent (a) (i) The Tenant shall without demand, deduction or right of offset
pay to the Landlord yearly and every year during the Term as rental (herein
called "Basic Rent"), the sum of Thirty-Three Thousand One Hundred Eight
and Of)/100 Dollars ($33,108.00) of lawful money of the jurisdiction in
which the Leased Premises are located, in equal monthly installments of Two
Thousand Seven Hundred Fifty-Nine and 00/100 Dollars ($2,759.00) each in
advance on the first day of each month during the Term, the first payment
to be made on the 1st day of September 199B.
Increase in rent (ii) Commencing on the 1st day of November l998 and continuing
until the 3lst day of August 1999, the Basic Rent shall be increased to
Sixty-Six Thousand Two Hundred Twenty-Eight and 00/100 Dollars ($66,228.00)
per annum of lawful money of the jurisdiction in which the Leased Premises
are located payable in equal monthly installments of Five Thousand Five
Hundred Nineteen and 00/100 Dollars ($5,519.00) each in advance on the
first day of each month during the Term, the first payment to be made on
the tat day of November 1998.
(iii) Commencing on the 1st day of September l999 and continuing until
the 3lst day of August 2OOO, the Basic Rent shall be increased to
Sixty-Seven Thousand Eight Hundred and OO/100 Dollars ($67,800.00) per
annum of lawful money of the jurisdiction in which the Leased Premises
are located payable in equal monthly installments of Five Thousand Six
Hundred Fifty and 00/100 Dollars ($5,650.GO) each in advance on the
first day of each month during the Term, the first payment to be made
on the tat day of September 1999.
<PAGE>
(iv) Commencing on the 1st day of September 2OOO and continuing until
the 3lst day of August 2001, the Basic Rent shall be increased to
Sixty-Nine Thousand Three Hundred Eighty-Four and 00/100
Dollars($69,384.00)per annum of lawful money of the jurisdiction which
the Leased Premises are located payable in equal monthly installments
of Five Thousand Seven Hundred Eighty-Two and 00/100 Dollars
($5,782.00) each in advance on the first day of each month during the
Term, the first payment to be made on the tat day of September 2000.
Additional Rent (b) The Tenant shall, without deduction or right of offset pay
to the Landlord yearly and every year during the Term as additional rental
(herein called 'Additional Rent")
(i) the amounts of any Taxes payable by the Tenant to the Landlord
pursuant to the provisions of Schedule "C" attached hereto; and
(ii) the amounts required to be paid to the Landlord pursuant to the
provisions of Schedule "D" attached hereto.
Payment Additional Rent (c)Additional Rent shall be paid and adjusted with
reference to a fiscal period of twelve (12) calendar months ("Fiscal
Period"), which shall be a calendar year unless the Landlord shall from
time to time have selected a fiscal Period which is not a calendar year by
written notice to the Tenant.
The Landlord shall advise the Tenant in writing of its estimate of the
Additional Rent to be payable by the Tenant during the Fiscal Period (or
broken portion of the Fiscal Period, as the case may be, if applicable at
the commencement or end of the term or because of a change in Fiscal
Period) which commenced upon the commencement date of the Term and for each
succeeding Fiscal Period or
2
<PAGE>
broken portion thereof which commences during the Term. Such estimate shall
in every case be a reasonable estimate and, if requested by the Tenant,
shall be accompanied by reasonable particulars of the manner in which it
was calculated. The Additional Rent payable by the Tenant shall be paid in
equal monthly installments in advance at the same time as payment of Basic
Rent is due hereunder based on the Landlords estimate as aforesaid. From
time to time, the Landlord may re-estimate, on a reasonable basis, the
amount of Additional Rent for any Fiscal Period or broken portion thereof,
in which case the Landlord shall advise the Tenant in writing of such
re-estimate and fix new equal monthly installments for the remaining
balance of such Fiscal Period or broken portion thereof. After the end of
each such Fiscal Period or broken portion thereof the Landlord shall
provide the Tenant with a statement of the actual Additional Rent payable
in respect of such Fiscal Period or broken portion thereof and a
calculation of the amounts by which the Additional Rent payable by the
Tenant exceeds or is less than (as the case may be) the aggregate
installments paid by the Tenant on account of Additional Rent for such
Fiscal Period.
Within thirty (30) days after the submission of such statement either the
Tenant shall pay to the Landlord any amount by which the amount found
payable by the Tenant with respect to such Fiscal Period or broken portion
thereof exceeds the aggregate of the monthly payments made by it on account
thereof during such Fiscal Period or broken portion thereof, or the
Landlord shall pay to the Tenant any amount by which the amount found
payable as aforesaid is less than the aggregate of such monthly payments.
Recovery of Rent (d) In this Lease 'Rent' means all amounts required to be paid
by the Tenant pursuant to this Lease including without limitation Basic
Rent and Additional Rent.
Accrual of Rent (e) Basic Rent and Additional Rent shall be considered as
accruing from day to day, and for an irregular period of less than one year
or less than one calendar month shall be apportioned and adjusted by the
Landlord for the Fiscal Periods of the Landlord in which the tenancy
created hereby commences and expires. Where the calculation of Additional
Rent for a period cannot be made until after the termination of this Lease,
the obligation of the Tenant to pay Additional Rent shall survive the
termination hereof and Additional Rent for such period shall be payable by
the Tenant upon demand by the Landlord. If the Term commences or expires on
any day other than the first or the last day of a month, Basic Rent and
Additional Rent for such fraction of a month shall be apportioned and
adjusted as aforesaid and paid by the Tenant on the commencement date of
the Term.
(f) The information set out in Statements, documents or other writings
setting out the amount of Additional Rent submitted to the Tenant under or
pursuant to this Lease shall be binding on the Tenant and deemed to be
accepted by it and shall not be subject to amendment for any reason unless
the Tenant gives written notice (the "Dispute Notice") to the Landlord
within sixty (60) lays of the Landlord's submission of such statement,
document, or writing identifying the statement, document, or writing. The
Dispute Notice shall set out in reasonable detail the reason why such
statement, document or writing is in error or otherwise should not be
binding on the Tenant. If the Tenant disputes the amount of the Additional
Rent as aforesaid, and if such dispute is not resolved within thirty (30)
days after the Tenant delivers the Dispute Notice to the Landlord, then the
<PAGE>
Landlord shall cause an audited statement of Additional Rent to be prepared
by an independent nationally recognized firm of chartered accountants. The
statement of Additional Rent as prepared by such accountants shall be final
and binding upon the parties hereto and within fifteen (15) days after
delivery of such statement of Additional Rent to the parties by the
accountants the Landlord sort Tenant shall readjust Additional Rent as
contemplated by section 3(c). The cost of preparation of such audited
statement shall be paid by the Tenant as Rent unless the amount of
Additional Rent payable by the Tenant as set forth in such audited
financial statement is at least 4% less than the amount of Additional Rent
demanded by the Landlord la accordance with the statement delivered to the
Tenant pursuant to section 3(c).
4. SECURITY DEPOSIT
Security Deposit The Tenant shall pay to the Landlord on execution of this Lease
by the Tenant the sum of Five Thousand Five Hundred Nineteen Dollars
($5,519.00) as a deposit to the Landlord to stand as security for the
payment by the Tenant of any and all present and future debts and
liabilities of the Tenant to the Landlord and for the performance by the
Tenant of all of its obligations arising under or in connection with this
Lease (the "Debts, Liabilities and Obligations"). The Landlord shall not be
required to keep the deposit separate from its general funds. In the event
of the Landlord disposing of its interest in this Lease, the Landlord shall
credit the deposit to its successor and thereupon shall have no liability
to the Tenant to repay the security deposit to the Tenant, Subject to the
foregoing and to the Tenant not being in default under this Lease, the
Landlord shall repay the security deposit to the Tenant without interest at
the end of the Term or sooner termination of
3
<PAGE>
the Lease provided that all Debts, Liabilities and Obligations of the
Tenant to the Landlord are paid and performed in full, failing which the
Landlord may on notice to the Tenant elect to retain the security deposit
and to apply it in reduction of the Debts, Liabilities and Obligations and
the Tenant shall remain fully liable to the Landlord for payment and
performance of the remaining Debts, Liabilities and Obligations.
5. GENERAL COVENANTS
Landlord's Covenant (a) The Landlord covenants with the Tenant:
(i) for quiet enjoyment; and
(ii) to observe and perform all the covenants and
obligations of the Landlord herein.
Tenant's Covenant (b) The Tenant covenants with the Landlord:
(i) to pay Rent, and
(ii) to observe and perform ail the covenants and
obligations of the Tenant herein.
6. USE AND OCCUPANCY
The Tenant covenants with the Landlord:
(a) not to use the Leased Premises for any purpose other than an office for the
conduct of the Tenant's business which is general office use and such use shall
be consistent with the character of the Property and compatible with the other
uses of the Property;
Waste, Nuisance, etc.(b) not to commit, or permit, any waste, injury or damage
to the Property including the Leasehold Improvements and any trade fixtures
therein, any loading of the floors thereof in excess of the maximum degree of
loading as determined by the Landlord acting reasonably, any nuisance therein or
any use or manner of use causing annoyance to other tenants and occupants of the
Property or to the Landlord;
Insurance Risks (c) not to do, or permit to be done or omitted to be done upon
the Property anything which would cause to be increased the Landlord's cost of
insurance or the costs of insurance of another tenant of the Property against
perils as to which the Landlord or such other tenant has insured or which shall
cause any policy of insurance on the Property to be subject to cancellation;
Compliance with Law (d) to comply at its own expense with all governmental laws,
regulations and requirements pertaining to the occupation and use of the
Leased Premises, the condition of the Leasehold Improvements, trade
fixtures, furniture and equipment installed by or on behalf of the Tenant
therein and the making by the Tenant of any repairs, changes or
improvements therein;
Environmental Compliance (e) (i) not to conduct and maintain its business and
operations at the Leased Premises so as to comply in all respect with
common law and with all present and future applicable federal, provincial/
state, local, municipal, governmental or quasi-governmental laws, by-laws,
rules, regulations, licenses, orders, guidelines, directives, permits,
decisions or requirements concerning occupational or public health and
safety or the environment and any order, injunction, judgment, declaration,
notice or demand issued thereunder, ("Environmental Laws");
(ii) not to permit or suffer any substance which is hazardous or is
prohibited, restricted, regulated or controlled under any
Environmental Law to be present at, on or in the Leased Premises,
unless it has received the prior written consent of the Landlord which
consent may be arbitrarily withheld;
<PAGE>
Rulesand Regulations (f) to observe and perform, and to cause its employees,
invited and others over whom the Tenant can reasonably be expected to
exercise control to observe and perform, the Rules and Regulations
contained in Schedule "E" hereto, and such further and other reasonable
rules and regulations and amendments and additions therein as may hereafter
be made by the Landlord and notified in writing to the Tenant, except that
no change or addition may be made that is inconsistent with this Lease
unless as may be required by governmental regulation or unless the Tenant
comments thereto. The imposition of such Rules and Regulations shall not
create or imply any obligation of the Landlord to enforce them or create
any liability of the Landlord for their non-enforcement or otherwise.
7. ASSIGNMENT AND SUB-LETTING
No Assignment and Subletting (a) The Tenant covenants that it will not assign
this Lease or sublet all or any part of the Leased
<PAGE>
Premises or mortgage or encumber this Lease or the Leased Premises or any
part thereof, or suffer or permit the occupation of all or any part thereof
by others (each of which is a 'Transfer') without the prior written consent
of the Landlord, which consent the Landlord covenants not to withhold
unreasonably (i) as to any assignee, subtenant or occupant (the
'Transferee') who is in a satisfactory financial condition, agrees to use
the Leased Premises for those purposes permitted hereunder, and is
otherwise satisfactory to the Landlord, and (ii) as to any portion of the
Leased Premises which, in the Landlord's sole judgment, is a proper and
rational division of the Leased Premises, subject to the Landlord's right
of termination arising under this paragraph, This prohibition against a
Transfer shall be construed to include a prohibition against any Transfer
by operation of law.
Assignment or Subletting procedures (b) The Tenant shall not effect a
Transfer unless;
(i) it shall have received or procured a bona fide written offer to
take an assignment or sublease which is not inconsistent with the
Lease, and the acceptance of which would not breach any provision of
this Lease if this paragraph is complied with and which the Tenant has
determined to accept subject to this paragraph being complied with,
and
(ii) it shall have first requested and obtained the consent in writing
of the Landlord thereto.
Any request for consent shall be in writing and accompanied by a copy of
the offer certified by the Tenant to the best of its knowledge to be true
and complete, and the Tenant shall furnish to the Landlord all information
available to the Tenant and requested by the Landlord as to the
responsibility, financial standing and business of the proposed Transferee.
Notwithstanding the provisions of sub-paragraph (a), within twenty (20)
days after the receipt by the Landlord of such request for consent and of
all information which the Landlord shall have requested hereunder, the
Landlord shall have the right upon written notice of termination submitted
to the Tenant, if the request is to assign this Lease or sublet the whole
of the Leased Premises, to cancel and terminate this Lease, or if the
request is to sublet a part of the Leased Premises only, to cancel and
terminate this Lease with respect to such part, in each case as of a
termination date to be stipulated in the notice of termination which shall
be not less than sixty (60) days or more than ninety (90) days following
the giving of such notice. In such event the Tenant shall surrender the
whole or part, as the case may be, of the Leased Premises in accordance
with such notice of termination and Basic Rent and Additional Rent shall be
apportioned and paid to the date of surrender and, if a part only of the
Leased Premises is surrendered, Basic Rent and Additional Rent shall after
the date of surrender abate proportionately. If such consent shall be given
the Tenant shall effect the Transfer only upon the terms set out in the
offer submitted to the Landlord as aforesaid and not otherwise. Any consent
shall be given without prejudice to the Landlord's rights under the Lease
and shall be limited to the particular Transfer in respect of which it was
given and shall not be deemed to be an authorization for or cement to any
further or other Transfer.
<PAGE>
Excess Transfer Rent (c) In the event the Landlord consents to any Transfer, the
Tenant shall pay to the Landlord, as and when amounts on account are due or
paid by the Transferee to the Tenant, all excess Transfer rents
(hereinafter called the "Excess Transfer Rent"), if any, as Rent. The
Excess Transfer Rent shall be determined in accordance with the following
formula: all gross revenue received by the Tenant from the Transferee and
attributable to the Transfer less:
(i) the Rent paid by the Tenant to the Landlord during the term of the
Transfer,
(ii) any reasonable and customary out of pocket transaction costs
incurred by the Tenant in connection with such Transfer including
attorney's fees, brokerage commissions, cash inducements and
alteration costs (which transaction costs shall be amortized on a
straight line basis over the term of the Transfer).
The Tenant agrees to promptly furnish such information with regard to the Excess
Transfer Rent as the Landlord may request from time to time.
Assumption of Obligation (d) No Transfer shall be effective unless the Transfer
shall execute an agreement on the Landlord's form, assuming all the
obligations of the Tenant hereunder, and shall have paid to the Landlord
its reasonable fee for processing the Transfer.
Tenant's Continuing Obligations (e) The Tenant agrees that any consent to a
Transfer shall not thereby release the Tenant of its obligations hereunder.
Change of Control (f) if the Tenant or occupant of the Leased Premises at any
time is a corporation, it is acknowledged and agreed that the transfer of
the majority of the issued capital stock of the corporation or the transfer
or issuance of any capital stock of the corporation sufficient to transfer
effective voting content of the corporation to others than the shareholder
or shareholders having
5
<PAGE>
effective voting control of the corporation immediately prior to such transfer
or issuance, shall be deemed for all purposes of this paragraph 7 to be a
Transfer and, accordingly, a violation of this paragraph 7 respecting assignment
of this Lease unless the prior written consent of the Landlord is first
obtained, and the Landlord shall have all of the same rights in respect thereof
as though any such transfer or issuing of shares or proposed transferring or
issuing of shares were a Transfer. The Landlord shall have access at all times
to the corporate books and records of the Tenant, and the Tenant shall make the
same available to the Landlord or its representatives upon request, for
inspection and copying at all times in order to ascertain whether or not there
has at any time during the Term of this Lease been a transfer or issuing of
shares sufficient to constitute a change in the effective voting control of the
Tenant. This subparagraph 7 (f) shall not apply to the Tenant if and for so
long as the Tenant is a corporation whose shares are listed and traded on any
recognized stock exchange in Canada or the United States.
(g) Notwithstanding anything in this Lease to the contrary, the Tenant shall not
be permitted without the written consent of the Landlord to effect a Transfer to
tenants currently occupying space in the Property.
S. REPAIR & DAMAGE
Landlord's repairs to building and property (a) The Landlord covenants with the
Tenant to keep in a good and reasonable state of repair and decoration:
(i) those portions of the Property consisting of the entrance,
lobbies, stairways, corridors, landscaped areas, parking areas, and
other facilities from time to time provided for use in common by the
Tenant and other tenants of the Building or Property, and the exterior
portions (including foundations and roofs) of all buildings and
structures from time to time forming part of the Property and
affecting its general appearance; and
(ii) the Building (other than the Leased Premises and premises of
other tenants) including the systems for interior climate control, the
elevators and escalators (if any), entrances, lobbies, stairways,
corridors and washrooms from time to time provided for use in common
by the Tenant and other tenants of the Building or Property and the
systems provided for use in common by the Tenant and other tenants of
the Building or Property and the systems provided for bringing
utilities to the Leased Premises.
Landlord's repairs to the Leased premises (b) The Landlord covenants with the
Tenant to repair, so far as reasonably feasible, and as expeditiously as
reasonably feasible, defects in standard demising walls or in structural
elements, exterior walls of the Building, suspended ceiling, electrical and
mechanical installations standard to the Building installed by the Landlord in
the Leased Premises (if and to the extent that such defects are sufficient to
impair the Tenant's use of the Leased Premises while using them in a manner
consistent with this Lease) and "Insured Damage" (as herein defined). The
Landlord shall in no event be required to make repairs to Leasehold Improvements
made by the Tenant, or by the Landlord on behalf of the Tenant or another tenant
or to make repairs to wear and tear within the Leased Premises.
<PAGE>
Tenant's repairs (c) The Tenant covenants with the Landlord to repair, maintain
and keep at the Tenant's own cost, except insofar as the obligation to
repair rests upon the Landlord pursuant to this paragraph, the Leased
Premises, including Leasehold Improvements in good and substantial repair,
reasonable wear and tear excepted, provided that this obligation shall not
extend to structural elements or to exterior glass or to repairs which the
Landlord would be required to make under this paragraph but for the
exclusion therefrom of defects not sufficient to impair the Tenant's use of
the Leased Premises while using them in a manner consistent with this
Lease. The Landlord may enter the Leased Premises at all reasonable times
upon twenty-four (24) hours notice, except in case of emergency and view
the condition thereof and the Tenant covenants with the Landlord to repair,
maintain and keep the Leased Premises in good and substantial repair
according to notice in writing, reasonable wear and tear excepted. If the
Tenant shall fail to repair as aforesaid after reasonable notice to do so,
the Landlord may upon twenty-four (24) hours notice, except in case of
emergency, effect the repairs and the Tenant shall pay the reasonable cost
thereof to the Landlord on demand. The Tenant covenants with the Landlord
that the Tenant will at the expiration of the Term or sooner termination
thereof peaceably surrender the Leased Premises and appurtenances in good
and substantial repair and condition, reasonable wear and tear excepted.
Indemnification (d) If any part of the Property becomes out of repair, damaged
or destroyed through the negligence of, or misuse by, the Tenant or its
employees, agents, invitees or others under its control, the Tenant shall
pay the Landlord on demand the expense of repairs or replacements,
including the Landlord's reasonable administration charge thereof,
necessitated by such negligence or misuse.
6
<PAGE>
Damage and Destruction (e) It is agreed between the Landlord and the Tenant
that:
(i) in the event of damage to the Property or to any part thereof, if
in the reasonable opinion of the Landlord the damage is such that the
Leased Premises or any substantial part thereof is rendered not
reasonably capable of use and occupancy by the Tenant for the purposes
of its business for any period of time in excess of ten (10) days,
then
(1) unless the damage was caused by the fault or negligence of
the Tenant or its employees, agents, invitees or others under its
control, from the date of occurrence of the damage and until the
Leased Premises are again reasonably capable for use and
occupancy as aforesaid, the Rent payable pursuant to this Lease
shall abate from time to time in proportion to the part or parts
of the Leased Premises not reasonably capable of such use and
occupancy, and
(2) unless this Lease is terminated as hereinafter provided, the
Landlord or the Tenant as the case may be (according to the
nature of the damage and their respective obligations to repair
as provided in sub-paragraphs (a), (b) and (c) of this paragraph)
shall repair such damage with all reasonable diligence, but to
the extent that any part of the Leased Premises is not reasonably
capable of such use and occupancy by reason of damage which the
Tenant is obligated to repair hereunder, any abatement of Rent to
which the Tenant would otherwise be entitled hereunder shall not
extend later than the time by which, in the reasonable opinion of
the Landlord, repairs by the Tenant ought to have been completed
with reasonable diligence;
(ii) if the damage is such that the Leased Premises are rendered
untenantable, in whole or in part, and if, in the opinion of the
Landlord, the damage cannot be repaired with reasonable diligence
within one hundred and eighty (180) days from the happening of the
damage, then the Landlord may, within thirty (30) days after the date
of the damage, terminate this Lease by notice to the Tenant. Upon the
Landlord giving such notice, this Lease shall be terminated as of the
date of the damage and the Rent and all other payments for which the
Tenant is liable under the terms of this Lease shall be apportioned
and paid in full to the date of the damage;
(iii) the Landlord shall not be required to use plans and
specifications and working drawings used in the original construction
of the Building and nothing in this Section requires the Landlord to
rebuild the Building in the condition and state that existed before
the damage, but the Building, as rebuilt, will have reasonably similar
facilities and services to those in the Building prior to the damage;
and
(iv) if premises whether of the Tenant or other tenants of the
Property comprising in the aggregate half or more of the total number
of square feet of rentable office area in the Property or half or more
of the total number of square feet of rentable office area in the
Building (as determined by the Landlord) or portions of the Property
which affect access or services essential thereto, are substantially
damaged or destroyed by any cause and if in the reasonable opinion of
<PAGE>
the Landlord the damage cannot reasonably be repaired within one
hundred and eighty (180) days after the occurrence thereof, then the
Landlord may, by written notice to the Tenant given within thirty (30)
days after the occurrence of such damage or destruction, terminate
this Lease, in which event neither the Landlord nor the Tenant shall
be bound to repair as provided in sub-paragraphs (a) (b) and (c) of
this paragraph, and the Tenant shall instead deliver up possession of
the Leased Premises to the Landlord with reasonable expedition but in
any event within sixty (60) days after delivery of such notice of
termination, and Rent shall be apportioned and paid to the date upon
which possession is so delivered up (but subject to any abatement to
which the Tenant may be entitled under sub-paragraph (a) (i) of this
paragraph).
9. INSURANCE AND LIABILITY
Landlord's Insurance (a) The Landlord shall take out and keep in force during
the Term insurance with respect to the Property except for the "Leasehold
Improvements" (as hereinafter defined) in the Leased Premises.
The insurance to be maintained by the Landlord shall be in respect of
perils and in amounts and on terms and conditions which from time to time
are insurable at a reasonable premium and which are normally insured by
reasonable prudent owners of properties similar to the Property, all as
from time to time determined at reasonable intervals by insurance advisors
selected by the Landlord, and whose opinion shall be conclusive. Unless and
until the insurance advisors shall state that any such perils are not
customarily insured against by owners of properties similar to the
Property, the perils to be insured against by the Landlord shall include,
without limitation, public liability, boilers and
<PAGE>
machinery, fire and extended perils and may include at the option of the
Landlord losses suffered by the Landlord in its capacity as Landlord
through business interruption. The insurance to be maintained by the
Landlord shall contain a waiver by the insurer of any rights of subrogation
or indemnity or any other claim over which the insurer might otherwise be
entitled against the Tenant or the agents or employees of the Tenant.
Tenant's Insurance (b) The Tenant shall take out and keep in force during the
Term:
(i) comprehensive general public liability insurance all on an
occurrence basis with respect to the business carried on in or from
the Leased Premises and the Tenant's use and occupancy of the Leased
Premises and of any other part of the Property, with coverage for any
one occurrence or claim of not less than Two Million Dollars
($2,{)00,000) or such other amount as the Landlord may reasonably
require upon not less than one (2) month notice at any time during the
Term, which insurance shall include the Landlord as a named insured
and shall contain a cross liability clause protecting the Landlord in
respect of claim by the Tenant as if the Landlord were separately
insured;
(ii) insurance in respect of fire and such other perils @ are from
time to time in the usual extended coverage endorsement covering the
Leasehold Improvements, trade fixtures, and the furniture and
equipment in the Leased Premises for not less than 80% of the full
replacement cost thereof, and which insurance shall include the
Landlord as a named insured as the Landlord's interest may appear, and
(iii) insurance against such other perils and in such amounts as the
Landlord may from time to time reasonably require upon not less than
ninety (90) days' written notice, such requirement to be made on the
basis that the required insurance is customary at the time for prudent
tenants of properties similar to the Property.
All insurance required to be maintained by the Tenant shall be on terms and with
insurers satisfactory to the Landlord. Each policy shall contain: (A) a waiver
by the insurer of any rights of subrogation or indemnity or any other claim over
to which the insurer might otherwise be entitled against the Landlord or the
agents or employees of the Landlord, (B) a cross liability clause and (C) an
undertaking by the insurer that no material change adverse to the Landlord or
the Tenant will be made, and the policy will not lapse or be canceled, except
after not less than thirty (30) days' written notice to the Landlord of the
intended change, lapse or cancellation. The Tenant shall furnish to the
Landlord, if and whenever requested by it, certificates or other evidences
acceptable to the Landlord as to the insurance from time to time effected by the
Tenant and its renewal or continuation in force, If the Tenant shall fail to
take out, renew and keep in force such insurance, or if the evidences submitted
to the Landlord are unacceptable to the Landlord (or no such evidences are
submitted within a reasonable period after request therefor by the Landlord),
then the Landlord may give to the Tenant written notice requiring compliance
with this sub-paragraph and specifying the respects in which the Tenant is not
then in compliance with this sub-paragraph. If the Tenant does not within
forty-eight (48) hours provide appropriate evidence of compliance with this
sub-paragraph, the Landlord may (but shall not be obligated to) obtain some or
all of the additional coverage or other insurance which the Tenant shall have
failed to obtain, without prejudice to any other rights of the landlord under
this Lease or otherwise, and the Tenant shall pay all premiums and other
reasonable expenses incurred by the Landlord to the Landlord on demand.
<PAGE>
Limitations of Landlord's Liability (c ) The Tenant agrees that the Landlord
shall not be liable for any bodily injury or death of, or loss or damage to any
property belonging to, the Tenant or its employees, invitees or licensees or any
other person in, on or about the Property unless resulting from the actual
willful misconduct or gross negligence of the Landlord or its own employees. In
no event shall the Landlord be liable for any damage, including indirect,
special or consequential damages, which is caused by steam, water, rain or snow
or other thing which may leak into, issue or flow from any part of the Property
or from the pipes or plumbing works, including the sprinkler system (if any)
therein or from any other place or for any damage caused by or attributable to
the condition or arrangement of any electric or other wiring or of sprinkler
heads (if any) or for any such damage caused by anything clone or omitted by any
other tenant.
Indemnity of Landlord (d) Except with respect to claims or liabilities in
respect of any damage which is Insured Damage to the extent of the cost of
repairing such Insured Damage, the Tenant agrees to indemnify and save harmless
the Landlord in respect of:
(i) all claim for bodily injury or death, property damage or other
loss or damage arising from the conduct of any work or any act or
omission of the Tenant or any assignee, sub-tenant, agent, employee,
contractor, invites or licensee of the Tenant, and in respect of all
costs, expenses and liabilities incurred by the Landlord in connection
with or arising
8
<PAGE>
out of all such claims, including the expenses of any action or
proceeding pertaining thereto; and
(ii) any loss, cost, (including, without limitation, lawyers' fees and
disbursements), expense or damage suffered by the Landlord arising
from any breach by the Tenant of any of its covenants and obligations
under this Lease.
Definition of "Insured Damages" (e) For purposes of this Lease, "Insured
Damage" means that part of any damage occurring to the Property of which the
entire cost of repair (or the entire cost of repair other than deductible amount
Dproperly collectable by the Landlord as part of the Additional Rent) is
actually recovered by the Landlord under a policy or policies of insurance from
time to time effected by the Landlord pursuant to sub-paragraph (a) Where an
applicable policy of insurance contains an exclusion for damages recoverable
from a third party, claims as to which the exclusion applies shall be considered
to constitute Insured Damage only if the Landlord successfully recovered from
the third party.
10. EVENTS OF DEFAULT AND REMEDIES
Events of Default and Remedies (a) In the event of the happening of any one of
the following events:
(i) the Tenant shall have failed to pay an installment of Rent or any
other amount payable hereunder when due, and such failure shall be
continuing for a period of more than ten (10) days after the date such
installment or amount was due;
(ii) there shall be a default of or with any condition, covenant,
agreement or other obligation on the part of the Tenant to be kept,
observed or performed hereunder (other than the obligation to pay Rent
or any other amount of money) and such default shall be continuing for
a period of more than thirty (30) days after written notice by the
Landlord to the Tenant specifying the default and requiring that it be
cured;
(iii) if any policy of insurance upon the Property or any part thereof
from time to time effected by the Landlord shall be canceled or about
to be canceled by the insurer by reason of the use or occupation of
the Leased Premises by the Tenant or any assignee, sub-tenant or
licensee of the Tenant or anyone permitted by the Tenant to be upon
the Leased Premises and the Tenant after receipt of notice in writing
from the Landlord shall have failed to take such immediate steps in
respect of such use or occupation as shall enable the Landlord to
reinstate or avoid cancellation (as the case may be) of such policy of
insurance;
<PAGE>
(iv) the Leased Premises shall, without the prior written consent of
the Landlord, be used by any other persons than the Tenant or a
permitted Transferee or for any purpose other than that for which they
were leased or occupied or by any persons whose occupancy is
prohibited by this Lease;
(v) the Leased Premises shall be abandoned without the prior written
consent of the Landlord for fifteen (15) consecutive days or more
while capable of being occupied;
(vi) the balance of the Term of this Lease or any of the goods and
chattels of the Tenant located in the Leased Premises, shall at any
time be seized in execution or attachment;
or
(vii) the Tenant shall make any assignment for the benefit of
creditors or become bankrupt or insolvent or take the benefit of any
statute for bankrupt or insolvent debtors or, if a corporation, shall
take any steps or suffer any order to be made for Its winding-up or
other lamination of its corporate existence; or a trustee, receiver or
receiver-manager or agent or other like person shall be appointed of
any of the assets of the Tenant;
then the Landlord shall have the following rights and remedies all of
which are cumulative and not alternative and not to the exclusion of
any other or additional rights and remedies in law or equity available
to the Landlord by statute or otherwise;
(A) to remedy or attempt to remedy any default of the Tenant, and in so
doing to make any payments due or alleged to be due by the Tenant to third
parties and to enter upon the Leased Premises to do any work or other
things therein, and in such event all reasonable expenses of the Landlord
in remedying or attempting to remedy such default shall be payable by the
Tenant to the Landlord on demand;
(B) with respect to =paid overdue Rent, to the payment by the Tenant of the
Rent and of interest (which said interest shall be deemed included herein
in the term "Rent") thereon at a rate equal to the lesser of three percent
(3%) above the prime commercial loan rate charged to
9
<PAGE>
borrowers having the highest credit rating from time to time by the
Landlord's principal bank from the date upon which the same was due until
actual payment thereof and the maximum amount allowed under the laws of the
jurisdiction in which the Building is located;
(C) to terminate this Lease forthwith by leaving upon the Leased Premises
or by affixing to an entrance door to the Leased Premises notice
terminating the Lease and to immediately thereafter cease to furnish any
services hereunder and enter into and upon the Leased Premises or any part
thereof in the name of the whole and the same to have again, re-possess and
enjoy as of its former estate, anything in this Lease contained to the
contrary notwithstanding. The Tenant hereby expressly waives any and all
notices (other than those notices specifically outlined in this Lease) to
cure or vacate or to quit the Leased Premises provided by current or future
law;
(D) to enter the Leased Premises as agent of the Tenant and as such agent
to re-let them and to receive the rent therefor and as the agent of the
Tenant to take possession of any furniture of other property thereon and
upon giving ten (10) days' written notice to the Tenant to store the same
at the expense and risk of the Tenant or to sell or otherwise dispose of
the same at public or private sale without further notice and to apply the
proceeds thereof and any rent derived from re-letting the Leased Premises
upon account of the Rent due and to become due under this Lease and the
Tenant shall be liable to the Landlord for the deficiency if any; and
(E) in the event of any breach by the Tenant of any of the covenants or
provisions of this Lease, the Landlord shall have the right of injunction
and the right to invoke any remedy allowed at law or in equity, and mention
in this Lease of any particular remedy shall not preclude the Landlord from
any other remedy at law or in equity. Tenant hereby expressly waives any
and all rights of redemption or to any notice to quit granted by or under
any present or future laws in the event of this Lease being terminated
and/or Landlord obtaining possession of the Leased Premises pursuant to the
provisions of this section.
Payment of Rent, etc. on Termination (b) Upon the giving by the Landlord of
a notice in writing terminating this Lease under paragraph 10 (a)(C), above,
this Lease and the Tem shall terminate, the Tenant shall remain liable for and
shall pay on demand by the Landlord (I) the full amount of all Rent which would
have accrued until the date on which this Laws would have expired had such
termination not occurred, and any and all damages and expenses incurred by the
Landlord in re-entering and repossessing the Leased Premises in making good any
default of the Tenant, in making any alterations to the Leased Premises, and any
and all expenses which the Landlord may incur during the occupancy of any new
ten ant, less (if) the net proceeds of any re-letting of the Leased Premises
which has occurred at the time of the aforesaid demand by the Landlord to the
Tenant. The Tenant agrees to pay to the Landlord the difference between items
(i) and (ii) above for the period through and including the date on which this
Lease would have expired if it had not been terminated. The Landlord shall be
<PAGE>
entitled to any excess with no credit to the Tenant. The Landlord may, in its
sole discretion, make demand on the Tenant as aforesaid on any one or more
occasion, and any suit brought by the Landlord to enforce collection of such
difference for any one month shall not prejudice the Landlord's right to enforce
the collection of any difference for any subsequent month or months. In addition
to the foregoing, and without regard to whether this Lease has been terminated,
Tenant shall pay to the Landlord all costs incurred by the Landlord, including
reasonable attorneys' fees, with respect to any successful lawsuit or action
instituted or taken by the Landlord to enforce the provisions of this Lease. The
Tenant's liability shall survive the institution of summary proceedings and the
issuance of any warrant hereunder.
If the Landlord determines that it is impracticable or extremely difficult to
fix the actual damages, then, as an alternative to the remedy set forth in the
preceding paragraph, the Tenant will pay to the Landlord on demand,
liquidated and agreed final damages for the Tenant's default calculated in
accordance with this paragraph. Liquidated damages hereunder shall be an amount
equal to the present value at a rate of six percent (6%) per annum of the
excess, if any, of (i) all Rent payable under this Lease from the date of such
demand for what would be the then unexpired Term of this Lease in the absence of
such termination over (ii) the then fair market rental value of the Leased
Premises (as determined by the Landlord). if any law shall limit the amount
agreed upon, the Landlord shall be entitled to the maximum amount allowable
under such law. Nothing herein shall be construed to affect or prejudice the
Landlord's right to prove, and claim in full, unpaid rent seemed prior to
termination of this Lease. Upon termination of this Lease and the Term, the
Tenant shall immediately deliver up possession of the Leased Premises to the
Landlord, and the Landlord may forthwith re-enter and take possession of them.
(c) The Tenant shall pay to the Landlord on demand all costs and expenses,
including lawyers'
10
<PAGE>
fees, incurred by the Landlord in successfully enforcing any of the
obligations of the Tenant under this Lease.
ADDITIONAL PROVISIONS
Common Areas 11. The Tenant acknowledges and agrees that the common areas of the
Property shall at all times be subject to the exclusive management and control
of the Landlord. Without limiting the generality of the foregoing, the Tenant
specifically acknowledges and agrees that the Landlord may temporarily close or
restrict the use of all or any part of the common areas of the Property in an
emergency, or for security or crowd control purposes, to facilitate tenants
moving in or out of the building, or for the purpose of making repairs,
alterations or renovations. The Landlord agrees not to permanently alter such
common areas in any manner which would deny reasonable access to the Leased
Premises. In the event of any such temporary closure or restriction of use or if
changes are made to such common areas by the Landlord, the Landlord shall not be
subject to any liability nor shall the Tenant be entitled to any compensation or
any diminution or abatement of Rent and such closures, restriction and changes
shall not be deemed to be a constructive or actual "iction or a breach of the
Landlord's covenant for quiet enjoyment.
Relocation of Leased Premises 12. The Landlord shall have the right at
any time upon sixty (60) days' written notice (the "Notice of Relocation") to
relocate the Tenant to other premises in the Property (the "Relocated Premises")
and the following terms and conditions shall be applicable:
(a) the Relocated Premises shall contain approximately the same as, or
greater Rentable Area than, the Leased Premises;
(b) the Landlord shall provide at its expense leasehold improvements in the
Relocated Premises equal to the standards of the Leasehold Improvements in
the Leased Premises which have been completed or which the Landlord is
obliged herein to provide in the Leased Premises;
(c ) the Landlord shall pay for the reasonable moving costs (if any) from
the Leased Premises to the Relocated Premises of the Tenant's trade
fixtures and furnishings;
(d) as compensation for all other costs, expenses and damages which the
Tenant may suffer or incur in connection with the relocation including
disruption and l@ of business, Basic Rent and Additional Rent for the
Relocated Premises for the period of the first one (1) month of occupancy
shall abate;
(e) during the remaining Term of the Lease but not including any renewals
of the Lease, the Basic Rent and Tenant's Proportionate Share of Additional
Rent for the Relocated Premises shall be no greater than the Basic Rent and
Tenant's Proportionate Share of Additional Rent for the Leased Premises,
notwithstanding the Relocated Premises may contain a greater Rentable Area;
(f) all other terms and conditions of the Lease shall apply to the
Relocated Premises except as are inconsistent with the terms and conditions
of this sub-paragraph;
<PAGE>
(g) the Tenant agrees to execute the Landlord's standard form of lease
amendment then being used by the Landlord for the Building to give effect
to the relocation.
Subordination and Attornment 13. This Lease and all rights of the Tenant
hereunder are subject and subordinate to all underlying leases and charges, or
mortgages now or hereafter existing (including charges, and mortgages by way of
debenture, note, bond, deeds of trust and mortgage and all instruments
supplemental thereto) which may now or hereafter affect the Property or any part
thereof and to all renewals, modifications, consolidations, replacements and
extensions thereof provided the lessor, charges, mortgagee or trustee agrees to
accept this Lease if not in default; and in recognition of the foregoing the
Tenant agrees that it will, whenever requested, attorn to such lessor, charges,
mortgagee as a tenant upon all the terms of this Lease. The Tenant agrees to
execute promptly whenever requested by the Landlord or by the holder of any such
lease, charge, or mortgage an instrument of subordination or attornment as may
be required of it.
Certificates 14. The Tenant agrees that it shall promptly whenever requested
by the Landlord from time to time execute and deliver to the Landlord, and if
required by the Landlord, to any lessor, charges, or
mortgagee (including any trustee) or other person designated by the Landlord, an
acknowledgment in writing as to the then status of this Lease, including as to
whether it is in fell force and effect, is modified or unmodified, confirming
the Rent payable hereunder and the state of the accounts between Landlord and
the Tenant, the existence or nonexistence of defaults, and any other matters
pertaining to this Lease as to which the Landlord shall request an
acknowledgment.
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<PAGE>
Inspection of and Access to the Leased Premises 15. The Landlord shall be
permitted at any time and from time to time upon twenty-four (24) hours notice,
except in case of emergency, to enter and to have its authorized agents,
employees and contractors enter the Leased Premises for the purposes of
inspection, window cleaning, maintenance, providing janitor service, making
repairs, alterations or improvements to the Leased Premises or the Property, or
to have access to utilities and services (including all ducts and access panels
(if any), which the Tenant agrees not to obstruct) and the Tenant shall provide
free and unhampered access for the purpose, and shall not be entitled to
compensation or any diminution or abatement of Rent for any inconvenience,
nuisance or discomfort mused thereby. During the last six (6) months, the
Landlord and its authorized agents and employees shall be permitted entry to the
Leased Premises for the purpose of exhibiting them to prospective tenants. The
Landlord in exercising its rights under this paragraph shall do so to the extent
reasonably necessary so as to minimize interference with the Tenant's use and
enjoyment of the Leased Premises provided that in an emergency the Landlord or
persons authorized by it may enter the Leased Premises without regard to
minimizing interference.
Delay 16. Except as herein otherwise expressly provided, if and whenever and to
the extent that either the Landlord or the Tenant shall be prevented, delayed or
restricted in the fulfillment of any obligation hereunder in respect of the
supply or provision of any service or utility, the making of any repair, the
doing of any work or any other thing (other than the payment of moneys required
to be paid by the Tenant to the Landlord hereunder) by reason
- -or-
(a) strikes or work stoppages;
(b) being unable to obtain any material, service, utility or labor
required to fulfill such obligation;
(c ) any statute, law or regulation of, or inability to obtain any
permission from any government authority having lawful jurisdiction
preventing, delaying or restricting such fulfillment;
-or-
(d) other unavoidable occurrence,
the time for fulfillment of such obligation shall be "tended during
the period in which such circumstance operates to prevent, delay or
restrict the fulfillment thereof, and the other party to this Lease
shall not be entitled to compensation for any inconvenience, nuisance
or discomfort thereby occasioned; provided that nevertheless the
Landlord will use its best efforts to maintain services essential to
the use and enjoyment-of the Leased Premises and provided further that
if the Landlord shall be prevented, delayed or restricted in the
fulfillment of any such obligation hereunder by reason of say of the
circumstances act out in sub-paragraph (c) of this paragraph '15 and
to fulfill such obligation could not, in the reasonable opinion of the
Landlord, be completed without substantial additions to or renovations
of the Property, the Landlord may an sixty (60) days' written notice
to the Tenant terminate this Lease.
Waiver 17. If either the Landlord or the Tenant shall overlook, excuse,
condone or suffer any default, breach, non-observance, improper compliance or
noncompliance by the other of any obligation hereunder, this shall not operate
as a waiver of such obligation in respect of any continuing or
subsequent default, breach, or non-observance, and no such waiver shall be
implied but shall only be effective if expressed in writing.
<PAGE>
Sale, Demoi1ition and Renovation 18. (a) The term "Landlord" as used in
this Lease, means only the owner for the time being of the Property, so that in
the event of any sale or sales or transfer or transfers of the Property, or the
making of any lease or lease thereof, or the sale or sales or the transfer
or transform or the assignment or assignments of any such lease or lease,
previous landlords shall be and hereby are relieved of all covenants and
obligations of Landlord hereunder. It shall be deemed and construed without
further agreement between the parties, or their successors in interest, or
between the parties and the transferee or acquirer, at any such sale, transfer
or assignment, or lessee on the making of any such lease, that the transferee,
acquirer or lessee has assumed and agreed to carry out any and all of the
covenants and obligations of Landlord hereunder to Landlord's exoneration, end
Tenant shall thereafter be bound to and shall attorn to such transferee,
acquirer or lessee, as the case may be, as Landlord under this Lease;
(b) Notwithstanding anything contained in this Lease to the contrary,
in the event the Landlord intends to demolish or to renovate substantially
all the Building, then the Landlord, upon giving the Tenant one hundred and
eighty (180) days' written notice, shall have the right to terminate this Lease
and this Lease shall thereupon expire on the expiration of one hundred and
eighty (180) days from the date of the giving of such
12
<PAGE>
notice without compensation of any kind to the Tenant.
Public Taking 19. The Landlord and Tenant shall co-operate, each with the
other, in respect of any Public Taking of the Leased Premises or any part
thereof so that the Tenant may receive the maximum award to which it is entitled
in law for relation costs and business interception and so that the Landlord my
receive the maximum award for all other compensation arising from or relating to
such Public Taking (including all compensation for the value of the Tenant's
leasehold interest subject to the Public Taking) which shall be the property of
the Landlord, and the Tenant's rights to such compensation are hereby assigned
to the Landlord. If the whole or any part of the Leased Premises is Publicly
Taken, as between the parties hereto, their respective rights and obligations
under this Lease shall continue until the day on which the Public Taking
authority takes possession thereof. If the whole or any part of the Leased
Premises is Publicly Taken, the Landlord shall have the option, to be exercised
by written notice to the Tenant, to terminate this Lease and such termination
shall be effective on the day the Public Taking authority takes possession of
the whole or the portion of the Property Publicly Taken. Rent and all other
payments shall be adjusted as of the date of such termination and the Tenant
shall, an the date of such Public Taking, vacate the Leased Premises and
surrender the same to the Landlord, with the Landlord having the right to
re-enter and re-possess the Leased Premises discharged of this Lease and to
remove all persons therefrom. In this paragraph, the words "Public Taking"
shall include expropriation and condemnation and shall include a sale by the
Landlord to an authority with powers of expropriation, condemnation or taking,
in lieu of or under threat of expropriation or taking and "Publicly Taken" shall
have a corresponding meaning.
Registration of Lease 20. The Tenant agrees with the Landlord not to register
this Lease in any recording office and not to register notice of this Lease in
any form without the prior written consent of the Landlord. If such consent is
provided such notice of Lease or caveat shall be in such form as the Landlord
shall have approved and upon payment of the Landlord's reasonable fee for same
and all applicable transfer or recording taxes or charges. The Tenant shall
remove and discharge at Tenant's expense registration of such a notice or caveat
at the expiry or earlier termination of the Term, and in the event of Tenant's
failure to so remove or discharge such notice or caveat after ten (10) days'
written notice by Landlord to Tenant, the Landlord may in the name and on behalf
of the Tenant execute a discharge of such a notice or caveat in order to remove
and discharge such notice of caveat and for the purpose thereof the Tenant
hereby irrevocably constitutes and appoints any officer of the Landlord the true
and lawful attorney of the Tenant.
Lease Entire Agreement 21. The Tenant acknowledges that there are no covenants,
representations, warranties, agreements or conditions express or implied,
collateral or otherwise forming part of or in say way affecting or relating to
this Lease save as expressly set out I, this Lease and Schedules attached hereto
<PAGE>
and that this Lease and such Schedules constitute the entire agreement between
the Landlord and the Tenant and may not be modified except as herein explicitly
provided or except by agreement in writing executed by the Landlord and the
Tenant.
Notices 22. Any notice, advice, document or writing required or contemplated by
any provision hereof shall be given in writing and if to the Landlord, either
delivered personally to an officer of the Landlord or mailed by prepaid mail
addressed to the Landlord at the said local office address of the Landlord shown
above, and if to the Tenant, either delivered Personally to the Tenant lot to an
officer of the Tenant, if a corporation) or mailed by prepaid mail addressed to
the Tenant at the Leased Premises, or if an address of the Tenant is shown in
the description of the Tenant above, to such address. Every such notice, advice,
document or writing shall be deemed to have been given when delivered
personally, or if mailed as aforesaid, upon the fifth day after being mailed.
The Landlord may from time to time by notice in writing to the Tenant designate
another address as the address to which notices are to be mailed to it, or
specify with greater particularity the address and persons to which such notices
are to be mailed and may require that copies of notices be sent to an agent
designated by it- The Tenant easy, if an address of the Tenant is shown in the
description of the Tenant above, from time to time by notice in writing to the
landlord, designate another address a, the address to which notices are to be
mailed to it, r specify with greater particularity the address to which such
notices are to be mailed.
Interpretation 23. In this Agreement "herein, "hereof", "hereby", "hereunder",
"hereto", "hereinafter" and similar expressions refer to ibis Lease and not to
any particular paragraph, clause or other portion
thereof, unless there is something in the subject matter or context inconsistent
therewith; and the parties agree that all of the provisions f this Lease are to
be construes as covenants and agreements as though words importing such
covenants and agreements were used in each separate paragraph hereof, and that
should any provision or provisions of this Lease be illegal or not enforceable
it Or they shall be considered separate and severable from the Lease and its
remaining provisions shall remain in fares and be binding upon the parties
hereto as though the said provision or provisions
13
<PAGE>
had never been included, and further that the captions appearing for the
provisions of this Lease have been inserted as a matter of convenience and for
reference only and in no way define, limit or enlarge the scope or meaning of
this Lease or of any provisions hereof.
Interpretation 24. This Agreement and everything herein contained shall ensure
to the benefit of and be binding upon the respective heirs, executors,
administrators, successors, assigns and other legal representatives, as the case
may be, of each and every of the parties hereto, subject to the granting of
consent by the Landlord to any assignment or sublease, and every reference
herein to any party hereto shall include the heirs, executors, administrators,
successors, assigns and other legal representatives of such party, and where
there is more than one tenant or there is a male or female party the provisions
hereof shall be read with all grammatical changes thereby rendered necessary and
all covenants shall be deemed joint and several.
Use and Occupancy Prior to Term 25. If the Tenant shall for any reason use
or occupy the Leased Premises in any way prior to the commencement of the Term
without there being an existing lease between the Landlord and Tenant under
which the Tenant has occupied the Leased Premises, then during such prior use or
occupancy the Tenant shall be a Tenant of the Landlord and shall be subject to
the same covenants and agreements in this Lease mutatis mutandis.
Limitation of Landlord Liability 26. Notwithstanding any other provision of
this Lease, it is expressly understood and agreed that the total liability of
the Landlord arising out of or in connection with this Lease, the relationship
of the Landlord and the Tenant hereunder and/or the Tenant's use of the Leased
Premises, shall be limited to the estate of the Landlord in the Property. No
other property or asset of the Landlord or any partner or owner of the Landlord
shall be subject to levy, execution, or other enforcement, proceedings or other
judicial process for the satisfaction of any judgment or any other right or
remedy of the Tenant arising out of or in connection with this Lease, the
relationship of the Landlord and the Tenant hereunder and /or the Tenant's use
of the Leased Premises.
14
<PAGE>
Waiver of Jury Trial 27. The Tenant hereby waives trial by jury in any claim,
action, proceeding or counterclaim brought by either party against the other on
any matters arising out of or in any way connected with this Lease, the
relationship of the Landlord and the Tenant, or the Tenant's use and occupancy
of the Leased Premises.
Choice of Law 28. This Lease shall be governed by the laws of the State in
which the Leased Premises are located. Any litigation between the Landlord and
the Tenant concerning this Lease shall be initiated in the county in which the
Premises are located.
Schedules 29. The provisions of the following Schedules attached hereto
shall form part of this Lease as if the same were embodied herein:
Schedule 'A' Legal Description of Property
Schedule 'B' Measurement of Rentable Area
Schedule "B-1" Location of Leased Premises
Schedule "C' Taxes Payable by Landlord and Tenant
Schedule 'D' Services and Costs
Schedule "E' Rules and Regulations
Schedule 'F' Leasehold Improvements
IN WITNESS WHEREOF the parties hereto have executed this Agreement. I/We
have authority
to bind the corporation.
Landlord:
THE MANUFACTURERS LIFE
INSURANCE COMPANY (USA)
Witness as to Signing by Landlord by Signature ___________
Title:
Tenant: Alta Vista Technology, Inc.,
A California Corporation
Witness/Attest
By Signature: s. Jack Marshall
Title: President
Name: Jack Marshall
Witness as to signing by
Tenant or officer(s) of Tenant
By Signature:________
Title:
Name:
15
<PAGE>
SCHEDULE 'A'
Legal Description - 300 Orchard City Drive
All that real property situated in the City of Campbell, County of Santa Clara,
State of California, described as follows:
Parcel One:
Beginning at the point of intersection of the Southwesterly line of a parcel of
land described in Deed and recorded in 1975 under series number 5194638 in the
Santa Clara County's Recorders Office, Santa Clara County, California, and the
Northwesterly right-of-way line of the Southern Pacific Transportation Company,
said points being the True Point of Beginning, thence North 58 06' 21" West,
292.40 feet to an iron pipe as shown on that certain Parcel Map recorded March
12, 1974 in Book 337 of Maps at Page 19, Santa Clara County Records; thence
North 31 44' 30"East, 228.57 feet to an iron pipe as shown on said map thence,
North 0 09' 35" West, 31.26 feet to an iron pipe as shown on said map; thence
North 89 55' 46" East, 10.45 feet to an iron pipe as shown on said map; thence
North 02 27' East, 32.98 feet to an iron pipe as shown on said map thence North
89 56' 17" West, 126.22 feet, more or less to the Easterly right-of-way of
South First Street; thence Northerly along said Easterly right-of-way line North
0 09' 35" West, 50.39 feet, more or less to the Southerly right-of-way line of
Orchard City Drive, thence, Easterly along said Southerly right-of-way line
236.34 feet, to a tangent curve concave to the Southwest having a radius of
275.00 feet; thence, along said tangent curve concave to the Southwest, 72.99
feet, more or less through a central angle of 15 12'28" to the Westerly
right-of-way line of central avenue; then Southerly along said Westerly right of
way line 115.00 feet, more or less to an iron pipe, as shown on said map marking
an angel point to said Westerly right-of-way line, 122.84 feet to an iron pipe
as shown on said map marking the intersection of said Southerly right-of-way
line with the Northwesterly right-of-way line of the Southern Pacific
Transportation Company; thence, Southwesterly, along said right-of-way line,
South 31 34'10" West, 544.54 feet to the True Point of Beginning.
Excepting from above, the following described parcels:
Parcel A:
Beginning at an iron pipe marking the intersection of the Northwesterly
right-of-way line of the South Pacific Railroad Company and the Southerly line
of Central Avenue; thence, South 31 34'10" West along said Northwesterly
right-of-way line 18.00 feet; thence, North 58 27' 19" West, parallel to the
Southerly right-of-way line of Central Avenue and at right angles, 18.00 feet
distant, 52.00 feet; thence, North 31 34' 10" East, 3.00 feet to a tangent
curve concave to the Southwest, having a radius of 1.5 feet thence along said
tangent curve concave to the Southwest 2.36 feet, through a central angle of 90
; thence, North 58 27' 19" West, 19.00 feet; thence, North 31 32' 41" east,
14.00 feet, more or less, to the Southerly right-of-way line of Central Avenue;
thence, Easterly along said Southerly right-of-way line, South 58 27' 19" East,
73.00 feet, more or less, tot he point of beginning.
<PAGE>
Parcel B:
All that certain parcel of land situated in the City of Campbell, County of
Santa Clara, State of California described as follows:
Beginning at the point of intersection of the Southwesterly line of a parcel of
land described in Deed and recorded in 1975 under series number 5194638 in the
Santa Clara County's Recorders Office, Santa Clara County, California, and the
Northwesterly right-of-way line of the Southern Pacific Transportation Company,
said point of being the True Point of Beginning thence North 58 06' 21" west,
292.40 feet to an iron pipe; thence North 31 44' 30" East, 200.00 feet; thence
South 58 06' 19" East 291.50 feet, thence South 31 34' 10" West, 200.00 feet
to the True Point of Beginning.
Page 2 (300 Orchard City Drive)
Parcel C
Bounded on the West by the East right-of-way line of the South First Street;
bounded on the North by the Southerly right-of-way line of Orchard City Drive
bounded on the East by the Westerly right of way line of Central Avenue; bounded
on the South by the following described line:
Beginning at an iron pipe on the Easterly right-of-way line of South First
Street, 50.39 feet Southerly on said Easterly right-of-way line from the
Southerly right-of-way line of Orchard City Drive; thence, South 89 56' 17"
East 126.21 feet to an iron pipe; thence, South 0 02' 27" West, 8.00 feet;
thence, North 73 33' 43", East 36.50 feet to a tangent curve concave to the
South, having a radius of 39.00 feet; thence along said tangent curve concave to
the South, 18.04 feet, through a central angle of26 30' 00"; thence, South 79
53' 41" East, 25.00 feet to a tangent curve concave to the Southwest having a
radius of 2.00 feet thence along said tangent curve concave to the Southwest
2.79 feet, through a central angle of 79 52' 41"; thence, South 00 01' East
19.00 feet, thence North 89 59' East, 19.00 feet to a tangent curve to the
Southwest having a radius of 159.00 feet; thence, along said tangent curve
concave to the Southwest, 87.56 feet, more or less, to the intersection of said
curve with the Westerly right-of-way line of Central Avenue.
Parcel Two:
An easement for Building Encroachment upon the following described parcel:
Beginning at the most Southwesterly corner of that certain parcel of land
described by that certain Grant Deed recorded September 25, 1978 and filed in
Book D 971 at Official Records at Page 453 in the office of the County Recorder,
County of Santa Clara, State of California; thence along the Southerly boundary
of said parcel of land the following courses and distances:
<PAGE>
South 89 56' 17" East, 126.21 feet to an iron pipe; South 0 02' 27" West, 8.00
feet; North 73 33' 43" East, 17.00 feet to the True Point of Beginning, said
True Point of Beginning being a point on a non-tangent curve concave Southerly
having a radius of 25.00 feet; thence from a tangent bearing North 18 39' 19"
East Northeasterly and Southeasterly along the arc of said curve through a
central angle of 130 02' 40" a distance of 56.74 feet, to its intersection with
aforesaid Southerly boundary of said parcel of land; thence along aforesaid
boundary the following courses and distances; North 79 53' 41" West 8063 feet to
a point of a non-tangent curve that is concave Southerly and has a radius of
39.00 feet; Westerly along the arc of last mentioned curve through a central
angle of 26 30' 00" a distance of 18.04 feet; South 73 33' 43" West 19.50 feet
to the True Point of Beginning.
Parcel Three:
Beginning at an iron pipe marking the intersection of the Northwesterly right of
way line of the South Pacific Railroad Company and the Southerly line of Central
Avenue, thence South 31 34' 10" West along said northwesterly right-of-way line
18.00 feet; thence, North 58 27' 29" West parcel to the Southerly right-of-way
line of Central Avenue and at right angles 18.00 feet distant 32.00 feet; thence
North 31 32' 41" East 3.00 feet to a tangent curve concave to the Southwest
having a radius of 1.5 feet, thence along said tangent curve to the Southwest
2.36 feet through a central angle of 90 thence North 58 27' 19" West 19.00
feet, thence North 31 32' 41" East 14.00 feet more or less to the right-of-way
line South 58 27' 19" East 73.00 feet, more or less, to the point of beginning.
Excepting therefrom a strip of land 3.00 feet wide the Northerly line of which
is coincident with the Southerly right-of-way line of Central Avenue.
<PAGE>
SCHEDULE 'B'
SINGLE TENANT FLOOR
The 'Rentable Area' of a single tenant floor shall be computed by measuring from
the inside finish of the permanent outer Building walls or from the glass line
in accordance with the standards of the Building established by the Landlord.
Rentable Area shall include all areas within outside walls or glass line less
stairs (but including stair landings where they provide access to washrooms,
storage rooms, etc.), elevator shafts, flues, pipe shafts, vertical ducts, and
their enclosing walls. Washrooms, janitor rooms, on-floor storage rooms,
telephone rooms, electrical closets shall be included in the Rentable Area.
Where the space on both sides of a wall is Rentable Area, the wall is to be
included in the Rentable Area. No deductions shall be made for columns and
projections necessary to the
Building.
MULTI-TENANT FLOOR
The Rentable Area of a multi-tenant floor tenant shall be computed by
multiplying such portion of the Usable Area (AS set out below) allocated to the
multi-tenant floor tenant by the ratio of the total Rentable Areas of the
Building to the total Usable Areas of the Building.
The "Usable Area" of a multi-tenant floor is the Rentable Area of a single
tenant floor less the area of the Normal Corridor (as act out below), washrooms,
janitor closets, telephone rooms, electrical closets, air conditioning rooms and
their enclosing walls.
The Usable Area of the multi-tenant floor tenant shall be computed by measuring
from the inside finish of the permanent outer Building Wall or from the glass
line to the Usable Area side of the Normal Corridor and /or other permanent
partitions and to the center line of partitions which demise tenant areas.
The 'Normal Corridor" is the minimum corridor permitted by the applicable code,
yet practical for leasing purposes. For example, although the code may permit a
42 inch wide corridor, for aesthetic reasons or because of grid restrictions,
the corridor might well be 4'6' or 5'0' wide. Once the corridor dimensions have
been established they shall remain unchanged and marked on the master plan
showing all dimensions used to calculate Rentable Area and Usable Area.
The ground floor is measured as Usable Area.
If the Normal Corridor is extended to provide a multi-tenant floor tenant access
to its space, the area of the corridor extension is included in that tenant's
Usable Area or allocated proportionately to the multi-tenant floor tenants
benefiting from the extension of the Normal Corridor.
<PAGE>
PROPERTY NAME: 300 Orchard City Drive
Campbell, California
PROPERTY NUMBER. 566
<PAGE>
SCHEDULE "C'
TAXES PAYABLE BY LANDLORD AND TENANT
Tenant Taxes (a) The Tenant covenants to pay all Tenant's Taxes, as and
when the same become due and payable. Where any Tenant's Taxes are payable by
the Landlord to the relevant taxing authorities, the Tenant covenants to pay the
amount thereof to the Landlord.
(b) The Tenant covenants to pay the Landlord the Tenant's Proportionate
Share of the excess of the amount of the Landlord's Taxes in each Fiscal Period
over the Landlord's Taxes in the "Base Year' (as hereinafter defined).
(c) The Tenant covenants to pay to the Landlord the Tenant's Proportionate
Share of the costs and expenses (including legal and other professional fees and
interest and penalties on deferred payments) incurred in good faith by the
Landlord in contesting, resisting or appealing any of the Taxes-
Landlord's Taxes(d) The Landlord covenants to Pay all Landlord's Taxes
subject to the payments on account of Landlord's Taxes required to be made by
the Tenant elsewhere in this Lease. The Landlord may appeal any official
assessment or the mount of any Taxes or other taxes based n such assessment and
relating to the Property, In connection with any such appeal, the Landlord may
defer payment f any Taxes or other taxes, as the case may be, payable by it to
the extent permitted by law, and the Tenant shall co-operate with the Landlord
and provide the Landlord with all relevant information reasonably required by
the Landlord in connection with any such appeal.
(e) In the event that the Landlord is unable to obtain from the taxing
authorities any Separate Allocation separate allocation of Landlord's Taxes,
Tenant's Taxes or assessment as required by the Landlord to make calculations of
Additional Rent under this Lease, such allocation shall be made by the Landlord
acting reasonably and shall be conclusive.
(f) Whenever requested by the Landlord, the Tenant shall deliver to it
receipts for payment of all the Tenant's Taxes and furnish such other
information in connection therewith as the Landlord may reasonably require.
Tax Adjustment (g) If the Building has not been taxed as a completed and
fully occupied building for any Fiscal Period, the Landlord's Taxes will be
determined by the Landlord as if the Building had been taxed as a completed
building fully occupied by commercial tenants for any such Fiscal Period.
Definition 2. In this lease:
(a) "Landlord's Taxes' shall mean the aggregate of all Taxes attributable
to the Property, the Rent or the Landlord in respect thereof and
including, any amounts imposed, assessed, levied or charged in
substitution for or in lieu of any such Taxes, but excluding such
taxes as capital gains taxes, corporate income, profit or excess
profit taxes to the extent such taxes are not levied in lieu of any of
the foregoing against the Property or the Landlord in respect thereof,
<PAGE>
(b) "Taxes" shall mean all taxes, rates, duties, levies, fees, charges,
local improvement rates, capital taxes, rental taxes and assessments
whatsoever including fees, rents, and levies for air rights and
encroachments on or over municipal property imposed, assessed, levied
or charged by any school, municipal, regional, state, provincial,
federal, parliamentary or other body, corporation, authority, agency
or commission provided that "Taxes' shall not include any special
utility, levies, fees or charges imposed, assessed, levied or charged
which are directly associated with initial construction of the
Property;
(c) "Tenant's Taxes" shall mean the aggregate of:
(i) all Taxes (whether imposed upon the Landlord or the Tenant)
attributable to the personal property, trade fixtures, business,
income, occupancy or sales of the Tenant or any other occupant of
the Leased Premises, and to any Leasehold Improvements or
fixtures installed by or on behalf of the Tenant within the
Leased Premises, and to the use by the Tenant of my of the
Property; and
(ii) the amount by which Taxes (whether imposed upon the Landlord or
the Tenant) are increased above the Taxes which would have
otherwise been payable as a result of the Leased Premises or the
Tenant or by their occupant of the Leased Premises being taxed or
assessed in support of separate schools; and
<PAGE>
SCHEDULE"C"
TAXES PAYABLE BY LANDLORD AND TENANT
(d) "Tenant's Proportionate Share" shall mean two decimal ninety-two
percent (2.92%) subject to adjustment as determined solely by the
Landlord and notified to the Tenant in writing for physical increases
or decreases in the total Rentable Area of the Property provided that
total Rentable Area of the Property and the Rentable Area of the
Leased Premises shall exclude areas designated (whether or not rented)
for parking and for storage.
(e) "Base Year" as used in this Schedule shall mean calendar year 1998.
C- 2
<PAGE>
SCHEDULE"D"
SERVICES AND COSTS
1 The Landlord covenants with the Tenant:
Interior Climate Control (a) To maintain in the Leased Premises conditions
of reasonable temperature and comfort in accordance with good standards
applicable to normal occupancy of premises for office purposes subject to
government regulations during hours to be determined by the Landlord (but to be
at least the hours from 8:00 a.m. to 6:00 p.m. from Monday to Friday inclusive
with the exception of holidays, Saturdays and Sundays), such conditions to be
maintained by means of a system for heating and cooling filtering and
circulating air; the Landlord shall have no responsibility for any inadequacy of
performance of the said system if the occupancy of the Leased Premises or the
electrical power or other energy consumed on the Leased Premises for all
purposes exceeds reasonable amounts as determined by the Landlord or the Tenant
installs partitions or other installations in locations which interfere with the
proper operation of the system of interior climate control or if the window
covering on exterior windows is not kept fully closed;
Janitor Service (b) To provide janitor and cleaning services to the Leased
Premises and to common areas of the Building consisting of reasonable services
in accordance with the standards of similar office buildings;
Elevators, Lobbies, etc. (c ) To keep available the following
facilities for use by the Tenant and its employees and invitees in common with
other persons entitled thereto:
(i) passenger and freight elevator service to each floor upon which
the Leased Premises are located provided such service is
installed in the Building and provided that the Landlord may
prescribe the hours during which and the procedures under which
freight elevator service shall be available and may limit the
number of elevators providing service outside normal business
boom;
(ii) common entrances, lobbies, stairways and corridors giving access
to the Building and the Leased Premises, including such other
areas from time to time which may be provided by the Landlord for
common use and enjoyment written the Property; (iii) the
washrooms as the Landlord may assign from time to time which are
standard to the Building, provided that the Landlord and the
Tenant acknowledge that where an entire floor is leased to the
Tenant or some other tenant the Tenant or such other tenant, as
the case may be, easy exclude others from the washrooms thereon.
2. (a) The Landlord covenants with the Tenant and the Landlord shall
have the sole right to furnish electricity to the Leased Premises (except Leased
Premises which have separate meters) for normal office use for lighting and for
office equipment capable of operating from the circuits available to the Leased
Premises and standard to the Building during hours to be determined by the
Landlord (but to be at least the home from 8:00 a.m. to 6:00 p.m. from Monday to
Friday inclusive with the exception of holidays, Saturdays and Sundays) and
during such other hours that the Tenant elects at its sole cost and expense
subject to governmental regulations,
<PAGE>
(b) The amount of electricity consumed on the Leased Premises in
excess of electricity required by the Tenant for normal office use shall be
@ determined by the Landlord acting reasonably or by a metering device
installed by the Tenant at the Tenant's expense. The Tenant shall pay the
Landlord for any such excess electricity on demand.
(c)Intentionally deleted.
(d) In calculating electricity costs for any Fiscal Period, if less
than one hundred percent (100%) of Building is occupied by tenants, then
the amount of such electricity costs shall be deemed for the purposes of
this Schedule to be increased to an amount equal to the like electricity
costs which normally would be expected by the Landlord to have been
incurred had such occupancy been one hundred percent (100%) during such
entire period,
3. The Landlord shall maintain and keep in repair the facilities required for
the provision of the interior climate control, elevator (if installed in the
Building) and other services referred to in sub-paragraph (a) and (c ) of
paragraph 1 and sub-paragraph (a) of paragraph 2 of this Schedule in accordance
with the standards of office buildings similar to the Building but reserves the
right to stop the use of any of these facilities and the supply of the
corresponding services when necessary by reason of accident or breakdown or
during the making of repairs, alterations or improvements, in the reasonable
judgment of the Landlord necessary or desirable
<PAGE>
SCHEDULE"D"
SERVICES AND COSTS
to be made, until the repairs, alterations or improvements shall have been
completed to the satisfaction of the Landlord.
Additional Services 4.(a) The Landlord may (but shall not be obliged) on
request of the Tenant supply services or materials to the Leased Premises and
the Property which are not provided for under this Lease and which are used by
the Tenant (the "Additional Services") including, without limitation,
(i) replacement of non-building standard tubes and ballasts;
(ii) carpet shampooing;
(ii) window covering cleaning;
(iv) locksmithing;
(v) removal of bulk garbage;
(vi) picture hanging; and
(vii) special "curtly arrangement.
(b) When Additional Services are supplied or furnished by the
Landlord, accounts therefor shall be rendered by the Landlord and shall be
payable by the Tenant to the Landlord on demand. In the event the Landlord shall
elect not to supply or furnish Additional Services, only persons with prior
written approval by the Landlord (which approval shall not be =reasonably
withheld) shall be permitted by the Landlord or the Tenant to supply or furnish
Additional Services to the Tenant and the supplying and furnishing shall be
subject to the reasonable rules fixed by the Landlord with which the Tenant
undertakes to cause compliance and to comply.
5. (a) The Tenant covenants to pay to the Landlord the Tenant's
Proportionate Share of the excess of the amount of the Operating Costs in each
Fiscal Period over the Operating Costs in the 'Base Year' (as hereinafter
defined).
(b) Subject to the other terms and conditions of this Lease, the
Landlord shall not be responsible during the Term for any costs, charges,
expenses and outlays of any nature whatsoever arising from or relating to the
Leased Premises and the Tenant shall pay all charges, impositions, costs and
expenses of every nature and kind relating to the Leased Premises and the
amounts included as Additional Rent whether or not specifically provided for
herein and the Tenant covenants with the Landlord accordingly;
(c) In this Lease "Operating Costs" shall include all costs incurred
or which will be incurred by the Landlord in discharging its obligations under
this Lease and in the maintenance, operation, administration and management
of the Property including without limitation:
(i) cast of heating, ventilating and air-conditioning
(ii) cost of water and power charges;
(iii)cost of electricity, fuel or other form of energy which are
not separately metered and recovered or paid by tenants;
(iv) costs of insurance carried by the Landlord pursuant to
paragraph 9(a) of this Lease and cost of any deductible
amount paid by the Landlord in connection with each claim
made by the Landlord under such Insurance;
<PAGE>
(v) cost of building office expanses, including telephone, rent,
stationery and supplies;
(vi) costs of all elevator and escalator (if installed in the
Building) maintenance and operation;
(vii)costs of operating staff, management staff and other
administrative personnel, including salaries, wages, and
fringe benefits;
(viii) owl of providing security and costs of repair, maintenance
and replacement of communications, fire and life safety
system serving the Property;
(ix) owl of providing janitorial services, window cleaning,
garbage and snow removal and pest control;
(x) cost of supplies and materials;
(xi) cost of decoration of common areas;
D- 2
<PAGE>
SCHEDULE"D"
SERVICES AND COSTS
(xii) cost of landscaping;
(xiii) cost of maintenance and operation of the parking area and
costs of operating, maintaining, repairing, and replacing
all pedestrian and vehicular entrances and exits,
passageways, driveways, tunnels, subway connections and
delivery and holding areas used in connection with the
Property;
(xiv)cost of consulting, and professional fees including
expenses;
(xv) cost of replacements, additions and modifications unless
otherwise included under Operating Costs under subparagraph
(xvi), and cost of repair and;
(xvi)cost a in respect of each Major Expenditure (as hereinafter
defined) as amortized over the period of the Landlord's
reasonable estimate of the economic life of the Major
Expenditure, but not to exceed fifteen (15) years, using
equal monthly installments of principal and interest at ten
percent (10%) per annum compounded semi-annually. For the
purpose hereof "Major Expenditure" shall mean any
expenditure incurred after the date of substantial
completion of the Building for replacement of machinery,
equipment, building elements, systems or facilities forming
a part of or used in connection with the Property or for
modifications, upgrades or additions to the Property or
facilities used in connection therewith, provided that, in
each case, such expenditure was more than ten percent (10%)
of the total Operating Costs for the immediately preceding
Fiscal Period.
(d) In this Lease there shall be excluded from Operating Costs the
following:
(i) interest on debt and capital retirement of debt;
(ii)such of the Operating Costs as are recovered from
insurance proceeds; and
(iii)costs as determined by the Landlord of acquiring
tenants for the Property.
6. The Tenant covenants to pay to the Landlord the Tenant's Proportionate
Share of the costs in respect of each Major Expenditure (as hereinafter defined)
as amortized over the period of the Landlord's reasonable estimate of the
economic life of the Major Expenditure, but not to exceed fifteen (15) years,
using equal monthly Installments of principal and interest at ten percent (10%)
per annum compounded semi-annually. For the purposes hereof, 'Major
Expenditure' shall mean any expenditure incurred after the date of substantial
completion of the Building for replacement of machinery, equipment, building
elements, systems or facilities forming a part of or used in connection with the
Property or for modification, upgrades or additions to the Property or
facilities used in connection therewith, provided that, in each case, such
expenditure is more than ten percent (10%) of the total Operating Costs of the
Immediately preceding Fiscal Period.
7. In calculating Operating Costs for any Fiscal Period, if less than one
hundred percent (100%) of Building is occupied by tenants, then the amount of
such Operating Costs shall be deemed for the
<PAGE>
purposes of this Schedule to be increased to an amount equal to the like
Operating Costs which normally would be expected by the Landlord to have been
incurred had such occupancy been one hundred percent (100-/.) during such entire
period.
8. In this Lease:
(i) "Tenant's Proportionate Share' shall mean two decimal ninety-two
percent (2.92%) subject to adjustment as determined solely by the
Landlord and notified to the Tenant in writing for physical increases
or decreases in the total Rentable Area of the Property provided that
total rentable area of the Property and the Rentable Area of the
Leased Premises shall exclude areas designated (whether or not rented)
for parking and for storage.
(ii) 'Base Year' shall mean calendar year 1998.
D-3
<PAGE>
SCHEDULE'E'
RULES AND REGULATIONS
1. The sidewalks, entry passages, elevators (if installed in the Building) and
common stairways shall not be obstructed by the Tenant or used for any other
purpose than for ingress and egress to and from the Leased Premises. The Tenant
will not place or allow to be placed in the Building corridors or public
stairways any waste paper, dust, garbage, refuse or anything whatever.
2. The washroom plumbing fixtures and other water apparatus shall not be wed for
any purpose other than those for which they were constructed, and no sweepings,
rubbish, rags, ashes or other substances shall be thrown therein. The expense of
any damage resulting by misuse by the Tenant shall be home by the Tenant.
3. The Tenant shall permit window cleaners to clean the windows of the Leased
Premises during normal business hours.
4. No birds or animals shall be kept in or about the Property nor shall the
Tenant operate or permit to be operated any musical or sound-producing
instruments or device or make or permit any improper noise inside or outside the
Leased Premises which may be heard outside such Leased Premises.
5. No one shall use the Leased Premises for residential purposes, or for the
storage of personal effects or articles other then those required for business
purposes.
6. All persons entering and leaving the Building at any time other than during
normal business hours shall register in the books which may be kept by the
Landlord at or near the night entrance and the Landlord will have the right to
prevent any person from entering or leaving the Building or the Property unless
provided with a key to the Premises to which such person seeks entrance and a
pass in a form to be approved by the Landlord. Any persons found in the Building
at such times without such keys and passes will be subject to the surveillance
of the employees and agents of the Landlord.
7. No dangerous or explosive materials shall be kept or permitted to be kept in
the Leased Premises.
8. The Tenant shall not permit any cooking in the Leased Premises except for
food warned up in microwaves for consumption by employees or guests of the
Tenant. The Tenant shall not install or permit the installation or use of any
machine dispensing goods for sale in the Leased Premises without the prior
written approval of the Landlord. Only persons authorized by the Landlord shall
be permitted to deliver or to use the elevators (if installed in the Building)
for the purpose of delivering food or beverages to the Leased Premises.
9. The Tenant shall not bring in or take out, position, construct, install or
move any safe, business machine or other heavy office equipment without first
obtaining the prior written cement of the Landlord. In giving such consent, the
Landlord shall have the right in its sole discretion, to prescribe the weight
permitted and the position thereof, and the use and design of planks, skids or
platform to distribute the weight thereof. All damage done to the Building by
moving or using any such heavy equipment or other office equipment or furniture
shall be repaired at the expense of the Tenant. The moving of all heavy
<PAGE>
equipment or other office equipment or furniture shall occur only at times
consented to by the Landlord and the persons employed to move the same in and
out of the Building must be acceptable to the Landlord. Safes and other heavy
office equipment will be moved through the halls and corridors only upon steel
bearing plates. No freight or bulky matter of any description will be received
into the Building or carried in the elevators (if installed in the Building)
except during hours approved by the Landlord.
10. The Tenant shall give the Landlord prompt notice of any accident to or any
defect in the plumbing, heating, air-conditioning, ventilating, mechanical or
electrical apparatus or any other part of the Building
11. The parking of automobiles shall be subject to the charges and the
reasonable regulations of the Landlord. The Landlord shall not be responsible
for damage to or theft of any car, its accessories or contents whether the same
be the result of negligence or otherwise.
12. The Tenant shall not mark, drill into or in any way deface the walls,
ceilings, partitions, floors or other parts of the Leased Premises and the
Building.
13. Except with the prior written consent of the Landlord, no tenant shall we or
engage any person or persons other than the janitor or janitorial contractor of
the Landlord for the purpose of any cleaning of the Leased Premises.
14. If the Tenant desires any electrical or communications wiring, the Landlord
reserves the right to direct qualified persons as to where and how the wires are
to be introduced, and without such directions no borings or cutting for wires
shall take place. No other wires or pipes of any kind shall be introduced
without the prior written consent of the Landlord.
15. The Tenant shall not place or cause to be placed any additional locks upon
any doors of the Leased Premises without the approval of the Landlord and
subject to any conditions imposed by the Landlord. Additional keys may be
obtained from the Landlord at the cost of the Tenant.
<PAGE>
SCHEDULE "E"
RULES AND REGULATIONS
16. The Tenant shall be entitled to have its name shown upon the directory board
of the Building and at one of the entrance doors to the Leased Premises all at
the Tenant's expense, but the Landlord shall in its sole discretion design the
style of such identification and allocate the space on the directory board for
the Tenant.
17. The Tenant shall keep the window coverings (if any) in a closed position
during period of direct son load. The Tenant shall not interfere with or
obstruct any perimeter heating, air-conditioning or ventilating units.
18. The Tenant shall not conduct, and shall not permit any, canvassing in the
Building.
19. The Tenant shall take care of the rugs and drapes (if any) in the Leased
Premises and shall arrange for the carrying-out of regular spot cleaning and
shampooing of carpets and dry cleaning of drapes in a manner acceptable to the
Landlord.
20. The Tenant shall permit the periodic closing of lanes, driveways and
passages for the purpose of preserving the Landlord's rights over such land,
driveways and passages.
21. The Tenant shall not place or permit to be placed any sign, advertisement,
notice or other display on any part of the exterior of the Leased Premises or
elsewhere if such sign, advertisement, notice or other display is visible from
outside the Leased Premises without the prior written consent of the Landlord
which may be arbitrarily withheld. The Tenant, upon request of the Landlord,
shall immediately remove any sign, advertisement, notice or other display which
the Tenant has placed or permitted to be placed which, in the opinion of the
Landlord, Is objectionable, and if the Tenant shall fail to do so, the Landlord
may remove the same at the expense of the Tenant.
22. The Landlord shall have the right to make such other and further reasonable
rules and regulations and to alter the same as In its judgment may from time to
time be needful for the safety, care, cleanliness and appearance of the Leased
Premises and the Building and for the presentation of good order therein, and
the same shall be kept and observed by the tenants, their employees and
servants. The Landlord also has the right to suspend or cancel any or all of
these rules and regulations herein set out.
<PAGE>
SCHEDULE "F"
LEASEHOLD IMPROVEMENTS
Definition of Leasehold Improvements 1. For purposes of this Lease, the term.
"Leasehold Improvements" includes, without limitation, all fixtures,
improvements, installations, alterations and additions from time to time made,
erected or installed by or on behalf of the Tenant, or any previous occupant of
the Leased Premises, in the Leased Premises and by or on behalf of other tenants
in other premises in the Building (including the Landlord if an occupant of the
Building), including all partitions, doors and hardware however affixed, and
whether or not movable, all mechanical, electrical and utility installations and
all carpeting and drapes with the exception only of furniture and equipment not
of the nature of fixtures.
Installation of Improvements and Fixtures 2. The Landlord shall include in the
Leased Premises the "Landlord's Work' (as hereinafter defined). The Tenant shall
not make, erect, install or alter any Leasehold Improvements in the Leased
Premises without having requested and obtained the Landlord's prior written
approval. The Landlord's approval shall not, if given, under any
circumstances be construed as a consent to the Landlord having its estate
charged with the cost of work. The Landlord shall not unreasonably withhold its
approval to any such request, but failure to comply with the Landlord's
reasonable requirements from time to time for the Building shall be considered
sufficient reason for refusal. In making, erecting, installing or altering any
Leasehold Improvements the Tenant shall not, without the prior written approval
of the Landlord, after or interfere with any installations which have been made
by the Landlord or others and in no event shall alter or interfere with window
coverings (if any) or other light control devices (if any) installed in the
Building. The Tenant's request for any approval hereunder shall be in writing
and accompanied by an adequate description of the contemplated work and, where
considered appropriate by the Landlord, working drawings and specifications
thereof. If the Tenant requires from the Landlord drawings or specifications of
the Building in connection with the Leasehold Improvements, the Tenant shall pay
the cost thereof to the Landlord on demand. Any reasonable costs and expenses
incurred by the Landlord in connection with the Tenant's Leasehold Improvements
shall be paid by the Tenant to the Landlord on demand. All work to be performed
in the Leased Premises shall be performed by competent and adequately insured
contractors and subcontractors of whom the Landlord shall have approved in
writing prior to commencement of any work, such approval not to be unreasonably
withheld (except that the Landlord may require that the Landlord's contractors
and subcontractors be engaged for any mechanical or electrical work) and by
workmen who have labor union affiliations that are compatible with those
affiliations (if any) of workmen employed by the Landlord and its contractors
and sub-contractors. All such work including the delivery, storage and removal
of materials shall be subject to the reasonable supervision of the Landlord,
shall be performed in accordance with any reasonable conditions or regulations
imposed by the Landlord including, without limitation, payment on demand of a
reasonable fee of the Landlord for such supervision, and shall be completed In
good and workmanlike manner in accordance with the description of the work
approved by the Landlord and in accordance with all laws, regulations and
by-laws of all regulatory authorities. Copies of required building permits or
authorization shall be obtained by the Tenant at its expense and copies thereof
shall be provided to the Landlord. If the Tenant undertakes Leasehold
Improvements, upon completion of such Leasehold Improvements the Tenant shall
supply to the Landlord complete 'As-Built" drawings representing Leasehold
Improvements installed and, if applicable, an engineer approved air balance
report. No locks shall be installed on the entrance doors or in any doors in the
Leased Premises that are not keyed to the Building master key system.
<PAGE>
Liens and Encumbrances on Improvements and Fixtures 3. In connection with the
making, erection, installation or alteration of Leasehold Improvements and all
other work or installations made by or for the Tenant in the Leased Premises the
Tenant shall comply with all the provisions of the construction lien and other
similar statutes from time to time applicable thereto (including any proviso
requiring or enabling the retention by way of holdback of portions of any sums
payable) and, except as to any such holdback, shall promptly pay all accounts
relating thereto. The Tenant will not create any mortgage, conditional sale
agreement or other encumbrance in respect of its Leasehold Improvements or,
without the written consent of the Landlord, with respect to its trade fixtures
nor shall the Tenant take any action as a consequence of which any such
mortgage, conditional sale agreement or other encumbrance would attach to the
Property or any part thereof. If and whenever any construction or other lien for
work, labor, services or materials supplied to or for the Tenant or for the cost
of which the Tenant may be in any way liable or claims therefor shall arise or
be filed or any such mortgage, conditional sale agreement or other encumbrance
shall attach, the Tenant shall within twenty (20) days after submission by the
Landlord of notice thereof procure the discharge thereof, including any
certificate of action registered in respect of any lien, by payment or giving
security or in such other manner as may be required or permitted by law, and
failing which the Landlord may avail itself of any of its remedies hereunder for
default of the Tenant and may make any payments or take any steps or
<PAGE>
SCHEDULE 'F"
LEASEHOLD IMPROVEMENTS
proceedings required to procure the discharge of any such liens or encumbrances,
and shall be entitled to be repaid by the Tenant on demand for any such payments
and to be paid on demand by the Tenant for all costs and expenses in connection
with steps or proceedings taken by the Landlord and the Landlord's right to
reimbursement and to payment shall not be affected or impaired if the Tenant
shall then or subsequently establish or claim that any lien or encumbrances so
discharged was without merit or excessive or subject to any abatement, set-off
or defense. The Tenant agrees to indemnify the Landlord from all claims, costs
and expenses which may be incurred by the Landlord In any proceedings brought by
any person against the Landlord alone or with another or others for or in
respect of work, labor, services or materials supplied to or for the Tenant.
Removal of Improvements and Fixtures 4. All Leasehold Improvements in or
upon the Leased Premises shall immediately upon their placement be and become
the Landlord's property without compensation therefor to the Tenant. Except to
the extent otherwise expressly agreed by the Landlord in writing, no Leasehold
Improvements, furniture or equipment shall be removed by the Tenant from the
Leased Premises either during or at the expiration or sooner termination of the
Term except that-.
(a) the Tenant shall, prior to the end of the Term, remove such of the
Leasehold Improvements and trade fixtures In the Leased Premises as
the Landlord shall require to be removed; and
(b) the Tenant may, at the times appointed by the Landlord and subject to
availability of elevators (if installed in the Building), remove its
furniture and equipment at the end of the Term, and also during the
Term in the usual and normal course of Its business where such
furniture or equipment has become excess for the Tenant's purposes or
the Tenant is substituting therefor new furniture and equipment.
The Tenant shall, in the case of every removal, make good at the expense of the
Tenant any damage caused to the Property by the Installation and removal. In
the event of the Non-removal by the end of the Term, or sooner termination of
this Lease, of such trade fixtures or Leasehold Improvements required by the
Landlord of the Tenant to be removed, the Landlord shall have the option, in
addition to its other remedies under this Lease to declare to the Tenant that
such trade fixtures are the property of the Landlord and the Landlord upon such
a declaration may dispose of such trade fixtures and retain any proceeds of
disposition as security for the obligations of the Tenant to the Landlord and
the Tenant shall be liable to the Landlord for any expenses incurred by the
Landlord.
5. For the purpose of this Lease,
(a) the term "Tenant's Work' shall mean all work required to be done to
complete the Leased Premises for occupancy by the Tenant excluding the
'Landlord's Work" (as hereinafter defined).
<PAGE>
(b) the term 'Landlord's Work" shall mean:
1. Install new carpet (building standard) throughout entire space
(except lunchroom).
2. Repaint white walls.
3. Touch up exterior paint on window sills.
4. Remove the janitorial closet (including sink).
5. Replace broken or stained ceiling tiles.
6. Remove existing 220V power cords and outlets.
7. Build insulating wall along back of space that shall considerably
reduce the noise from the adjacent mechanical room.
<PAGE>
AGREEMENT
---------
This Agreement (the "Agreement') is made and entered into by and between
Digital Equipment Corporation ("Digital"), a Massachusetts corporation, and
AltaVista Technology, Inc. ("ATI"), a California corporation (collectively, the
"Parties").
WHEREAS, ATI registered the domain name "altavista.com" with InterNIC on or
about February 1, 1995;
WHEREAS, on or about March 14, 1996, the Parties entered into an Agreement
pursuant to which ATI agreed to assign to Digital all of its right, title and
interest in and to the ALTAVISTA trademark and Digital agreed to grant ATI a
nonexclusive license to use the ALTAVISTA mark as part of the corporate name
"AltaVista Technology, Inc." and as part of the Internet domain name
"altavista.com";
WHEREAS, on or about March 14, 1996, the Parties entered into a trademark
Assignment Agreement pursuant to which ATI assigned to Digital all of its right,
title and interest in and to the ALTAVISTA trademark;
WHEREAS, on or about March 19, 1996, the parties entered into a Trademark
License Agreement ("License Agreement") pursuant to which Digital granted ATI a
nonexclusive license to use the ALTAVISTA mark as part of the corporate name
"AltaVista Technology, Inc." and as part of the Internet domain name
"altavista.com";
REDACTED
<PAGE>
WHEREAS, the Parties have agreed to terminate the License Agreement and
enter into a License Termination and Installment Sale Agreement whereby ATI has
agreed to sell, transfer and assign to Digital all of ATI's rights in and to the
ALTAVISTA mark granted to ATI under the License Agreement, including but not
limited to ATI's right to use the ALTAVISTA mark as part of the corporate name
"AltaVista Technology, Inc." and as part of the Internet domain name
"altavista.com" REDACTED;
NOW, THEREFORE, for and in consideration of the mutual promises, releases
and agreements herein contained, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
1. Installment Sale Agreement.
-----------------------------
Immediately upon execution of this Agreement, the Parties shall execute a
License Termination and Installment Sale Agreement, in the form attached hereto
as Exhibit A.
2. Linking and Content Agreement.
--------------------------------
Immediately upon execution of this Agreement, the Parties shall execute a
Linking and Content Agreement in the form attached hereto as Exhibit B.
REDACTED
--------
4. Press Release by Digital.
----------------------------
Within ten (IO) days after the execution of this Agreement, Digital will
issue a press release regarding the Parties' agreements, substantially in the
form attached hereto as Exhibit C. Except as permitted in paragraph 7.1 hereof,
ATI shall not make any statements regarding the terms of this Agreement or any
other agreement of the Parties entered into contemporaneously herewith except
those terms disclosed in the press release, nor shall ATI respond to inquiries
from the press or from any other person regarding said terms, except to refer
such inquiries to
Digital's press release.
2
<PAGE>
REDACTED
6. Return of Confidential Information.
--------------------------------------
Within ten (IO) days after the execution of this Agreement, each party
shall return all (including all copies) of the other Party's confidential
information produced in connection with the Action.
7. Confidentiality.
----------------
7.1 Confidentiality and non disparagement- Except to the extent that
--------
disclosure of the terms of this Agreement (i) may be required by law or (ii) is
required for purposes of obtaining tax or accounting advice or communicating
with insurance carriers, the Parties agree that the terms of this Agreement, the
settlement negotiations prior thereto, and the facts and circumstances
underlying this Agreement shall be considered confidential. Any and all
statements made by the Parties in connection with this Agreement and the
settlement negotiations prior thereto, whether a statement of fact, opinion,
supposition or otherwise, may not and will not be used, quoted or alluded to in
any manner. The Parties agree to use commercially reasonable efforts to prevent
disclosure of the terms of this Agreement and the settlement negotiations prior
thereto any third party. The Parties agree not to publicly disparage each other
(including, but not limited to, through their counsel) concerning the litigation
or the subject matter thereof.
7.2 Material Breach of Confidentiality- The Parties agree that any
-------------------------------------
violation of the provisions of paragraph 7.1 shall be a material breach of this
Agreement,
3
<PAGE>
REDACTED
9. Material Breach.
-----------------
The Parties agree that upon any material breach by ATI of the terms of this
Agreement or the terms of the License Termination and Installment Sale
Agreement, all of Digital's obligations under the Linking and Content Agreement
shall terminate.
10. Miscellaneous.
--------------
10.1 cc - All notices, requests, waivers, consents, or other
communications required or permitted by this Agreement ("Notices") shall be in
writing. Notices shall be deemed delivered for all purposes when delivered in
person or when dispatched by electronic facsimile transmission or upon
confirmation of receipt when dispatched by a nationally recognized overnight
courier service to the appropriate party with a copy to counsel (which shall not
constitute notice) as follows:
If to Digital:
Cliff Simpson, Esq.
Group Counsel, Consumer Products Group Office of the General Counsel
Compaq Computer Corporation
20555 SH249
MS I 10701
Houston, Texas 77070
Telephone: (281) 518-2552
Facsimile: (281) 514-8332
4
<PAGE>
with a copy to:
Shepard M. Remis, P.C.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109-2881
Telephone: (617) 570-1350
Facsimile: (617) 523-1231
If to ATI:
- ------------
Jack Marshall
President
AltaVista Technology, Inc-
1671 Dell Avenue, Suite 209
Campbell, California 95008
Telephone: (408) 364-8777
Facsimile: (408) 364-8778
with a copy to:
Lee Carl Bromberg, Esq.
Bromberg & Sunstein LLP
125 Summer Street
Boston, Massachusetts 02110-1618
Telephone: (617) 443-9292
Facsimile: (617) 443-0004
10.2 Amendment and Waiver, This Agreement may be amended, modified,
--------------------
waived, discharged or terminated only by an instrument in writing of subsequent
or even date signed by both Parties.
10.3 Successors and Assigns. This Agreement will be binding upon
-------------------------
and inure to the benefit of the Parties and their respective successors and
assigns.
10.4 Rights of the Parties. Nothing expressed or implied in this
------------------------
Agreement is intended or will be construed to confer upon or give any person or
entity other than the Parties or their respective successors and assigns any
rights or remedies under or by reason of this Agreement or any transaction
contemplated hereby.
10.5 Titles and Headings. Titles and headings to Articles and
----------------------
Sections herein are inserted for convenience of reference only, and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
5
<PAGE>
10.6 Entire Agreement. This Agreement, together with its Exhibits,
------------------
constitutes the entire agreement between the Parties with respect to the subject
matter hereof, and there are no agreements between the Parties with respect
hereto except as expressly set forth herein.
10.7 Delay or Omission. No delay or omission by either of the
--------------------
Parties in exercising any right under this Agreement will operate as a waiver of
any right. A waiver of consent given by either of the Parties on any occasion
is effective only in that instance and will not be construed as a bar to or
waiver of any right on any other occasion.
10.8 Severability. In case any provision contained in this
-------------
Agreement is determined by a court to be invalid or unenforceable, the validity
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
10.9 Additional Documents. Each of the Parties shall, upon the
----------------------
request of the other party, provide such other party with such additional
instruments, certificates and documents as the requesting party shall reasonably
require, whether or not such request is made after the date of this Agreement,
in order to provide the requesting party with the rights and benefits to which
such party is entitled under the Agreement.
10.10 Counterparts. This Agreement may be executed in any number of
-------------
counterparts, each of which when executed and delivered shall be deemed an
original; such counterparts shall together constitute but one agreement.
10.11 Corporation. Each party hereto is a corporation, and each
------------
person executing this Agreement on behalf of a corporation represents and
warrants that: (a) such corporation is duly organized, validly authorized and in
good standing, and possesses full power and authority to enter into and comply
with the terms of this Agreement; (b) the execution and delivery, and compliance
with the terms, of this Agreement have been duly and validly authorized by all
requisite corporate acts and consents and do not contravene the terms of any
other obligation to which the corporation is subject; (c) this Agreement, when
effective, shall constitute a legal, binding and valid obligation of such
entity, enforceable in accordance with its terms; and (d) each of the Parties
hereto shall furnish to the other party such evidence of such actions and
consent, and such legal opinions with respect thereto, as either of the Parties
may reasonably request.
6
<PAGE>
10.12 Governing Law. This Agreement and the terms, covenants and
--------------
conditions hereof shall be construed in accordance with, and governed by, the
laws of the Commonwealth of Massachusetts (without giving effects to any
conflicts of law provisions contained therein).
IN WITNESS HEREOF, the Parties hereto have duly executed this Agreement on this
31st. day of July, 1998.
DIGITAL EQUIPMENT CORPORATION ALTAVISTA TECHNOLOGY, INC.
By: s._Robert E. Hult By: _____________
-------------------
Robert E. Hult Jack Marshall
7
<PAGE>
10.12 Governing Law. This Agreement and the terms, covenants and
---------------
conditions hereof shall be construed in accordance with, and governed by, the
laws of the Commonwealth of Massachusetts (without giving effect to any
conflicts of law provisions contained therein).
IN WITNESS HEREOF, the Parties hereto have duly executed this Agreement on
this 31-st. day of July, 1998.
DIGITAL EQUIPMENT CORPORATION ALTAVISTA TECHNOLOGY,INC.
By: __________________ By: s. Jack Marshall
------------------
Robert E. Hult Jack Marshall
7
<PAGE>
EXHIBIT A
LICENSE TERMINATION AND INSTALLMENT SALE AGREEMENT
This License Termination and Installment Sale Agreement ("Installment Sale
Agreement") is made and entered into by and between Digital Equipment
Corporation ("Digital"), a Massachusetts corporation, and AltaVista Technology,
Inc. ("ATI"), a California corporation (collectively, the "Parties").
WHEREAS, ATI registered the domain name "altavista.com" with InterNIC on or
about February1,1995; and
WHEREAS, on or about March 19, 1986, the Parties entered into a trademark
license agreement (the "License Agreement") pursuant to which Digital granted to
ATI a nonexclusive license to use the ALTAVISTA mark as part of the corporate
name "AltaVista Technology, Inc." and as part of the Internet domain name
"altavista.com";
WHEREAS, the Parties have agreed to terminate the License Agreement; and
WHEREAS, ATI has agreed to sell, transfer and assign to Digital all of
ATI's rights in and to the ALTAVISTA mark granted to ATI under the License
Agreement, including but not limited to ATI's right to use the ALTAVISTA mark as
part of the corporate name "AltaVista Technology, Inc." and as part of the
Internet domain name "altavista.com";
NOW, THEREFORE, for and in consideration of the mutual promises and
agreements contained herein and in the Agreement of the Parties entered into
contemporaneously with this Installment Sale Agreement, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Termination of License Agreement. Thirty (30) days after the
execution of this Installment Sale Agreement, the License Agreement shall
terminate, and ATI shall have no further rights under the License Agreement,
provided however, that ATI may continue to use the ALTAVISTA mark in the limited
manner set forth in paragraph 6 below.
2. Sale, Transfer and Assignment of Rights. ATI hereby sells,
---------------------------------------------
transfers and assigns to Digital, effective thirty (30) days after the execution
of this Installment Sale Agreement, all of its rights in and to the ALTAVISTA
mark granted to ATI under the License Agreement, including but not limited to
ATI's right to use the ALTAVISTA mark as part of the corporate name "Alta Vista
Technology, Inc."and as part of the Internet domain name "altavista.com" and
ATI's rights to use any other names containing the term "altavista" or a
confusingly similar term. ATI further sells, transfers and assigns to Digital
all rights associated with the domain name "altavista.com" effective thirty (30)
days after the execution of this Installment Sale Agreement. Within thirty (30)
days after the execution of this Installment Sale Agreement, A1 ATI shall
<PAGE>
provide Digital with the documentation necessary to transfer the domain name
.1altavista.com" to Digital in accordance with the published procedures for
transfer domain names in effect at that time. Digital shall file such
documentation with InterNIC no earlier than the thirty-first day after execution
of this installment Sale Agreement. ATI agrees to execute and deliver to
Digital such other documents and take such other reasonable actions as are
required to transfer the domain name "altavista.com" to Digital and to confirm,
evidence, or establish Digital's rights to the domain name "altavista.com."
3. No Use of Similar Domain Name, ATI agrees to not use or register any
------------------------------
domain name containing the term "altavista" or any confusingly similar term.
4. No Objection to Registration of Domain Name. ATI agrees to not object
--------------------------------------------
to or otherwise challenge Digital's use and registration worldwide of any domain
name containing the term "altavista" or any confusingly similar term.
5. Representation and Warranties.
--------------------------------
5.1 Seller. ATI represents and warrants to the best of its actual
------
knowledge, as of the date of its execution of this Installment Sale Agreement,
that:
(a) There are no existing or threatened claims or proceedings by
any third party relating to ATI's use, registration, or ownership
of the domain name l,altavista.com";
(b) The domain name "altavista.com" is not subject to any
outstanding order, decree, judgment, stipulation, written
restriction, undertaking, or agreement that would prevent ATI
from complying with any of its obligations under this Installment
Sale Agreement;
(c) The domain name "altavista.com" is not subject to any lien,
security interest, mortgage, or other encumbrance;
(d) ATI has not granted any licenses to or authorized any third
parties to use the domain name "altavista.com" or any confusingly
similar domain name; and
(e) ATI does not own any domain name registrations or
applications containing the term "altavista" or any confusingly
similar term other than the domain name "altavista.com."
A2
<PAGE>
6. Transition Period.
-------------------
6.1 Domain Name. After the termination of the License Agreement, ATI
------------
shall not use the domain name altavista.com", provided however, that ATI may
refer to the domain name "altavista.com" in order to inform third parties that
it has changed its Web site address from the domain name "altavista.com" to
another domain name for a period of three (3) months following the transfer of
the domain name "altavista.com."
6.2 E-Mail Routing. Upon transfer to Digital of the domain name
----------------
"altavista.com" and for a period of six (6) months following the transfer,
Digital shall route e-mail directed to "altavista.com" and intended to be
received by ATI to magicbit.com" or to any other Internet address designated by
ATI. ATI shall have the right to change the Internet address to which e-mail is
routed upon five (5) days written notice to Digital. Digital shall be
responsible for maintaining consistent operation of the e-mail routing software
so as to minimize any delay between Digital's receipt of e-mail and the
transmission of e-mail to ATI and so as to ensure the integrity of e-mail
messages and attachments. In no case shall e-mail be routed to the address
designated by ATI later than twelve (12) hours after receipt by Digital. For
the period of six (6) months following the transfer of the domain name
altavista.com", Digital shall not use any of the e-mail addresses currently used
by ATI, as listed in Exhibit I hereto. ATI may refer to the domain name
"altavista.com" during this six (6) month period in order to inform third
parties that it has changed its e-mail addresses.
6.3 Change of Corporate Name. Within ten (1O) business days after
---------------------------
the execution of this Installment Sale Agreement, ATI shall file papers with the
appropriate legal agency to legally change its corporate name. For a period of
thirty (30) days following the execution of this Installment Sale Agreement, ATI
may use the ALTAVISTA mark as part of its corporate name. ATI shall not use the
ALTAVISTA mark as part of its corporate name after the thirty (30) day period
following the execution of this Installment Sale Agreement has expired.
7. Termination of Agreements. Immediately upon the execution of
this Installment Sale Agreement, ATI shall give notice of the termination of all
agreements that could impair its right to sell, transfer and assign to Digital
all of its rights in and to the ALTAVISTA mark granted to ATI under the License
Agreement. Such notice shall be given to all parties to all such agreements.
8. Payment. Immediately upon the execution of this Installment Sale
-------
Agreement, Digital shall deliver or cause to be delivered to ATI the sum of
three hundred and fifty thousand dollars ($350,000.00) and shall execute a seven
percent (7%) promissory note in the principal amount of two million seven
hundred and fifty thousand dollars ($2,750,000.00) in the form of Exhibit 2.
A3
<PAGE>
9. Miscellaneous.
--------------
9.1 Amendment and Wavier. This Installment Sale Agreement may be
-----------------------
amended, modified, waived, discharged or terminated only by an instrument in
writing of subsequent or even date signed by both Parties.
9.2 Successors and Assigns. This Installment Sale Agreement will be
-----------------------
binding upon and inure to the benefit of the Parties and their respective
successors and assigns.
9.3 Delay or Omission. No delay or omission by either of the
--------------------
Parties in exercising any right under this Installment Sale Agreement will
operate as a waiver of any right. A waiver of consent given by either of the
Parties on any occasion is effective only in that instance and will not be
construed as a bar to or waiver of any right on any other occasion.
9.4 Severability. In case any provision contained in this
Installment Sale Agreement is determined by a court to be invalid or
unenforceable, the validity and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
9.5 Additional Documents. Each of the Parties shall, upon the
----------------------
request of the other party, provide such other party with such additional
instruments, certificates and documents as the requesting party shall reasonably
require, whether or not such request is made after the date of this Installment
Sale Agreement, in order to provide the requesting party with the rights and
benefits to which such party is entitled under this Installment Sale Agreement.
9.6 Counterparts. This Installment Sale Agreement may be executed
-------------
in any number of counterparts, each of which when executed and delivered shall
be deemed an original; such counterparts shall together constitute but one
agreement.
9.7 Corporations. Each party hereto is a corporation, and each
person executing this Installment Sale Agreement on behalf of a corporation
represents and warrants that: (a) such corporation is duly organized, validly
authorized and in good standing, and possesses full power and authority to enter
into and comply with the terms of this Installment Sale Agreement; (b) the
execution and delivery, and compliance with the terms, of this Installment Sale
Agreement have been duly and validly authorized by all requisite corporate acts
and consents and do not contravene the terms of any other obligation to which
the corporation is subject; (c) this Installment Sale Agreement, when effective,
shall constitute a legal, binding and valid obligation of such entity,
enforceable in accordance with its terms; and (d) each of the Parties hereto
shall furnish to the other party such evidence of such actions and consent, and
such legal opinions with respect thereto, as either of the Parties may
reasonably request.
A4
<PAGE>
9.8 Governing Law. This Installment Sale Agreement and the terms,
---------------
covenants and conditions hereof shall be construed in accordance with, and
governed by, the laws of the Commonwealth of Massachusetts (without giving
effect to any conflicts of law provisions contained therein).
IN WITNESS HEREOF, the Parties hereto have duly executed this Installment
Sale Agreement on this 31st day of July, 1998.
DIGITAL EQUIPMENT CORPORATION ALTAVISTA TECHNOLOGY, INC.
By: _________ By: s.Jack Marshall
----------------
Robert E. Hutt
A5
<PAGE>
<PAGE>
EXHIBIT 2 (INSTALLMENT SALE AGREEMENT)
PROMISSORY NOTE
DIGITAL EQUIPMENT CORPORATION
REDACTED BOSTON, MA
DATE: JULY 31,1998
FOR VALUE RECEIVED, Digital Equipment Corporation, a Massachusetts
corporation (the "Company"), hereby promises to pay to the order of AltaVista
Technology, Inc., a California corporation (the "Seller"), and its successors
and assigns, the principal amount of REDACTED ), with interest on the principal
amount outstanding hereunder from time to time from the date hereof through and
including the date on which such principal amounts are paid, at the rate of
REDACTED annually. Interest shall be computed on the basis of the actual number
of days elapsed and a year of 360 days.
Ibis Note, together with all accrued and unpaid interest, shall be payable
REDACTED All payments shall be in lawful money of the United States of America.
Neither principal of nor interest on this Note may be prepaid by the Company
without the prior consent of the Seller, which consent the Seller may withhold
in its sole discretion.
ARTICLE I
EVENTS OF DEFAULT
At the option of the holder of this Note and without prejudice to any other
rights the holder hereof may have at law or in equity, all sums of principal and
interest then remaining unpaid hereunder shall immediately become due and
payable, without demand, presentment or notice, all of which are hereby
expressly waived, if any of the following occur ("Events of Default"):
1.1. The Company breaches any covenant or other term or provision of
this Note and such breach continues for five days after written notice thereof
to Company from the holder hereof.
1.2. The Company becomes insolvent or admits in writing its inability
to pay its debts as they mature; makes an assignment for the benefit of
creditors; applies for or consents to the appointment of a receiver or trustee
for it or for a substantial part of its property or business; or such
a receiver or trustee otherwise is appointed.
A7
<PAGE>
1.3. Bankruptcy, insolvency, dissolution, winding up, reorganization or
liquidation proceedings or relief under any bankruptcy law or any law for the
relief of debtors is instituted by or against the Company and is not dismissed
within thirty days.
1.4. The Company fails to pay this Note when due in accordance with its
terms.
ARTICLE 11
MISCELLANEOUS
2.1. No amendment, modification or waiver of any provision of this Note
nor consent TO any departure by the Company therefrom shall be effective unless
the same shall be in writing and signed by the holder hereof and such waiver or
consent shall be effective only in the SPECIFIC instance and for the specific
Purpose for which given.
2.2. The Company hereby waives any requirements of notice of dishonor,
notice of protest and protest.
2.3. This Note shall be governed in all respects by the laws of the
Commonwealth of Massachusetts without giving effect to the conflict of
law provisions thereof.
2.4. This Note shall be binding upon the Company and its successors and
assigns and the terms hereof shall inure to the benefit of the Seller
and its successors and assigns, including
subsequent holders hereof.
2.5. The holding of any provision of this Note to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provisions, and the other provisions of this Note shall remain in full force and
effect.
2.6. If this Note becomes worn, defaced, or mutilated but is still
substantially intact and recognizable, the Company or its agent may issue a new
Note in lieu hereof upon the surrender of such worn, defaced, or mutilated Note.
If the holder of this Note claims that it has been lost, destroyed, or
wrongfully taken, the Company will issue a new Note in place of the original
Note if the holder so requests by written notice to the Company actually
received by the Company before it is notified that the Note has been acquired by
a bona fide purchaser.
2.7. If the holder or payee of this note changes its name or mergers
with or into another corporation or other entity, the Company shall upon request
issue a new Note of like tenor payable to the payee under its new corporate
name, or to the successor entity, in lieu hereof upon the surrender of this
Note.
A8
<PAGE>
2.8. Unless otherwise specified by the holder hereof on the date when
payment is due, payment under this Note shall be made at and all notices to
holders shall be delivered to, the following address:
AltaVista Technology, Inc.
1671 Dell Ave. Suite 209
Campbell, CA 95009
Attention: Jack Marshall
DIGITAL EQUIPMENT CORPORATION
By: ____________________
Its:
By: ___________________
Its:
A9
<PAGE>
EXHIBIT B
LINKING AND CONTENT AGREEMENT
REDACTED
<PAGE>
EXHIBIT C
PRESS RELEASE
COMPAQ ACQUIRES RIGHTS TO ALTAVISTA DOMAIN
HOUSTON, July 31, 1998 -- Compaq Computer Corporation (NYSE: CPQ) announced
today an agreement with AltaVista Technology, Inc. (AVT) of Campbell, California
to transfer to Compaq full rights to the AltaVista trademark and domain name,
www.altavista.com. The financial terms were not disclosed.
- -----------------
Under the deal, AVT sells, transfers and assigns all of its rights to the
trademark and domain name to Compaq. AVT will transfer to Compaq the
www.altavista.com URL within 30 days and notify all third parties of the change
to its Internet address. AVT's new Internet address will be www.PhotoLoft.com.
-----------------
This agreement supersedes all previous agreements between ATI and Digital
Equipment Corporation, which was purchased by Compaq in June.
ABOUT ALTAVISTA
Compaq's fast and powerful AltaVista Search Service is the premier resource
for locating information on the Internet. A forerunner in Web search
technology, AltaVista has set new standards, from indexing the entire Internet
to providing the Web's first instant language translation capabilities. With an
extensive line-up of innovative content and services, AltaVista is now regarded
as one of the top destination sites on the Web. For more information, visit
AltaVista's flagship site located at www.altavista.digital.com.
--------------------------
<PAGE>
COMPANY BACKGROUND
Compaq Computer Corporation, the world's largest computer manufacturer, is
a Fortune Global 200 company and the largest global supplier of personal
computers. Founded in 1982, Compaq develops and markets hardware, software,
solutions and services, including industry-leading enterprise computing
solutions, fault-tolerant business-critical solutions, networking and
communications products, commercial desktop and portable products and consumer
PCS. The company is a leader in environmentally friendly programs and business
practices.
Compaq products are sold and supported in more than 100 countries through a
network of authorized Compaq marketing partners. Customer support and
information about Compaq and its products are available at http://www.compaq.com
---------------------
or by calling 1-800-OK-COMPAQ.
Product information and reseller locations are available by calling
1-800-345-1518.
2
<PAGE>
SUBLEASE AGREEMENT
1. Parties:
This Sublease is entered into this first day of September 1998, by and
between Surefire Verification, Inc., a California Corporation, (Subleasee), and
Photoloft.com., a California Corporation, (Subleasor) as a Sublease under the
Master Lease, dated August 19, 1997, entered into by Sublessor and NPL
Associates, a California general partnership (Lessor); a copy of the Master
Lease is attached hereto as Exhibit "A".
2. Provisions constituting sublease:
A. Sublease is subject to all of the terms and conditions of the Master
Lease in Exhibit "A" and Subleasee shall assume and perform the obligations of
the Subleasee/Lessee in said Master Lease, to the extent said terms and
conditions are applicable to the Premises subleased pursuant to this Sublease.
Sublessee shall not commit or permit to be committed on the Premises any act or
omission that shall violate any term or conditions of the Master Lease.
B. All of the terms and conditions contained in the Master Lease are
incorporated herein except as modified below.
3. Premises:
Sublessor leases to Sublessee and Sublessee hires from Sublessor the following
described premises, situated in the City of Campbell, County of Santa Clara,
State of California, commonly known and described as 1671 Dell Avenue, Suite
#209 and consisting of approximately one thousand four hundred thirty (1,430)
square feet of office space, as shown in Exhibit "B" to this Sublease.
4. Rental:
Sublessee shall pay directly to Lessor as rent for the Premises in advance of
the first day of each month of the term of this Sublease commencing September
`1, 1998, without deduction, offset, prior notice or demand, in lawful money of
the United States the sum of One thousand nine hundred sixty three and 85/100
dollars ($1,963.85). Receipt of One thousand nine hu8ndred sixty three and
85/100 dollars ($1,963.85) is hereby acknowledged by Sublessor as rental for the
first month. The additional amount of One thousand nine hundred sixty three and
85/100 dollars ($1,963.85) shall be paid prior to occupancy as non-interest
bearing security for performance under this Sublease. In the event Sublessee
vacating the Premises, the amount paid as a security deposit shall be returned
to Sublessee after first deducting any sum owing to Sublessor.
5. Term:
The term of this Sublease shall be for a period of twenty four months commencing
on October 1, 1998, and ending on September 30, 2000.
6. Use:
Sublessee shall use the premises for general offices and for no other purpose
without the written consent of Sublessor.
7. Improvements:
Sublessor shall clean the carpets, replace the ceiling tiles as necessary, paint
walls. No additional improvements shall be made by Sublessor or Lessor.
8. Early Occupancy:
Sublessee shall have access to the Premises as of September 15, 1998 for the
installation of computer and phone equipment.
<PAGE>
9. Broker:
Upon execution of this Sublease, Sublessor shall pay to KG Real Estate, Inc.,
licensed real estate broker, fees based upon broker's fee schedule.
10. Notices:
All notices or demands of any kind required or desired to be given by Sublessor
or Sublessee hereunder shall be in writing and SHALL BE DEPOSITED IN THE United
States mail, certified or registered, postage prepaid, addressed to the
Sublessor or Sublessee, respectively,, at the address set forth after their
signatures at the end of this Sublease. All rend and other payments due under
this Sublease or the Master Lease shall be made directly to Lessor at the
Sublessor's address.
Sublessor: Sublessee:
Photoloft.com Surefire Verification, Inc.,
a California Corporation a California Corporation
By: s. Jack Marshall By: s. Michael
------------------ -----------
Date: 9-3-98 Date: September 1st, 1998
Consent and Attournment Agreement
The undersigned, Lessor under the Master Lease attached as Exhibit "A", hereby
consents to the subletting of the Premises described herein on the terms and
conditions contained in this Sublease. This Consent shall apply only to this
Sublease and shall not be deemed to be a consent to any other Sublease. If,
after expiration of the applicable period that Sublessor has in which to cure
its default, Sublessor defaults under the Master Lease, Lessor shall notify
Sublessee of the default and in the event of the termination of the Master
Lease, this Sublease shall terminate coincidentally therewith without any
liability of Lessor to Sublessee.
Lessor: Sublessee:
NPL Associates Surefire Verification, Inc.,
A California Corporation a California Corporation
By: _________________ By: s. Michael
-----------
Dated:_______________ Dated: September 1st, 1998
<PAGE>
HEWLETT PACKARD
Exhibit TM02
CONSULTING SERVICES AGREEMENT (Deliverables)
CONSULTING SERVICES AGREEMENT BETWEEN
HEWLETT-PACKARD COMPANY
AND
PHOTOLOFT.COM
<PAGE>
HEWLETT PACKARD
CONSULTING SERVICES AGREEMENT (Deliverables)
Exhibit TM02
TABLE OF CONTENTS
SECTIONS OF THE AGREEMENT
1. Definitions
2. HP Obligations
3. Customer obligations
4. Price and Payment
5. Change Orders
6. Acceptance
7. Warranties
8. Licenses
9. Intellectual Property Rights
10. Intellectual Property Indemnity
11. Confidential Information
12. Remedies and Liabilities
13. Term and Termination
14. General
EXHIBITS TO THE AGREEMENT
A. Statement of Work
B. Chan a Order Procedures
<PAGE>
HEWLETT(TM)
PACKARD
CONSULTING SERVICES AGREEMENT (Deliverables)
Exhibit TM02
This Consulting Services Agreement ("Agreement") is made between HEWLETT-PACKARD
COMPANY, a California Corporation ("HP") and Photoloft.Com, a California
corporation ("Customer"), as of October 22, 1998 ("Effective Date").
The purpose of this Agreement is to set forth the mutually agreeable terms and
conditions under which HP will perform Consulting Services and provide
Deliverables to Customer according to one or more Statements of Work.
1. DEFINITIONS
a) "CONSULTING SERVICES" (sometimes referred to as "Work") refers to such
activities as analysis, design, planning, development, consulting,
implementation, education, training and project management as
described in a Statement f Work. Consulting Services may also include
other types of services describe more specifically in a Statement of
Work.
b) "DELIVERABLES" means the tangible results of the Consulting Services
provided by HP to Customer as described in a on Statement of Work.
Unless otherwise agreed, the term Deliverable. does not include custom
hardware.
c) "SOFTWARE" means one or more programs (including any associated
documentation) capable of operating on a controller, processor or
other hardware device .
a) "STATEMENT OF WORK" means a document attached to this Agreement which
describes a specific project, engagement or assignment ("Project") for
which HP will provide Consulting Services to Customer. More than one
Statement of Work may be attached to this Agreement from time to time.
2. HP OBLIGATIONS
a) HP will use reasonable commercial efforts to perform the Consulting
Services and provide the Deliverables specifically described in ore or
more Statements of Work in accordance with the terms and conditions of
this Agreement. Customer and HP will sign a separate Statement of Work
for each Project that exceeds $10,000, which will be incorporated by
reference into this Agreement upon execution by the parties. Each
Statement of Work will: (i) be made in writing in the form attached an
Exhibit A, (ii) reference this Agreement, (iii) be numbered
consecutively n a chronological basis, and (iv) be executed by
authorized representatives of Custom r no HP. Individual Statements of
Work should address at least the following areas:
1. Project description
2. Price, payment and delivery schedules
3. Scope of Consulting Services
4. Acceptance criteria
S. Nature of Deliverables
6. Project cost coordination
b) For all Projects under a value f $10,000, Customer's purchase order
referencing this Agreement will constitute the applicable Statement of
Work upon acceptance by HP.
c) Unless otherwise agreed, Consulting Service will be performed during
HP's normal business hour.
d) HP will use reasonable commercial efforts to provide the Deliverable
and perform the Consulting Service. in accordance with the delivery
schedule specified in each Statement of Work.
e) HE' may select qualified and reputable subcontractors to perform
Consulting Services and/or provide Deliverable.
f) HP will appoint a representative to supervise and coordinate HP's
performance of Consulting Services. HP may change its representative
at any time upon written notice.
a) Unless otherwise agreed in a Statement of Work, HP in not responsible
for providing support for any Deliverables.
3. CUSTOMEROBLIGATIONS
Customer will comply with the general obligations specified below together with
any specific Customer obligations described in a Statement of Work, in a timely
manner.
<PAGE>
HEWLETT PACKARD
CONSULTING SERVICES AGREEMENT (Deliverables)
Exhibit TM02
b) Customer acknowledges that HP's ability to deliver the Consulting
Services is dependent upon Customer's full and timely cooperation with
HP, as well as the accuracy and completeness of any information and
data Customer provides to HP. Therefore, Customer will:
1. Provide HP with access to, and use of, all information, data,
documentation, computer time, facilities, working space and
office services deemed necessary by HP.
2. Appoint a representative who will provide professional and prompt
liaison with HP, have the necessary expertise and authority to
commit Customer, be available at all times when HP's personnel
are at the Customer's site (or designate an alternate with the
same level of authority in the event of unavailability caused by
illness or other valid reasons), and meet with the HP
representative at regular intervals to be agreed upon t review
progress and resolve any issues relating to the Consultinq
Services or Deliverables.
c) Customer will be responsible for maintaining an external procedure for
reconstruction of lost or altered files, data or programs to the
extent deemed necessary by Customer, and for actually reconstructing
any such materials.
d) Customer will be liable for any delays to the delivery schedule
specified in each Statement of Work caused by Customer or resulting
from Customer's failure to fulfill any of its obligations. HP may
charge Customer for any additional charges or losses incurred by HP as
a result of such delays, and may adjust the affected delivery schedule
accordingly.
a) Customer will be responsible at all times for the supervision,
management and control of the Deliverables and any results obtained
from the Deliverables, including without limitation all responsibility
for maintenance of proper machine configuration, audit controls,
operating methods, error detection and recovery procedures, back-up
plans, security, insurance, maintenance and all that activities
necessary to enable Customer to use the Deliverables.
f) Except as expressly provided in this Agreement, Customer has sale
responsibility to ensure that its information technology environment
is Year 2000 compliant. HP is not providing Year 2000 services (for
example, Year 2000 assessment, conversion or testing) under this
Agreement. Customer acknowledges that HP will not be responsible for
failure to perform Consulting Services or supply Deliverable. under
this Agreement, if such failure is the result, directly or indirectly,
of the inability of any products to correctly process, provide or
receive date data (i.e., representations for month, day and year), and
to properly exchange data with the Deliverables by HP ,under this
Agreement.
<PAGE>
4. PRICE AND PAYMENT
a) Prices for Consulting Services and Deliverables a will be specified in
each Statement of work. Prices quoted in each Statement of Work are
valid for 30 days. Prices include all materials and labor expenses,
but do net include sales, use, service, value added or like taxes, or
customs duties. Such taxes and duties, when applicable, will be added
to HP's invoices.
b) HP will issue invoices in accordance with the payment schedule
specified in each Statement of Work. Charges for travel expenses may
be invoiced separately. Customer will pay all invoices within 30 days
from the date of invoice. HP may change credit terms upon reasonable
notice at any time when, in HP's opinion, Customer's financial
condition, previous payment record, or the nature of Customer's
relationship with HP so warrants.
c) Should any sum due to HP remain unpaid after 60 days from the date of
invoice, HP may terminate this Agreement pursuant t Section 13.b.2 and
discontinue performance under any other agreement with Customer.
5. CHANGE ORDERS
a) "Change Order" means an agreed upon change or modification to the
Deliverables, Consulting Services or that material aspect of a
Statement of Work that complies with the requirements of Exhibit B.
Requests by Customer and recommendations by HP for Change Orders are
subject to the procedures set forth in Exhibit B, and will be made in
writing in the form attached to Exhibit B as Attachment B-1.
b) All Change Orders must be mutually agreed by the parties. Pending such
agreement, HP will continue to perform and be paid as if such Change
Order had not been requested or recommended, provided that if either
party process a Change Older which, in HP's judgment, represents a
material change in the Consulting Services or Deliverables ad such
Change Order remains outstanding for 30 days or is rejected by
Customer, HP will have the right to terminate the affected Statement
of Work pursuant to Section 13.b.2 below.
<PAGE>
HEWLETT PACKARD
CONSULTING SERVICES AGREEMENT (Deliverables)
exhibit TM02
6. ACCEPTANCE
a) HP will provide notice to Customer when the Deliverables are ready for
acceptance. Acceptance of Deliverables will occur upon the earlier of:
a) the date HP demonstrates to Customer, by the successful completion
of acceptance tests or otherwise, that the Deliverables substantially
conform to the acceptance criteria specified in the applicable
Statement of Work; or b) the date that Customer uses any substantial
part of the Deliverables for any purpose other than performing
acceptance tests. Acceptance of Consulting Services will occur upon
HP's performance of such Consulting Services,
b) In the event that any Deliverable fails to conform substantially to
the acceptance criteria specified in the applicable Statement of Work,
HP will have a reasonable time to remedy such substantial
non-conformance, following HP's receipt of written notice from
Customer specifying in reasonable detail the nature of Such
non-conformance. In the event that HP is unable to remedy the
non-conformance: a) Customer may accept the Deliverable without
warranty, on an "AS IS" basis, subject to a reasonable price
adjustment; or b) Customer may return the Deliverable to HP and
receive a refund of amounts paid to HP for the Deliverable.
c) Acceptance will not be delayed for any minor non-conformance with the
requirements specified in any Statement of Work. Following acceptance,
HP will use reasonable commercial efforts to correct any minor
non-conformance that appears during acceptance testing.
d) If acceptance testing is delayed for reasons attributable to Customer,
acceptance will be deemed to occur on the 10th day after notice by HP
that the Deliverable in ready for acceptance testing.
7. WARRANTIES
a) HP will perform Consulting Services in accordance with generally
recognized commercial practices and standards. HP will re-perform any
Consulting Services not performed in accordance with the foregoing
warranty, provided that HP receives notice from Customer within 30
days after such Consulting Services were performed.
b) HP warrants that Deliverables will substantially conform to the
acceptance criteria specified in the applicable Statement of Work for
a period of 90 days from the date of acceptance.
c) HP does not warrant that the operation of Deliverables will be
uninterrupted or error conform to any reliability or performance
standards beyond those specified in the applicable acceptance
criteria. HP also does not warrant that Deliverables will be
compatible with future HP products those of other vendors.
<PAGE>
d) If HP receives notice during the warranty period of any substantial
non-conformance with the acceptance criteria that materially impairs
the functioning of a Deliverable, HP will, at its option, either
correct such non-conformance or provide a work-around which
substantially remedies the non-conformance.
e) If HP is unable within a reasonable time to comply with the foregoing
--
obligations, HP will refund a reasonable portion of the price stated
in the Statement of Work upon or prompt return of the affected
Deliverable to HP, and/or delivery to HP of proof of the destruction
of the affected Deliverable.
f) The warranties provided in this Section 7 will not apply in the event
of deemed acceptance under Section 6.a(b) or 6.d above, or to defects
or non-conformance resulting from:
1. Unauthorized, improper or inadequate maintenance or calibration
by Customer or any third party.
2. Software, hardware, interfacing, or supplies not supplied by HP.
3. Unauthorized modification of Deliverables or any portion thereof.
4. Improper use or operation of Deliverable or any portion thereof
or Customer's failure to comply with the applicable environmental
specification.
5. Improper site preparation or maintenance by Customer or a third
party.
g) THE ABOVE WARRANTIES ARE EXCLUSIVE AND NO OTHER WARRANTY, WHETHER
WRITTEN OR ORAL, IS EXPRESSED OR IMPLIED. HP SPECIFICALLY DISCLAIMS
THE IMPLIED WARRANTIES OF MERCHTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
<PAGE>
HEWLETT PACKARD
CONSULTING SERVICES AGREEMENT (Deliverables)
Exhibit TM02
8. LICENSES
a) Unless otherwise agreed in writing, when HP supplies Customer with a
Deliverable that in whole or in part consists of Software (sometimes
referral to in Sections 8 and 9 as a "Software Deliverable"), such
Software Deliverable will be supplied in object code form only.
b) Upon Customer acceptance of a Deliverable and receipt by HP of the
associated payment in full, HP grants Customer a non-exclusive,
perpetual, non-transferable license to use such Deliverable for its
own internal purposes. Customer's license confers no title or
ownership in the Deliverable and no rights in any associated Software
Deliverable source code, and will not be construed as a sale of any
rights in the Deliverable or the media on which it is recorded or
printed.
c) Unless otherwise authorized by HP, Customer may only make copies of
Deliverables for archival purposes, or when copying is an essential
step in the authorized use of a Software Deliverable on a backup
controller, processor or other hardware device.
d) Customer will label each copy of Deliverables made under Section 8.c
above with the copyright notice that appears on the original.
e) Customer will not market, sublicense or otherwise provide the
original, any copy or partial copy, or any derivative of a Deliverable
to any third party.
f) Customer's license does not include the right to updates, upgrades or
other enhancements to a Deliverable.
g) Customer will not disassemble or decompile any Software Deliverable
without HP's prior written consent. Where Customer has other rights
under statute, Customer will provide HP with reasonably detailed
information regarding any intended disassembly or decompilation.
Customer will not decrypt any Software Deliverable unless necessary
for legitimate use of the Deliverable.
h) HP may terminate Customer's license in any Deliverables upon notice
for failure to comply with the terms of this Agreement. TR the event
of termination of Customer's license, Customer will immediately
destroy or return to HP the affected Deliverable and all partial or
complete copies, or provide satisfactory evidence of in their
destruction to HP.
<PAGE>
i) Customer grants HP a non-exclusive, worldwide, royalty-free license to
use, copy, make derivative works of, distribute, display, perform, and
transmit Customer's pre-existing copyrighted works or other
intellectual property rights to the extent necessary for HP to perform
its obligations under this Agreement.
9. INTELLECTUAL PROPERTY RIGHTS
a) All copyrights aid other intellectual property rights existing prior
to the Effective Date will belong to the party that owned such rights
immediately prior to the Effective Date.
b) Neither party will gain by virtue of this Agreement any rights of
ownership of copyrights, patents, trade secrets, trademarks or any
other intellectual property rights owned by the other.
c) HP will own all copyrights, patents, trade secrets, trademarks and
other intellectual property rights, title and interest in or
pertaining to all Works (including computer programs, Deliverables and
Software Deliverables) developed by HP for purposes of this Agreement.
10. INTELLECTUALPROPERTYINDEMNITY
HP will defend or settle any claim against Customer regarding the
Consulting Services and Deliverables, to the effect that HP knowingly
infringed a patent, utility model, industrial design, copyright, trade
secret, mask work or trademark in the country where, such Deliverables
are used or such Consulting Services are provided.
b) The indemnities provided in Section 10.1 above will apply provided
Customer promptly notifies HP in writing of the claim, and Customer
cooperates with HP in and grants HP sole control of the defense or
settlement
c) For infringement claims covered by this Section 10, HP will pay
infringement claim defense costs, settlement amounts and court-awarded
damages. If such a claim regarding a Deliverable appears likely, HP my
modify the Deliverable, procure any necessary license or replace it.
If HP determines that none of these alternatives is reasonably
available, HP will refund Customer's purchase price upon return of the
Deliverable if within one year of delivery, or Customer's net book
value thereafter.
d) HP has no obligation for any claim of infringement arising from:
<PAGE>
HEWLETT PACKARD
CONSULTING SERVICES AGREEMENT (Deliverables)
Exhibit TM02
1. HP-s compliance with or use of Customer's information,
technology, designs, specifications or instructions, including
those incorporated into dry Statement of Work.
2. Modification of a Deliverable by Customer or a third party.
3. Use of a Deliverable in a way not indicated in a Statement of
Work.
4. Use of a Deliverable with products not supplied by HP.
a) This Section 10 states HP's entire liability for claims of
intellectual property infringement.
11. CONFIDENTIAL INFORMATION
HP and Customer agree that all information exchanged between them is
not confidential unless they have entered into a separate confidential
disclosure agreement
12. REMEDIES AND LIABILITIES
a) The remedies in this Agreement are Customer's sole and exclusive
remedies.
b) To the extent HP IS held legally liable to Customer, HP's liability is
limited to:
1. Payments described in Sections 6, 7, and 10 above, this Section
12, and Section 13.d below.
2. Damages for bodily injury.
3. Direct damages to tangible property up to a limit of U.S.
$1,000,000.
c) Notwithstanding Section 12.b above, in no event will HP or its
affiliates, subcontractors and suppliers be liable for any of the
following:
1. Actual loss or direct damage that is not listed in Section 12.b
above.
2. Damages for loss of data, or Software restoration.
<PAGE>
3. Damages relating to Customer's procurement of substitute products
or services (i.e., "cost of cover").
4. Incidental, special or consequential damages, including downtime
costs or lost profits but excluding damages for bodily injury and
payments described in Section 10.c above.
d) The Deliverables are not specifically designed, manufactured or
intended for sale as parts, components or assemblies for the planning,
construction, maintenance, or direct operation of a nuclear facility.
Customer will be solely liable if any Deliverables purchased or
licensed by Customer are used for these applications. Customer will
indemnify and hold HP harmless from all loss, damage, expense or
liability in connection with such use.
13. TERM AND TERMINATION
a) This Agreement will commence on the Effective Date and will continue
in force until termination according to the terms of this Agreement.
Individual Statements of Work will be effective upon execution by both
parties and will continue in force until both parties have fulfilled
all of their, Project obligations, or until the earlier termination of
such Statement of Work according to the terms of this Agreement.
b) This Agreement or an individual Statement of Work may be terminated
immediately upon notice in writing:
1. By either party if the other party is in material breach of any
of its obligations hereunder and fails to remedy such breach
within 30 days of receipt of a written notice by the other party
which specifies the material breach.
2. By HP, in the absence of mutual agreement regarding a Change
Order which represents a material change under Section 5,b, or if
Customer fails to pay any sum due under this Agreement within the
60 day time period specified in Section 4.c.
3. By either party if the other party has a receiver appointed, or
an assignee for the benefit of creditors, or in the event of any
insolvency or inability to pay debts as they become due by the
other party, except as may be prohibited by applicable bankruptcy
law
c) Either party may terminate this Agreement for convenience upon 30 days
prior written notice to the other party. Any termination of this
Agreement will not relieve either party of its obligations
<PAGE>
HEWLETT PACKARD
CONSULTING SERVICES AGREEMFNT (Deliverables)
E3NbitTM02
under any Statement of Work in effect on the date of termination of
this Agreement, unless otherwise mutually agreed to in writing.
d) Upon termination of any Statement of Work, Customer will pay HP for
all Work performed and charges and expenses incurred by HP up to the
date of termination, and Customer will receive all work in progress
for which Customer has paid. Should the sum of such amounts be less
than any advance payment received by HP, HP will refund the difference
within 30 days of receipt of an invoice from Customer.
a) Sections 4, 7, 8, 9, 10 and 12 above, and Section 14 below, will
survive termination of this Agreement.
14. GENERAL
a) STANDARD PRODUCTS. This Agreement does not cover standard HP hardware
and software products sold or licensed to Customer. Any such
transactions will be governed by the terms of Customer's HP purchase
agreement or, in the absence of a signed purchase agreement, HP's
Terms add Conditions of Sale and Service (Exhibit E16).
b) HEALTH AND SAFETY. HP and any of its subcontractors will, when at the
Customer's site, conduct their activities so that their equipment,
working Conditions and methods are safe and without risk to health for
their own and Customer's employees as well as for any that user. other
Customer's site.
c) NON-RESTRICTIIVE RELATIONSHIP. HP may provide the same or similar
Consulting Services and Deliverables to other customer
d) NO PUBLICITY. Neither party will publicize or disclose to any third
party without the consent of the other party, either the price or
other terms f this Agreement or the fact of its existence. a aid
execution, except as may be necessary to comply with other obligations
stated in this Agreement.
<PAGE>
e) NO JOINT VENTURE. N thing contained in this Agreement will be
construed as creating a joint venture, partnership or employment
relationship between the parties hereto, nor will either party have
the right, power or authority to create any obligation or only,
express or implied on behalf of the other.
f) NO ASSIGNMENT. Except will respect to HP's rights regarding the use of
subcontractors, neither party may assign any rights or obligations
under this Agreement to any Statement of Work without the prior
written consent of the that party.
g) EXPORT ADMINISTRATION REGULATIONS. If Customer exports any Deliverable
outside the country in which the Deliverable is delivered to Customer,
Customer assumes responsibility for complying with applicable laws and
regulations and for obtaining required export and import
authorizations. Customer will not export or re-export any technical
data in violation of U.S. Export Administration regulations or other
applicable export regulations.
h) FORCE MAJEURE. Neither party will be liable for performance delays or
for non-performance due to causes beyond its reasonable control.
i) NOTICES. All notices required under or regarding this Agreement or any
individual Statement of Work will be in writing and will be considered
given upon personal delivery of a written notice to the HP
representative or Customer representative designated in the Statement
of Work, or within five days of mailing, postage prepaid and
appropriately addressed.
j) WAIER. Neither party's failure to exercise any of its rights under
this Agreement will constitute or be deemed a waiver or forfeiture of
those rights.
k) SERABILITY. If any term or provision of this Agreement is held to be
illegal or unenforceable, the validity or enforceability of the
remainder of this Agreement will not be affected.
1) EXHIBITS. The fo1lowing documents are attached hereto as exhibits, the
terms of which are incorporated by reference in their entirety:
A Statement of Work (and all subsequently executed Statements of
Work)
B change Order Procedures
m) PRECEDENCE. In the event of conflict between the provision. of this
Agreement and any attached exhibit or Statement of Work, the
provisions of this Agreement will to the extent of such conflict take
precedence.
n) ENTIRE AGREEMENT. This Agreement and its exhibits and Statements of
Work constitute the entire agreement between HP and Customer and
supersede any prior or contemporaneous communications,
<PAGE>
HEWLETT PACKARD
CONSULTING SERVICES AGREEMENT (Deliverables)
Exhibit TM02
representations or agreements between the parties, whether oral or
written, regarding the subject matter of this Agreement. Customer's
additional or different terms and conditions will not apply. The terms
and conditions of this Agreement may not be changed except by an
amendment signed by an authorized representative of each party.
o) APPLICABLE LAW. This Agreement is made under and will be construed in
accordance with the law of California without giving effect to that
state's choice of law rules.
<PAGE>
HEWLETT PACKARD
CONSULTING SERVICES AGREEMENT (Deliverables)
Exhibit TM02
<TABLE>
<CAPTION>
<S> <C>
AGREED TO: AGREED TO:
HP /S/ Shrinivas Sukamar Customer /s/ Jack Marshall
--------------------- ---------------------
Authorized Representative Signature Authorized Representative Signature
Name: Srinivas Sukumar Name: Jack Marshall
Title Hewlett Packard ITIO Genera Manager Title: CEO- PhotoLoft.com
Address: 1100 Wolf Road Address: 300 Orchard City Dr. Suite 142
Cupertino, CA 95014, USA Campbell, CA 95008
</TABLE>
<PAGE>
HEWLETT PACKARD
CONSULTING SERVICES AGREEMENT (Deliverables)
Exhibit TM02
EXHIBIT A
STATEMENT OF WORK FORM
REDACTED
<PAGE>
HEWLETT PACKARD
CONSULTING SERVICES AGREEMENT (Deliverables)
Exhibit TM02
EXHIBIT B
CHANGE ORDER PROCEDURES
The following procedures will be observed for all Change Orders:
1. Either party may request a Change Order but all Change Orders must be
in writing and prepared by HP. HP may charge a reasonable fee for
investigating, preparing or initiating a Change Order at Customer's
request.
2. Change Order requests will be processed as a on as is reasonably
possible.
3. All Change Orders will be in the form attached hereto as Attachment
B-1 to Exhibit B, and will be signed by the appointed representative
for each party (or individuals specified in writing as substitute
during periods of illness or absence).
4. Change Orders will include the following:
a) A description of any additional work to be performed and/or any
changes to the performance required of either party.
b) A statement of the impact of the work or changes on the
Consulting Services, the Deliverables, the acceptance tests or
criteria, or other requirements of the Agreement.
c) The estimated timetable to complete the work specified in the
Change Order and the impact, if any, on the delivery schedule,
pricing and payments.
d) Specific individuals with management or coordination
responsibilities.
a) The documentation to be modified or supplied as part or the work.
f) Any additional acceptance test procedures for such work.
<PAGE>
HEWLETT PACKARD
CONSULTING SERVICES AGREEMENT (Deliverables)
Exhibit TM02
EXHIBIT B
TO CONSULTING SERVICES ADDENDUM
ATTACHMENT B-1
CHANGE ORDER FORM
1. Describe services or changes requested (attach additional pages if
necessary).
REQUESTED BY CUSTOMER: REQUESTED BY:
Customer: ________________ HP: ______________
----------------------------------- -----------------------------------
Authorized Representative Signature Representative Signature
Name: ________________ Name: ____________________
Title: _______________ Title: ___________________
Date: ________________ Date: _____________________
2. Modifications, clarifications or supplements to description of services or
changes requested in paragraph 1 above, if any (attach additional pages if
necessary):
3. Assignment of necessary HP personnel and resources (attach additional pages
if necessary):
<PAGE>
HEWLETT PACKARD
CONSULTING SERVICES AGREEMENT (Deliverables)
Exhibit TM02
4. Impact on price, delivery schedule, payment schedule, Deliverables,
Consulting Services and ancceptance test procedures and criteria (attach
additional pages if nece5sary):
a. Price
b. Delivery Schedule and Payment Schedule
c. Deliverables
d. Consulting Services
a. Acceptance Test Procedures and Criteria
<PAGE>
HEWLETT PACKARD
CONSULTING SERVICES AGREEMENT (Deliverables)
Fxhibit TM02
Change Order Approved and Accepted
Customer: ______________________ HP: ______________________________
- ----------------------------------- ----------------------------------
Authorized Representative Signature Authorized Representative Signature
Name: __________________________ Name: ____________________________
Title: __________________________ Title: ____________________________
Date: __________________________ Date: ____________________________
Change Order Rejected
Customer: ______________________ HP: ______________________________
- ----------------------------------- ----------------------------------
Authorized Representative Signature Authorized Representative Signature
Name: __________________________ Name: ____________________________
Title: __________________________ Title: ____________________________
Date: __________________________ Date: ____________________________
<PAGE>
AMENDMENT TO THE DISTRIBUTION AND REPUBLISHING AGREEMENT COVERING THE PRODUCT
"HOWDY" DATED THE 17.10.97
Between
infoMedia Software Publishing GmbH, Heltorfer Str. 12; 40472 Dusseldorf
hereafter referred to as the "licensee"
and
PhotoLoft.com Inc., of 300 Orchard City Drive, Suite 142, Campbell, CA 95008,
USA, hereafter referred to as the "Licensor"
1.0 EXTENSION OF TERM
The duration of the term has been extended for a further 24 month.
2.0 FINANCIAL CONSIDERATION
For bundling and sub-licensing purposes infoMedia shall deliver to licensor 40%
of the net profits gained from such a deal.
All other matters arising out of this agreement are covered in the main contract
and those are applicable at all times.
NAME:
-------------
Date: 12 FEB. 99
-------------
infoMedia Software Pub ishing GmbH.
NAME:
NAME:
-------------
Date: 2/25/99
-------------
PhotoLoft.com Inc
<PAGE>
SUBLEASE
--------
THIS SUBLEASE (this "Sublease") is dated for reference purposes as of February
--------
1, 1999, and is made by and between Summit Microelectronics, a California
- --------
corporation ("Sublandlord"), and Photoloft, Inc., a _____________ corporation
("Subtenant"). Sublandlord and Subtenant hereby agree as follows:
1. RECITALS: This Sublease is made with reference to the fact that The
--------
Manufacturers Life Insurance Company, as Landlord ("Master Landlord"), and
Sublandlord, as tenant, are parties to that certain Lease dated _____, (the
"Lease"), with respect to those certain premises described therein (the "Master
Premises"), in that certain building (the "Building") located at 300 Orchard
City Drive, Campbell, California. A copy of the Master Lease is attached hereto
as Exhibit A. Capitalized terms used and not defined herein shall have the
meaning ascribed to them in the Master Lease.
2. SUBLEASED PREMISES: Subject to the terms and conditions of this
-------------------
Sublease, Sublandlord hereby subleases to Subtenant, and Subtenant, and
Subtenant hereby subleases from Sublandlord, a portion of the Master Premises
deemed to be approximately 1288 rentable square feet as more particularly
----
described on Exhibit B attached hereto and incorporated herein by reference
----------
(hereinafter, the "Subleased Premises").
3. TERM:
----
A. TERM. The term (The "Term") of this Sublease shall be for the
----
period commencing on the later of 1 Feb, 99 or the date by which Master
---------
Landlord consents to this Sublease (the "Commencement Date") and ending 1 Sept,
-------
99, unless this Sublease is sooner terminated pursuant to its terms or the
- --
Master Lease is sooner terminated pursuant to its terms (the "Expiration Date").
B. OPTION TO EXTEND. Subtenant shall have no options or rights to
----------------
extend the Term of this Sublease or expand the Subleased Premises.
4. RENT:
----
A. BASE RENT. Commencing on the Commencement Date and continuing
----------
each month throughout the Term of this Sublease, Subtenant shall pay to
Sublandlord as base rent for the Subleased Premises equal monthly installments
of $2,770.20 ("Base Rent"). Base Rent and Additional Rent, as defined in
---------
Paragraph 4.B below, (collectively, hereinafter "Rent") shall be paid in advance
-
on or before the first (1st) day of each month. Rent for any period during the
Term hereof which is for less than one (1) month of the Term shall be a pro rata
portion of the monthly installment based on a thirty (30) day month. Rent shall
be payable without notice or demand and without any deduction, offset, or
abatement, in lawful money of the United States of America. Rent shall be paid
directly to Sublandlord at ___________, Attention: _______________, or such
other address as may be designated in writing by Sublandlord.
B. ADDITIONAL RENT. All monies other than Base Rent required to
----------------
be paid by Subtenant under this Sublease, including, without limitation,
__________ payable by Subtenant under the Master Lease, and all amounts payable
by Sublandlord to the master Landlord with respect to or reasonably allocable to
the Subleased Premises shall be deemed additional rent ("Additional Rent").
C. PREPAYMENT OF RENT. Upon execution hereof by Subtenant,
--------------------
Subtenant shall pay to Sublandlord the sum of _________ ($________), which shall
constitute Base Rent for the first (1st) month of the Term.
5. SECURITY DEPOSIT: Upon execution hereof by Subtenant, Subtenant
-----------------
shall deposit with Sublandlord the sum of five thousand Dollars and no/100ths
------------- ---------
($5,000.00) (the "Security Deposit"), in cash, as security for the performance
by Subtenant of the terms and conditions of this Sublease. If Subtenant fails
to pay Rent or other charges due under this Sublease or otherwise defaults with
respect to any provision of this Sublease, then Sublandlord may draw upon, use,
apply or retain all or any portion of the Security Deposit for the payment of
any Rent or other charge in default, for the payment of any other sum which
Sublandlord has become obligated to pay by reason of Subtenant's default, or to
compensate Sublandlord for any loss or damage which Sublandlord has suffered
thereby. If Sublandlord so uses or applies all or any portion of the Security
Deposit, then Subtenant, within ten (10) days after demand by Sublandlord
therefor, shall deposit cash with Sublandlord in the amount required to restore
the Security Deposit to the full amount stated above. Sublandlord may commingle
the Security Deposit with its own funds and Subtenant shall not be entitled to
interest on the Security Deposit. Upon the expiration of this Sublease and
Subtenant's vacation of the Subleased Premises, provided Subtenant is not in
default under the terms of this Sublease, Sublandlord shall return to Subtenant
so much of the Security Deposit as has not been applied to Sublandlord pursuant
to this Paragraph, or which is not otherswise required to cure Subtenant's
defaults.
6. HOLDOVER: Subtenant acknowledges that the Termination Date of the
--------
Master Lease is __________ and that it is critical that Subtenant surrender the
Subleased Premises on or before the Expiration Date in accordance with the terms
of this Sublease. Accordingly, Subtenant shall indemnify, defend and hold
harmless Sublandlord from and against all losses, costs, claims, liabilities and
damages resulting from Subtenant's failure to surrender the Subleased Premises
on the Expiration Date in the condition required under the terms of this
Sublease (including, without limitation, any liability or damages sustained by
Sublandlord as a result of a holdover of the Master Premises by Sublandlord
occasioned by the holdover of the Subleased Premises by Subtenant). In
addition, Subtenant shall pay Sublandlord holdover rent equal to two hundred
percent (200%) of Base Rent plus any Additional Rent payable hereunder for any
period from the Expiration Date through the date Subtenant surrenders the
Premises in the condition required hereunder.
7. REPAIRS: The parties acknowledge and agree that Subtenant is
-------
subleasing the Subleased Premises on an "AS IS" basis, and that Sublandlord has
made no representations or warranties, express or implied, whatsoever, with
respect to the Subleased Premises, including, without limitation, any
representation or warranty as to the suitability of the Subleased Premises for
Subtenant's intended use. Sublandlord shall have no obligation whatsoever to
make or pay the cost of any alterations, improvements or repairs to the
Subleased Premises, including, without limitation, any improvement or repair
required to comply with any law, regulation, building code or ordinance
(including the Americans with Disabilities Act of 1990, as may be amended). In
addition, Sublandlord shall have no obligation to perform any repairs or any
other obligation of Master Landlord required to be performed by Master Landlord
and Subtenant shall look solely to Master Landlord for performance of said
obligations. Sublandlord shall, however, request performance of the same in
writing from Master Landlord promptly after being requested to do so by
Subtenant, and shall use Sublandlord'' reasonable efforts (not including the
payment of money, the incurring of any liabilities, or the institution of legal
proceedings) to obtain Master Landlord's performance.
8. RIGHT TO CURE DEFAULTS: If Subtenant fails to pay any sum of money
-----------------------
to Sublandlord, or fails to perform any other act on its part to be performed
hereunder, then Sublandlord may, but shall not be obligated to, make such
payment or perform such act. All such sums paid, and all reasonable costs and
expenses of performing any such act, shall be deemed Additional Rent payable by
Subtenant to Sublandlord upon demand, together with interest thereon at the
lesser of (i) ten percent (10%) per annum or (ii) the maximum rate allowable
under law (the "Interest Rate") from the date of the expenditure until repaid.
9. INDEMNITY: Except to the extent caused by the gross negligence or
---------
willful misconduct of Sublandlord, its agents, employees or contractors,
Subtenant shall indemnify, defend with counsel reasonably acceptable to
Sublandlord, protect and hold harmless Sublandlord and its agents, employees,
directors, shareholders, contractors and representatives from and against any
and all losses, claims, liabilities, judgements, causes of actions, damages,
costs and expenses (including, without limitation, reasonable attorneys' and
experts' fees), caused by or arising in connection with: (i) the use,
occupancy, operation or condition of the Subleased Premises; (ii) the negligence
or willful misconduct of Subtenant or its agents, employees, contractors or
invitees; and (iii) a breach of subtenant's obligations under this Sublease or
the provisions of the Master lease assumed by Subtenant hereunder. Subtenant's
covenants under this Paragraph shall survive termination of this Sublease.
10. ASSIGNMENT AND SUBLETTING: Subject to the terms of the Master
---------------------------
Lease, incorporated herein, as modified by this Sublease, Subtenant may not
assign any interest in this Sublease, sublet any of the Subleased Premises,
transfer any interest of Subtenant therein or permit any use of the Subleased
Premises by another party (collectively, "Transfer"), without prior written
consent of Sublandlord and Master Landlord. Subtenant shall pay within five (5)
days of demand therefor a sum equal to all of Sublandlord's costs, including,
without limitation, reasonable attorneys' fees, incurred in connection with any
Transfer (including, without limitation, any costs payable by Sublandlord to
Master Landlord). A consent to one Transfer shall not be deemed to be a consent
to any subsequent Transfer. Any Transfer without such consent shall be void
and, at the option of Sublandlord, shall terminate this Sublease. Sublandlord's
waiver or consent shall be void and, at the option of Sublandlord, shall
terminate this Sublease. Sublandlord's waiver or consent to any assignment or
subletting shall be ineffective unless set forth in writing, and Subtenant shall
not be relieved from any of its obligations under this Sublease unless the
consent expressly so provides.
11. USE:
---
A. Subtenant may use the Subleased Premises for those purposes
permitted in the Master Lease only and for no other purpose whatsoever.
-2-
<PAGE>
B. Subtenant shall not use, store, keep, handle, manufacture,
transport, release, discharge, emit or dispose of any Hazardous Materials in,
on, under, about, to or from the Subleased Premises. Subtenant shall indemnify,
defend with counsel reasonably acceptable to Sublandlord and hold harmless
Sublandlord and its agents, employees, directors, shareholders, contractors and
representatives from and against all claims, actions, suits, proceedings,
judgments, losses, costs, personal injuries, damages, liabilities, deficiencies,
fines, penalties, damages, attorneys' fees, consultants' fees, investigations,
detoxifications, remediations, removals, and expenses of every type and nature,
arising from or relating in any manner to the use, storage, handling,
manufacture, transportation, release, discharge, emission or disposal of
Hazardous materials on or about the Subleased Premises or Building during the
Term of this Sublease by Subtenant or its agents, employees, contractors or
invitees.
C. Subtenant shall not do or permit anything to be done in or
about the Subleased Premises which would (i) injure the Subleased Premises; or
(ii) vibrate, shake, overload, or impair the efficient operation of the
Subleased Premises or the sprinkler systems, heating, ventilating or air
conditioning equipment, or utilities systems located therein. Subtenant shall
not store any materials, supplies, finished or unfinished products or Sections
of any nature outside of the Subleased Premises. Subtenant shall comply with
all reasonable rules and regulations promulgated from time to time by
Sublandlord and master Landlord.
12. EFFECT OF CONVEVANCE: As used in this Sublease, the term
----------------------
"Sublandlord" means the holder of the Tenant's interest under the Master Lease.
In the event of any assignment or transfer of the Tenant's interest under the
Master Lease, which assignment or transfer may occur at any time during the Term
hereof obligations of Sublandlord hereunder, and it shall be deemed and
construed, without further agreement between the parties hereto, that any
transferee has assumed and shall carry out all covenants and obligations
thereafter to be performed by Sublandlord hereunder. Sublandlord may transfer
and deliver any security of Subtenant to the transferee of the Tenant's interest
under the Master Lease, and thereupon Sublandlord shall be discharged from any
further liability with respect thereto.
13. DELIVERY AND ACCEPTANCE: Sublandlord shall deliver the Subleased
-------------------------
Premises in broom-clean condition. This Sublease shall not be void or voidable,
nor shall Sublandlord be liable to Subtenant for any loss or damage, by reason
of delays in the Commencement Date or delays in Sublandlord delivering the
Subleased Premises to Subtenant for any reason whatsoever; provided, however,
that Rent shall abate until Sublandlord delivers possession of the Subleased
Premises to Subtenant. Subtenant has fully inspected the Subleased Premises and
is satisfied with the condition thereof. By taking possession of the Subleased
Premises, Subtenant conclusively shall be deemed to have accepted the Subleased
Premises in its then-existing, "AS IS" condition, without any representation or
warranty whatsoever from Sublandlord with respect thereto.
14. IMPROVEMENTS: Subtenant shall not make any alterations or
------------
improvements to the Subleased Premises, except in accordance with the master
Lease, and with the prior written consent of both master Landlord and
Sublandlord.
15. RELEASE AND WAIVER OF SUBROGATION: Notwithstanding anything to the
---------------------------------
contrary in this Sublease, Sublandlord and Subtenant hereby release each other
from any damage to property or loss of any kind which is caused by or results
from any risk that normally would be insured against under any property
insurance policy contains a clause to the effect that this release shall not
affect the right of the insured to recover under the policy. Each party shall
use its reasonable efforts to cause each property insurance policy obtained by
it to provide that the insurer waives all right of recovery against the other
party and its agents and employees in connection with any damage or injury
covered by the policy, and each party shall notify the other party if it is
unable to obtain a waiver of subrogation. Sublandlord shall not be liable to
Subtenant, nor shall Subtenant be entitled to terminate this Sublease or to
abate Rent for any reason, including, without limitation, (i) failure or
interruption of any utility system or service or (ii) failure of Master Landlord
to maintain the Subleased Premises as may be required under the Master Lease.
The obligations of Sublandlord shall not constitute the personal obligations of
the officers, directors, trustees, partners, joint ventures, members, owners,
stockholders or other principals or representatives of the business entity.
16. INSURANCE: Subtenant shall obtain and keep in full force and
---------
effect, at Subtenant's sole cost and expense, during the Term the insurance
required to be carried by the "Tenant" under the master Lease. Subtenant shall
include Sublandlord and Master Landlord as an additional insured in any policy
of insurance carried by Subtenant in connection with this Sublease and shall
provide Sublandlord with certificates of insurance upon Sublandlord's request.
-3-
<PAGE>
17. DEFAULT: Subtenant shall be in material default of its obligations
-------
under this Sublease if any of the following events occur:
A. Subtenant fails to pay any Rent when due, when such failure
continues for three (3) days after such sum becomes due; or
B. Subtenant fails to perform any term, covenant or condition of
this Sublease (except those requiring payment of Rent) and fails to cure such
breach within ten (10) days after delivery of a written notice specifying the
nature of the breach; provided, however, that if more than ten (10) days are
reasonably required to remedy the failure, then Subtenant shall not be in
default if Subtenant commences the cure within the ten (10) day period and
thereafter completes the cure within thirty (30) days after the date of the
notice; or
C. Subtenant makes a general assignment of its assets for the
benefit of its creditors, including attachment of, execution on, or the
appointment of a custodian or receiver with respect to a substantial part of
Subtenant'' property or any property essential to the conduct of its business;
or
D. Subtenant abandons the Subleased Premises; or
E. Subtenant commits any other act or omission which constitutes a
default under the master Lease, which has not been cured after delivery of any
written notice required and passage of one-half (1/2) of any applicable grace
period provided in the master Lease as modified, if at all, by the provisions of
this Sublease.
18. REMEDIES: In the event of any default by Subtenant, Sublandlord
--------
shall have all remedies provided to the "Landlord" in the Master Lease as if an
event of default had occurred thereunder and all other rights and remedies
otherwise available at law and in equity. Sublandlord may resort to its
remedies cumulatively or in the alternative.
19. SURRENDER: On or before the Expiration Date or any sooner
---------
termination of this Sublease, Subtenant shall remove all of its trade fixtures,
personal property and all alterations constructed by Subtenant in the Subleased
Premises which are required to be removed under the terms of this Sublease and
shall surrender the Subleased Premises to Sublandlord in (a) good condition,
order and repair, reasonable wear and tear excepted and (b) free of Hazardous
Materials used, stored, handled, manufactured, transported, released,
discharged, emitted or disposed of by Subtenant or its agents, employees,
contractors or invitees. Subtenant shall repair any damage to the Subleased
Premises caused by Subtenant's removal of its personal property, furnishings and
equipment. If the Subleased Premises are not so surrendered, then Subtenant
shall be liable to Sublandlord for all costs incurred by Sublandlord in
returning the Subleased Premises to the required conditions, plus interest
thereon at the Interest Rate.
20. BROKER: Sublandlord and Subtenant each represent to the other that
------
they have dealt with no real estate brokers, finders, agents or salesmen in
connection with this transaction. Subtenant agrees to indemnify and hold
Sublandlord harmless from and against all claims for brokerage commissions,
finder's fees or other compensation made by any other agent, broker, salesman or
finder as a consequence of Subtenant's actions or dealings with such other
agent, broker, salesman, or finder.
21. NOTICES: Unless at least five (5) days' prior written notice is
-------
given in the manner set forth in this paragraph, the address of each party for
all purposes connected with this Sublease shall be that address set forth below
their signatures at the end of this Sublease. All notices, demands or
communications in connection with this Sublease shall be properly addressed and
delivered as follows: (a) personally delivered; or (b) submitted to an
overnight courier service, charges prepaid; or (c) deposited in the mail
(certified, return-receipt requested, and postage prepaid). Notices shall be
deemed delivered upon receipt, if personally delivered, one (1) business day
after being so submitted to an overnight courier service and three (3) business
days after deposit in the United States mail, if mailed as set forth above. All
notices given to Master Landlord under the Master Lease shall be considered
received only when delivered in accordance with the Master Lease.
22. OTHER SUBLEASE TERMS:
----------------------
A. INCORPORATION BY REFERENCE. Except as set forth below and
----------------------------
except as the otherwise provided in this Sublease, the terms and conditions of
this Sublease shall include all of the terms of the Master Lease and such terms
are incorporated into this Sublease as if fully set forth herein, except that:
(i) each reference in such incorporated sections to "Lease" shall be deemed a
reference to this "Sublease"' (ii) each reference to the "Premises" shall be
deemed a reference to the "Subleased Premises"; (iii) each reference to
"Landlord" and "Tenant" shall be deemed a reference to the "Subleased Premises"'
(iii) each reference to "Landlord" and "Tenant" shall be deemed a reference to
"Sublandlord" and "Subtenant", respectively, except as otherwise expressly set
forth herein; (iv) with respect to work, services, utilities,
-4-
<PAGE>
electricity, repairs (or damage caused by Master Landlord), restoration,
insurance, indemnities, reimbursements, representations, warranties or the
performance of any other obligation of master Landlord under the master Lease,
whether or not incorporated herein, the sole obligation of Sublandlord shall be
to request the same in writing from master Landlord as and when requested to do
so by Subtenant, and to use Sublandlord's reasonable efforts (not including the
payment of money, the incurring of any liabilities, or the institution of legal
proceedings) to obtain master Landlord's performance; (v) with respect to any
obligation of Subtenant to be performed under this Sublease, wherever the Master
Lease grants to "Tenant" a specified number of days to perform its obligations
under the master Lease, except as otherwise provided herein, Subtenant shall
have five (5) fewer days to perform the obligation, including without
limitation, curing any defaults; (vi) with respect to any approval required to
be obtained from the "Landlord" under the Master Lease, such approval must be
obtained from both Master Landlord and Sublandlord, and Sublandlord's
withholding of approval shall in all events be deemed reasonable if for any
reason master Landlord's approval is not obtained; (vii) in any case where the
"Landlord" reserves or is granted the right to manage, supervise, control,
repair, alter, regulate the use of, enter or use the Premises or any areas
beneath, above or adjacent thereto, such reservation or grant of right of entry
shall be deemed to be for the benefit of both Master Landlord and Sublandlord;
(viii) in any case where "Tenant" is to indemnify, release or waive claims
against "Landlord", such indemnity, release or waiver shall be deemed to run
from Subtenant to both Master Landlord and Sublanlord; (ix) in any case where
"Tenant" is to execute and deliver certain documents or notices to "Landlord",
such obligation shall be deemed to run from Subtenant to both Master Landlord
and Sublandlord; and (x) the following modifications shall be made to the master
Lease as incorporated herein:
(a) the following provisions of the Master Lease are not
incorporated herein: the Recitals, Paragraphs 2(b), 3(a), Schedules F, H, N, O,
and K; and
(b) references to "Landlord" in the following provisions
shall mean "Master Landlord" only (subject, however, to clauses (iv) through
(ix) of the introductory language to this Paragraph 22.A): Paragraphs 8, 11, 18.
B. ASSUMPTION OF OBLIGATIONS. This Sublease is and at all times
---------------------------
shall be subject and subordinate to the master Lease and the rights of master
Landlord thereunder. Subtenant hereby expressly assumes and agrees: (i) to
comply with all provisions of the master lease which are assumed by Subtenant
hereunder; and (ii) to perform all the obligations on the part of the "Tenant"
to be performed under the terms of the Master Lease with respect to the
Subleased Premises during the term of this Sublease. In the event the Master
Lease is terminated for any reason whatsoever, this Sublease shall terminate
simultaneously with such termination without any liability of Sublandlord to
Subtenant. In the event of a conflict between the provisions of this Sublease
and the Master Lease, as between Sublandlord and Subtenant, the provisions of
this sublease shall control.
23. RIGHT TO CONTEST: If Sublandlord does not have the right to
------------------
contest any matter in the Master Lease due to expiration of any time limit that
may be set forth therein or for any other reason, then notwithstanding any
incorporation of any such provision from the Master Lease in this Sublease,
Subtenant shall also not have the right to contest any such matter.
24. COVENANT OF QUIET ENJOYMENT: Subtenant peacefully shall have, hold
---------------------------
and enjoy te Subleased Premises, subject to the terms and conditions of this
Sublease, provided that Subtenant pays all Rent imposed hereunder and otherwise
performs all of Subtenant's covenants and agreements contained herein.
25. CONDITIONS PRECEDENT: Notwithstanding anything to the contrary in
---------------------
this Sublease, this Sublease and Sublandlord's and Subtenant's obligations
hereunder are conditioned upon Sublandlord's receipt of the written consent of
master Landlord to this Sublease in form and substance satisfactory to
Sublandlord. If Sublandlord does not receive such consent within thirty (30)
days after execution of this Sublease by Sublandlord, then Sublandlord may
terminate this Sublease by giving Subtenant written notice thereof, and upon
such termination, Sublandlord shall return to Subtenant its payment of the first
month's Base Rent paid by Subtenant pursuant to Paragraph 4 hereof and the
Security Deposit.
26. CHOICE OF LAW: SEVERABILITY: This Sublease shall in all respects
-----------------------------
be governed by and construed in accordance with the laws of the State of
California. If any term of this Sublease is held to be invalid or unenforceable
by any court of competent jurisdiction, then the remainder of this Sublease
shall remain in full force and effect to the fullest extent possible under the
law, and shall not be affected or impaired.
27. AMENDMENT: This Sublease may not be amended except by the written
---------
agreement of all parties hereto.
-5-
<PAGE>
28. ATTORNEYS' FEES: If either party brings any action or legal
----------------
proceeding with respect to this Sublease, the prevailing party shall be entitled
to recover from the other party reasonable attorneys' fees, experts' fees, and
court costs. If either party becomes the subject of any bankruptcy or
insolvency proceeding, then the other party shall be entitled to recover all
reasonable attorneys' fees, experts' fees, and other costs incurred by that
party in protecting its rights hereunder and in obtaining any other relief as a
consequence of such proceeding.
29. WAIVER: If either Sublandlord or Subtenant waives the performance
------
of any term, covenant or condition contained in this Sublease, 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, or constitute a course of dealing
contrary to the expressed terms of this Sublease. The acceptance of Rent by
Sublandlord shall not constitute a waiver of any preceding breach of Subtenant
of any term, covenant or condition of this Sublease regardless of Sublandlord's
knowledge of such preceding breach oat the time Sublandlord accepted such Rent.
Failure by Sublandlord to enforce any of the terms, covenants or conditions of
the Sublease for any length of time shall not be deemed to waive or decrease the
right of Sublandlord to insist thereafter upon strict performance by Subtenant.
Waiver by Sublandlord of any term, covenant or condition contained in this
Sublease may only be made by a written document signed by Sublandlord, based
upon full knowledge of the circumstances.
30. NO DRAFTING PRESUMPTION: The parties acknowledge that this
-------------------------
Sublease has been agreed to by both the parties, that both Sublandlord and
Subtenant have had the opportunity to consult with attorneys with respect to the
terms of this Sublease and that no presumption shall be created against
Sublandlord because Sublandlord drafted this Sublease. Except as otherwise
specifically set forth in this Sublease, with respect to any consent,
determination or estimation of Sublandlord required or allowed in this Sublease
or requested of Sublandlord, Sublandlord's consent, determination or estimation
shall be given or made solely by Sublandlord in Sublandlord's good faith
opinion, whether or not objectively reasonable. If Sublandlord fails to respond
to any request for its consent within the time period, if any, specified in this
Sublease, Sublandlord shall be deemed to have disapproved such request.
31. AUTHORITY TO EXECUTE: Subtenant and Sublandlord each represent and
--------------------
warrant to the other that each person executing this Sublease on behalf of each
party is duly authorized to execute and deliver this Sublease on behalf of that
party.
32. COUNTERPARTS: This Sublease may be executed in one (1) or more
------------
counterparts each of which shall be deemed an original but all of which together
shall constitute one (1) and the same instrument. Signature copies may be
detached from the counterparts and attached to a single copy of this Sublease
physically to form one (1) document.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Sublease as of the day
and year first above written.
SUBLANDLORD: SUBTENANT:
Summit Microelectronics, Inc. Photoloft, Inc.,
A California corporation a __________ corporation
By: _______________________________ By: _____________________________
Print Name: _______________________ Print Name: _____________________
Title: ____________________________ Title: __________________________
By: _______________________________ By: _____________________________
Print Name: _______________________ Print Name: _____________________
Title: ____________________________ Title: __________________________
-7-
<PAGE>
CONSENT TO SUBLEASE
-------------------
Master Landlord hereby acknowledges receipt of a copy of this Sublease and
consents to the terms and conditions of this Sublease. By this consent, master
Landlord shall not be deemed in any way to have entered into the Sublease or to
have consented to any further assignment or sublease. Master Landlord, however,
agrees that the Subrogation Waiver set forth in the master Lease shall also
apply to Subtenant as well as to Sublandlord.
MASTER LANDLORD:
The Manufacturers Life
Insurance Company
By: _______________________________
Its: _______________________________
Dated: ____________________________
-8-
<PAGE>
AMENDMENT# I TO
CONSULTING SERVICES AGREEMENT
DATED OCTOBER 22,1998
BETWEEN
HEWLETT-PACKARD COMPANY
AND
PHOTOLOFT.COM
This Amendment #1 ("Amendment #1") to that certain Consulting Services Agreement
dated October 22, 1998 by and between Hewlett-Packard Company ("HP") and
PhotoLoft.Com ("PhotoLoft") is entered into by and between HP and Licensor
effective as of February 9, 1999.
A. WHEREAS, HP and PhotoLoft entered into an agreement entitled Consulting
Services Agreement as of October 22, 1998 (the "Agreement") under which, among
other things, HP assisted PhotoLoft with the installation and integration of the
PhotoLoft OpenPix Image Print
Solution into PhotoLoft-com, upon the terms and conditions set forth in the
Agreement; and
B. WHEREAS, HP and PhotoLoft would now like to amend the Agreement upon the
terms and conditions set forth herein below;
NOW, THEREFORE, the parties agree to amend the Agreement as follows:
1. The following new Section 8.J is hereby added immediately following the
present end of Section 8 (LICENSES) of the Agreement:
8.J Notwithstanding the restrictions on sublicensing, copying or transfer
of the Software hereunder, upon Customer acceptance of a Deliverable
and receipt by HP of the associated payment in full, HP grants to
Customer a non-exclusive, non-transferable license to make and
distribute copies of that piece of Software known as "OpenPix Print
Integrator," in object code form only, to end-user customers for use
in accessing images from a computer server, provided that: (i)
Customer provide it's end-user customers with copies of the OpenPix
Print Integrator Software License Terms and Warranty Disclaimer
(attached hereto as Exhibit A); (ii) Customer reproduce all copyright
and other ------- proprietary notices in the original copy of the
OpenPix Print Integrator on any copies made under this Section, and
(iii) any distribution of OpenPix Print Integrator is made free of
charge to end-user customers.
2. Entire Agreement. This Amendment #l, together with the Agreement, sets
-----------------
forth the entire agreement between the parties with respect to the matters
set forth herein and supersedes all prior and contemporaneous discussions
or understandings between them relating thereto.
<PAGE>
Capitalized terms used in this Amendment #1 and not defined herein shall
have the meanings set forth in the Agreement. Except as otherwise expressly
set forth herein, the Agreement and each and every provision thereof shall
remain in full force and effect.
3. Counterparts. This Amendment # 1 may be executed in counterparts, each of
------------
which shall be deemed an original.
IN WITNESS WHEREOF, HP and PhotoLoft have executed this Amendment #1 as of
the date first written above.
HEWLETT-PACKARD COMPANY PhotoLoft.com
By: By: /S/Jack Marshall
----------------
Print Name: Print: Jack Marshall
-------------
Title: Title: President
-------------
2
<PAGE>
BAYTREE CAPITAL ASSOCIATES, LLC
INVESTMENT BANKERS
THE TRUMP BUILDING AT
40 WALL STREET
NEW YORK, NEW YORK 10005
212/509-1700 - FACSIMILE 2121363-4231
February 10, 1999
PhotoLoft.Com
300 Orchard City Drive
Suite 142
Campbell, CA 95009
Attn: Mr. Jack Marshall
President
Dear Mr. Marshall:
This letter agreement (the "Agreement")confirms the terms and conditions of
---------
the exclusive engagement of Baytree Capital Associates, LLC ("Baytree")by
-------
PhotoLoft.Com, Inc., ("PhotoLoft") and its affiliates to render certain
financial advisory and investment banking services to PhotoLoft and any person,
corporation or other entity formed by or affiliated with such person (the
"Company") which participates in, or which was formed for the purpose of
effecting a Transaction (as hereinafter defined) and effecting a certain
Financing as hereinafter described. In the context of this Agreement,
"Transaction" shall mean, whether effected in one transaction or -a series of
transactions, (i) any merger, consolidation, reorganization, recapitalization or
other business combination pursuant to which the business of PhotoLoft is
combined with that of another entity (the "Merger Candidate"),whether or not
-----------------
PhotoLoft is the surviving entity in such business combination.
1. SERVICES. Pursuant to the terms and conditions set forth in this
Agreement, Baytree will assist PhotoLoft in negotiating and effecting: (i) a
Loan (as hereinafter described in subparagraph (a) if such is requested by
PhotoLoft; and (ii) a Transaction; and will act as the placement agent with
regard to obtaining the Financing (as hereinafter described in Paragraph 2) for
the Company. In this regard, Baytree proposes to undertake certain activities on
behalf of PhotoLoft, including, the following:
1
<PAGE>
(a) structuring and negotiating a loan (the "Loan") in the
principal amount of Two Hundred Fifty Thousand ($250,000) Dollars should said
loan be requested in writing by PhotoLoft prior to the consummation of the
Transaction, provided, however, that said Loan shall be subject to Baytree's
satisfactory completion of its due diligence review of PhotoLoft (as herein
further described in paragraph 2 (a) ). In the event that PhotoLoft shall
request the Loan, it shall simultaneously execute and deliver the Agreement and
Plan of Reorganization with regard to the Transaction arid execute and deliver
the Note (as hereinafter defined). Said Loan will be provided to PhotoLoft
within five (5) days of such a request on terms and conditions substantially in
the form of the Note (the "Note) as set forth in Annex B attached hereto;
(b) identifying a Merger Candidate which is a public company
within the meaning of Rule 15(c)-2 of the Securities Act of 1934;
(c) advising PhotoLoft as to the structure and form of the
Transaction;
(d) assisting PhotoLoft in obtaining appropriate information and
performing due diligence regarding the Merger Candidate;
(e) counseling PhotoLoft with respect to, and conducting,
negotiations with, the Merger Candidate regarding the Transaction;
(f) arranging for consummation of the Transaction;
(g) arranging for financing on behalf of the Company as otherwise
discussed in this Agreement;
(h) rendering such other financial advisory and investment banking
services as may from time to time be agreed upon by Baytree and PhotoLoft or the
Company.
Any obligations pursuant to this Paragraph I shall survive the termination
or expiration of this Agreement.
2. FINANCING.
----------
(a) Baytree shall arrange (i) the Loan (if one has been so requested
pursuant to Paragraph(a) and(ii) a financing (the "Financing") on behalf of the
Company. The Financing shall be arranged either by the conversion of the Loan
into equity of PhotoLoft or other funding or a combination of conversion and
other funding, and will be completed through a limited offering. The Financing
will be for a maximum of One Million ($1,000,000.00 US) Dollars and
2
<PAGE>
will be completed contemporaneously with consummation of the Transaction. The
limited offering comprising the Financing will be of Common Stock of the
Company. The Loan and the Financing will be subject to Baytree's successful and
satisfactory completion in Baytree's sole and absolute discretion of its due
diligence prior to the funding of the Loan or the Financing, such shall include,
but not be limited to, a review and analysis of PhotoLoft's financial status,
business plans and any pending or potential litigation. The placement of the
Common Stock will rely on Rule 504 of Regulation D ("Regulation D")promulgated
------------
under the U.S. Securities Act of 1933, as amended (the "Act"),and shall thereby
-----
be exempt from the registration requirements of the Act, provided, however, that
should Rule 504 of Regulation D be changed so that the exemption from
registration for stock so issued is altered then no further Financing as
contemplated in this Agreement will occur unless and until the parties to this
Agreement enter into a separate and distinct Agreement to continue with a
financing wherein the terms of said financing shall be specifically described.
In connection with their purchase of the Common stock in the Financing, the
purchasers will receive Two Hundred Thousand (200,000) shares of the Common
Stock of the Company for every One Hundred Thousand ($ 100,000 US) Dollars so
invested and a prorata number of shares for any portion thereof so invested.
Baytree shall not be deemed an agent of the Company nor an agent of
PhotoLoft for any other purpose. Any proceeds shall be paid, less the Expense
Allowance and legal fees reimbursement (each as defined in Paragraph 4 below),
to the Company at a closing held with respect to the sale of the Common Stock in
the Financing (the "Closing" against delivery of certificates representing the
securities sold. The Company agrees that until the later of the termination of
the Offering Period, or twelve (12) months from the Closing, it will not,
directly or indirectly, seek to arrange or place any equity or convertible
security financing, without Baytree's prior written consent except if such
financing is a sale of securities of nonconvertible debt. Additionally, the
Company agrees that upon Closing, the Company shall grant Baytree a right of
first refusal for a period of twenty-four (24) months from the Closing with
respect to any sale of securities by the Company except if the sale is either
pursuant to an underwritten public offering or is of securities of
non-convertible debt and except for the issuance of securities upon the exercise
of currently outstanding options and warrants. Baytree shall have ten (10)
business days following receipt of written notice from the Company setting forth
the terms of any proposed financing to be conducted by it (a "Notice"), to
exercise the right of first refusal by presenting a letter of intent for a
proposed financing on the same or better economic terms as presented to the
Company. In the event Baytree fails to exercise this right to present a letter
of intent for a proposed financing, the Company shall be free to sell such
securities in the manner, amount and for the prices and terms set forth in the
Notice without liability to Baytree, subject to Baytree's right of consent for a
period of twelve (12) months as set forth above.
(b) In the event that the Loan shall have been converted to stock
pursuant to the terms of the Note, then and in that event Baytree shall be
deemed to have provided the Company that portion of the Financing contemplated
in subparagraph (a) hereof
3
<PAGE>
and shall therefore be entitled to all Fees and Expenses provided for in
Paragraph 4 of this Agreement.
This Agreement does not constitute an understanding or a commitment,
express or implied, by Baytree to provide any of the Financing from its own
account. Any obligations pursuant to this Paragraph 2 shall survive the
termination or expiration of this Agreement.
3. REGISTRATION RIGHTS Baytree shall receive one "Piggyback"
--------------------
registration right for the shares of Common Stock representing fees or other
compensation to Baytree.
4. FEES AND EXPENSES PhotoLoft agrees to cause the Company to pay
-------------------
Baytree for its services as follows:
(a) Baytree shall receive a placement fee in cash and shares of
the Common Stock of the Company(the "Placement Fee") herein equal to Ten
Thousand ($10,000.) Dollars and Twenty Five Thousand (25,000) shares of the
Company's Common Stock for each gross One Million ($ 1,000,000.00 US) Dollars
raised in the Financing and a pro rata amount of cash and number of shares for
any part of One Million ($1,000,000.00 US) Dollars so raised. The Placement Fee
and Baytree's Expense Allowance (as hereinafter defined) with respect to the
Financing shall be payable concurrently with Closing (or each Closing if more
than one).
(b) In addition to any other fees payable to Baytree hereunder,
if at any time commencing with the date hereof and ending twenty-four (24)
months after termination of this Agreement or the closing of the Transaction
(whichever is later) a party introduced to PhotoLoft or the Company by Baytree
or by any broker-dealers selected by Baytree to participate in the Financing
shall purchase or commit to purchase any securities (other than those offered in
the Financing) of PhotoLoft, the Company or any person or entity controlled by
or under common control with PhotoLoft, the Company, or such other person (which
commitment the Company shall have accepted or shall subsequently accept),
Baytree shall receive as compensation the Placement Fee that would have been
payable and issuable had such purchases occurred in connection with the
Financing, regardless of the type of securities so purchased or the form of
payment therefor.
(c) It shall be the Company's obligation to bear all of its
expenses in connection with the Transaction and the Financing, which expenses
shall include, but are not limited to the following: printing and duplication
costs, postage and mailing expenses with respect to the transmission of offering
materials, registrar and transfer agent fees, accounting fees and issue and
transfer taxes, if any. In addition, PhotoLoft will cause the Company to pay to
Baytree a non-accountable expense allowance of Thirty Thousand ($30,000.00 US)
Dollars with respect to the Transaction and Financing, which shall include the
fees and reasonable
4
<PAGE>
disbursements of Baytree's and the Merger Candidate's legal counsel incurred in
connection with the Transaction and Financing (collectively, the
Any obligation pursuant to this Paragraph 4 shall survive the termination
or expiration of this Agreement.
(d) Following the provision of a Merger Candidate into which there
shall have been any merger, consolidation, reorganization, recapitalization or
other business combination pursuant to Paragraph I of this Agreement, the
Company agrees that six hundred twenty five thousand (625,000) shares of the
Common Stock of the Merger Candidate shall remain with the original shareholders
of the Merger Candidate.
Any obligation pursuant to this Paragraph 4 shall survive the
termination or expiration of this Agreement.
5. REPRESENTATIONS, WARRANTIES, AND COVENANTS.
----------------------------------------------
(a) PhotoLoft represents and warrants and shall cause the Company to so
represent and warrant that this Agreement has been duty authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company enforceable against the Company in accordance with its terms- The
Company further represents and warrants that consummation of the transactions
contemplated herein will not conflict with or result in a breach of any of the
terms, provisions or conditions of any written agreement to which it is a party.
(b) PhotoLoft has not done, and shall cause the Company not to do
anything that may be considered a direct selling effort in the United States or
which could reasonably be expected to result in general preconditioning of the
United States Market for the Securities of the Company. Subject to the
requirements of law, the Company shall not make any public announcement of the
Financing without the prior written consent of Baytree and in any event, shall
make no such disclosure which could be deemed to be a general solicitation or
directed selling effort within the meaning of Regulation D under the Act,
(c) Baytree covenants that it will comply with all Rules and Regulations
applicable to Regulation D with regard to this Offering. Further, Baytree
represents and warrants that this Agreement has been duly authorized, executed
and delivered by it and constitutes its valid and binding agreement enforceable
against it in accordance with its terms. Baytree further represents and warrants
that consummation of the transactions contemplated herein will not conflict with
or result in a breach of any of the terms, provisions or conditions of any
written agreement to which it is a party.
5
<PAGE>
(d) PhotoLoft represents, warrants, and covenants that at the time of
any Loan and /or Financing contemplated herein there shall be no liens,
encumbrances or security interest in any assets of PhotoLoft (or any
subsidiaries or affiliates), said unencumbered assets shall include but not be
limited to the intellectual or proprietary property of PhotoLoft which property
shall include but not be limited to, any and all copyrights issued to, titled
to, or claimed by PhotoLoft.
(e) The PhotoLoft represents and PhotoLoft shall cause the Company to
so represent that upon the completion of the Transaction it shall cause a
nominee identified by Baytree to be added to the Company's Board of Directors
for the maximum term provided for in the Company's By Laws.
(f) PhotoLoft represents and shall cause the Company to so represent
that they have One Million Dollars ($1,000,000) of eligibility pursuant to Rule
504 of Regulation D. In the event that it is deter-mined that the Company has
less than One Million Dollars of eligibility, then the amount undertaken in
connection with any Financing shall be reduced to the amount of the Company's
remaining Rule 504 eligibility.
(g) The Company acknowledges that Baytree's undertaking to perform the
Financing described in Paragraph 2 is on a best efforts basis.
(h) PhotoLoft represents and warrants and shall cause the Company to so
represent and warrant that the post Transaction capitalization of the Company
shall be as set forth on Annex C attached hereto.
6. TERM. The term of this Agreement with regard to the completion
-----
of the Transaction shall be ninety (90) days from the date of the execution of
this Agreement. This Agreement may be renewed upon mutual written agreement of
Baytree and PhotoLoft and/or the Company. PhotoLoft agrees to cause the Company
to pay Baytree any fees specified in Paragraph 4 if the events specified therein
shall occur during the term of this Agreement or within two years after the
termination or expiration of this Agreement. Any obligation pursuant to this
Paragraph 6 shall survive the termination or expiration of this Agreement.
Notwithstanding anything in this Agreement to the contrary, in the event
that Baytree shall have failed to arrange for and fund the Loan within thirty
(30) days of the date of a request for such Loan then and in that event this
Agreement shall be null and void and of no further force or effect.
7. INDEMNIFICATION. In addition to the payment of fees and
----------------
reimbursement of fees and expenses provided for above, and regardless of whether
the Transaction or the
6
<PAGE>
Financing are consummated, PhotoLoft agrees to indemnify and to cause the
Company to indemnify Baytree and any broker-dealers who participate in the
Financing, as set forth in Annex A, attached hereto, which is incorporated by
reference as if fully set forth herein. This Paragraph 7 shall survive the
termination or expiration of this Agreement.
8. INFORMATION. PhotoLoft recognizes and confirms that in
------------
performing its duties pursuant to this Agreement, Baytree and broker-dealers
selected by it to participate in the Financing will be using and relying on
data, material, and other information (the "Information") or ("Offering
----------
Materials")furnished by PhotoLoft and the Merger Candidate or their respective
- ---------
employees and representatives. In connection with Baytree's activities on
PhotoLoft's behalf, PhotoLoft will cooperate with Baytree and will furnish
Baytree with all information concerning PhotoLoft the Transaction and, to the
extent available to PhotoLoft the Merger Candidate, which Baytree deems
appropriate and will provide Baytree with access to PhotoLoft's officers,
directors, employees, independent accountants and legal counsel for the purpose
of performing Baytree's obligations pursuant to this agreement. To the extent
that PhotoLoft has access to the officers, directors, employees, independent
accountants and legal counsel of the Merger Candidate, it will provide such
access to Baytree for the purpose of performing Baytree's obligations pursuant
to this Agreement. PhotoLoft hereby agrees and represents that all Information
(a) furnished to Baytree pursuant to this Agreement, and (b) contained in any
filing by PhotoLoft with any court or governmental or regulatory agency,
commission or instrumentality (each, an "Agency")shall, at all times during the
------
period of the engagement of Baytree hereunder, be accurate and complete in all
material respects and that, if the Information provided by PhotoLoft becomes
materially inaccurate, incomplete or misleading during the term of Baytree's
engagement hereunder, the Company shall so advise Baytree in writing.
Accordingly, Baytree assumes no responsibility for the accuracy and completeness
of the Information. In rendering its services hereunder, Baytree will be using
and relying upon the Information without independent verification thereof or
independent evaluation of any of the assets or liabilities of PhotoLoft or the
Merger Candidate. All Information that is not publicly available will be treated
in strict confidence, and will not be revealed, or used (except in the
performance of Baytree's duties under this Agreement) by Baytree unless legally
compelled as determined in good faith by counsel to Baytree.
9. DISCLOSURE. PhotoLoft agrees that, except as compelled by law,
-----------
rule or regulation, it will not disclose and will cause the Company not to
disclose the services or advice to be provided by Baytree under this Agreement
publicly or to any third party without the prior written approval of Baytree.
10. SEVERABILITY. If any provision of this Agreement shall be held
-------------
or made invalid by a statute, rule, regulation, decision of a tribunal or
otherwise, the remainder of this
7
<PAGE>
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
11. AUTHORIZATION. PhotoLoft and Baytree represent and warrant that
--------------
each has all requisite power and authority, and all necessary authorizations, to
enter into and carry out the terms and provisions of this Agreement.
12. SUCCESSORS. This Agreement and all rights, liabilities and
-----------
obligations hereunder shall be binding upon and inure to the benefit of each
party's successors but may not be assigned without the prior written approval of
the other party. Any such approval shall not be unreasonably withheld.
13. HEADINGS. The descriptive headings of the Paragraphs of this
---------
Agreement are inserted for convenience only, do not constitute a part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement.
14. NO BROKERS. PhotoLoft represents and warrants to Baytree that
------------
there are no brokers, representatives or other persons which have an interest in
or claim for compensation due to Baytree from any transaction contemplated
herein.
15. NOTICES. Any notice or other communication to be given to
--------
PhotoLoft hereunder may be given by delivering the same in writing to the
address set forth above, and any notice or other communication to be given to
Baytree may be given by delivering the same to Baytree Capital Associates, LLC,
40 Wall Street, New York, New York 10005, Attention: Michael Gardner, Principal,
or in each case, such other address of which a party shall have received notice.
Any notice or other communication hereunder shall be deemed given three days
after deposit in the mail if mailed by certified mail, return receipt requested,
or on the day after deposit with an overnight courier service for next day
delivery, or on the date personally delivered.
16. ARBITRATION. In the case of any dispute, question, controversy
------------
or claim arising among the parties hereto which shall arise out of or in
connection with this Agreement, the same shall be submitted to arbitration
before a panel of three arbitrators in New York, New York, in accordance with
the rules of the American Arbitration Association. One arbitrator shall be
appointed by the party or parties bringing the claims ("Claimant") and one
----------
arbitrator shall be appointed by the party or parties defending the claim
("Respondent").The arbitrators selected by such parties shall be selected within
---------
thirty (30) days after notification by the Claimant to the Respondent that it
has determined to submit such dispute, question, controversy or claim to
arbitration. The two arbitrators so selected shall select a third arbitrator
within thirty (30) days after the selection of the arbitrator selected by such
parties. Should a party fail to select an arbitrator within the specified time
period, or should the arbitrators selected by the parties fail to select a third
arbitrator, the missing arbitrator or arbitrators shall be appointed by the New
York, New York office of the American Arbitration Association. The decision of
the panel shall be final and binding on the parties and enforceable in any court
of competent jurisdiction. The costs of the arbitration will be imposed upon the
Claimant and Respondent as determined by the arbitration panel or, failing such
determination, will be home equally by the
8
<PAGE>
Claimant and the Respondent. The successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees in addition to any other
relief to which it may be entitled.
In the event of any dispute, question, controversy or claim arising among
the parties hereto which shall arise out of or in connection with this
Agreement, the parties shall keep the proceeding related to such controversy in
strict confidence and shall not disclose the nature of said dispute, the status
of the proceeding or any testimony, documents or information obtained or
exchanged in the course of said proceeding without the express written consent
of all parties to such dispute unless either party is legally compelled to make
any such disclosure.
Please confirm that the foregoing correctly sets forth our agreement by
signing the enclosed letters in the space provided and returning them to us for
execution, whereupon we will send you a fully executed original letter which
shall constitute a binding agreement as of the date first above written.
Very truly yours,
BAYTREE CAPITAL ASSOCIATES, LLC
By: /s/ Michael Gardner
-------------------------------
Michael Gardner, Principal
Agreed to and accepted as of the above date
PHOTOLOFT.COM, INC.
By: /s/ Jack Marshall
----------------------------
Jack Marshall, President
9
<PAGE>
ANNEX A: INDEMNIFICATION
PhotoLoft agrees to indemnify and to cause the Company to indemnify
Baytree, any broker-dealers who participate in the Financing, and their
respective employees, directors, officers, agents, affiliates, and each person,
if any, who controls them within the meaning of either Section 20 of the
Securities Exchange Act of 1934 or Section 15 of the Securities Act of 1933
(each such person, including Baytree and such broker-dealers, is referred to as
"Indemnified Party") from and against any losses, claims, damages and
liabilities, joint or several including all legal or other expenses reasonably
incurred by an Indemnified Party in connection with the preparation for or
defense of any threatened or pending claim, action or proceeding, whether or not
resulting in any liability ("Damages"), to which such Indemnified Party, in
connection with its services or arising out of its engagement hereunder, may
become subject under any applicable Federal or state law or otherwise, including
but not limited to liability (i) caused by or arising out of an untrue statement
or an alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact necessary in order to make a statement not
misleading in light of the circumstances under which it was made, (ii) caused by
or arising out of any act or failure to act or (iii) arising out of Baytree's
engagement or the rendering by any Indemnified Party of its services under this
Agreement; provided, however, that neither PhotoLoft nor the Company will be
liable to the Indemnified Party hereunder to the extent that any Damages are
found in a final non-appealable judgment by a court of competent jurisdiction to
have resulted from the gross negligence, bad faith or willful misconduct of the
Indemnified Party seeking indemnification hereunder.
These indemnification provisions shall be in addition to any liability
which PhotoLoft and/or the Company may otherwise have to any Indemnified Party.
If for any reason, other than a final non-appealable judgment finding an
Indemnified Party liable for Damages for its gross negligence, bad faith, or
willful misconduct the foregoing indemnity is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless, then PhotoLoft
shall and shall cause the Company, to contribute to
10
<PAGE>
the amount paid or payable by an Indemnified Party as a result of such Damages
in such proportion as is appropriate to reflect not only the relative benefits
received by PhotoLoft or the Company, as the case may be and its shareholders on
the one hand, and Baytree on the other, but also the relative fault of PhotoLoft
or the Company, as the case may be, and the Indemnified Party as well as any
relevant equitable considerations, subject to the limitation that in no event
shall the total contribution of all Indemnified Parties to all such Damages
exceed the amount of fees actually received and retained by Baytree and the
broker-dealers selected by Baytree that participate in the placement of the
Common Stock.
Promptly after receipt by the Indemnified Party of notice of any claim or
of the commencement of any action in respect of which indemnity may be sought,
the Indemnified Party will notify PhotoLoft or the Company in writing of the
receipt or commencement thereof and PhotoLoft or the Company shall have the
right to assume the defense of such claim or action (including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of fees
and expenses of such counsel), provided that the Indemnified Party shall have
the right to control its defense if, in the opinion of its counsel, the
Indemnified Party's defense is unique or separate to it as the case may be, as
opposed to a defense pertaining to PhotoLoft or the Company In any event, the
Indemnified Party shall have the right to retain counsel reasonably satisfactory
to PhotoLoft or the Company, at PhotoLoft's or the Company's expense, to
represent it in any claim or action in respect of which indemnity may be sought
and agrees to cooperate with PhotoLoft or the Company and PhotoLoft's or the
Company's counsel in the defense of such claim or action, it being understood,
however, that PhotoLoft or the Company shall not, in connection with any one
such claim or action or separate, but substantially similar or related claims or
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys, for all the Indemnified Parties unless the defense
of one Indemnified Party is unique or separate from that of another Indemnified
Party subject to the same claim or action. In the event that PhotoLoft or the
Company does not promptly assume the defense of a claim or action, the
Indemnified Party shall have the right to employ counsel reasonably satisfactory
to PhotoLoft or the Company, at PhotoLoft's or, the Company's expense, to defend
such claim or action. The omission by an Indemnified Party to promptly notify
PhotoLoft or the Company of the receipt or commencement of any claim or action
in respect of which indemnity may be sought will relieve PhotoLoft or the
Company from any liability PhotoLoft or the Company may have to such Indemnified
Party only to the extent that such a delay in notification materially prejudice
PhotoLoft's or the Company's defense of such claim or action. PhotoLoft or the
Company shall not be liable for any settlement of any such claim or action
effected without its written consent, which shall not be unreasonably withheld
or delayed. Any obligation pursuant to this Annex shall survive the termination
or expiration of this Agreement.
11
<PAGE>
ANNEX B: FORM OF PROMISSORY NOTE
$250,000 February -, 1999
- --------
FOR VALUE RECEIVED, PHOTOLOFT.COM, INC. (the "Maker"), a California corporation,
with offices at 300 Orchard City Drive, Suite 142, Campbell, California 95008,
hereby promises to pay to the order of (the "Payee"),
------------------------
residing at (or with a business office located
at) , the principle sum of Two Hundred Fifty
----------------------------------
Thousand ($250,000.00 US) Dollars, together with interest on the principal
amount outstanding from the date hereof until payment in full.
The principal amount of this Note together with all interest then accrued
shall be payable three months from the date hereof (the "Due Date"). However,
the term of this Note shall automatically be extended for an additional three
months from the original Due Date in the event that the conversion of this Note
as hereinafter described has not been completed by the original Due Date.
Interest on outstanding principal shall accrue at the rate of nine (9%) percent
per annum from the date hereof and shall be paid on the Due Date. All interest
shall be calculated on the basis of a 365 day year, counting the actual number
of days elapsed from the date of this Note to the Due Date. Interest on any
overdue payments of principal and interest due hereunder shall accrue and be
payable at the rate of twelve (12%) percent per annum, based on the actual
number of days elapsed from the date such principal or interest payment was due
to the date of actual payment.
The principal of this Note may be prepaid in whole or in part without
premium or penalty, at any time. The Maker shall prepay the principal and
accrued interest of this Note, as and to the extent that the Maker receives
proceeds (net of expenses) (1) from the sale of common stock of the Maker prior
to the Due Date, or (2) as a part of being acquired by a public company prior to
the Due Date.
Maker shall offer the Payee the option to convert this note into shares of
common stock of any corporation which acquires at least fifty-one (51%) percent
of the Maker at any time prior to the Due Date. The terms of the issuance of
such shares shall be part of a structure wherein it is contemplated that such
corporation shall have 13,000,000 shares of common stock outstanding after the
acquisition of Maker (but before the conversion of a maximum of $250,000 of
Notes or further financing). In connection with said acquisition, it is
contemplated that the company shall issue 12,375,000 shares to the shareholders
of the Maker and shall undertake a financing by selling 2,000,000 shares at $.50
per share (the "Offering Shares"). The shares issuable upon conversion of this
Note shall be a part of the Offering Shares and shall be converted at $.50 per
share.
12
<PAGE>
All principal and interest payments hereunder are payable in lawful money
of the United States of America to the Payee at the address first shown above,
or at such other address as may be directed by Payee, in immediately available
funds.
The Maker hereby waives presentment, demand, dishonor, protest, notice of
protest, diligence and any other notice or action otherwise required to be given
or taken under the law in connection with the delivery, acceptance, performance,
default, enforcement or collection of this Note, and expressly agrees that this
Note, or any payment hereunder, may be extended, modified or subordinated (by
forbearance or otherwise) from time to time, without in any way affecting the
liability of the Maker.
In the event that (a) the Maker shall fail to pay when due, any payment of
principal or interest due hereunder and such failure to pay is not cured within
ten (10) days of the date such payment was due, or (b) if the maker shall (i)
make a general assignment for the benefit of creditors; (ii) be adjudicated a
bankrupt or insolvent; (iii) file a voluntary petition in bankruptcy-, (iv) take
advantage of any bankruptcy or insolvency law or statute of the United States of
America or any state or jurisdiction thereof now or hereafter in effect; (v)
have a petition or proceeding filed against the Maker under any bankruptcy or
insolvency law or statute of the United States of America or any state or
jurisdiction thereof, which petition or proceeding is not dismissed within
forty-five (45) days from the date of commencement thereof; or (vi) have a
receiver, trustee, custodian, conservator or other person appointed by any court
to take charge of the Maker's affairs, assets or business and such appointment
is not vacated or discharged within forty-five (45) days thereafter; then, and
upon the happening of any such event, the Payee, at Payee's option, by written
notice to the Maker, may declare the entire indebtedness evidenced by this Note
immediately due and payable, whereupon the same shall forthwith mature and
become immediately due and payable without presentment, demand, protest or
further notice.
In the event that Maker shall fail to pay when due any principal or
interest payment, and the Payee shall exercise or endeavor to exercise any of
its remedies hereunder, the Maker shall pay all reasonable costs and expenses
incurred in connection therewith including, without limitation, reasonable
attorneys' fees, and the Payee may take judgment for all such amounts in
addition to all other sums due hereunder.
No consent or waiver by the Payee with respect to any action or failure to
act by maker which, without such consent or waiver, would constitute a breach of
any provision of this Note shall be valid and binding unless in writing and
signed by the Payee.
All agreements between the Maker and the Payee are expressly limited to
provide that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to the
13
<PAGE>
Payee for the use, forbearance or detention of the indebtedness evidenced hereby
exceed the maximum amount which the Payee is permitted to receive under
applicable law. If, from any circumstances whatsoever, fulfillment of any
provision hereof, at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by law, then, without the
necessity of any action by Payee or Maker, the obligation to be fulfilled shall
automatically be reduced to the limit of such validity, and if from any
circumstance the Payee should ever receive as interest an amount which would
exceed the highest lawful rate, such amount which would be excessive interest
shall be applied to the reduction of the principal balance hereof, and not to
the payment of interest. As used herein, the term "applicable law" shall mean
the law in affect as of the date hereof, provided, however, that in the event
there is a change in the law which results in a higher permissible rate of
interest, then this Note shall be governed by such new law as of its effective
date. This provision shall control every other provision of all agreements
between the Maker and the Payee.
This Note shall be governed by and construed in accordance with the laws of
the State of New York, except to the extent that such laws are superseded by
Federal enactments.
If any covenant or other provision of the Note is invalid, illegal, or
incapable of being enforced by reason of any rule of law or public policy, all
other covenants and provisions of the Note shall nevertheless remain in full
force and effect, and no covenant or provision shall be deemed dependent upon
any other covenant or provision.
IN WITNESS WHEREOF, the Maker, by its duly authorized officer, has
executed this Note as of the date first above written.
PHOTOLOFT.COM, INC.
By: /s/ Jack Marshall
------------------------------
Jack Marshall, President
14
<PAGE>
ANNEX C
-------
PHOTOLOFT.COM CAPITALIZATION TABLE
<TABLE>
<CAPTION>
SHARES PERCENTAGE
---------- -----------
<S> <C> <C>
ORIGINAL PHOTOLOFT.COM SHAREHOLDERS. . 12,375,000 82.36%
---------- -----------
INVESTORS. . . . . . . . . . . . . . . 2,000,000 13.31%
---------- -----------
ORIGINAL MERGER CANDIDATE SHAREHOLDERS 625,000 4.16%
---------- -----------
BAYTREE. . . . . . . . . . . . . . . . 25,000 0.17%
---------- -----------
TOTAL. . . . . . . . . . . . . . . . . 15,025,000 100.00%
- -------------------------------------- ---------- -----------
</TABLE>
15
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") effective as of the 26th day of February
1999, between photoLoft.com , a Nevada corporation having its principal place of
business at 300 Orchard City Drive, Suite 142, Campbell, California 98005
("Employer") , and Jack Marshall ("Employee").
WITNESSETH:
WHEREAS, Employer desires to employ Employee upon the terms and subject to the
conditions hereinafter set forth, and Employee desires to accept such
employment:
NOW, THEREFORE, for and in consideration of the premises, the mutual promises,
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows.
1. EMPLOYMENT. Subject to the terms and conditions of this Agreement,
Employer shall employ Employee and Employee hereby accepts such employment.
2. TERM. The term of this Agreement shall be for the period from March 1,
1999 through December 31, 2001 (the "Initial Term"), thereafter to continue on a
year to year basis, unless or until terminated pursuant to the terms of this
agreement.
3. POSITION AND DUTIES.
A. POSITION. Employee shall serve as CEO, President and Treasurer and shall
perform the duties and exercise the powers in connection with such position and
which may from time to time be reasonably assigned to or vested in him or her by
the board of Directors or similar governing body of Employer (the "Board") or
the duly authorized committee or designee thereof.
B. FULL TIME EFFORTS. Employee shall perform and discharge faithfully,
diligently and to the best of his or her ability such duties and
responsibilities and shall devote his or her full-time efforts to the business
and affairs of Employer.
C. NO INTERFERENCE WITH DUTIES. Employee shall not devote time ot other
activities such as would inhibit or otherwise interfere with the proper
performance of his or her duties.
4. WORK STANDARD. Employee hereby agrees that he or she will at all times
comply with abide by all terms and conditions set forth in this Agreement, and
all applicable work policies, procedures and rules as may be issued by Employer.
5. COMPENSATION.
A. BASE SALARY. Subject to the terms and conditions set forth in this
Agreement, Employer shall pay Employee, and Employee shall accept, a salary
("Base Salary") at the annual rate of $120,000 for all services rendered during
the term of this Agreement. Base Salary shall be reviewed no less frequently
than annually. The Base Salary is not to be considered in any way to limit
Employee's opportunity to receive appropriate increases in Base Salary during
the term of this Agreement. The Base Salary shall be apid in accordance with
Employer's normal payroll procedures.
B. INCENTIVE BONUS. Subject to the terms and conditions set forth in this
Agreement, Employer shall pay Employee, and Employee shall accept, an annual
bonus ("Incentive Bonus") to be no less than 50% of Employee's Base Salary as
defined by this Agreement if the following criteria are met: 1) the company
begins trading on the NASD Bulletin Board during calendar year 1999, 2) the
company achieves a minimum of $100,000 via e-commerce in 1999, 3) there are an
average of 500,000 hits to the site for a one month period. The Incentive Bonus
is not to be considered in any way to limit Employee's opportunity to receive
additional cash bonus compensation as deemed appropriate by the Employer. This
incentive Bonus shall be paid no later than February 15 of the year following
the year the incentive bonus was earned.
C. STOCK OPTIONS. Employer will grant to Employee: 250,000 shares of
PhotoLoft.com common stock exercisable at current market value on the day of the
grant when traffic to the site averages 500,000 hits during a one month period;
500,000 shares of photoLoft.com common stock exercisable at current market value
on the day of the grant when traffic to the site averages 750,000 hits during a
one month period; and 750,000 shares of PhotoLoft.com common stock exercisable
at current market value on the day of the grant when traffic to the
PhotoLoft.com web site averages 1,000,000 hits per day for a one month period.
D. WITHHOLDING. All compensation payable to Employee pursuant to this
Agreement shall be subject to, and Employer will deduct and withhold, all
applicable federal, state and local withholding, employment, social security,
and other similar taxes.
6. FRINGE BENEFITS. During the term of Employee's employment under this
Agreement, Em0ployee shall receive the fringe benefits described below:
A. MEDICAL, DENTAL, VISION, LIFE AND DISABILITY INSURANCE. Employer shall
provide Employee and eligible dependents ("spouse and children under 21 years of
age") with medical, dental and vision insurance coverage. Life and disability
insurance coverage will be provided by Employer to Employee.
B. VACATION. Employee is eligible for vacation as outlined in the standard
corporate vacation plan.
C. CAR ALLOWANCE. Employee is eligible for a monthly car allowance of $500.
D. OUT OF POCKET EXPENSES. Employer will reimburse Employee for out of
pocket expenses ("out of pocket expenses") as incurred by the Employee in the
normal course of business, including, but not limited to corporate
entertainment, non-capital purchases and corporate travel.
7. LAWS, REGULATIONS, AND PUBLIC ORDINANCES. Employee shall comply with all
federal, state, and local statutes, regulations and public ordinances governing
the work.
8. CONFIDENTIAL INFORMATION; INVENTIONS; CONFLICTING EMPLOYMENT; RETURNING
COMPANY DOCUMENTS; SOLICITATION OF EMPLOYEES; NON-COMPETE.
A. COMPANY INFORMATION: I agree at all times during the term of my
employment and thereafter, to hold in strictest confidence, and not use, except
for the benefit of the Employer, or to disclose to any person, firm or
corporation without written authorization of the board of Directors of the
Company, any Confidential Information of the Company. I understand that
Confidential Information means any company proprietary information, technical
data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, customer lists and customers (including, but
not limited to, customers of the company on whom I called or with whom I became
acquainted during the term of my employment), markets, software, developments,
inventions, processes, formulas, technology, designs, drawings, engineering,
hardware configuration information, marketing, finances, or other business
information disclosed to me by the company either directly or indirectly in
writing, orally or by drawings or inspection of parts or equipment. I further
understand that Confidential Information does not include any of the foregoing
items which has become publicly known and made generally available through no
wrongful act of mine.
B. FORMER EMPLOYER INFORMATION. I agree that I will not, during my
employment with the company, improperly use or disclose any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity with which I have an agreement or duty to keep in confidence,
information acquired by me in confidence, if any, and that I will not bring onto
the premises of the Company any unpublished document or proprietary information
belonging to any such employer, person or entity unless consented to in writing
by such employer, person or entity.
C. THIRD PARTY INFORMATION. I recognize that the company has received and
in the future will receive from third parties their confidential or proprietary
information subject to a duty on certain limited purposes. I agree to hold all
such confidential or proprietary information in the strictest confidence and not
to disclose it to any person, firm or corporation or to use it except as
necessary in carrying out my work for the company consistent with the company's
agreement with such third party.
D. INVENTIONS RETAINED AND LICENSED: I have attached hereto as Exhibit A, a
list describing all inventions, original works of authorship, developments,
improvements and trade secrets which were made by me prior to my employment with
the company (collectively referred to as Prior inventions), which belong to me,
which relate to the company's purposed business, products or hereunder; or, if
not such list is attached, I represent that there are no such prior inventions.
If in the course of my employment wit the company, I incorporate into a company
product, process or machine a prior invention owned by me or in which I have an
interest, the Company is hereby granted and shall have a non-exclusive,
royalty-free, irrevocable, perpetual, worldwide license to make, have made,
modify, use and sell such prior invention as part of or in connection with such
product, process or machine.
E. ASSIGNMENT OF INVENTIONS; I agree that I will promptly make full written
disclosure to the company, will hold in trust for the sole right and benefit of
the company and hereby assign to the company, or its designee, all my right,
title, and interest in and to any and all inventions, original works of
authorship, developments, concepts, improvements or trade secrets, whither or
not patentable or registrable under copyright or similar laws, which I may
solely or jointly conceive or develop or reduce to practice, during the period
of time I am in the employee of the company (collectively referred to as
"Inventions"), except as provided in Section i below. I further acknowledge
that all original works of authorship which are made by me (solely or jointly
with others) within the scope of my employment and which are protectable by
copyright are "works made for hire," as that term is defined in the United
States Copyright Act.
F. MAINTENANCE OF RECORDS: I agree to keep and maintain adequate and current
written records of all inventions made by me (solely or jointly with others)
during the term of my employment with the company. The records will be in the
form of notes, sketches, drawings and any other format that may be specified by
the company. The records will be available to and remain the sole property of
the company at all times.
G. PATENT AND COPYRIGHT REGISTRATION: I agree to assist the company, or its
designee, at the company's expense, in every proper way to secure the company's
rights in the inventions and any copyrights, patents, mask work rights or other
intellectual property rights relating thereto in any and all countries,
including the disclosure to the company of all pertinent information and data
with respect thereto, the execution of all applications, specifications, oaths,
assignments and all other instruments which the company shall deem necessary in
order to apply for and obtain such rights and in order to assign and convey to
the comp0any, its successors, assigns and nominees the sole and exclusive
rights, title and interest in and to such inventions, and any copyrights,
patents, mask work rights, or other intellectual property rights relating
thereto. I further agree that my obligation to execute or cause to be executed,
when it is in my power to do so, any such instrument or papers shall continue
after the termination of this Agreement. If the company is unable because of my
mental or physical incapacity or for any other reason to secure my signature to
apply for or to pursue any application for any United States or foreign patents
or copyrights registrations covering inventions or original works of authorship
assigned to the company as above, then I hereby irrevocably designate and
appoint 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 or copyright registrations thereon
with the same legal force and effect as if executed by me.
H. EXCEPTIONS TO ASSIGNMENTS. I understand that the provisions of this
Agreement requiring assignment of inventions to company do not apply to any
invention which qualifies fully under the provisions of California Labor Code
Section 2870. I will advise the company promptly in writing of any inventions
that I believe meet the criteria in California Labor Code Section 2870 and not
otherwise disclosed on Exhibit A.
I. CONFLICTING EMPLOYMENT. I agree that, during the term of my employment
with the company, I will not engage in any other employment, occupation,
consulting or other business activity directly related to the business in which
the company is now involved or become involved during the terms of my
employment, nor will I engage in any other activities that conflict with my
obligations to company.
J. RETURNING COMPANY DOCUMENTS. I agree that, at the time of leaving the
employ of the company I will deliver to the company (and will not keep in my
possession or deliver to anyone else) any and all devices, records, data, notes,
reports, proposals, lists, correspondence, specifications, drawings, blueprints,
sketches, materials, equipment, others documents, or property, or reproductions
of any aforementioned items developed by me pursuant to my employment with the
company or otherwise belonging to the company, its successors or assigns.
K. SOLICITATION OF EMPLOYEES. I agree that I shall not, for a period of one
year immediately following the termination of my relationship with the company
for any reason, whether with or without cause, either directly or indirectly, on
my own behalf or in the service or on behalf of other, solicit, recruit or
attempt to persuade any person to terminate such person's employment with the
company, whether or not such person is a full-time employee or whether or not
such employment is pursuant to a written agreement or is at-will.
L. NON-COMPETE. I agree that I shall not, for a period of one year
immediately following the termination of my relationship with the company for
any reason, whether with or without cause, either directly or indirectly engage
in any activity that competes with PhotoLoft.com
9. TERMINATION FOR CAUSE. This Agreement may be terminated at any time by
Employer without prior notice thereof to Employee and without any liability
owning to Employee under this Agreement under the following conditions, each of
which shall constitute "Cause";
A. FAILURE TO DISCHARGE DUTIES. Employee willfully neglects or refuses to
discharge his duties hereunder or refuses to comply with any lawful and
reasonable instructions given to him by Employer without reasonable excuse;
B. BREACH. Employee shall have committed any material breack, or repeated
or continued after written notice of any breach, whether material or not, of his
obligations hereunder;
C. GROSS MISCONDUCT. Employee is guilty of gross misconduct. For the
purposes of this Agreement the following acts shall constitute gross misconduct:
I) Any act involving fraud or dishonesty or breach of applicable regulations
of competent authorities in relation to trading or dealing with stocks,
securities, investments and the like;
II) The carrying out of any activity or the making of any statement which
would prejudice or impair the good name or standing of Employer or would bring
Employer into contempt, riducule or would reasonable shock or offend any
community in which Employer is located;
III) Attendance at work in a state of intoxication or otherwise being found
in possession at his place of work any prohibited drug or substance, possession
of which would amount to a criminal offense;
IV) Assault or other act of violence against any employee of Employer or
other person during the course of his or her employment;
V) Harassment of disparagement of others based on their age, disability,
color, national origin, race, religion, sex or veteran status, including acts of
sexual harassment or,
VI) Conviction of any felony or misdemeanor involving moral turpitude.
10. TERMINATION BY EMPLOYER FOR REASONS OTHER THAN CAUSE. Notwithstanding
anything herein to the contrary, and subject to the survival provisions of
Paragraph 13.G hereof, Employer may terminate this Agreement at any time with
thirty (30) days prior notice thereof to Employee. In such an event, Employer
shall pay to Employee in accordance with Employer's normal practices; 1) the
Base Salary; 2) Incentive Bonus as applicable, 3) vested Stock Options, 4)
Medical, Dental, Vision, Life and Disability Insurance, 5) car Allowance, 6) and
any unused Vacation - all through December 31, 2001.
11. TERMINATION BY EMPLOYEE.
A. VOLUNTARY TERMINATION. Employee may terminate his employment under this
Agreement at any time with thirty (30) days prior written notice thereof to
Employer. Upon such termination, Employee shall be entitled to his pro-rata
Base Salary and Incentive Bonus through the date of such termination.
B. RESIGNATION FOR GOOD CAUSE. The termination of his employment under this
Agreement by Employee following a substantial reduction in Employee's position
or duties or material breach of this Agreement by Employer shall be deemed a
termination by employee for reasons other than cause as set forth in paragraph
10 hereof.
C. TERMINATION UPON DEATH. This Agreement shall terminate immediately upon
Employee's death. Employee's estate shall be entitled to Employee's Base Salary
up to twelve (12) months after the Employee's death, Incentive Bonus based upon
the average of the previous two annual Incentive Bonuses received by Employee or
the previous Incentive Bonus is only one such bonus was received, and earned
Stock Options. Medical, Dental and Vision Insurance payments shall continue for
six (6) months from date of Employee's death.
GENERAL PROVISIONS.
A. AMENDMENT. This Agreement may be amended or modified only by a writing
signed by both of the parties hereto.
B. BINDING AGREEMENT. This Agreement shall inure to the benefit of and be
binding upon Employee, his or her heirs and personal representatives, and
Employer, its successors and assigns.
C. WAIVER. The waiver by either party of a breach of any provision
contained in this Agreement shall not be construed as or operate as a waiver of
any subsequent breach.
D. NOTICES
I) All notices and all other communication provided for herein shall be in
writing and delivered personally to the other designated party, or mailed by
certified or registered mail, return receipt requested or delivered by a
recognized national overnight courier service, or sent by facsimile as follows:
If to Employer to: Mr. Patrick Dane
Director
If to Employee to: Mr. Jack Marshall
CEO, President, Treasurer
If Employee has provided notice to Employer that he is represented by counsel,
Employer shall copy Employee's counsel at the address specified. Employee
agrees and understands that any legal fees or expenses incurred by him in
connection with this Agreement are his sole responsibility and Employer shall
not reimburse Employee for any portion of such fees or expenses.
II) All notices sent under this Paragraph 13 shall be deemed given
twenty-four (24) hours after sent by facsimile or courier and seventy-two (72)
hours after sent by certified or registered mail.
III) Either party hereto may change the address to which notice is to be
sent hereunder by written notice to the other party in accordance with the
provisions of this Paragraph.
E. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to
principles of conflicts of laws.
F. ENTIRE AGREEMENT. This Agreement contains the full and complete
understanding of the parties hereto with respect to the subject matter contained
herein and this Agreement supersedes and replaces any prior agreement , either
oral or written, which Employee may have with Employer that relates generally to
the same subject matter.
G. SURVIVAL. Notwithstanding any expiration or termination of this
Agreement, the provisions of this agreement shall survive and remain in full
force and effect, as shall any other provision hereof that, by its terms or
reasonable interpretation thereof, sets forth obligations that extend beyond the
termination of this Agreement.
H. ASSIGNMENT. This Agreement may not be assigned by Employee without the
prior written consent of Employer, and any attempted assignment not in
accordance herewith shall be null and void and of no force or effect. Employer
can assign this Agreement to any Affiliate with Employee's written consent.
Thereafter, any such assignee shall be considered to be the Employer for all
purposes under this Agreement; provided however, that references to previous
incentive bonuses shall be deemed to include incentive bonuses paid by any
assignor.
I. SEVERABILITY. I any one or more of the terms, provisions, covenants or
restrictions of this Agreement shall be determined by a court of competent
jurisdiction to be invalid, void or unenforceable, then the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect, and to that end the provisions hereof shall be deemed
severable.
J. PARAGRAPH HEADING. The section headings set forth herein are for
convenience of reference only and shall not affect the meaning or interpretation
of this Agreement whatsoever.
K. VOLUNTARY AGREEMENT. Employee and Employer represent and agree that each
has reviewed all aspects of this Agreement, has carefully read and fully
understands all provisions of this Agreement, and is voluntarily entering into
this Agreement. Each party represents and agrees that such party has had the
opportunity to review any and all aspects of this Agreement with legal, tax or
other advisers(s) of such party's choice before executing this Agreement.
10. REMEDIES.
ARBITRATION OF DISAGREEMENTS. Any dispute, controversy or claim arising out of
or relating to the obligations under this Agreement shall be settled by final
and binding arbitration in accordance with the American Arbitration Association
Employment Dispute Resolution Rules. The arbitrator shall be selected by mutual
agreement of the parties, if possible. If the parties fail to reach agreement
upon appointment of an arbitrator within 30 days following receipt by one party
of the other party's notice of desire to arbitrate, the arbitrator shall be
selected from a panel or panels of persons submitted by the American Arbitration
Association (the "AAA"). The selection process shall be that which is set forth
in the AAA Employment Dispute Resolution Rules, except that, if the parties fail
to select an arbitrator from one or more panels, AAA shall not have the power to
make an appointment but shall continue to submit additional panels until an
arbitrator has been selected.
All fees and expenses of the arbitration, including a transcript if requested,
will be borne by the Employer. Any action to enforce or vacate the arbitrator's
award shall be governed by the Federal Arbitration Act, if applicable, and
otherwise by California state law.
IN WTINESS WHEREOF, the parties hereto have executed, or caused their duly
authorized representative to execute, this Agreement as of the date first above
written.
EMPLOYER
Patrick Dane Jack Marshall
BY:
<PAGE>
PHOTOLOFT.COM
STOCK OPTION PLAN
PhotoLoft.com, a corporation organized and existing under the laws of the
State of Nevada (hereinafter referred to as the "Company"), hereby adopts the
following Stock Option Plan for certain of Its employees and outside
consultants:
1. PURPOSE.
-------
This Stock Option Plan (herein referred to as the "Plan") Is intended to
advance the interests of the Company by providing employees and outside
consultants having substantial responsibility for the direction and management
of the Company & its subsidiaries with an opportunity to acquire a proprietary
interest in the Company and an additional Incentive to promote its success and
to encourage them to remain In the employ of the Company. The Plan Is intended
to permit stock options granted to employees under the Plan to qualify as
incentive stock options, herein referred to as "Incentive Stock Options", under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"). All options granted under the plan which are not intended to
qualify as Incentive Stock Options shall herein be referred to as "Non-
Statutory Options". All options granted under the Plan, including Incentive
Stock Options, and Non-Statutory Options are referred to as "Options".
2. ADMINISTRATION OF PLAN.
------------------------
The Plan shall be administered by a Stock Option Committee (the
"Committee") consisting of directors of the Company who shall be appointed by
Its Board of DirectorThe Committee may adopt rules and regulations from time to
time for carrying out the
Plan. The interpretation and construction of any provision of the Plan by the
Committee shall be final and conclusive, The Committee may consult with counsel,
who may be counsel to the Company, and shall not incur any liability for any
action taken in good faith in reliance upon the advice of counsel.
3. ELIGIBILITY.
------------
All employees of the Company and all outside consultants providing services
to the Company shall be eligible to have options granted to them. The Committee
shall grant Options only to employees of the Company and Company outside
consultants of the Company who perform services of major importance in the
management, operation end development of the business of the Company, and it
shall determine the number of shares to be allocated to each Option. The Company
shall effect the grant of Options under the Plan in accordance with
determinations made by the Committee pursuant to the provisions of the Plan by
execution and delivery of written Instruments in a form approved by the
Committee. All persons to whom Incentive Stock Options are granted must be
employees of the Company.
4. STOCK.
-----
The Company has authorized the Committee to appropriate and to grant
Options for and to issue and sell for the purpose of the Plan an aggregate of
1,000,000 shares of the common stock of the Company. Options to purchase any
shares issued pursuant to the Plan that, for any reason expire or are terminated
unexercised may be reissued under the Plan. The Company shall not be required to
Issue or deliver any certificate for shares of its stock purchased upon the
exercise of any part of an Option before (i)
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<PAGE>
completion of any registration or other qualification of such shares under any
state or federal law or ruling or regulation of any governmental regulatory body
that the Company shall, in its sole discretion, determine is necessary or
advisable, or (ii) the Board of Directors shall have been advised by counsel
that the issuance of such shares is exempted from any such registration or
qualification of such shares. In this regard the Committee shall be able to
require the execution of an "investment lettert' in standard form prior to the
Issuance of any shares purchased upon the exercise of any part of an Option.
Before the granting of any Option hereunder, Optionee must agree that no share
of stock transferred to him pursuant to this Plan may be disposed of by him
within two (2) years from the date of the granting of the Option nor within one
(1) year after the transfer of such share to said Optionee or such Option will
not be qualified as an Incentive Stock Option.
5. TAX CHARACTER OF OPTIONS.
---------------------------
The Committee shall have discretion to designate whether Options shall be
Incentive Stock Options or Non-Statutory Options. Subject to the limitations
described in Sections 4,11, 16 and 17, all Options granted to employees of
Company shall be Incentive Stock Options, unless the Committee determines
otherwise.
6. PRICE.
------
Except as to Options to which the provisions of paragraph 16 and 17 apply,
the purchase price of each share of stock covered by an Option granted hereunder
shall be equal to the fair market value per share of the Company's common stock
on the date the Option Is granted. As to Options to which the provisions of
paragraph 16 apply the
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<PAGE>
purchase price of each share of stock covered by such Option granted hereunder
shall be at least one hundred ten percent (110%) of the fair market value per
share of the Company's common stock on the date the Option is granted. If the
stock is traded in the over-the-counter market, such fair market value shall be
deemed to be the mean between the asked and the bid prices on such day as
reported by the NASD. If the stock is traded on an exchange, such fair market
value shall be deemed to be the mean of the high and low prices at which it is
quoted or traded on such day on the exchange on which it generally has the
greatest trading volume. If the stock is not traded on either an
over-the-counter market or on an exchange, the fair market value shall be set by
the Committee in good faith based upon all relevant facts and circumstances
pursuant to any and all regulations issued by the internal Revenue Service.
7. DURATION AND EXERCISE OF OPTIONS.
------------------------------------
A. Except as to Options to which the provisions of paragraph 16 and 17
hereof apply, the Option period shall be ten (10) years or less from the date
the Option is granted, and as to Options to which the provisions of paragraph 16
apply, the Option period shall be five (5) years or less from the date the
Option is granted, except that either such period shall be reduced with respect
to any Option as outlined below in the event of death or termination of
employment or retirement of the Optionee; provided that the Committee may, in
the case of merger, consolidation, dissolution or liquidation. accelerate the
expiration date and the dates on which any part of the Option shall be
exercisable for all of the shares covered thereby, but the effectiveness of such
acceleration, and any exercise of the Option pursuant thereto in excess of the
number
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<PAGE>
of shares for which it would have been exercisable in the absence of such
acceleration, shall be conditioned upon the consummation of the merger,
consolidation, dissolution or liquidation.
B. The exercise of any Option and delivery of the optioned shares shall
be contingent upon receipt by the Company of the full purchase price in cash.
C. No Incentive Stock Option may be exercised more than thirty (30)
days after termination of employment of the Optionee except as hereinafter
provided.
D. Except as otherwise provided herein, or unless otherwise determined
by the Committee, every Option granted hereunder shall, upon its grant, be
immediately exercisable. The Committee shall have the right to set any vesting
schedule or delay of exercisability it deems appropriate.
E. Incentive Stock Options granted under the Plan may be exercised, if
otherwise timely, (I) within three (3) months after retirement, other than
retirement by reason of disability, of the Optionee at or after the age of
sixty-five (65) years, if such retirement occurs on or after one year following
the grant of any incentive Stock Option hereunder, and (ii) within three (3)
months after retirement occurring at any age by reason of disability. In any
such case, the Incentive Stock Option may not be exercised for more than the
number of shares, if any, as to which if was exercisable by the Optionee
immediately before such retirement; provided that if such retirement was by
reason of disability, said Option shall in any case be exercisable for at least
fifty percent (50%) of the shares covered thereby; and provided further that if
such retirement occurred when
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<PAGE>
or after the Optionee attained the age of sixty-five (65) years, said Option
shall be exercisable for all of the shares covered thereby.
F. If an Optionee shall die while employed by the Company or within
three (3) months after retirement, such incentive Stock Option may be exercised
(to the extent that the Optionee would have been entitled to do so at the date
of this death) by the legatees, personal representative or distributees of the
Optionee during the balance of the term thereof or within one year of the date
of the Optionee's death, whichever is shorter.
G. if Optionee is at the time of exercise, a person who is regularly
required to report his ownership and changes of ownership of the common stock of
the Company to the Securities and Exchange Commission and is subject to short
swing profit liability under the provisions of Section 16(b) of the Securities
Exchange Act of 1934 as the same, or any replacement rule, now exists, or may,
from time to time, be amended, then the Optionee may only exercise Options and
Release Rights during the period beginning on the third business day and ending
on the twelfth business day following the release for publication of quarterly
or annual summary statements of sales and earnings. This condition shall be
deemed to be satisfied if the specified financial data appears (I) on a wire
service, (ii) in a financial news service, (iii) in a newspaper of general
circulation, or (iv) is otherwise made publicly available, and shall remain in
effect so long as it does not violate the law or any rule or regulation adopted
by appropriate governmental authority,
- 6 -
<PAGE>
H. Options may be exercised in whole or in part, but only with respect
to whole shares of stock. The Committee shall have the right to set any minimum
amount on the number of shares which must be exercised at any one time as it
deems appropriate.
8. NON-TRANSFERABILITYOFOPTIONS.
----------------------------
An Incentive Stock Option, by its terms, shall not be transferable
otherwise than by will or by the laws of descent and distribution, and an
Incentive Stock Option may be exercised during the lifetime of the Optionee only
by him.
9. EFFECT OF STOCK DIVIDENDS, ETC.
----------------------------------
The Committee shall make appropriate adjustments in the price of the shares
and the number allotted or subject to allotment if there are any changes in the
common stock of the Company by reason of stock dividends, stock splits, reverse
stock splits, recapitalizations, mergers or consolidations.
10. REORGANIZATION.
--------------
If (a) the Company is merged or consolidated with another corporation and
the Company is not the surviving corporation, (b) all or substantially all of
the property is acquired by another corporation, or (o) the Company is
reorganized, then the Company, or the corporation assuming the obligations of
the Company, shall by action of its Board of Directors either:
(i) make equitable provisions so that the excess of the
aggregate fair market value of the shares subject to the Stock Options over the
option price of such shares immediately after the merger, consolidation or
reorganization of the Company, is equivalent to the excess of the aggregate fair
market value of the
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<PAGE>
shares subject to such Stock Options over the option price of such shares
immediately before such merger, consolidation or reorganization of the Company,
or
(ii) give written notice to the employee that the Options
shall be terminated if they are not exorcised within a prescribed period after
the date of such notice.
11. LIMITATIONS ON INCENTIVE STOCK OPTIONS.
------------------------------------------
Notwithstanding anything in this Plan to the contrary, the aggregate fair
market value (determined at the time of grant) of stock for which an employee
may exercise incentive Stock Options under all plans of the Company shall not
exceed $1O0~0QO per calendar year. If any employee shall have the right to
exercise any Options in excess of $100,000 during any calendar year, the options
in excess of $100,000 shall be deemed not to be Incentive Stock Options.
12 EXPIRATION AND TERMINATION OF THE PLAN.
-------------------------------------------
Options may be granted under the Plan at any time until the Plan is
terminated by the Board of Directors of the Company or until such earlier date
when termination of the Plan shall be required by applicable low. If not sooner
terminated, the Plan shall terminate automatically on that date which is ten
years from the earlier of the date on which the Plan was originally approved by
the shareholders of the Company or the date on which this' Plan was adopted.
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<PAGE>
13. AMENDMENTS.
----------
The Board of Directors of the Company may from time to time make such
changes in and additions to the Plan as it may deem proper; provided that no
change shall be made that increases (except pursuant to Section 9) the total
number of shares covered by the Plan or effects any change in who may receive
Options under the Plan or materially Increases the benefits accruing to
Optionees hereunder unless such change Is authorized by the holders of the
common stock of the Company. Notwithstanding the foregoing, the Board of
Directors of the Company may amend the Plan, without stockholder approval, to
the extent necessary to cause Incentive Stock Options granted under the Plan to
meet the requirements of Section 422 of the Internal Revenue Code.
14. INTERPRETATION.
--------------
The terms of this Plan concerning Incentive Stock Options are subject to
all present and future regulations and rulings of the Secretary of the Treasury
or his delegate relating to the qualification of Incentive Stock Options under
Section 422 of the Internal Revenue Code. If any provision of the Plan conflicts
with any such regulation or ruling, then that provision of the Plan shall be
void and of no effect.
15. EFFECTIVE DATE OF THE PLAN.
------------------------------
This Plan shall become effective February 26, 1999, having been approved by
shareholders and adopted by the Board of Directors.
16. TEN PERCENTOR GREATER SHAREHOLDERS.
-------------------------------------
Anything to the contrary contained herein notwithstanding, no incentive
Stock Option shall be granted hereunder to any individual, if at the time such
Incentive Stock
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<PAGE>
Option is granted, such individual owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of Company or
its parent or subsidiary corporations, unless at the time such option is granted
the option price is at least one hundred ten percent (110%) of the fair market
value of the stock subject to the option and such option by its terms is not
exercisable after the expiration of five (5) years or less from the date of such
option is granted. My option which does not comply with the terms of this
paragraph shall be deemed not to be an Incentive Stock Option.
17. Non-StatutoryOptions
--------------------
The Committee shall have the right to determine, subject to approval of the
Board of Directors, the rights and terms of all Non-Statutory Options, including
price, duration, transferability and limitations on exercise.
PHOTOLOFT.COM
By: /s/ Gary B. Peterson
-----------------------------------
Gary B. Peterson, President
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<PAGE>
EXHIBIT A
FIRST AMENDMENT
TO
TEE PHOTOLOFT.COM STOCK OPTION PLAN
This First Amendment (the "Amendment") to the PhotoLoft.com Stock Option
Plan (the "Plan") is adopted this __ day of ___, 1999.
1. Section 4 of the Plan is hereby amended to increase the number of Options
available to be granted under the Plan from 1,000,000 to 3,800,000.
2. Except as set forth in this A.rnendxnent, all terms and conditions of the
Plan shall remain in full force and effect.
<PAGE>
PHOTOLOFT.COM
STOCK OPTION AGREEMENT
[FORM]
This Photoloft.com Stock Option Agreement (the "Agreement"), by and between
Photoloft.com, a Nevada corporation (the "Company"), and _______________
("Optionee"), is made effective as of this day of ______________, 199__.
RECITALS
1. Pursuant to the Photoloft.com 1999 Stock Option Plan (the "Plan"),
the Board of Directors of the Company (the "Board") has authorized the grant of
an option to purchase common stock of the Company ("Common Stock") to Optionee,
effective on the date indicated above, thereby allowing Optionee to acquire a
proprietary interest in the Company in order that Optionee will have further
incentive for continuing his or her employment by, and increasing his or her
efforts on behalf of, the Company or an Affiliate of the Company.
2. The Company desires to issue a stock option to Optionee and
Optionee desires to accept such stock option on the terms and conditions set
forth below.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
AGREEMENT
1. Option Grant. The Company hereby grants to the Optionee, as a
-------------
separate incentive and not in lieu of any fees or other compensation for his or
her services, an option to purchase, on the terms and conditions hereinafter set
forth, all or any part of an aggregate of ____________________
(________________) shares of authorized but unissued shares of Common Stock, at
the Purchase Price set forth in paragraph 2 of this Agreement.
2. Purchase Price. The Purchase Price per share (the "Option Price")
---------------
shall be $_________, which is not less than ___________________________ percent
(___%) of the fair market value per share of Common Stock on the date hereof.
The Option Price shall be payable in the manner provided in paragraph 9 below.
3. Adjustment. The number and class of shares specified in paragraph 1
----------
above, and the Option Price, are subject to appropriate adjustment in the event
of certain changes in the capital structure of the Company such as stock splits,
recapitalizations and other events which alter the per share value of Common
Stock or the rights of holders thereof. In connection with (i) any merger,
consolidation, acquisition, separation, or reorganization in which more than
fifty percent (50%) of the shares of the Company outstanding immediately before
such event are converted into cash or into another security, (ii) any
dissolution or liquidation of the Company or any partial liquidation involving
fifty percent (50%) or more of the assets of the Company, (iii) any sale of more
than fifty percent (50%) of the Company's assets, or (iv) any like occurrence in
which the Company is involved, the Company may, in its absolute discretion, do
one or more of the following upon ten days' prior written notice to the
Optionee: (a) accelerate any vesting schedule to which this option is subject;
(b) cancel this option upon payment to the Optionee in cash, to the extent this
option is then exercisable, of any amount which, in the absolute discretion of
the Company, is determined to be equivalent to any excess of the market value
(at the effective time of such event) of the consideration that the Optionee
would have received if this option had been exercised before the effective time
over the Option Price; (c) shorten the period during which this option is
exercisable (provided that this option shall remain exercisable, to the extent
otherwise exercisable, for at least ten days after the date the notice is
given); or (d) arrange that new option rights be substituted for the option
rights granted under this option, or that the Company's obligations under this
option be assumed, by an employer corporation other than the Company or by a
parent or subsidiary of such employer corporation. The actions described in
this paragraph 3 may be taken without regard to any resulting tax consequence to
the Optionee.
<PAGE>
[OPTIONAL FOUR YEAR VESTING]
4. Option Exercise. Commencing on the date one (1) year after the date
---------------
of this Agreement the right to exercise this option will accrue as to one-fourth
( ) of the number of shares subject to this option. Thereafter, the right to
exercise the remainder of this option will accrue in twelve (12) equal quarterly
installments. Shares entitled to be, but not, purchased as of any accrual date
may be purchased at any subsequent time, subject to paragraphs 5 and 6 below.
The number of shares which may be purchased as of any such anniversary date will
be rounded up to the nearest whole number. No partial exercise of the option
may be for an aggregate exercise price of less than One Hundred Dollars ($100).
In order to exercise any part of this option, Optionee must agree to be bound by
the Company's Shareholder Buy-Sell Agreement, if any, existing at the time of
the exercise of this Option.
5. Termination of Option. The right to exercise this option will lapse
---------------------
in four (4) equal installments of the number of shares subject to this option on
each of the sixth, seventh, eighth, and ninth anniversaries of the effective
date of this Agreement. Notwithstanding any other provision of this Agreement,
this option may not be exercised after, and will completely expire on, the close
of business on the date ten (10) years after the effective date of this
Agreement, unless terminated sooner pursuant to paragraph 6 below.
6. Termination of Employment. In the event of termination of
---------------------------
Optionee's employment with the Company for any reason, this option will
terminate three (3) months after the date of the termination of Optionee's
employment, unless terminated earlier pursuant to paragraph 5 above. However,
(i) if termination is due to the death of Optionee, the Optionee's estate or a
legal representative thereof, may at any time within and including six (6)
months after the date of death of Optionee, exercise the option to the extent it
was exercisable at the date of termination; or (ii) if termination is due to
Optionee's "disability" (as determined in accordance with Section 22(e)(3) of
the Internal Revenue Code), Optionee may, at any time, within one (1) year
following the date of this Agreement, exercise the option to the extent it was
exercisable at the date of termination. If the Optionee or his or her legal
representative fails to exercise the option within the time periods specified in
this paragraph 6, the option shall expire. The Optionee or his or her legal
representative may, on or before the close of business on the earlier of the
date for exercise set forth in paragraph 5 or the dates specified in paragraph 4
above, exercise the option only to the extent Optionee could have exercised the
option on the date of such termination of employment pursuant to paragraphs 4
and 5 above.
7. Repurchase Option of Company. Pursuant to Section 6.1.8 of the
-------------------------------
Plan, in the event of termination of Optionee's employment with the Company for
any reason, the Company shall have an option to repurchase ("Repurchase Option")
any Common Stock owned by the Optionee or his or her heirs, legal
representatives, successors or assigns at the time of termination, or acquired
thereafter by any of them at any time, by way of an option granted hereunder.
The Repurchase Option must be exercised, if at all, by the Company within ninety
(90) days after the date of termination upon notice ("Repurchase Notice") to the
Optionee or his or her heirs, legal representatives, successors or assigns, in
conformance with paragraph 13 below. The purchase price to be paid for the
shares subject to the Repurchase Option shall be the average trading price for
the shares of common stock of the Company over a thirty (30) day period prior to
the delivery of the Repurchase Notice. Any shares issued pursuant to an exercise
of an option hereunder shall contain the following legend condition in addition
to any other applicable legend condition:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO REPURCHASE
PROVISIONS IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND
THE SHAREHOLDER, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE
COMPANY.
2
<PAGE>
8. Transferability. This option will be exercisable during Optionee's
---------------
lifetime only by Optionee. Except as otherwise set forth in the Plan, this
option will be non-transferable.
9. Method of Exercise. Subject to paragraph 10 below, this option may
-------------------
be exercised by the person then entitled to do so as to any shares which may
then be purchased by delivering to the Company an exercise notice in the form
attached hereto as Exhibit A and:
----------
(a) full payment of the Option Price thereof (and the amount of
any tax the Company is required by law to withhold by reason of such exercise)
in the form of:
(i) cash or readily available funds; or
(ii) delivery of Optionee's promisory note (the "Note")
substantially in the form attached hereto as Exhibit B in the amount of the
---------
aggregate Option Price of the exercised shares together with the execution and
delivery by the Optionee of the Security Agreement attached hereto as Exhibit C;
---------
or
(iii) a written request to Net Exercise, as defined in this
paragraph 9(a)(iii). In lieu of exercising this Option via cash payment or
promissory note, Optionee may elect to receive shares equal to the value of this
Option (or portion thereof being canceled) by surrender of Options at the
principal office of the Company together with notice of election to exercise by
means of a Net Exercise in which event the Company shall issue to Optionee a
number of shares of the Company computed using the following formula:
X = Y (A-B)
--------
A
where X is the number of shares of stock to be issued to Optionee; Y is the
number of shares purchasable under this Option; A is the fair market value of
the stock determined in accordance with Section 6.1.12 of the Plan; and B is the
Option Price as adjusted to the date of such calculation.
(b) payment of any withholding or employment taxes, if any.
The Company will issue a certificate representing the shares so purchased within
a reasonable time after its receipt of such notice of exercise, payment of the
Option Price and withholding or employment taxes, and execution of any other
appropriate documentation, with appropriate certificate legends.
10. Securities Laws. The issuance of shares of Common Stock upon the
----------------
exercise of the option will be subject to compliance by the Company and the
person exercising the option with all applicable requirements of federal and
state securities and other laws relating thereto. No person may exercise the
option at any time when, in the opinion of counsel to the Company, such exercise
is permitted under applicable federal or state securities laws. Nothing herein
will be construed to require the Company to register or qualify any securities
under applicable federal or state securities laws, or take any action to secure
an exemption from such registration and qualification for the issuance of any
securities upon the exercise of this option.
11. No Rights as Shareholder. Neither Optionee nor any person claiming
------------------------
under or through Optionee will be, or have any of the rights or privileges of, a
shareholder of the Company in respect of any of the shares issuable upon the
exercise of the option, unless and until this option is properly and lawfully
exercised.
12. No Right to Continued Employment. Nothing in this Agreement will
----------------------------------
be construed as granting Optionee any right to continued employment. EXCEPT AS
THE COMPANY AND OPTIONEE WILL HAVE OTHERWISE AGREED IN WRITING, OPTIONEE'S
EMPLOYMENT WILL BE TERMINABLE BY THE COMPANY, AT WILL, WITH OR WITHOUT CAUSE FOR
ANY REASON OR NO REASON. Except as otherwise provided in the Plan, the Board in
its sole discretion will determine whether any leave of absence or interruption
in service (including an interruption during military service) will be deemed a
termination of employment for the purpose of this Agreement.
3
<PAGE>
13. Notices. Any notice to be given to the Company under the terms of
-------
this Agreement will be addressed to the Company, in care of its Secretary, at
its executive offices, or at such other address as the Company may hereafter
designate in writing. Any notice to be given to Optionee will be in writing and
delivered or mailed by registered or certified mail, return receipt requested,
postage prepaid, addressed to Optionee at the address set forth beneath
Optionee's signature in writing. Any such notice will be deemed to have been
duly given where deposited in a United States post office in compliance with the
foregoing.
14. Non-Transferrable. Except as otherwise provided in the Plan or in
-----------------
this Agreement, the option herein granted and the rights and privileges
conferred hereby will not be transferred, assigned, pledged or hypothecated in
any way (whether by operation of law or otherwise). Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of this option, or of
any right or upon any attempted sale under any execution, attachment or similar
process upon the rights and privileges conferred hereby, this option will
immediately become null and void.
15. Successor. Subject to the limitation on the transferability of the
---------
option contained herein, this Agreement will be binding upon and inure to the
benefit of the heirs, legal representatives, successors and assigns of the
parties hereto.
16. California Law. This Agreement will be governed by and construed
---------------
in accordance with the laws of the State of California.
17. Type of Option. The option granted in this Agreement:
----------------
[ ] Is intended to be an Incentive Stock Option ("ISO") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
[ ] Is a non-qualified Option and is not intended to be an ISO.
18. Plan Provisions Incorporated by Reference. A copy of the Plan is
-------------------------------------------
attached hereto as Exhibit "A" and incorporated herein by this reference. In
the case of conflict between any provision in this Agreement and any provision
in the Plan or a Shareholder Buy-Sell Agreement, if any, the terms of this
Agreement shall prevail. In the case of conflict between any provision in the
Plan and a provision in a Shareholders Buy-Sell Agreement, if any, the terms of
the Plan shall prevail.
19. Term. Capitalized terms used herein, except as otherwise
----
indicated, shall have the same meaning as those terms have under the Plan.
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year written below.
COMPANY: PHOTOLOFT.COM
By:________________________________
Title:_____________________________
OPTIONEE: ___________________________________
(print name)
___________________________________
(signature)
Address:___________________________
___________________________________
5
<PAGE>
PHOTOLOFT.COM
STOCK OPTION AGREEMENT
This Photoloft.com Stock Option Agreement (the "Agreement"), by and between
Photoloft.com, a Nevada corporation (the "Company"), and CHRISTOPHER MCCONN
("Optionee"), is made as of this 1ST DAY OF JULY, 1999.
RECITALS
1. Pursuant to the Photoloft.com Stock Option Plan (the "Plan"), the
Board of Directors of the Company (the "Board") has authorized the grant of an
option to purchase common stock of the Company ("Common Stock") to Optionee,
effective on the date indicated above, thereby allowing Optionee to acquire a
proprietary interest in the Company in order that Optionee will have further
incentive for continuing his or her employment by, and increasing his or her
efforts on behalf of, the Company or an Affiliate of the Company.
2. The Company desires to issue a stock option to Optionee and
Optionee desires to accept such stock option on the terms and conditions set
forth below.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
AGREEMENT
1. Option Grant. The Company hereby grants to the Optionee, as a
-------------
separate incentive and not in lieu of any fees or other compensation for his or
her services, an option to purchase, on the terms and conditions hereinafter set
forth, all or any part of an aggregate of FOUR HUNDRED FIFTY FOUR THOUSAND
THIRTEEN (454,013) shares of authorized but unissued shares of Common Stock, at
the Purchase Price set forth in paragraph 2 of this Agreement.
2. Purchase Price. The Purchase Price per share (the "Option Price")
---------------
shall be $0.48, which is not less than ONE HUNDRED TEN PERCENT (110%) of the
fair market value per share of Common Stock on the date hereof. The Option
Price shall be payable in the manner provided in paragraph 9 below.
3. Adjustment. The number and class of shares specified in paragraph 1
----------
above, and the Option Price, are subject to appropriate adjustment in the event
of certain changes in the capital structure of the Company such as stock splits,
recapitalizations and other events which alter the per share value of Common
Stock or the rights of holders thereof. In connection with (i) any merger,
consolidation, acquisition, separation, or reorganization in which more than
fifty percent (50%) of the shares of the Company outstanding immediately before
such event are converted into cash or into another security, (ii) any
dissolution or liquidation of the Company or any partial liquidation involving
fifty percent (50%) or more of the assets of the Company, (iii) any sale of more
than fifty percent (50%) of the Company's assets, or (iv) any like occurrence in
which the Company is involved, the Company may, in its absolute discretion, do
one or more of the following upon ten days' prior written notice to the
Optionee: (a) accelerate any vesting schedule to which this option is subject;
(b) cancel this option upon payment to the Optionee in cash, to the extent this
option is then exercisable, of any amount which, in the absolute discretion of
the Company, is determined to be equivalent to any excess of the market value
(at the effective time of such event) of the consideration that the Optionee
would have received if this option had been exercised before the effective time
over the Option Price; (c) shorten the period during which this option is
exercisable (provided that this option shall remain exercisable, to the extent
otherwise exercisable, for at least ten days after the date the notice is
given); or (d) arrange that new option rights be substituted for the option
rights granted under this option, or that the Company's obligations under this
option be assumed, by an employer corporation other than the Company or by a
parent or subsidiary of such employer corporation. The actions described in
this paragraph 3 may be taken without regard to any resulting tax consequence to
the Optionee.
<PAGE>
4. Option Exercise. Commencing on July 1, 1998 the right to exercise
----------------
this option will accrue in forty (48) equal monthly installments. Shares
entitled to be, but not, purchased as of any accrual date may be purchased at
any subsequent time, subject to paragraphs 5 and 6 below. The number of shares
which may be purchased as of any such anniversary date will be rounded up to the
nearest whole number. No partial exercise of the option may be for an aggregate
exercise price of less than One Hundred Dollars ($100). In order to exercise
any part of this option, Optionee must agree to be bound by the Company's
Shareholder Buy-Sell Agreement, if any, existing at the time of the exercise of
this Option.
5. Termination of Option. The right to exercise this option will lapse
---------------------
on the ninth anniversary of the effective date of this Agreement.
Notwithstanding any other provision of this Agreement, this option may not be
exercised after, and will completely expire on, the close of business on the
date ten (10) years after the effective date of this Agreement, unless
terminated sooner pursuant to paragraph 6 below.
6. Termination of Employment. In the event of termination of
---------------------------
Optionee's employment with the Company for any reason, this option will
terminate three (3) months after the date of the termination of Optionee's
employment, unless terminated earlier pursuant to paragraph 5 above. However,
(i) if termination is due to the death of Optionee, the Optionee's estate or a
legal representative thereof, may at any time within and including six (6)
months after the date of death of Optionee, exercise the option to the extent it
was exercisable at the date of termination; or (ii) if termination is due to
Optionee's "disability" (as determined in accordance with Section 22(e)(3) of
the Internal Revenue Code), Optionee may, at any time, within one (1) year
following the date of this Agreement, exercise the option to the extent it was
exercisable at the date of termination. If the Optionee or his or her legal
representative fails to exercise the option within the time periods specified in
this paragraph 6, the option shall expire. The Optionee or his or her legal
representative may, on or before the close of business on the earlier of the
date for exercise set forth in paragraph 5 or the dates specified in paragraph 4
above, exercise the option only to the extent Optionee could have exercised the
option on the date of such termination of employment pursuant to paragraphs 4
and 5 above.
7. Repurchase Option of Company. Pursuant to Section 6.1.8 of the
-------------------------------
Plan, in the event of termination of Optionee's employment with the Company for
any reason, the Company shall have an option to repurchase ("Repurchase Option")
any Common Stock owned by the Optionee or his or her heirs, legal
representatives, successors or assigns at the time of termination, or acquired
thereafter by any of them at any time, by way of an option granted hereunder.
The Repurchase Option must be exercised, if at all, by the Company within ninety
(90) days after the date of termination upon notice ("Repurchase Notice") to the
Optionee or his or her heirs, legal representatives, successors or assigns, in
conformance with paragraph 13 below. The purchase price to be paid for the
shares subject to the Repurchase Option shall be the average trading price for
the shares of common stock of the Company over a thirty (30) day period prior to
the delivery of the Repurchase Notice. Any shares issued pursuant to an exercise
of an option hereunder shall contain the following legend condition in addition
to any other applicable legend condition:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO REPURCHASE
PROVISIONS IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND
THE SHAREHOLDER, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE
COMPANY.
8. Transferability. This option will be exercisable during Optionee's
---------------
lifetime only by Optionee. Except as otherwise set forth in the Plan, this
option will be non-transferable.
9. Method of Exercise. Subject to paragraph 10 below, this option may
-------------------
be exercised by the person then entitled to do so as to any shares which may
then be purchased by delivering to the Company an exercise notice in the form
attached hereto as Exhibit A and:
----------
2
<PAGE>
(a) full payment of the Option Price thereof (and the amount of
any tax the Company is required by law to withhold by reason of such exercise)
in the form of:
(i) cash or readily available funds; or
(ii) delivery of Optionee's promisory note (the "Note")
substantially in the form attached hereto as Exhibit B in the amount of the
---------
aggregate Option Price of the exercised shares together with the execution and
delivery by the Optionee of the Security Agreement attached hereto as Exhibit C;
---------
or
(iii) a written request to Net Exercise, as defined in this
paragraph 9(a)(iii). In lieu of exercising this Option via cash payment or
promissory note, Optionee may elect to receive shares equal to the value of this
Option (or portion thereof being canceled) by surrender of Options at the
principal office of the Company together with notice of election to exercise by
means of a Net Exercise in which event the Company shall issue to Optionee a
number of shares of the Company computed using the following formula:
X = Y (A-B)
--------
A
where X is the number of shares of stock to be issued to Optionee; Y is the
number of shares purchasable under this Option; A is the fair market value of
the stock determined in accordance with Section 6.1.12 of the Plan; and B is the
Option Price as adjusted to the date of such calculation.
(b) payment of any withholding or employment taxes, if any.
The Company will issue a certificate representing the shares so purchased within
a reasonable time after its receipt of such notice of exercise, payment of the
Option Price and withholding or employment taxes, and execution of any other
appropriate documentation, with appropriate certificate legends.
10. Securities Laws. The issuance of shares of Common Stock upon the
----------------
exercise of the option will be subject to compliance by the Company and the
person exercising the option with all applicable requirements of federal and
state securities and other laws relating thereto. No person may exercise the
option at any time when, in the opinion of counsel to the Company, such exercise
is permitted under applicable federal or state securities laws. Nothing herein
will be construed to require the Company to register or qualify any securities
under applicable federal or state securities laws, or take any action to secure
an exemption from such registration and qualification for the issuance of any
securities upon the exercise of this option.
11. No Rights as Shareholder. Neither Optionee nor any person claiming
------------------------
under or through Optionee will be, or have any of the rights or privileges of, a
shareholder of the Company in respect of any of the shares issuable upon the
exercise of the option, unless and until this option is properly and lawfully
exercised.
12. No Right to Continued Employment. Nothing in this Agreement will
----------------------------------
be construed as granting Optionee any right to continued employment. EXCEPT AS
THE COMPANY AND OPTIONEE WILL HAVE OTHERWISE AGREED IN WRITING, OPTIONEE'S
EMPLOYMENT WILL BE TERMINABLE BY THE COMPANY, AT WILL, WITH OR WITHOUT CAUSE FOR
ANY REASON OR NO REASON. Except as otherwise provided in the Plan, the Board in
its sole discretion will determine whether any leave of absence or interruption
in service (including an interruption during military service) will be deemed a
termination of employment for the purpose of this Agreement.
13. Notices. Any notice to be given to the Company under the terms of
-------
this Agreement will be addressed to the Company, in care of its Secretary, at
its executive offices, or at such other address as the Company may hereafter
designate in writing. Any notice to be given to Optionee will be in writing and
delivered or mailed by registered or certified mail, return receipt requested,
postage prepaid, addressed to Optionee at the address set forth beneath
Optionee's signature in writing. Any such notice will be deemed to have been
duly given where deposited in a United States post office in compliance with the
foregoing.
3
<PAGE>
14. Non-Transferrable. Except as otherwise provided in the Plan or in
-----------------
this Agreement, the option herein granted and the rights and privileges
conferred hereby will not be transferred, assigned, pledged or hypothecated in
any way (whether by operation of law or otherwise). Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of this option, or of
any right or upon any attempted sale under any execution, attachment or similar
process upon the rights and privileges conferred hereby, this option will
immediately become null and void.
15. Successor. Subject to the limitation on the transferability of the
---------
option contained herein, this Agreement will be binding upon and inure to the
benefit of the heirs, legal representatives, successors and assigns of the
parties hereto.
16. California Law. This Agreement will be governed by and construed
---------------
in accordance with the laws of the State of California.
17. Type of Option. The option granted in this Agreement:
----------------
[X] Is intended to be an Incentive Stock Option ("ISO") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
[ ] Is a non-qualified Option and is not intended to be an ISO.
18. Plan Provisions Incorporated by Reference. A copy of the Plan is
-------------------------------------------
attached hereto as Exhibit "A" and incorporated herein by this reference. In
the case of conflict between any provision in this Agreement and any provision
in the Plan or a Shareholder Buy-Sell Agreement, if any, the terms of this
Agreement shall prevail. In the case of conflict between any provision in the
Plan and a provision in a Shareholders Buy-Sell Agreement, if any, the terms of
the Plan shall prevail.
19. Term. Capitalized terms used herein, except as otherwise
----
indicated, shall have the same meaning as those terms have under the Plan.
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year written below.
COMPANY: PHOTOLOFT.COM
By: /S/ CHRISTOPHER MCCONN
------------------------------
Title:_____________________________
OPTIONEE:
CHRISTOPHER MCCONN
Address:___________________________
___________________________________
5
<PAGE>
PHOTOLOFT.COM
STOCK OPTION AGREEMENT
This Photoloft.com Stock Option Agreement (the "Agreement"), by and between
Photoloft.com, a Nevada corporation (the "Company"), and JACK MARSHALL
("Optionee"), is made as of this 1ST DAY OF JULY, 1998.
RECITALS
1. Pursuant to the Photoloft.com Stock Option Plan (the "Plan"), the
Board of Directors of the Company (the "Board") has authorized the grant of an
option to purchase common stock of the Company ("Common Stock") to Optionee,
effective on the date indicated above, thereby allowing Optionee to acquire a
proprietary interest in the Company in order that Optionee will have further
incentive for continuing his or her employment by, and increasing his or her
efforts on behalf of, the Company or an Affiliate of the Company.
2. The Company desires to issue a stock option to Optionee and
Optionee desires to accept such stock option on the terms and conditions set
forth below.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
AGREEMENT
1. Option Grant. The Company hereby grants to the Optionee, as a
-------------
separate incentive and not in lieu of any fees or other compensation for his or
her services, an option to purchase, on the terms and conditions hereinafter set
forth, all or any part of an aggregate of ONE MILLION ONE HUNDRED THIRTY FIVE
THOUSAND THIRTY TWO (1,135,032) shares of authorized but unissued shares of
Common Stock, at the Purchase Price set forth in paragraph 2 of this Agreement.
2. Purchase Price. The Purchase Price per share (the "Option Price")
---------------
shall be $0.48, which is not less than ONE HUNDRED TEN PERCENT (110%) of the
fair market value per share of Common Stock on the date hereof. The Option
Price shall be payable in the manner provided in paragraph 9 below.
3. Adjustment. The number and class of shares specified in paragraph 1
----------
above, and the Option Price, are subject to appropriate adjustment in the event
of certain changes in the capital structure of the Company such as stock splits,
recapitalizations and other events which alter the per share value of Common
Stock or the rights of holders thereof. In connection with (i) any merger,
consolidation, acquisition, separation, or reorganization in which more than
fifty percent (50%) of the shares of the Company outstanding immediately before
such event are converted into cash or into another security, (ii) any
dissolution or liquidation of the Company or any partial liquidation involving
fifty percent (50%) or more of the assets of the Company, (iii) any sale of more
than fifty percent (50%) of the Company's assets, or (iv) any like occurrence in
which the Company is involved, the Company may, in its absolute discretion, do
one or more of the following upon ten days' prior written notice to the
Optionee: (a) accelerate any vesting schedule to which this option is subject;
(b) cancel this option upon payment to the Optionee in cash, to the extent this
option is then exercisable, of any amount which, in the absolute discretion of
the Company, is determined to be equivalent to any excess of the market value
(at the effective time of such event) of the consideration that the Optionee
would have received if this option had been exercised before the effective time
over the Option Price; (c) shorten the period during which this option is
exercisable (provided that this option shall remain exercisable, to the extent
otherwise exercisable, for at least ten days after the date the notice is
given); or (d) arrange that new option rights be substituted for the option
rights granted under this option, or that the Company's obligations under this
option be assumed, by an employer corporation other than the Company or by a
parent or subsidiary of such employer corporation. The actions described in
this paragraph 3 may be taken without regard to any resulting tax consequence to
the Optionee.
<PAGE>
4. Option Exercise. Commencing on July 1, 1998 the right to exercise
----------------
this option will accrue in forty (48) equal monthly installments. Shares
entitled to be, but not, purchased as of any accrual date may be purchased at
any subsequent time, subject to paragraphs 5 and 6 below. The number of shares
which may be purchased as of any such anniversary date will be rounded up to the
nearest whole number. No partial exercise of the option may be for an aggregate
exercise price of less than One Hundred Dollars ($100). In order to exercise
any part of this option, Optionee must agree to be bound by the Company's
Shareholder Buy-Sell Agreement, if any, existing at the time of the exercise of
this Option.
5. Termination of Option. The right to exercise this option will lapse
---------------------
on the ninth anniversary of the effective date of this Agreement.
Notwithstanding any other provision of this Agreement, this option may not be
exercised after, and will completely expire on, the close of business on the
date ten (10) years after the effective date of this Agreement, unless
terminated sooner pursuant to paragraph 6 below.
6. Termination of Employment. In the event of termination of
---------------------------
Optionee's employment with the Company for any reason, this option will
terminate three (3) months after the date of the termination of Optionee's
employment, unless terminated earlier pursuant to paragraph 5 above. However,
(i) if termination is due to the death of Optionee, the Optionee's estate or a
legal representative thereof, may at any time within and including six (6)
months after the date of death of Optionee, exercise the option to the extent it
was exercisable at the date of termination; or (ii) if termination is due to
Optionee's "disability" (as determined in accordance with Section 22(e)(3) of
the Internal Revenue Code), Optionee may, at any time, within one (1) year
following the date of this Agreement, exercise the option to the extent it was
exercisable at the date of termination. If the Optionee or his or her legal
representative fails to exercise the option within the time periods specified in
this paragraph 6, the option shall expire. The Optionee or his or her legal
representative may, on or before the close of business on the earlier of the
date for exercise set forth in paragraph 5 or the dates specified in paragraph 4
above, exercise the option only to the extent Optionee could have exercised the
option on the date of such termination of employment pursuant to paragraphs 4
and 5 above.
7. Repurchase Option of Company. Pursuant to Section 6.1.8 of the
-------------------------------
Plan, in the event of termination of Optionee's employment with the Company for
any reason, the Company shall have an option to repurchase ("Repurchase Option")
any Common Stock owned by the Optionee or his or her heirs, legal
representatives, successors or assigns at the time of termination, or acquired
thereafter by any of them at any time, by way of an option granted hereunder.
The Repurchase Option must be exercised, if at all, by the Company within ninety
(90) days after the date of termination upon notice ("Repurchase Notice") to the
Optionee or his or her heirs, legal representatives, successors or assigns, in
conformance with paragraph 13 below. The purchase price to be paid for the
shares subject to the Repurchase Option shall be the average trading price for
the shares of common stock of the Company over a thirty (30) day period prior to
the delivery of the Repurchase Notice. Any shares issued pursuant to an exercise
of an option hereunder shall contain the following legend condition in addition
to any other applicable legend condition:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO REPURCHASE
PROVISIONS IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND
THE SHAREHOLDER, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE
COMPANY.
8. Transferability. This option will be exercisable during Optionee's
---------------
lifetime only by Optionee. Except as otherwise set forth in the Plan, this
option will be non-transferable.
9. Method of Exercise. Subject to paragraph 10 below, this option may
-------------------
be exercised by the person then entitled to do so as to any shares which may
then be purchased by delivering to the Company an exercise notice in the form
attached hereto as Exhibit A and:
----------
2
<PAGE>
(a) full payment of the Option Price thereof (and the amount of
any tax the Company is required by law to withhold by reason of such exercise)
in the form of:
(i) cash or readily available funds; or
(ii) delivery of Optionee's promisory note (the "Note")
substantially in the form attached hereto as Exhibit B in the amount of the
---------
aggregate Option Price of the exercised shares together with the execution and
delivery by the Optionee of the Security Agreement attached hereto as Exhibit C;
---------
or
(iii) a written request to Net Exercise, as defined in this
paragraph 9(a)(iii). In lieu of exercising this Option via cash payment or
promissory note, Optionee may elect to receive shares equal to the value of this
Option (or portion thereof being canceled) by surrender of Options at the
principal office of the Company together with notice of election to exercise by
means of a Net Exercise in which event the Company shall issue to Optionee a
number of shares of the Company computed using the following formula:
X = Y (A-B)
--------
A
where X is the number of shares of stock to be issued to Optionee; Y is the
number of shares purchasable under this Option; A is the fair market value of
the stock determined in accordance with Section 6.1.12 of the Plan; and B is the
Option Price as adjusted to the date of such calculation.
(b) payment of any withholding or employment taxes, if any.
The Company will issue a certificate representing the shares so purchased within
a reasonable time after its receipt of such notice of exercise, payment of the
Option Price and withholding or employment taxes, and execution of any other
appropriate documentation, with appropriate certificate legends.
10. Securities Laws. The issuance of shares of Common Stock upon the
----------------
exercise of the option will be subject to compliance by the Company and the
person exercising the option with all applicable requirements of federal and
state securities and other laws relating thereto. No person may exercise the
option at any time when, in the opinion of counsel to the Company, such exercise
is permitted under applicable federal or state securities laws. Nothing herein
will be construed to require the Company to register or qualify any securities
under applicable federal or state securities laws, or take any action to secure
an exemption from such registration and qualification for the issuance of any
securities upon the exercise of this option.
11. No Rights as Shareholder. Neither Optionee nor any person claiming
------------------------
under or through Optionee will be, or have any of the rights or privileges of, a
shareholder of the Company in respect of any of the shares issuable upon the
exercise of the option, unless and until this option is properly and lawfully
exercised.
12. No Right to Continued Employment. Nothing in this Agreement will
----------------------------------
be construed as granting Optionee any right to continued employment. EXCEPT AS
THE COMPANY AND OPTIONEE WILL HAVE OTHERWISE AGREED IN WRITING, OPTIONEE'S
EMPLOYMENT WILL BE TERMINABLE BY THE COMPANY, AT WILL, WITH OR WITHOUT CAUSE FOR
ANY REASON OR NO REASON. Except as otherwise provided in the Plan, the Board in
its sole discretion will determine whether any leave of absence or interruption
in service (including an interruption during military service) will be deemed a
termination of employment for the purpose of this Agreement.
13. Notices. Any notice to be given to the Company under the terms of
-------
this Agreement will be addressed to the Company, in care of its Secretary, at
its executive offices, or at such other address as the Company may hereafter
designate in writing. Any notice to be given to Optionee will be in writing and
delivered or mailed by registered or certified mail, return receipt requested,
postage prepaid, addressed to Optionee at the address set forth beneath
Optionee's signature in writing. Any such notice will be deemed to have been
duly given where deposited in a United States post office in compliance with the
foregoing.
3
<PAGE>
14. Non-Transferrable. Except as otherwise provided in the Plan or in
-----------------
this Agreement, the option herein granted and the rights and privileges
conferred hereby will not be transferred, assigned, pledged or hypothecated in
any way (whether by operation of law or otherwise). Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of this option, or of
any right or upon any attempted sale under any execution, attachment or similar
process upon the rights and privileges conferred hereby, this option will
immediately become null and void.
15. Successor. Subject to the limitation on the transferability of the
---------
option contained herein, this Agreement will be binding upon and inure to the
benefit of the heirs, legal representatives, successors and assigns of the
parties hereto.
16. California Law. This Agreement will be governed by and construed
---------------
in accordance with the laws of the State of California.
17. Type of Option. The option granted in this Agreement:
----------------
[X] Is intended to be an Incentive Stock Option ("ISO") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
[ ] Is a non-qualified Option and is not intended to be an ISO.
18. Plan Provisions Incorporated by Reference. A copy of the Plan is
-------------------------------------------
attached hereto as Exhibit "A" and incorporated herein by this reference. In
the case of conflict between any provision in this Agreement and any provision
in the Plan or a Shareholder Buy-Sell Agreement, if any, the terms of this
Agreement shall prevail. In the case of conflict between any provision in the
Plan and a provision in a Shareholders Buy-Sell Agreement, if any, the terms of
the Plan shall prevail.
19. Term. Capitalized terms used herein, except as otherwise
----
indicated, shall have the same meaning as those terms have under the Plan.
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year written below.
COMPANY: PHOTOLOFT.COM
By: /s/ Jack Marshall
------------------------------
Title: President
------------------------------
OPTIONEE:
Jack Marshall
Address: 1668 Hyacirith Ln.
-------------------------
San Jose, CA 95124
-------------------------
5
<PAGE>
PhotoLoft.com, Inc.
Co-Branded Marketing Agreement
Thus Agreement is made March 8 1999 (the "Effective Date") between Picture Works
a California corporation, having a place of business at __________, Danville, CA
("Partner"), and PhotoLoft.com, Inc., a California corporation having a place of
business at 300 Orchard City Drive Suite#142, Campbell, California 95009
("PhotoLoft.com").
1.0 INTENT: PhotoLoft.com offers certain proprietary software and
-------
services for creation, maintenance and storage of on-line digital photo albums
via its PhotoLoft.com web site (the "Service").
PhotoLoft.com and Partner desire to provide the Service to Partner's customers
through:
1.1 The creation of a Co-Branded PhotoLoft.com entrance page on
PhotoLoft.com's server (having the URL address
http://www.photoloft.com/Pictureworks ("Co-Branded PhotoLoft.com") to enable
Partner's visitors and customers ("Visitors") to register to use services or
view photo albums from PhotoLoft.com.
1.2 The creation of a link in Partners Software products and a link on
Partner's web page that will promote and direct a customer to the Co-branded
page.
2.0 LINK: PhotoLoft.com. will cooperate to promptly develop (a) a
-----
specially co-branded PhotoLoft.com page using both PhotoLoft.com's and Partner's
names and logos (the "Co-Branded Pages"); and (b) links from Partner's Site to
the Co-Branded Pages (the "Links").
3.0 USAGE: Partner's customers will be offered a one year free Premium
------
PhotoLoft account.
<PAGE>
5.0 PROMOTION BY PHOTOLOFT.COM: Every image posted by Partner's customer
-----------------------------
will be identified as a Partner's customer image. Every time that that image is
viewed by any PhotoLoft viewer, the logo or link of the Partner will also be on
display to the PhotoLoft viewer. Partners logo and link may not be displayed on
any private label or customized site built or run specifically for a third
party.
7.0 CO-PROMOTION: Partner will mention and reference the relationship
-------------
with PhotoLoft.com in Partner's launch press release. PhotoLoft.com may put out
a separate press release announcing the relationship between the two companies.
Partner will cooperate with PhotoLoft in developing this release.
8.0 FURTHER CUSTOMIZATION: PhotoLoft.com has complete discretion on
-----------------------
making any additional page modifications to the Co-Branded PhotoLoft.com after
the initial design.
9.0 TRADEMARKS:
-----------
PHOTOLOFT.COM MARKS: PhotoLoft.com hereby grants Partner a nonexclusive
- ---------------------
limited license to use, reproduce and display the PhotoLoft.com trademarks and
- ----
logos designated by PhotoLoft.com on Partner's Web Site during the term of this
Agreement in accordance with any guidelines that PhotoLoft.com may provide to
Partner from time to time. PhotoLoft.com will supply Partner with electronic
versions of the PhotoLoft.com trademarks and logos for Partner's use. All
representations of the PhotoLoft.com trademarks and logos that Partner uses will
be exact copies of those provided by PhotoLoft.com, or shall First be submitted
to PhotoLoft.com for approval.
<PAGE>
PARTNER MARKS: Partner hereby grants PhotoLoft.com a nonexclusive limited
- ---------------
license to use, reproduce and display Partner's trademarks and logos designated
by Partner on the Co-Branded Pages during the term of this Agreement in
accordance with any guidelines that Partner may provide to PhotoLoft.com from
time to time. Partner will supply PhotoLoft.com with electronic versions of the
Partner trademarks and logos for PhotoLoft.com's use. All representations of the
Partner's trademarks and logos that PhotoLoft.com intends to use will be exact
copies of those
Initials of PhotoLoft.com Initials of Partner
<PAGE>
provided by Partner, or shall first be submitted to Partner for approval.
10.0 PROPRIETARY RIGHTS: Except as expressly provided herein, each party
-------------------
shall own all right, title and interest in its respective web site and all
portions thereof, including without limitation all intellectual property rights
therein. Except as specifically and clearly set forth in this Agreement,
neither party shall be granted any right or license to any of the other party's
property, including intellectual property in its respective software, web site
or any portions thereof
11.0 TERM: This Agreement shall become effective on the Effective Date
-----
and shall remain in effect for a one (1) year term which shall renew
automatically for successive one-year terms, unless terminated by written notice
by either party @ (30) days prior to the end of any one-year term. In the event
of a breach, the non-breaching party may serve written notice of breach on the
breaching party. If such breach is not cured within fourteen (14) days, the
non-breaching party may immediately terminate this Agreement.
12.0 ASSIGNMENT: This Agreement and any rights under this Agreement may
----------
be transferred, assigned or delegated by either party without the prior written
consent of the other party.
13.0 INDEPENDENT CONTRACTOR: With respect to all matters relating to
------------------------
this Agreement each party is deemed to be an independent contractor. Neither
party shall represent itself as an employee, servant, agent or legal
representative of the other party for any purposes whatsoever.
14.0 GOVERNING LAW/DISPUTE RESOLUTION: The parties intend this Agreement to
--------------------------------
be construed in
accordance with the laws of the State of California. Partner and PhotoLoft.com
agree that they will attempt to settle any claim or controversy arising out of
this Agreement through consultation and negotiation in the spirit of mutual
friendship and cooperation. Any dispute which the parties cannot resolve
between themselves in good faith within six (6) months of the date of the
initial demand by either party for such resolution will be submitted for final
determination by one (1) mutually agreed arbitrator within the State of
California.
<PAGE>
15.0 Limitation of Liability: Neither party shall be liable to the other
-------------------------
for any lost profit or other commercial damage, including, without limitation,
indirect, special, consequential, incidental or punitive damages of any nature
arising out of this Agreement.
16.0 ENTIRE AGREEMENT: This Agreement contains the entire agreement of the
------------------
parties and supersedes all previous understandings and agreements between the
parties relating to the subject matter hereof.
17.0 NOTICES: Any notice or request required to be given under or in
--------
connection with this Agreement shall be in writing and given by facsimile or
postpaid registered or certified mail return receipt requested. The date of
receipt shall be deemed die date on which such notice or request has been given.
Until such time as written notice of a change of address is given by either
party to the other, any such notice or request shall be deemed sufficiently
addressed when directed to the addresses of the parties set out in the first
paragraph of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agree Effective Date:
BY:
Name: Jack Marshall Name:
--------------
Date: 3/22/99 Date:
Title: President Title:
PhotoLoft.com, Inc.
Initials of PhotoLoft.com Initials of Partner
<PAGE>
PHOTOLOFT.COM, INC.
CO-BRANDED MARKETING AGREEMENT
This Agreement is made this March 11,1999 (the "Effective Date") between Umax
-------------
Technologies, Inc., a California corporation, having a place of business at 3361
Gateway Blvd., Fremont, CA 94538 ("Partner"), and PhotoLoft.com, Inc., a
California corporation having a place of business at 300 Orchard City Drive
Suite#142, Campbell, California 95008 ("PhotoLoft.com").
1.0 INTENT: PhotoLoft.com offers certain proprietary software and services
-------
for creation, maintenance and storage of on-line digital photo albums via its
PhotoLoft.com web site (the "Service"). PhotoLoft.com and Partner desire to
provide the Service to Partner's customers through the creation of a Co-Branded
PhotoLoft.com site on PhotoLoft.com's server (having the URL address
http://www.photoloft.com/UMAX ("Co-Branded PhotoLoft.com") to enable Partner's
visitors and customers ("Visitors") to register to use services or view photo
albums from PhotoLoft.com.
2.0 LINK: PhotoLoft.com. will cooperate to promptly develop (a) a specially
-----
co-branded PhotoLoft.com page using both PhotoLoft.com's and Partner's names and
logos (the "Co-Branded Pages"); and (b) links from Partner's Site to the
Co-Branded Pages (the "Links"). During the term of this agreement, the Partner
will maintain the links on the Partners home page/front page
(http://www.umax.com), toolbar/menu bar, and other appropriate locations to be
agreed upon by PhotoLoft.com and Partner.
3.0 CLIENT SOFTWARE: Partner agrees to ship the PhotoLoft Client software
-----------------
with each copy of the product. The PhotoLoft Client software will direct
customers to the Co-Branded Page, and contain the Partner Logo.
4.0 USAGE: Partner's customers will be offered a one year free Premium
-----
PhotoLoft account. Partner's customers will be identified by the serial number
associated with the hardware.
5.0 PROMOTION BY PHOTOLOFT.COM: Every image posted by PhotoLoft's customer
----------------------------
will be identified as a Partner's customer. Every time that that image is
viewed by any PhotoLoft viewer, the logo of the Partner will also be on display
to the PhotoLoft viewer.
6.0 PROMOTION BY PARTNER: Partner will (a) provide a sticker or logo on
--------------------
the hardware box identifying Partner as a PhotoLoft partner, and (b) provide in
box documentation promoting the Premium Account special offer.
7.0 CO-PROMOTION: Upon completion of the Co-Branded pages and associated
------------
links, PhotoLoft.com and Partner will issue a joint press release. In addition,
Partner will notify installed base of the availability of PhotoLoft.com via
e-mail.
8.0 FURTHER CUSTOMIZATION: PhotoLoft.com will be entitled to make changes
----------------------
to the co-branded entrance page to assure the same look and feel with the rest
of the site. Umax shall approve these changes within 10 days of notification by
PhotoLoft. Umax shall not unreasonably withhold approval of these changes.
9.0 TRADEMARKS:
----------
PHOTOLOFT.COM MARKS: PhotoLoft.com hereby grants Partner a nonexclusive
---------------------
limited license to use, reproduce and display the PhotoLoft.com trademarks and
logos designated by PhotoLoft.com on Partner's Web Site and in Partner's
promotional material and documentation during the term of this Agreement in
accordance with any guidelines that PhotoLoft.com may provide to Partner from
time to time. PhotoLoft.com will supply Partner with electronic versions of the
PhotoLoft.com trademarks and logos for Partner's use. All representations of
the PhotoLoft.com trademarks and logos that Partner uses will be exact copies of
those provided by PhotoLoft.com, or shall first be submitted to PhotoLoft.com
for approval.
1
<PAGE>
PARTNER MARKS: Partner hereby grants PhotoLoft.com a nonexclusive limited
---------------
license to use, reproduce and display Partner's trademarks and logos designated
by Partner on the Co-Branded Pages during the term of this Agreement in
accordance with any guidelines that Partner may provide to PhotoLoft.com from
time to time. Partner will supply PhotoLoft.com with electronic versions of the
Partner trademarks and logos for PhotoLoft.com's use. All representations of
the Partner's trademarks and logos that PhotoLoft.com intends to use will be
exact copies of those provided by Partner, or shall first be submitted to
Partner for approval.
10.0 PROPRIETARY RIGHTS: Except as expressly provided herein, each party
-------------------
shall own all right, title and interest in its respective web site and all
portions thereof, including without limitation all intellectual property rights
therein. Except as specifically and clearly set forth in this Agreement,
neither party shall be granted any right or license to any of the other party's
property, including intellectual property in its respective software, web site
or any portions thereof
11.0 TERM: This Agreement shall become effective on the Effective Date and
-----
shall remain in effect for a one (1) year term which shall renew automatically
for successive one-year terms, unless terminated by written notice by either
party thirty (30) days prior to the- end of any one-year term. In the event of
a breach, the non-breaching party may serve written notice of breach on the
breaching party. If such breach is not cured within fourteen (14) days, the
non-breaching party may immediately terminate this Agreement.
12.0 NON ASSIGNMENT: Neither this Agreement nor any rights under this
---------------
Agreement may be transferred, assigned or delegated by either party without the
prior written consent of the other party.
13.0 INDEPENDENT CONTRACTOR: With respect to all matters relating to this
------------------------
Agreement, each party is deemed to be an independent contractor. Neither party
shall represent itself as an employee, servant, agent or legal representative of
the other party for any purposes whatsoever.
14.0 GOVERNING LAW/DISPUTE RESOLUTION: The parties intend this Agreement to
--------------------------------
be construed in accordance with the laws of the State of California. Partner
and PhotoLoft.com agree that they will attempt to settle any claim or
controversy arising out of this Agreement through consultation and negotiation
in the spirit of mutual friendship and cooperation. Any dispute which the
parties cannot resolve between themselves in good faith within six (6) months of
the date of the initial demand by either party for such resolution will be
submitted for FINAL determination by one (1) mutually agreed arbitrator within
the State of California.
15.0 LIMITATION OF LIABILITY: NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR
-----------------------
ANY LOST PROFIT OR OTHER COMMERCIAL DAMAGE, INCLUDING, WITHOUT LIMITATION,
INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES OF ANY NATURE
ARISING OUT OF THIS AGREEMENT.
16.0 ENTIRE AGREEMENT: This Agreement contains the entire agreement of the
-----------------
parties and supersedes all previous understandings and agreements between the
parties relating to the subject matter hereof.
17.0 NOTICES: Any notice or request required to be given under or in
--------
connection with this Agreement shall be in writing and given by facsimile or
postpaid registered or certified mail return receipt requested. The date of
receipt shall be deemed the date on which such notice or request has been given.
Until such time as written notice of a change of address is given by either
party to the other, any such notice or request shall be deemed sufficiently
addressed when directed to the addresses of the parties set out in the first
paragraph of this Agreement.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in as of the
Effective Date:
By: s. Jack Marshall By: s. John
------------------ --------------------------
Date: 3/12/99 Date: 3/11/99
Title: President Title: Senior Director Mktg.
PhotoLoft.com, Inc.
3
<PAGE>
INTERNET SERVICES AND CO-LOCATION AGREEMENT
PLEASE READ THIS INTERNET SERVICES AND CO-LOCATION AGREEMENT (THIS "AGREEMENT")
CAREFULLY BEFORE SIGNING, SINCE BY SIGNING THIS AGREEMENT, YOU CONSENT TO ALL OF
ITS TERMS AND CONDITIONS. This Agreement is made by and between AboveNet
Communications, Inc. ('AboveNet') and Customer. This Agreement is effective
upon AboveNet's acceptance as indicated by its signature below on the date below
(the 'Effective Date'). This Agreement may be executed in two or more
counterparts, each of which will ad an original, but all of which together
shall constitute one and the same instrument.
<TABLE>
<CAPTION>
<S> <C>
Customer Signature: /S/ Chris McConn Customer ID#
- --------------------------------------
(print name): Chris McConn Contract No. C
- --------------------------------------
Title : V.P. Effective Date:
- --------------------------------------
Date: 3/15/99 AboveNet Signature
- --------------------------------------
Company Name: PhotoLoft.com (print name)
- --------------------------------------
Address:300 Orchard City Dr. Suite 142
- --------------------------------------
Campbell, CA 95008
- --------------------------------------
Phone: 408-364-8777
- --------------------------------------
Fax: 408-364-8778
- --------------------------------------
</TABLE>
Thank you for choosing AboveNet to provide your Internet co-location services.
As used in this Agreement, the term 'you' and "Customer" refers to the
above-named corporation, partnership or other business entity that enters into
this Agreement, and "Service" means the transmission of data to and from the
Internet through the network of routers, switches and communication channels
owned and controlled by AboveNet ('Network') together with co-location services
including 24x7 connectivity to the Internet and Co-location Space, as further
defined in this Agreement and in your Order for AboveNet Services Form (the
'Order Form'). The initial Order Form is attached to this Agreement as Exhibit
A. AboveNet and Customer may enter into subsequent Order Forms, which may
supercede or complement prior Order Forms. As used in this Agreement, the term
"Customer Equipment' refers to any and all computer equipment, software,
networking hardware or other materials placed by or for Customer in the
Co-location Space, other than AboveNet Equipment.
AboveNet will begin installation, initiation and Service after it receives and
accepts: (1) your Order Form: (2) a copy of this Agreement signed by your
authorized representative and (3) payment of amounts due under Section 1.1
below, detailed on your Order Form.
1. SERVICE FEES AND BILLING. Customer agrees to pay the Service Activation
Charges, Monthly Service Fees, and other
fees indicated on the Order Form (collectively, "Service Fees').
1.1 ACTIVATION CHARGES. AboveNet will bill Customer for all Service
Activation Charges and first and last month Service Fees (the "Activation
Charges") upon AboveNet's acceptance of this Agreement and the Order Form.
AboveNet will not commence installation, initiation and Service unless and until
it either has received payment in full of all Activation Charges or has agreed,
at its sole option, to extend credit to Customer.
1.2 RECURRING FEES. AboveNet will begin billing for recurring Service Fees
on the date that is the earlier of: (a) the Installation Date specified in the
Order Form ' and (b) the date that Customer places Customer Equipment in
AboveNet's premises. If, however, Customer is unable to use the Services
commencing on the Installation Date solely as a result of delays caused by
AboveNet, then the Installation Date specified in the Order Form shall be
extended one day for each day of delay caused by AboveNet. On or about the
first day of each month, AboveNet will bill Customer for Network services
provided during the previous month, and for co-location services to be provided
in the current month. Recurring Service Fees do not include monthly telephone
company charges which are billed separately by the local telephone company(s).
Rev. 2 4 1 Page I of 8 ABOVENET COMMUNICATIONS, INC. CONFIDENTIAL
<PAGE>
1.3 PAYMENT. All Fees and charges will be due, in U.S. dollars, within
twenty (20) days of the date of each AboveNet invoice. Late payments will
accrue interest at a rate of one and one-half percent (1 1/2%) per month, or the
highest rate allowed by applicable law, whichever is lower, If in its judgment
AboveNet determines that Customer lacks financial resources, AboveNet may, upon
written notice to Customer, modify the payment terms to secure Customer's
payment obligations before providing Services.
1.4 TAXES. All payments required by this Agreement are exclusive of
applicable taxes and shipping charges. Customer will be liable for and will pay
in full all such amounts, other than taxes based on AboveNet net income.
2. CO-LOCATION.
2.1 INSTALLATION. AboveNet grants you the right to operate Customer
Equipment at the Co-location Space, as specified on your Order Form. The
Co-location Space is provided on an 'AS-IS' basis and you may use the
Co-location Space only for the purposes of maintaining and operating Customer
Equipment as necessary to support local access communications facilities and
links to AboveNet and to third parties. Customer will install Customer
Equipment in the Co-location Space after obtaining the appropriate authorization
from AboveNet to access AboveNet premises. Customer will remove and be solely
responsible for all packaging for Customer Equipment.
2.2 ACCESS. You may access the Co-location Space only in accordance with
the AboveNet Co-Location Access Policies located at
http://www.above.net/html/security.html, as updated from time to time. Customer
- ----------------------------------------
may not provide or make available to any third party any portion of the
Co-location Space without AboveNet's prior written consent, which consent
AboveNet may withhold in its sole discretion.
2.3 REMOVAL OF CUSTOMER EQUIPMENT. Customer will provide AboveNet with
written notification two (2) days before Customer wishes to remove any Customer
Equipment. Before authorizing the removal of any Customer Equipment, AboveNet's
accounting department will verify that Customer has no payments due to AboveNet.
Once AboveNet authorizes removal of Customer Equipment, Customer will remove
such Customer Equipment, and will be solely responsible to bring appropriate
packaging and moving materials. Should Customer use an agent or other third
party (for example, but without limitation, a common carrier such as U.P.S.) to
remove Customer Equipment, Customer will be solely responsible for the acts of
such party, and any damages caused by such party to Customer Equipment or
otherwise. At Customer's option, AboveNet will remove and package Customer
Equipment, and place such Customer Equipment in a designated area for pick-up,
on the condition that Customer either provides all packaging needed or pays
AboveNet to package Customer Equipment. Customer may thereafter remove Customer
Equipment from the designated area, or may arrange for a carrier to remove and
ship such equipment with any necessary insurance to be paid by Customer.
3. SECURITY. AboveNet does not guarantee security of Customer Equipment,
the Co-Location Space or of the Network. AboveNet requires that you and your
employees comply with all Co-Location Security Procedures, as modified from time
to time, in order to maximize the security of the Network and AboveNet premises.
AboveNet's current Go-Location Security Procedures are located at
http://www.above.net In particular, you must establish a password with AboveNet
- --------------------
for purposes of requesting any support services with respect to Customer
Equipment or your Network connection, either by telephone or email, Information
detailing password requirements is available on the World Wide Web at
http://www.above.net/html/aug.html. Only individuals whom you have identified
- ----------------------------------
as 'Customer Representatives" in writing to AboveNet will be permitted to enter
the Co-location Space, to request Services on your behalf, or to request any
support services with respect to Customer Equipment or your Network connection,
either by telephone or email (for example, but without limitation, instructing
AboveNet to modify or reconfigure its Services or to remove Customer Equipment).
For good cause, AboveNet may suspend the right of any Customer Representative or
other person to visit the AboveNet premises and/or the Co-location Space.
AboveNet will assist in Network security breach detection or identification, but
shall not be liable for any inability, failure or mistake in doing so.
4. LOCAL AND LONG DISTANCE CARRIERS. AboveNet will provide Customer with a
list of approved third party carriers for data communications and
telecommunications. Customer is responsible for ordering all local and
long-distance lines from such third party carriers and ordering any and all
necessary cross-connects from AboveNet. AboveNet Service Fees for such
cross-connects are as indicated on the Order Form, The carriers will install
such circuits in Customer's name. Customer will be solely responsible for such
circuits and for all payments due to the carriers. Customer will notify the
carrier directly when Customer wishes to terminate or modify such circuit,
5. DOMAIN INFORMATION AND REGISTRATION APPLICATION, If Customer has not
registered the domain name that it wishes to use, Customer may complete the
applicable sections of the Order Form to request registration or a change in
domain name.
Rev. 2.4 1 Page 2 of 8 ABOVENET COMMUNICATIONS, INC. CONFIDENTIAL
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6. OTHER NETWORKS; APPROVAL AND USAGE, Services include the ability to
transmit data beyond AboveNet's Network, through other networks, public and
private, Use of or presence on other networks may require approval of the
respective network authorities and will be subject to any acceptable usage
policies such networks may establish. Customer will not hold AboveNet
responsible for, and AboveNet will not be liable for, such approval or for
violation of such policies. Customer understands that AboveNet does not own or
control other networks outside of its Network, and AboveNet is not responsible
or liable for performance (or non-performance) within such networks or within
interconnection points between the Service and other networks that are operated
by third parties.
7. RESALE. Customer may resell the Service after receiving AboveNet's prior
written approval as to the nature and scope of such resale as set forth in
Section 2.2. Should Customer resell any portion of the Service to any other
party, Customer assumes a[( liabilities arising out of or related to such third
party sites and communications, Customer agrees to enter into written agreements
with any and all parties to which it resells any portion of the Services with
terms and conditions at least as restrictive and as protective of AboveNet's
rights as the terms and conditions of this Agreement, including, without
limitation, Sections 2.3, 3, 6, 8, 9.6-9.8. 10, 11, 12, 14 and 16, and naming
AboveNet as a third party beneficiary
8. ACCEPTABLE USE GUIDELINES. Customer must at all times conform its use of
the Service to AboveNet's Acceptable Use Guidelines and Anti-SPAM Policy, as
AboveNet may update such Guidelines and Policy from time to time, The current
version of AboveNet's Acceptable Use Guidelines can be found at
http://www.above.net/html/aug.html. AboveNet's Anti-SPAM Policy is located at
- ----------------------------------
http://www.above.net/html/anti-spam.html. If AboveNet is informed by government
- ----------------------------------------
authorities or other parties of inappropriate or illegal use of AboveNet's
facilities (including but not limited to the Network) or other networks accessed
through AboveNet, or AboveNet otherwise learns of such use or has reason to
believe such use may be occurring, then Customer will cooperate in any resulting
investigation by AboveNet or government authorities. Any government
determinations will be binding on Customer. If Customer fails to cooperate
with any such investigation or determination, or fails to immediately rectify
any illegal use, AboveNet may immediately suspend Customer's Service. Further,
upon notice to Customer, AboveNet may modify or suspend Customer's Service as
necessary to comply with any law or regulation as reasonably determined by
AboveNet. This includes, without limitation, any use contrary to the Digital
Millennium Copyright Act of 1998, 17 U.S.C. 512.
9. LIMITED SERVICE LEVEL WARRANTY. AboveNet warrants that it will use its
commercially reasonable efforts to minimize Excess Packet Loss and Latency, and
to avoid Downtime, and that AboveNet will provide the following remedies to
Customer: (Excess Packet Loss, Latency and Downtime are defined below)
9.1 PACKET LOSS AND LATENCY. AboveNet does not proactively monitor the
packet loss or transmission latency of specific customers. AboveNet does,
however, proactively monitor the aggregate packet loss and transmission latency
within its LAN and WAN. In the event that AboveNet discovers (either from its
own efforts or after being notified by Customer) that Customer is experiencing
packet loss in excess of five percent (5%) ("Excess Packet Loss") or
transmission latency in excess of 120 milliseconds round-trip time based on
AboveNet's measurements ("Latency') between any two routers within the
continental United States portion of the Network on average for each hour, and
Customer notifies AboveNet (or AboveNet has notified Customer), then AboveNet
will use its commercially reasonable actions to determine the source of the
Excess Packet Loss or Latency and correct the problem.
9.2 Remedy FOR Failure. If either Excess Packet Loss or Latency occurs and
it stems from a source within the Network and not from the Customer or beyond
the Network, and if AboveNet fails to correct the Excess Packet Loss or Latency
after using its commercially reasonable efforts for a period of twenty four (24)
hours after the onset of such Excess Packet Loss or Latency, then AboveNet will
credit Customer's account the pro-rata Bandwidth Fees (as set forth in the
applicable Order Form) for the continuous duration of such Excess Packet Loss or
Latency; provided that all such credits will not exceed an aggregate maximum
credit of Bandwidth Fees otherwise due from Customer for one (1) calendar month
for failures in any one (1) calendar month.
9.3 INABILITY TO ACCESS THE INTERNET (DOWNTIME). AboveNet will use its
commercially reasonable efforts to avoid Downtime for 99.9% of the hours as an
average calculated over each calendar year. If Customer is unable to transmit
and receive information from the Network to other portions of the Internet
because AboveNet failed to provide Network access Services ("Downtime") for more
than four (4) continuous hours, then AboveNet will credit Customer's account the
pro-rata Bandwidth Fees (as set forth in the applicable Order Form) for the
continuous duration of such Excess Packet Loss or Latency; provided that all
such credits will not exceed an aggregate maximum credit of Bandwidth Fees
otherwise due from Customer for one (1) calendar month for failures in any one
(1) calendar month. For purposes of the foregoing, "unable to transmit and
receive" shall mean sustained packet loss in excess of fifty percent (50%) based
on AboveNet' measurements.
9.4 YEAR 200O. AboveNet hereby incorporates its Year 2000 Compliance
Disclosure found at http://www.above.netlhtml/y2k.html into this Agreement. If
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Customer experiences any Excess Packet Loss,
Rev. 2.4 1 Page 3 of 8 ABOVENET COMMUNICATIONS, INC. CONFIDENTTAL
<PAGE>
Latency or Downtime due to AboveNet's failure to be Year 2000 compliant (as
defined in the Year 2000 Compliance Disclosure), Customer will have the remedies
set forth in this Section 9, and the limitations set forth in this Section 9,
Section 11 and the Year 2000 Compliance Disclosure. The Year 2000 Compliance
Disclosure, as incorporated into this Agreement, is provided as a 'Year 2000
Readiness Disclosure" as defined in the Year 2000 Information and Readiness
Disclosure Act of 1998 (Public Law 105-271, 112 Stat. 2386) enacted on October
19, 1998.
9.5 CUSTOMER MUST REQUEST CREDIT. Customer must notify AboveNet within
three (3) business days from the time Customer becomes eligible to receive a
credit under this Section 9 to receive such credit. Failure to comply with this
requirement will forfeit Customer's right to receive a credit.
9.6 LIMITATION ON REMEDIES. IF CUSTOMER IS ENTITLED TO MULTIPLE CREDITS
UNDER THIS SECTION 9, SUCH CREDITS SHALL NOT BE CUMULATIVE BEYOND A TOTAL OF
CREDITS FOR ONE (1) CALENDAR MONTH OF BANDWIDTH FEES IN ANY ONE (1) CALENDAR
MONTH IN ANY EVENT. ABOVENET WILL NOT APPLY A CREDIT UNDER SECTION 9.2 FOR ANY
EXCESS PACKET LOSS OR LATENCY FOR WHICH CUSTOMER RECEIVED A CREDIT UNDER SECTION
9.3. ABOVENET WILL ONLY APPLY A CREDIT TO THE MONTH IN WHICH THE INCIDENT
OCCURRED. FURTHER, ABOVENET WILL NOT APPLY A CREDIT FOR ANY PERIOD IN WHICH
CUSTOMER RECEIVED ANY BANDWIDTH SERVICES FREE OF CHARGE. SECTIONS 9.2 AND 9.3
ABOVE STATE CUSTOMER'S SOLE AND EXCLUSIVE REMEDY FOR ANY FAILURE BY ABOVENET TO
PROVIDE SERVICES OR ADEQUATE SERVICE LEVELS, INCLUDING BUT NOT LIMITED TO ANY
OUTAGES OR NETWORK CONGESTION. ABOVENET'S BLOCKING OF DATA COMMUNICATIONS IN
CONTRAVENTION OF ITS ANTI-SPAM POLICY OR ACCEPTABLE USE GUIDELINES SHALL NOT BE
DEEMED TO BE A FAILURE OF ABOVENET TO PROVIDE ADEQUATE SERVICE LEVELS UNDER THIS
AGREEMENT.
9.7 NO OTHER WARRANTY. EXCEPT FOR THE EXPRESS WARRANTY SET OUT IN THIS
SECTION 9 ABOVE, THE SERVICES ARE PROVIDED ON AN "AS IS" BASIS, AND CUSTOMERS
USE OF THE SERVICES IS AT ITS OWN RISK. ABOVENET DOES NOT MAKE, AND HEREBY
DISCLAIMS, ANY AND ALL OTHER EXPRESS AND IMPLIED WARRANTIES, INCLUDING, BUT NOT
LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT AND TITLE, AND ANY WARRANTIES ARISING FROM A COURSE OF DEALING,
USAGE, OR TRADE PRACTICE. ABOVENET DOES NOT WARRANT THAT THE SERVICES WILL BE
UNINTERRUPTED, ERROR-FREE, OR COMPLETELY SECURE.
9.8 DISCLAIMER OF THIRD PARTY ACTIONS AND CONTROL. AboveNet does not and
cannot control the flow of data to or from the Network and other portions of the
Internet, Such flow depends in large part on the performance of Internet
services provided or controlled by third parties. At times, actions or
inactions caused by these third parties can produce situations in which AboveNet
customers' connections to the Internet (or portions thereof) may be impaired or
disrupted. Although AboveNet will use commercially reasonable efforts to take
actions it deems appropriate to remedy and avoid such events, AboveNet cannot
guarantee that they will not occur. Accordingly, AboveNet disclaims any and all
liability resulting from or related to such events,
10. INSURANCE. Customer will keep in full force and effect during the term
of this Agreement: (i) business loss and interruption insurance in an amount not
less than that necessary to compensate Customer and its customers for complete
failure of Service ' (ii) comprehensive general liability insurance in an amount
not less than one (1) million dollars per occurrence for bodily injury and
property damage, (ii) employer's liability insurance in an amount not less than
one (1) million dollars per occurrence; and (iii) workers' compensation
insurance in an amount not less than that required by applicable law. Customer
also agrees that it will be solely responsible for ensuring that its agents
(including contractors and subcontractors) maintain other insurance at levels no
less than those required by applicable law and customary in Customer's and its
agents' industries, Prior to installation of any Customer Equipment in the
Co-location Space or otherwise as AboveNet may request, Customer will furnish
AboveNet with certificates of insurance which evidence the minimum levels of
insurance set forth above. Customer agrees that prior to the
installation of any Customer Equipment at AboveNet premises or the Co-location
Space, Customer will cause its insurance provider(s) to name both AboveNet and
the AboveNet landlord indicated on the applicable Order Form as additional
insured and notify AboveNet in writing of the effective date of such coverage.
Customer agrees that Customer and its agents and representatives shall not
pursue any claims against AboveNet for any liability AboveNet may have under or
relating to this Agreement unless and until Customer or Customer's employee, as
applicable, first makes claims against Customer's insurance provider(s) and such
insurance provider(s) finally resolve(s) such claims. Any inability
by Customer to furnish the proof the insurance required under this Section 10 or
failure to obtain such insurance shall be a material breach of this Section 10
and of this Agreement.
11. LIMITATIONS OF LIABILITY.
11.1 PERSONAL INJURY. Each Customer Representative and any other persons
visiting AboveNet facilities does so at his or her own risk and AboveNet shall
not be liable for any harm to such persons resulting from any cause
Rev. 2.4 1 Page 4 of 8 ABOVENET COMMUNICATIONS, INC CONFIDENTIAL
<PAGE>
other than AboveNet's gross negligence or willful misconduct resulting in
personal injury to such persons during such a visit.
11.2 Damage to Customer Business. Except as expressly set forth in Section
9 including the limited remedy and other limitations set forth under Section 9,
in no event will AboveNet be liable to Customer, any Customer Representative, or
any third party for any claims arising out of or related to Customer's business,
Customer's customers or clients, Customer Representative's activities at
AboveNet or otherwise, or for any lost revenue, lost profits, replacement goods,
loss of technology, rights or services, incidental, punitive, indirect or
consequential damages, loss of data, or interruption or loss of use of Service
or of any Customer's business, even if advised of the possibility of such
damages, whether under theory of contract, tort (including negligence), strict
liability or otherwise.
11.3 Damage to Customer Equipment. AboveNet assumes no liability for any
damage to, or loss of, any Customer Equipment resulting from any cause other
than AboveNet's gross negligence or willful misconduct. To the extent AboveNet
is liable for any damage to, or loss of, the Customer Equipment for any reason,
such liability will be limited solely to the then-current value of the Customer
Equipment and further subject to the limitations set forth in this Section 11.3
and in Section 11.4 below. In no event will AboveNet be liable to Customer, any
Customer Representative, or any third party for any claims arising out of or
related to Customer Equipment for any lost revenue, lost profits, replacement
goods, loss of technology, rights or services, incidental, punitive, indirect or
consequential damages, loss of data, or interruption or loss of use of any
Customer Equipment, even if advised of the possibility of such damages, whether
under theory of contract, tort (including negligence), strict liability or
otherwise.
11.4 Maximum Liability. Notwithstanding anything to the contrary in this
Agreement, AboveNet's maximum aggregate liability to Customer related to or in
connection with this Agreement will be limited to the total amount paid by
Customer to AboveNet hereunder for the Twelve (12) month period prior to the
event or events giving rise to such liability
12. DEFENSE OF THIRD PARTY CLAIMS AND INDEMNIFICATION.
12.1 DEFENSE. Customer will defend AboveNet, its directors, officers,
employees, affiliates and customers (collectively, the 'Covered Entities') from
and against any and all claims, actions or demands brought by or against
AboveNet and/or any of the Covered Entities alleging: (a) with respect to the
Customer's business (i) infringement or misappropriation of any intellectual
property rights: (ii) defamation, libel, slander, obscenity, pornography, or
violation of the rights of privacy or publicity; or (iii) spamming, or any other
offensive, harassing or illegal conduct or violation of the Acceptable Use
Guidelines or Anti-Spam Policy. (b) any damage or destruction to the Co-location
Space, the Network, AboveNet premises, AboveNet Equipment or to any other
AboveNet customer which damage is caused by or otherwise results from acts or
omissions by Customer, Customer Representative(s) or Customer's designees; (c)
any personal injury or property damage to any Customer employee, Customer
Representative or other Customer designee arising out of such individual's
activities related to the Services, unless such injury or property damage is
caused solely by AboveNet's gross negligence or willful misconduct; or (d) any
other damage arising from the Customer Equipment or Customer's business
(collectively, the 'Covered Claims').
12.2 INDEMNIFICATION. Customer hereby agrees to indemnify AboveNet and each
Covered Entity from and against all damages, costs, and fees awarded in favor of
third parties in each Covered Claim, and Customer will indemnify and hold
harmless AboveNet and each Covered Entity from and against any and all claims,
demands, liabilities, losses, damages, expenses and costs (including reasonable
attorneys fees) (collectively, "Losses") suffered by AboveNet and each Covered
Entity which Losses result from or arise out of a Covered Claim.
12.3 NOTIFICATION. Customer will provide AboveNet with prompt written
notice of each Covered Claim of which Customer becomes aware, and, at AboveNet's
sole option, AboveNet may elect to participate in the defense and settlement of
any Covered Claim, provided that such participation shall not relieve Customer
of any of its obligations under this Section 12.
13. RELIANCE ON DISCLAIMER, LIABILITY LIMITATIONS AND INDEMNIFICATION
OBLIGATIONS. Customer acknowledges that AboveNet has set its prices and entered
into this Agreement in reliance upon the limitations and exclusions of
liability, the disclaimers of warranties and damages and Customer's indemnity
obligations set forth herein, and that the same form an essential basis of the
bargain between the parties. The parties agree that the limitations and
exclusions of liability and disclaimers specified in this Agreement will survive
and apply even if this Agreement is found to have failed of their essential
purpose.
Rev. 2.4.1 Page 5 of 8 ABOVENET COMMUNICATIONS, INC. CONFIDENTIAL
<PAGE>
14. CONFIDENTIAL INFORMATION. Each party acknowledges that it will have
access to certain confidential information of the other party concerning the
other party's business, plans, customers, technology, and products, including
the terms and conditions of this Agreement ('Confidential Information').
Confidential Information will include, but not be limited to, each party's
proprietary software and customer information. Each party agrees that it will
not use in any way, for its own account or the account of any third party,
except as expressly permitted by this Agreement, nor disclose to any third party
(except as required by law or to that party's attorneys, accountants and other
advisors as reasonably necessary), any of the other party's Confidential
Information and will take reasonable precautions to protect the confidentiality
of such information. Information will not be deemed Confidential Information
hereunder if such information: (I) is known to the receiving party prior to
receipt from the disclosing party directly or indirectly from a source other
than one having an obligation of confidentiality to the disclosing party; (ii)
becomes known (independently of disclosure by the disclosing party) to the
receiving party directly or indirectly from a source other than one having an
obligation of confidentiality to the disclosing party; (iii) becomes publicly
known or otherwise ceases to be secret or confidential, except through a breach
of this Agreement by the receiving party. (iv) is independently developed by the
receiving party; or (v) is required to be released by law or regulation,
provided that the receiving party provide prompt written notice to the
disclosing party of such impending release, and the releasing party cooperate
fully with the disclosing party to minimize such release.
15. TERM. This Agreement will be effective beginning on the Effective Date
and ending at the end of the last 'Term' specified in any Order Form accepted by
AboveNet, unless terminated as provided in Section 16 below. Use of any Service
after the Term specified on the Order Form under which such Service was provided
will constitute Customer's acceptance of AboveNet's then current standard
Agreement and the fee rates then in effect, but be terminable by AboveNet upon
notice.
16. TERMINATION.
16.L FOR NONPAYMENT. After fifteen (15) days of non-payment from the due
date, or such longer period as AboveNet's Billing Terms & Conditions may
provide, AboveNet may disable Service. To re-enable Service, AboveNet will
require a reconnection fee. After thirty (30) days of nonpayment from the
AboveNet invoice due date, or such longer period as AboveNet's Billing Terms &
Conditions may provide, AboveNet may terminate the Service permanently.
Termination does not remove Customer's obligations under this Agreement,
including the obligation to pay all fees for Service until termination or due
for a committed, initial Term.
16.2 UNACCEPTABLE USE; BANKRUPTCY. AboveNet may terminate this
Agreement upon written notice to Customer for violation of the Acceptable Use
Guidelines or Anti-Spam Policy or if Customer becomes the subject of a voluntary
petition in bankruptcy or any voluntary proceeding relating to insolvency,
receivership, liquidation, or composition for the benefit of creditors or
becomes the subject of an involuntary petition in bankruptcy or any involuntary
proceeding relating to insolvency, receivership, liquidation, or composition for
the benefit of creditors, if such petition or proceeding is not dismissed within
sixty (60) days of filing.
16.3 FOR CAUSE. Either party may terminate this Agreement if the other
party materially breaches any term or condition of this Agreement and fails to
cure such breach within thirty (30) days after receipt of written notice of the
same, except in the case of failure to pay fees which failure is subject to
Section 16.1 above or for failure to comply with AboveNet's Acceptable Use
Guidelines or Anti-SPAM Policy as set forth in Section 16.2.
16.4 NO LIABILITY FOR TERMINATION. Neither party will be liable to the
other for any termination or expiration of this Agreement in accordance with its
terms. However, expiration or termination will not extinguish claims or
liability (including, without limitation, for payments due) arising prior to
such expiration or termination.
16.5 EFFECT OF TERMINATION. Upon the effective date of expiration or
termination of this Agreement: (a) AboveNet will immediately cease providing the
Services, (b) any and all payment obligations of Customer under this Agreement
will become due immediately, including but not limited to Recurring Service Fees
through the end of the term indicated on the Order Form adjusted for the net
present value of the prospective payments; (c) within thirty (30) days after
such expiration or termination, each party will return all Confidential
Information of the other party in its possession at the time of expiration or
termination and will not make or retain any copies of such Confidential
Information except as required to comply with any applicable legal or accounting
record keeping requirement: and (d) Customer will remove from AboveNet's
premises all Customer Equipment and any of its other property on AboveNet
premises within ten (10) days of AboveNet's request (and only after Customer
receives authorization from AboveNet as provided in Section 2.3) and return the
Co-location Space to AboveNet in the same condition as it was prior to
Customer's installation. If Customer does not remove such property (or cannot
remove such property because of payments due to AboveNet) within such ten (10)
day period, then AboveNet may move any and all such property to storage and
charge Customer for the cost of such removal and storage, without being liable
for related damages. If Customer does not pay all amounts due to AboveNet and
remove such property from AboveNet premises or storage within thirty (30) days
of such
Rev. 2.4 1 Page 6 of 8 ABOVENET COMMUNICATIONS, INC. CONFIDENTIAL
<PAGE>
AboveNet request, AboveNet may liquidate the property in any reasonable manner,
without being liable for related damages.
16.6 SURVIVAL. The following provisions will survive any expiration or
termination of the Agreement: Sections 1.3, 1.4, 2 (until all Customer Equipment
is removed from the Co-location Space), 3, 4, 6, 8, 9.5-9.8, 10-13, 14 (for a
period of three (3) years), 16.4-16.6, and 17.
17. MISCELLANEOUS PROVISIONS.
17.1 FORCE MAJEURE. Except for the obligation to pay money, neither party
will be liable for any failure or delay in its performance under this Agreement,
or for credits under Section 9, due to any cause beyond its reasonable control,
including act of war, acts of God, earthquake, flood, embargo, riot, sabotage,
labor shortage or dispute, governmental act or failure of the Internet, provided
that the delayed party: (a) gives the other party prompt notice of such cause,
and (b) uses its reasonable commercial efforts to correct promptly such failure
or delay in performance.
17.2 NO LEASE. This Agreement is a services agreement and is not intended
to and will not constitute a lease of any real or personal property. In
particular, Customer acknowledges and agrees that Customer has not been granted
any real property interest in the Co-location Space or other AboveNet premises,
and Customer has no rights as a tenant or otherwise under any real property or
landlord/tenant laws, regulations, or ordinances.
17.3 MARKETING. Customer agrees that AboveNet may refer to Customer by
trade name and trademark, and may briefly describe Customer's Business, in
AboveNet marketing materials and web site. Customer hereby grants AboveNet a
limited license to use any Customer trade names and trademarks solely in
connection with the rights granted to AboveNet pursuant to this Section 17.3.
All goodwill associated with Customer's trade name and trademarks will inure
solely to Customer. Customer may display the slogan 'Powered by AboveNet'
together with the AboveNet logo, or any other AboveNet trademark or service mark
or logo, on Customer's web sites or marketing literature only after obtaining
AboveNet's written approval on a case-by-case basis, and provided that Customer
abide by the AboveNet trademark guidelines and such other guidelines as AboveNet
may provide Customer. All goodwill associated with AboveNet's trade name,
trademarks, slogans and logos will inure solely to AboveNet.
17.4 GOVERNMENT REGULATIONS. Customer will not export, re-export, transfer,
or make available, whether directly or indirectly, any regulated item or
information to anyone outside the U.S. in connection with this Agreement without
first complying with all export control laws and regulations which may be
imposed by the U.S. Government and any country or organization of nations within
whose jurisdiction Customer operates or does business.
17.5 ASSIGNMENT. Neither party may assign its rights or delegate its duties
under this Agreement either in whole or in part without the prior written
consent of the other party, except to a party that acquires substantially all of
the assigning party's assets or a majority of its stock as part of a corporate
merger or acquisition. Any attempted assignment or delegation without such
consent will be void. This Agreement will bind and inure to the benefit of each
party's successors and permitted assigns.
17.6 NOTICES. Any notice or communication required or permitted to be
given hereunder may be delivered personally, deposited with an overnight
courier, sent by confirmed facsimile, or mailed by registered or certified mail,
return receipt requested, postage prepaid, in each case to the address of the
receiving party first indicated above, or at such other address as either party
may provide to the other by written notice. Such notice will be deemed to have
been given as of the date it is delivered, or five (5) days after mailed or
sent, whichever is earlier.
17.7 RELATIONSHIP OF PARTIES. AboveNet and Customer are independent
contractors and this Agreement will not establish any relationship of
partnership, joint venture, employment, franchise or agency between AboveNet and
Customer. Neither AboveNet nor Customer will have the power to bind the other
or incur obligations on the other's behalf without the other's prior written
consent, except as otherwise expressly provided herein.
17.8 CHOICE OF LAW AND ARBITRATION. This Agreement will be governed by and
construed in accordance with the laws of the State of California, excluding its
conflict of laws principles. Each party agrees to submit any and all disputes
concerning this Agreement, if not resolved between the parties, to binding
arbitration under one (1) neutral, independent and impartial arbitrator in
accordance with the Commercial Rules of the American Arbitration Association
("AAA") provided, however, the arbitrator may not vary, modify or disregard any
of the provisions contained in this Section 17.8. The decision and any award
resulting from such arbitration shall be
Rev. 2.4 1 Page 7 of 8 ABOVENET COMMUNICATIONS, INC. CONFIDENTIAL
<PAGE>
final and binding. The place of arbitration will be at AboveNet's offices. The
arbitrator is not empowered to award damages in excess of compensatory damages
and each party hereby irrevocably waives any right to recover such damages with
respect to any dispute resolved by arbitration. Both parties shall equally
share the fees of the arbitrator. The language of arbitration will be English,
provided, however that an interpreter may be provided for any witness that
requires an interpreter. The costs of such interpretation will be borne by the
party requesting the interpreter. Any final decision or award from arbitration
under this Section 17.8 NO. I be in writing and reasoned. The arbitrator may
award attorney's fees to the prevailing party as determined by the arbitrator
with wide discretion considering both (I) which party bettered its position most
by the outcome of the Arbitration, and (II) that the parties intended that all
limitations on liability would be enforced by the arbitrator. Except for
attorney's fees as the arbitrator may award as provided in the previous
sentence, each will bear their own costs and expenses that are reasonable and
necessary for participating in arbitration under this Section 17.8. As part of
any arbitration conducted under this Section 17.8, each party may: (i) request
from the other party documents and other materials relevant to the dispute and
likely to bear on the issues in such dispute, (ii) conduct no more than five (5)
oral depositions each of which will be limited to a maximum of seven hours in
testimony, and (iii) propound to the other party no more than thirty (30)
written interrogatories, answers to which the other party will give under oath.
All the dispute resolution proceedings contemplated in this Section 17.8 will be
as confidential and private as permitted by law. The parties will not disclose
the existence, content or results of any proceedings conducted in accordance
with this Section 17.8, and materials submitted in connection with such
proceedings will not be admissible in any other proceeding, provided however,
that this confidentiality provision will not prevent a petition to vacate or
enforce an arbitration award, and shall not bar disclosures required by law.
The parties agree that any decision or award resulting from proceedings in
accordance with this Section 17.8 shall have no preclusive effect in any other
matter involving third parties. All applicable statutes of limitation and
defenses based upon the passage of time will be tolled while the procedures
specified in this Section 17.8 are pending. The parties will take such action,
if any. required to effectuate such tolling, The arbitration shall be governed
by the United States Arbitration Act and judgement upon the award rendered by
the arbitrator may be entered by any court having jurisdiction.
17.9 CHANGES PRIOR TO EXECUTION. Customer represent and warrants that it
made no changes to this Agreement prior to providing this Agreement to AboveNet
for its acceptance and execution, and that AboveNet alone incorporated any and
all changes negotiated between, and accepted by, Customer and AboveNet into this
Agreement or into an addendum executed by both parties.
17.10 ENTIRE AGREEMENT. This Agreement, together with the Order Form and
AboveNet policies referred to in this Agreement represents the complete
agreement and understanding of the parties with respect to the subject matter
herein, and supersedes any other agreement or understanding, written or oral.
This Agreement may be modified only through a written instrument signed by both
parties. Both parties represent and warrant that they have full corporate power
and authority to execute and deliver this Agreement and to perform their
obligations under this Agreement and that the person whose signature appears
above is duly authorized to enter into this Agreement on behalf of the
respective party. Should any terms of this Agreement be declared void or
unenforceable by any arbitrator or court of competent jurisdiction, such terms
will be amended to achieve as nearly as possible the same economic effect as the
original terms and the remainder of this Agreement will remain in full force and
effect. If a conflict arises between Customer's purchase order terms and this
Agreement, this Agreement shall take precedence. In the case of international,
federal, state or local government orders, Customer's purchase order must
contain the following language: 'Notwithstanding any provisions to the contrary
on the face of this purchase order, attachments to this purchase order, or on
the reverse side of this purchase order, this purchase order is being used for
administrative purposes only, and this purchase order is placed under and
subject solely to the terms and conditions of the AboveNet Network Agreement
executed between Customer and AboveNet.'
End OF ABOVENET Internet SERVICES Agreement
Rev. 2 4 1 Page 8 of 8 ABOVENET COMMUNICATIONS. INC. CONFIDENTIAL
<PAGE>
50 WEST SAN FERNANDO STREET #1010 SAN JOSE CA 95113 TEL: 408-367-6666 FAX:
408-367-6688 HTTP:HWWW.ABOVE.NET
March 1, 1999
Christopher McConn
Photoloft.com
300 Orchard City Drive
ste. 142
Campbell, CA 95008
Dear Christopher,
it was a pleasure speaking with you, and discussing your requirements, and our
Internet Service Exchange. ABOVENET is pleased to present PHOTOLOFT.COM the
following QUOTATION OF SERVICE for your mission critical, secured, co-located
business server application. I believe that AboveNet is the best possible
choice for your connectivity solution for the following reasons:
SUPPORT AboveNet's entire support focus is MISSION CRITICAL
Co-location service.
BANDWIDTH AboveNet provides non-stop, non congestive GUARANTEED
BANDWIDTH.
MAINTAINABILITY AboveNet's pro-active, automated service reporting
and ALERTING SYSTEM.
The 1.5 Mbps bandwidth included with your space is based upon 5 minute
averages of your actual usage, then
subjected to 95" percentile adjustment. (Additional bandwidth beyond
the 1.5 Mbps is figured this way also.)
Here's how that works:
We sample your actual usage 5 minutes, we then average the total and
post the result as a 5 minute usage point on a
5 minute usage point on your usage graph. Over the month, we will
continue to plot the 5 minute averages, which
total about 8640 points plotted on the graph. We then take the top 5
percent of your usage (432 points) and throw it
out! Your usage is determined based upon the highest remaining usage
plotted. If your usage is at or lower than 5
Mbps AFTER we've taken off the top 5%, you will not receive any
additional billing. Any usage over the minimum
will be billed at the appropriate rate.
You are automatically placed on a burstable 1OOMbps link. You'll be
able to monitor your bandwidth usage to
understand exactly what your usage is. At the beginning of the
following month, you will get a bill for actual 95t'
percentile usage. If you go over your base of 1.5 Mbps, and wish to
stay on the burstable link, simply pay the bill.
If you want to remain at 1.5 Mbps, simply contact our customer service
department, pay your agreed upon base, and
VOLI will be capped at 1.5 Mbps. Also, AboveNet will only charge for
traffic one way.
This method of billing provides you with a number of advantages.
First, any usage bursts that are untypical of your
bandwidth requirements are riot charged to you. Second, this equates
to receiving your highest 36 hours of
bandwidth usage free each month. Third, like our network, our billing
is scaleable - the cost of entry is reduced and
your bill will only increase as actual bandwidth usage occurs.
AboveNet appreciates this opportunity to be of service to
Photoloft.com. We look forward to a long lasting,
mutually beneficial business relationship. Once you have read this
proposal, please contact me to discuss the
details.
Sincerely,
Todd Mayo 408-367-6621 [email protected]
<PAGE>
50 WEST SAN FERNANDO STREET #1010 SAN JOSE CA 95113 Q M
TEL: 408-367-6666 FAX: 408-367-6688 HTTP://WWW.ABOVE.NET
SUPPORT SERVICES
The following AboveNet service offerings are designed to cover commonly
requested support needs of our Network Operations Center (NOC). Customized
support plans are available on a case by case basis.
AUTOMATED PRO-ACTIVE SERVICE (APST") INCLUDED
Every 5 minutes your equipment will be pinged and probed (HTTP, FTP, SNTP, NNTP)
You will need to select who will be notified and at what intervals. A full
description of these and our escalation procedures can be reviewed on our web
site http://www.above.net/html/customer - services.html. At the time of install
your customer service representative will help you select the configuration that
best suits your requirements.
REMOTE HANDS LEVEL 1 INCLUDED
This service is provided at no additional cost, involves the most basic
activities of an AboveNet 24x7 on-duty staff performed with "eyes", "ears" and
"fingers", but without involvement of tools or equipment. Examples of Level I
services would include: pushing a button, switching a toggle, setting a dip
switch, power cycling (turning on and off) equipment, securing cabling to
connections, observing, describing or reporting on indicator lights or display
information on machines or consoles basic observation and reporting on the local
environment in AboveNet's Premises running single, built in diagnostics
equipment typing commands on a keyboard cable organization, ties or labeling
modifying basic cable layout, such as Ethernet connections labeling or/and
re-labeling equipment installation of newly or previously received equipment in
rack space.
REMOTE HANDS LEVEL 2 OPTIONAL $125/HOUR
Provided for a fee, this service involves all the service of level 1, plus
direct contact with equipment configuration, including hardware and software
interaction. Upon request, AboveNet will provide the Customer with a list of
AboveNet's 3rd party partners for advanced service requirement. Please contact
[email protected] for details. Examples of Level 2 services would include:
replacing hardware components with spares or upgrades adding memory upgrading
drive capacity by installation of new or additional disk drives install or
re-install legal software
REMOTE POWER CYCLE FOR REBOOT OPTIONAL $15/MONTH
From time to time many servers require reboot after a notification of a problem.
You can call and have the tech support team re-boot your server, or with a Power
Cycle Port, you can have Remote power reset activated with a Web based
interface. By using this feature, you will be able to reboot remotely. In
addition, if designated, the PPS will automatically reboot your system when a
malfunction is detected.
TAPE BACK UP OPTIONAL $100/MONTH
AboveNet can facilitate daily tape backup of your equipment, To take advantage
of this service, the equipment must have its own tape drive and be accompanied
by a set of tapes. Before installation of the server, configure the software to
back up files to be saved every day. When the server arrives, AboveNet
personnel will verify that backups are operating correctly. AboveNet personnel
will change the tape in your backup unit and retrieve archived tapes when
needed.
DNS ADMINISTRATION OPTIONAL $50/DOMAIN See: http://www.above.net/htmi/ip
and_dns.html Most customers administer their own DNS (Domain Name Service),
however we can administer this for a fee. As names are added or deleted, notify
NOC by E-mail. You will be responsible to notify InterNic of the transfer of
the account to AboveNet.
SECONDARY DNS SERVICE OPTIONAL $]O/DOMAIN
Customer must create name entry first before submitting to InterNic hostmaster.
Customer must "cc" the domain name registration/modification request to
"[email protected]". Changes to DNS records will be handled by AboveNet as required.
Incorrectly registered domains will be deleted.
TELCO SERVICES AND REMOTE ACCESS OPTIONAL
AboveNet will, assist in co-ordination of the provisioning of telco services to
support your co-location remote access. Ordering of and payment for Telco
services connected to equipment owned by will be your responsibility.
<PAGE>
50 WEST SAN FERNANDO STREET #1010 SAN JOSE CA 95113
TEL: 408-367-6666 FAX: 408-367-6688 HTTP:HWWW.ABOVE.NET
MARCH 15,1998
QUOTATION OF SERVICE
FOR: PHOTOLOFT.COM
<TABLE>
<CAPTION>
SERVICE ACTIVATION CHARGES:
- ---------------------------------------------------
DESCRIPTION OF SERVICE UNITS COST OF SERVICE EXTENSION
<S> <C> <C>
Above Net Asymmetric Allocation of Packets (ASAPTM) lncl.
Bandwidth on Demand Feature Incl.
Automated Pro-Active service (APSTM) Incl.
Primary & Secondary DNS service 2 Incl.
IP Address 2 Incl.
Daily Tape Back-up 1 $100.00 $100.00
Remote Access through leased line 0 $250.00
Installation I ('@ Rack Cage) 1 $ 2,500.00 $2,500.00
TOTAL (ONE TIME) $2,600.00
</TABLE>
MONTHLYSERVICE RATES- 100 MB S ETHERNET SEGMENT
- -----------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
DESCRIPTION OF SERVICE UNITS COST OF SERVICE EXTENSION
Remote Hands Level I incl.
1.5 Mbps of Bandwidth usage (95" Percentile) incl.
Additional bandwidth usage per Kbps f. 00-.90
Amps of Clean 120V AC Power TBD $ 20.00
Additional Power per Amp $ 20.00
Daily Tape Back Up 1 $100.00 $100.00
Remote Access through Leased Line 0 $ 50.00
Power Cycle for Remote Reboot 0 $ 15.00
Shelf Space 1 (3 Rack Cage) 1 $4,500.00 $4,500.00
TOTAL (MONTHLY)
$4,600.00
</TABLE>
ADDITIONAL BANDWIDTH
1-2 Mbps $1.30 per Kbps
- ---------------------------
2-4 Mbps $1.20 per Kbps
- ---------------------------
4-10 Mbps $1.10 per Kbps
- ----------------------------
10-20 Mbps $1.00 per Kbps
- -----------------------------
Over 20 Mbps$.95 per Kbps
- -----------------------------
TOTAL AMOUNTS DUE UPON SIGNING:
- -----------------------------------
TOTAL SERVICE ACTIVATION $2,600.00
FIRST MONTH'S SERVICE $4,600.00
LAST MONTH'S SERVICE $4,600.00
TOTAL: $11,800.00
TERM: 1 YEAR
SERVICE ORDER AUTHORIZED BY: Print Name Chris McConn Title V.P Engineering
------------ ---------------------
Company: PhotoLoft.com
Signature: s. Chris McConn Date: 3/15/99_____________________
- ----------------------------- -----------------------------------
(signature executes this Service Order) SERVICES AND PRICES ARE TO ABOVENET
SPECIFICATIONS AND SUBJECT TO CHANGE WITHOUT PRIOR NOTIFICATION. QUOTE VALID FOR
30 DAYS.
Quote prepared by: Todd Mayo Tel: 408-367-6621 Fax: 408-367-6688 E-mail:
[email protected]
- ---------------
PAYMENT INFORMATION
- --------------------
Charge Invoice Other
Credit Card # Expiration Date
- ------------------- ----------------
Name on Card visa Amex Mastercard
- ------------------- ------------------------------------------------------
Card Holder's Card
- -------------------
Signature
<PAGE>
COWABUNGA RECIPCAL WEB SITE LINKING AGREEMENT
This AGREEMENT (this "Agreement") entered into this ___ day of April, 1999
("Effective Date"), by and between Cowabunga Enterprises Inc, a wholly owned
subsidiary of Gateway 2000 Inc., ("Cowabunga"), having an office at 610
Gateway Drive, N. Sioux City, SD 57049 and PhotoLoft.com, Inc. a Nevada
corporation, having an office at 300 Orchard City Drive, Suite 142, Campbell,
CA 95008 ("Provider").
In consideration of the mutual promises and covenants herein contained,
Cowabunga and Provider agree as follows:
1. This Web Linking Agreement ("Agreement") shall take effect on the date
set forth above and shall remain in effect until sooner terminated as set forth
in this Agreement.
2. Provider hereby grants to Cowabunga during the term of this Agreement the
worldwide, non-exclusive, non-transferable license, subject to the terms and
conditions of this Agreement, to establish one or more hyperlinks ("Link(s)") to
the Provider's URL http://www.photoloft.com/gatewaynet and from Provider's URL
to gateway.net's URL: http://www.gateway.net,("Site") under the guidelines
provided by Cowabunga.
2.1 Provider acknowledges and agrees that its use of the Link will comply
with the Logo and Distribution Guidelines provided by Cowabunga. If Provider
makes a new release of the Link or component thereof, then: the Link will comply
with the Logo and Distribution Guidelines provided by Cowabunga. If Cowabunga
utilizes Provider's icon or brand features to indicate the location(s) of the
Links, then Provider further grants to Cowabunga a worldwide, non-exclusive,
non-transferable license to use, reproduce, distribute and display Provider's
icon or brand features solely for the purpose of indicating the location of the
Link(s), as set forth above.
2.2 Cowabunga may display Provider's icon or brand features to establish one
or more Links, provided that set-up fee is timely paid.
2.3 Cowabunga may not use or modify the Provider's icon, brand features, marks
or logos without the prior written consent of Provider.
3. Inclusion of Link. During the term of this agreement, Cowabunga shall
designate the Provider's Site Link on the Site in the Travel and Family
category.
3.1 Within 30 days following the completion of each calendar quarter,
Provider shall submit to Cowabunga a report setting forth the number of
end-users that accessed the Provider's Site pursuant to Section 2 above and
Provider shall pay Cowabunga the amounts due pursuant to Section 3.6 above.
3.2 Neither Cowabunga nor Provider make any representations(s) of fact or
opinion or promises to each other with respect to anticipated or minimum
commercial activity, revenues, customer volume or other tangible results from
their respective activities under this Agreement.
3.3 Cowabunga shall have the right to audit Providers' books and records, no
more than twice per year to determine revenue due and owing. If errors in
payments resulting from the audit are greater than five percent (5%), Provider
agrees to pay for all the costs of the audit. Cowabunga shall not engage the
auditors under a contingency fee basis.
3.4 Cowabunga will offer its users a Free Premium Account. This has a value
of $29.95 and entitles the user to 50Mbytes of disk space for image storage on
Providers site and password protection of the users on-line photo albums for a
period of one year.
Web Link Agreement -1
<PAGE>
3.5 Provider will create a co-branded site with a unique Cowabunga entrance
page that will contain the Cowabunga logo and branding information on each page.
3.6 Provider will share 10% of the page view advertising revenue generated
from the Cowabunga co-branded site. All advertising revenue sharing is based on
net income received by Provider after allowances are made for commissions,
agency fees, and any other fees.
3.7 Cowabunga will feature the Free Premium Account offer to its customer base
in the following manner a) list the special offer in the Special Offer section
of the gateway.net web page, c) display Providers logo and link information in
the family and travel sections of the Cowabunga site.
4. Neither Cowabunga, its officers, directors or employees may be held
liable for any damages suffered or incurred by Provider arising out of
Cowabunga's failure to display Provider's icon or brand features, or Cowabunga's
failure to display Provider's icon or brand features within a certain time
period.
5. Neither party will be liable for any failure to perform any obligations
hereunder, or from any delay in the performance hereof, due to causes beyond its
control.
6. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THERE ARE NO WARRANTIES,
CONDITIONS, GUARANTIES OR REPRESENTATIONS AS TO MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR OTHER WARRANTIES, CONDITIONS, GUARANTIES OR
REPRESENTATIONS, WHETHER EXPRESS OR IMPLIED, IN LAW OR IN FACT, ORAL OR IN
WRITING.
7. Under no circumstances will either party, or their respective officers,
directors or employees be liable for any indirect, special or consequential
damages with respect to the provision of the Provider's Content to Cowabunga,
including lost profits regardless of whether such damages could have been
foreseen or prevented by either party.
9. Notwithstanding any provision contained herein to the contrary, in no
event will the aggregate liability of Cowabunga or its officers, directors and
employees to Provider for damages, direct or otherwise, arising out of or in
connection with this Agreement exceed $1,000.00, regardless of the cause or form
of action.
10. Provider will indemnify, defend and hold Cowabunga and its officers,
directors and employees harmless from and against any claim, suit, action, or
other proceeding and all damages resulting from or arising out of claims that
any of the Provider's icon or brand features infringes any United States
trademark right of any third party or breach of representation or warranty of
Provider contained herein.
11. Term; Termination.
11.1 Term. This Agreement will remain in effect for a period of one year from
the date hereof and shall automatically renew for successive one-year periods
unless terminated by either party upon written notice at least 30 days prior to
expiration of the then current term.
11.2 Automatic Immediate Termination. This Agreement shall be automatically
terminated immediately upon either party becoming the subject of any bankruptcy,
liquidation, receivership or similar proceedings, making an assignment for the
benefit of its creditors, or becoming unable to pay its debts as they become
due.
11.3 Termination for Non-compliance of Linking Policies. Without prejudice
to any other rights or remedies available at law non-breaching party demands in
writing (email included) or in equity, either party may terminate this Agreement
at any time if the other party does not comply with the terms and policies in
this Agreement and does not cure its breach within five (5) days after notice do
so.
Web Link Agreement -2
<PAGE>
11.4 Cowabunga may terminate the Agreement on thirty (30) days notice for
any reason.
12. Nothing will be deemed to limit or restrict either party from
entering into agreements with any other person-covering establishment of branded
Links similar to Provider's or to Cowabunga's Site or from offering such similar
Links itself.
13. Neither party will make or issue any press statement or publicity
regarding the terms of this Agreement.
14. The terms and conditions of this Agreement shall be considered
confidential and shall not be disclosed to any third parties except to such
party's accountants or attorneys or except as otherwise required by law.
15. This Agreement represents the entire agreement of the parties regarding
the subject matter hereof.
16. This Agreement will be governed by and construed in accordance with the
laws of the State of New York.
17. All notices, requests and other communications to any party hereunder
will be in writing and will be given to such party at its address set forth in
this Agreement.
18. Neither party may assign any of its rights or delegate any of its duties
under this Agreement without the prior written consent of the other.
19. There is no joint venture, partnership, agency or fiduciary relationship
existing between the parties and the parties do not intend to create any such
relationship by this Agreement.
20. This Agreement may not be amended, modified or superseded unless
expressly agreed to in writing by both parties.
21. If any provision or term of this Agreement is held to be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remainder of this Agreement will not be affected.
22. The provisions of Paragraphs 5 through 10, 12, 14, 15, 16, 18, 19, 21
and 22 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties to this Agreement have caused it to be duly
executed by their respective duly authorized offices or representatives as of
the date and year first above written.
Cowabunga: Provider:
By: __________________________ By: __________________________
Name: Name:
Title: Title:
Web Link Agreement -3
<PAGE>
ADSMART NETWORK
REPRESENTATION AGREEMENT
------------------------
THIS REPRESENTATION AGREEMENT (the "Agreement") is made on this 26th day of
April, 1999 (the "Effective Date"), by and between ADSMART NETWORK ("ADSMART")
with its principal place of business located at 100 Brickstone Square, 5th
Floor, Andover, MA 01810 and PHOTOLOFT.COM, INC. ("PLI") with its principal
place of business located at 300 Orchard City Dr. Suite 142, Campbell, CA 95008.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, ADSmart and PLI agree to the
following:
1. ADSMART RESPONSIBILITIES.
(a) Representation. ADSmart will provide advertising sales representation
--------------
and consultation services (collectively the "Representation Services") on
behalf of PLI's web site(s) (the "Website") set forth in Attachment A
("Attachment A") and made a part of this Agreement. In connection with such
Representation Services, ADSmart shall actively promote the Website and solicit
advertising for the Website. Any and all advertising shall be subject to the
approval of PLI in its absolute and unfettered discretion.
(b) Exclusivity. ADSmart is appointed the exclusive sales representative
-----------
for PLI for the Initial Term and all Renewal Terms of this Agreement, as defined
below
(c) Management Services. ADSmart will provide the following management
--------------------
services ("Management Services"):
(i) Collect advertising creative ("Creative") from advertisers or ad
agencies ("Advertisers") that will be displayed on the Website.
(ii) Provide pipeline reports (the "Pipeline Reports") every two (2) weeks,
which outline advertising schedule, including costs, number of
impressions and outstanding proposals to Advertisers.
(iii)Update PLI on the progress and demand of the Internet advertising
marketplace.
(iv) Consult with PLI on marketing and advertising opportunities.
(d) Ad Serving & Tracking.
------------------------
(i) Banners. PLI will utilize banner serving through ADSmart. There
-------
will be no charge by ADSmart for this service (Subject to section 2F
below). ADSmart shall have exclusive control of the banner inventory
allocated to ADSmart by PLI and ADSmart shall have reasonable discretion
over the content and nature of the banners that can be sold to cover banner
serving and bandwidth cost. ADSmart will not run any advertising campaign
on the Website, which PLI reasonably determines to be offensive to PLI or
its customers or inconsistent with PLI's editorial policy.
<PAGE>
Promotional campaigns and/or sponsorships shall not be included in the banner
inventory allocated to ADSmart.
(ii) Specific Requests. If PLI requests specific paid or non-paid
------------------
campaigns to be placed on the banner spots allocated to ADSmart, PLI shall
pay ADSmart $.55 net per thousand impressions, for paid or non-paid open
inventory banner serving, auditing and reporting. ADSmart will deduct fees
for banner serving from checks being sent to PLI for advertising revenue.
If PLI requests banners to be served for its own internal purposes, using
the cost listed above, the amount of banner impressions will not exceed ten
percent (10%) of the monthly banner inventory allocated to ADSmart by PLI.
(f) Guarantee
---------
ADSmart guarantees that it will sell 100% of PLI's allocated banner inventory at
a minimum $2.00 gross CPM.
2. PLI'S RESPONSIBILITIES.
(a) Impressions. PLI will allocate a minimum of one- (1) million
-----------
impressions ("Impressions") per month to ADSmart. (IMPRESSION-shall mean a
-----------
single viewing of a web asset, such as an ad banner or HTML document.)
Impressions shall be a cross section of all available Impressions on the
Website. PLI will make reasonable efforts to ensure that the Impressions
committed to ADSmart are available and notify ADSmart immediately in the event
that any major decrease in Impressions is foreseen.
(b) Website Information. Upon execution of this Agreement, PLI will provide
-------------------
ADSmart with the following information: available demographic and psychographic
(interest and behavioral) information regarding Website audience, Website
description by section, advertising and sponsorship opportunities, technical
specifications relating to advertising, marketing information, and contact
information. PLI agrees to keep all information provided to ADSmart current and
will advise ADSmart on new opportunities with its Website and new services
offered by PLI.
(c) Tracking. PLI will provide ADSmart with a detailed inventory projection
--------
analysis of the Website's traffic, including visitor and page view totals
for its primary sections.
(d) Editorial Policy. PLI will provide ADSmart with its Website editorial
-----------------
policy.
(e) Fulfillment of Advertising Campaigns. PLI shall use its best efforts to
------------------------------------
fulfill all advertising campaigns obtained by ADSmart in a timely manner,
including but not limited to fulfilling estimated impressions.
(f) In-House Sales.ADSmart acknowledges that PLI's in-house sales force will
---------------
continue its advertising sales efforts concurrently with this agreement and
ADSmart and PLI agree to work together to prevent duplication of sales efforts
<PAGE>
and to inform the other of targeted advertisers. To facilitate this process,
PLI shall provide ADSmart with a report every month or more often in PLI's
discretion, which contains the same information provided by ADSmart to PLI in
ADSmart's Pipeline Report.
(g) Advertiser Exclusions. ADSmart shall not pursue any Advertiser listed
----------
on Attachment B ("Attachment B") and made a part of this Agreement.
3. MARKETING MATERIAL
(a) Highlighting and Approval. ADSmart will highlight the Website in its
---------------------------
World Wide Web site on the Internet located at www.adsmart.net and within
---------------
its media kit. PLI will have the right to review in advance and approve the
final version of the media kit.
(b) Marketing Materials. PLI agrees and acknowledges that ADSmart may
--------------------
market and promote the Website to potential Advertisers, by such means as it
deems appropriate, including, without limitation, listing the in directories,
trade publications, ADSmart proposals and presentations, advertisements, and
other promotional opportunities.
(c) Promotional Material. PLI agrees to provide ADSmart with reasonable
---------------------
amounts of PLI's promotional materials.
(d) Press Releases. Both parties must approve in writing all press releases
--------------
or announcements referring to any ADSmart/PLI agreement before they are released
to the press or any third party.
(e) Registry as Agent. PLI authorizes ADSmart Network to register as PLI's
-----------------
agent in all relevant periodicals, directories, and other marketing sources
identified by ADSmart and approved in advance by PLI within the scope of and
during the Initial Term and all Renewal Terms of this Agreement.
4. COMPENSATION. For the Representation Services and Management Services
provided by ADSmart, PLI agrees to pay ADSmart a thirty-five- (35%) percent
commission on all net advertising revenues invoiced and collected by ADSmart
arising out of the advertisements placed upon the Website by ADSmart during the
term of this Agreement, less credits, refunds and sales or use taxes.
5. BILLING.
--------
(a) Collection. ADSmart will invoice and collect all advertising revenue
-----------
from Advertisers solicited by ADSmart on behalf of PLI.
(b) Billing. Billing by ADSmart is calculated using gross invoice amount,
-------
equal to CPM in effect at the time of signature of the insertion Order,
multiplied by the number of Impressions delivered divided by one thousand. The
net invoice amount is the gross invoice amount less a 15% agency commission
(where applicable). The invoice sent by ADSmart to the Advertiser will include
both a gross invoice amount and the net invoice amount in applicable situations.
<PAGE>
ADSmart shall pay PLI the amount for each campaign calculated from the net
invoice amount billed to the Advertiser (i.e., the amount that we are actually
due to receive from the Advertiser), less ADSmart's Commission, as set forth in
Section 4 above.
(c) Reports. ADSmart will provide written details of ADSmart generated
-------
activity on the Website. These reports will, at a minimum, summarize (i) the
ADSmart ad campaigns that ran and how long they ran, (ii) the number of
Impressions delivered.
(d) Payment. ADSmart shall remit amounts due to PLI within fifteen (15)
-------
business days from the date of receipt of payment or within one hundred, twenty
(120) days from the end of the campaign, whichever occurs first
6. CONFIDENTIAL INFORMATION. "Confidential Information" means all
--------------------------
information identified in written or oral format by the Disclosing Party as
confidential, trade secret or proprietary information, and, if disclosed orally,
summarized in written format within thirty (30) days of disclosure.
Confidential Information shall also include the terms and conditions of this
Agreement. "Disclosing Party" is the party disclosing Confidential Information.
"Receiving Party" is the party receiving Confidential Information. The
Receiving Party shall not use the Confidential Information except to carry out
the purposes of this Agreement, or disclose the Confidential Information to any
third party other than persons in the direct employ of the Receiving Party who
have a need to have access to and knowledge of the Confidential Information
solely for the purpose authorized above. Each party shall take appropriate
measures by instruction and agreement prior to disclosure to such employees to
assure against unauthorized use or disclosure. The Receiving Party shall have
no obligation with respect to information which (i) was rightfully in possession
of or known to the Receiving Party without any obligation of confidentiality
prior to receiving it from the Disclosing Party; (ii) is, or subsequently
becomes, legally and publicly available without breach of this Agreement; (iii)
is rightfully obtained by the Receiving Party from a source other than the
Disclosing Party without any obligation of confidentiality; or (iv) is disclosed
by the Receiving Party under a valid order created by a court or government
agency, provided that the Receiving Party provides prior written notice to the
Disclosing Party of such obligation and the opportunity to oppose such
disclosure. Upon written demand of the Disclosing Party, the Receiving Party
shall cease using the Confidential Information and return the Confidential
Information and all copies, notes or extracts thereof to the Disclosing Party
within seven (7) days of receipt of notice.
7. PLI'S REPRESENTATIONS AND WARRANTIES.PLI represents and warrants that (i)
-------------------------------------
it has full power and authority to enter into this Agreement, (ii) this
Agreement does not conflict with any other agreement or commitment made by PLI,
(iii) it shall not do anything to harm or bring into disrepute or disparage
ADSmart or any Advertiser, (iv) the Website is year 2000 compliant, and (v) it
will use best efforts to provide its services in accordance with the terms of
this Agreement and in accordance with industry standards.
<PAGE>
8. ADSMART'S REPRESENTATIONS AND WARRANTIES. ADSmart represents and
--------------------------------------------
warrants that (i) it has full power and authority to enter into this Agreement,
(ii) this Agreement does not conflict with any other agreement or commitment
made by ADSmart, (iii) it shall not do anything to harm or bring into disrepute
or disparage PLI, and (iv) it will use best efforts to provide its services in
accordance with the terms of this Agreement and in accordance with industry
standards.
9. WARRANTV DISCLAIMER.EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES
--------------------
PROVIDED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY
EXPRESS OR IMPLIED WITH RESPECT TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT
LIMITATION, NETWORK FAILURES, THIRD-PARTY AD SERVING DIFFICULTIES, THE SOFTWARE
PROGRAMS, SERVICES PROVIDED HEREUNDER, OR ANY OUTPUT OR RESULTS THEREOF.
ADSMART SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
10. INDEMNIFICATION. Each party agrees to indemnify, defend, and hold
----------------
harmless the other party, and its successors, officers, directors, employees,
agents and assigns, from and against any and all third party actions, causes of
action, claims, demands, costs, liabilities, expenses and damages arising out of
or in connection with any claim which, if true, would be a breach of the
warranties, representations, and covenants set forth in this Agreement. ADSmart
is not a party to and has no liability for any and all problems which may arise
in connection with the Website, including, without limitation, failure to
fulfill an advertising insertion order obtained as part of the Representation
Services.
11. LIMITATION OF LIABILITY. Expect as set forth in paragraphs 6 and 10,
ADSmart's total liability arising out of this Agreement or the services provided
hereunder, whether based on contract, tort or otherwise, shall not exceed
commissions paid to ADSmart for ad campaigns run on PLI's behalf or $50,000,
whichever is less. PLI's total liability arising out of this Agreement or the
services provided hereunder, whether based on contract, tort or otherwise, shall
not exceed revenues received from ADSmart for ad campaigns run on PLI's behalf
or $50,000, whichever is less.
12. EXCLUSION OF DAMAGES. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT
LIMITED TO, LOSS OF DATA, LOSS OF USE, OR LOSS OF PROFITS ARISING HEREUNDER OR
FROM THE PROVISION OF SERVICES, INCLUDING ADVERTISING ON PLI'S WEBSITE, EVEN IF
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
13. TERM AND TERMINATION.
-----------------------
(a) Basic Provisions. This Agreement shall have a term of one year (the
-----------------
.'Term") and shall automatically renew for periods of one year thereafter (each,
a
<PAGE>
"Renewal Term"), unless either party provides sixty (60) days written notice of
their intent to terminate the Agreement immediately prior to any renewal.
(b) Minimum Term. After an initial term of ninety- (90) days, either party
--------------
may terminate this Agreement at the end of ninety (90) days with thirty- (30)
days-advanced written notice.
(c) Breach and Cure. In the event a party is given notice that it is in
-----------------
material breach of this agreement, it shall have thirty (30) days from
receipt to cure its breach in all material respects. On the failure so to
cure, the non-breaching party may terminate this agreement. In the event of
termination pursuant to this section, all revenue due PLI (minus all ad-serving
fees & compensations due ADSmart) prior to termination will be paid in
accordance with this Agreement.
(d) Content. ADSmart may, in its sole discretion, decide to terminate this
-------
Agreement immediately if ADSmart feels that continuing to represent PLI's
Website conflicts with ADSmart's standards and the standards being set by other
websites in ADSmart's network. Examples of this include: pornography, excessive
violence, abusive and/or foul language, or a pattern of neglect on the Website
such that it appears PLI is not updating it regularly, or has abandoned it
altogether.
(e) For a period of three- (3) months following the expiration or earlier
termination of this agreement, ADSmart shelf continue to be entitled to its
commission for advertising revenue generated from any and all advertisers
initially obtained by ADSmart. Except as set forth in this agreement, PLI shall
have no other liability to ADSmart whatsoever and shall not be liable for any
damages or losses to ADSmart resulting from the expiration or termination of
this agreement.
14. NON-COMPETITION.The Parties agree that during the Initial Term and all
----------------
Renewal Terms of this Agreement and for a period of six (6) months following the
expiration or earlier termination of this Agreement, a Party shall not solicit
the services of any employee of the other Party, including, without limitation,
as a full or part-time employee or independent contractor unless such person has
left the employment of a Party and formed his or her own business. In such
case, Party shall have the right to hire such person as a consultant.
15. MISCELLANEOUS. Sections 4, 6, 7, 8, 9, 10, 11, 12, 13, 13(d), 14 and 15
--------------
shall survive expiration or earlier termination of this Agreement. Nothing in
this Agreement shall be deemed to create a partnership or joint venture between
the parties and neither ADSmart nor PLI shall hold itself out as the agent of
the other, except for that specified in this Agreement. Neither party shall be
liable to the other for delays or failures in performance resulting from causes
beyond the reasonable control of that party, including, but not limited to, acts
of God, labor disputes or disturbances, material shortages or rationing, riots,
acts of war, governmental regulations, communication or utility failures, or
casualties. Any notice required or permitted to be given by either party under
this Agreement shall be in writing and shall be personally delivered or sent by
a reputable overnight mail service (e.g., Federal Express), or by first class
mail (certified or registered). Failure by either party to enforce any
provision of this Agreement will not be deemed a waiver of future enforcement of
that or any other provision. Any waiver, amendment or other modification of any
provision of this Agreement will be effective only if in writing and signed by
the parties. If for any reason a court of competent jurisdiction finds any
provision of this Agreement to be unenforceable, that provision of the Agreement
will be enforced to the maximum extent permissible so as to effect the intent of
the parties, and the remainder of this Agreement will continue in full force and
effect. This agreement shall be interpreted under the laws of the Commonwealth
of Massachusetts, and the parties submit to the exclusive jurisdiction of the
courts of the Commonwealth of Massachusetts, including the federal courts
located there. Headings used in this Agreement are for ease of reference only
and shall not be used to interpret any aspect of this Agreement. This
Agreement, including all attachments which are incorporated herein by reference,
constitutes the entire agreement between the parties with respect to the subject
matter hereof, and supersedes and replaces all prior and contemporaneous
understandings or agreements, written or oral, regarding such subject matter.
Neither ADSmart nor its agents, if any, is a franchise, partner, broker,
employee, servant or agent of PLI. Each is an independent contractor with
respect to its right s and obligations under this agreement.
IN WITNESS OF THE FOREGOING, the parties have caused the Agreement to be signed
as of the Effective Date set forth above.
ADSMART NETWORK PHOTOLOFT.COM
BY: /S/ JEFF EISENBERG BY: /S/ JACK MARSHALL
------------------
NAME: JEFF EISENBERG NAME: JACK MARSHALL
TITLE: VP, BUSINESS DEVELOPMENT TITLE: PRESIDENT
DATE: APRIL 26, 1999 DATE: 4/29/99
<PAGE>
ATTACHMENT A
This Attachment dated April 26, 1999 supersedes any previous drafted
Attachment A.
Representation by ADSmart for PLI includes the following Website(s):
Site Name -
http://www.i)hotoloft.com
-------------------------
plus Co-Branded photoloft.com sites -
<PAGE>
ATTACHMENT B
This Attachment dated April 26, 1999 supersedes any previous drafted
Attachment B.
ADSmart is not to contact any of the following accounts on behalf of PLI,
unless PLI formally notifies ADSmart in writing:
Competitors:
- ------------
Kodak
PhotoPoint
PhotoNet
Live Pictures
Zing
Photo Highway
Club Photo
<PAGE>
PHOTOLOFT.COM, INC.
CO-BRANDED MARKETING AGREEMENT
This Agreement is made this ____5/3/99_________________ (the "Effective Date")
between Tribal Voice, a California corporation, having a place of business at
One Victor Square, Scotts Valley, CA 95066 ("Partner"), and PhotoLoft.com, Inc.,
a California corporation having a place of business at 300 Orchard City Drive
Suite#142, Campbell, California 95008 ("PhotoLoft.com").
1.0 INTENT: PhotoLoft.com offers certain proprietary software and services
-------
for creation, maintenance and storage of on-line digital photo albums via its
PhotoLoft.com web site (the "Service"). PhotoLoft.com and Tribal Voice, Inc.
desire to provide the Service to Partner's customers through the creation of a
Co-Branded PhotoLoft.com site on PhotoLoft.com's server (having the URL address
http://www.photoloft.com/tribalvoice ("Co-Branded PhotoLoft.com") to enable
Partner's visitors and customers ("Visitors") to register to use services,
store, share and view photo albums from PhotoLoft.com.
2.0 LINK: PhotoLoft.com will cooperate to promptly develop (a) a specially
-----
co-branded PhotoLoft.com page using both PhotoLoft.com's and Tribal Voice
Pow-Wow names and logos (the "Co-Branded Pages"); (b) links from Partner's Site
to the Co-Branded Pages (the "Links"); and ( c ) placement of the Tribal Voice
link and logo on the Digital Imaging and Resource Page within the PhotoLoft.
During the term of this Agreement, the Partner will make commercially reasonable
efforts to place and maintain links to the PhotoLoft service from prominent
places on the Partner web site. A link from the Partner home page to the
PhotoLoft service will be at the discretion of Partner.
2.1 PhotoLoft.com will provide a notice on each co-branded page disclaiming
responsibility of both PhotoLoft and Partner for the content of that page. The
disclaimer shall be mutually agreed to by both parties.
3.0 USAGE: Partner's customers will be offered a one year free Premium
-----
PhotoLoft account. Partner's users will be identified by entering the site
through the co-branded page.
4.0 PROMOTION BY PHOTOLOFT.COM: Every image posted by PhotoLoft's customer
----------------------------
will be identified as a Partner's customer. Every time that that image is
viewed by any PhotoLoft viewer, the logo of Tribal Voice, Inc. will also be on
display to the PhotoLoft viewer.
5.0 PROMOTION BY PARTNER: Tribal Voice, Inc. will participate in the
----------------------
announcement and co-promotion of the partnership on-line, and with press
releases, and by furnishing information to its licensees and clients. Usual and
customary types of promotional activities outside the sites may be, but are not
limited to: special rewards and loyalty points awards programs with sponsors,
tradeshow and convention appearance coordination and cooperation, print,
broadcast and other media advertising, as appropriate and at the discretion of
Tribal Voice. Examples of the type of promotion that Tribal Voice may do are:
5.1 Write and post a feature article on the PhotoLoft capability and post it
on the Partner Home Page.
5.2 Include PhotoLoft in email newsletters to the Partner customer base.
5.3 Highlight PhotoLoft in the Partner Community Spotlight feature.
6.0 CO-PROMOTION: PhotoLoft.com and Partner will issue independent press
------------
releases announcing the relationship. Partner and PhotoLoft.com will each
review and approve the others' press releases.
7.0 FURTHER CUSTOMIZATION: PhotoLoft.com has complete discretion on making
----------------------
any additional page modifications to the PhotoLoft portion of the Co-Branded web
site after the initial design provided such changes do not compromise or demean
Tribal Voice's brand name, marketing image and logo. Tribal Voice shall not
make unreasonable requests that may interfere with the operation of the site.
Initials of PhotoLoft.com _____ Initials of Tribal Voice, Inc. _____ 1
<PAGE>
7.1 Tribal Voice will provide input regarding the contents of the login
page. Tribal Voice and PhotoLoft.com shall mutually agree and approve the
contents of the login page.
7.2 It is agreed that in the event of a major logo change by Tribal Voice,
Inc., PhotoLoft.com will make commercially reasonable efforts to coordinate such
a change, provided that Tribal Voice agrees to a reciprocal arrangement
concerning the PhotoLoft.com Logo and Tribal Voice hosted indicia and content.
8.0 TRADEMARKS:
----------
PHOTOLOFT.COM MARKS: PhotoLoft.com hereby grants Tribal Voice, Inc. a
---------------------
nonexclusive limited license to use, reproduce and display the PhotoLoft.com
trademarks and logos designated by PhotoLoft.com on Tribal Voice, Inc.'s Web
Site during the term of this Agreement in accordance with any guidelines that
PhotoLoft.com may provide to Tribal Voice, Inc. from time to time.
PhotoLoft.com will supply Tribal Voice, Inc. with electronic versions of the
PhotoLoft.com trademarks and logos for Tribal Voice, Inc.'s use. All
representations of the PhotoLoft.com trademarks and logos that Tribal Voice,
Inc. uses will be exact copies of those provided by PhotoLoft.com, or shall
first be submitted to PhotoLoft.com for approval.
TRIBAL VOICE, INC. MARKS: Tribal Voice, Inc. hereby grants PhotoLoft.com a
--------------------------
nonexclusive limited license to use, reproduce and display Tribal Voice, Inc.'s
trademarks and logos designated by Tribal Voice, Inc. on the Co-Branded Pages
during the term of this Agreement in accordance with any guidelines that Tribal
Voice, Inc. may provide to PhotoLoft.com from time to time. Tribal Voice, Inc.
will supply PhotoLoft.com with electronic versions of the Tribal Voice, Inc.
trademarks and logos for PhotoLoft.com's use. All representations of the Tribal
Voice, Inc.'s trademarks and logos that PhotoLoft.com intends to use will be
exact copies of those provided by Tribal Voice, Inc., or shall first be
submitted to Tribal Voice, Inc. for approval.
9.0 PROPRIETARY RIGHTS: Except as expressly provided herein, each party
-------------------
shall own all right, title and interest in its respective web site and all
portions thereof, including without limitation all intellectual property rights
therein. Except as specifically and clearly set forth in this Agreement,
neither party shall be granted any right or license to any of the other party's
property, including intellectual property in its respective software, web site
or any portions thereof
10.0 TERM: This Agreement shall become effective on the Effective Date and
-----
shall remain in effect for a one (1) year term which shall renew automatically
for successive one-year terms, unless terminated by written notice by either
party thirty (30) days prior to the- end of any one year term. In the event of
a breach, the non-breaching party may serve written notice of breach on the
breaching party. If such breach is not cured within fourteen (14) days, the
non-breaching party may immediately terminate this Agreement.
11.0 TERMINATION FOR CONVENIENCE: Either party may terminate this
-----------------------------
agreement, after the initial 90 days of the agreement, upon 60 days written
notice to the other party. If Tribal Voice terminates the Agreement, then
Tribal Voice will inform its users that they may continue to use the Service,
and PhotoLoft will have no obligation to continue financial payments to the
Tribal Voice. If PhotoLoft terminates the agreement, then PhotoLoft and Tribal
voice will inform users of a replacement service (if any) and continue with the
financial terms of the agreement for a period of 2 years.
12.0 EFFECTS OF TERMINATION: Upon termination of this Agreement
-------------------------
PhotoLoft.com will remove all branding information and revenue sharing will
- -------------
cease asset forth in 11.0 above. PhotoLoft.com will continue to support Partner
members with the same service and support as PhotoLoft supports its own members.
13.0 NON ASSIGNMENT: Neither this Agreement nor any rights under this
---------------
Agreement may be transferred, assigned or delegated by either party without the
prior written consent of the other party. , In the event the other party has
been acquired or undergone a change of control, such consent shall not be
unreasonably withheld.
Initials of PhotoLoft.com _____ Initials of Tribal Voice, Inc. _____ 2
<PAGE>
14.0 INDEPENDENT CONTRACTOR: With respect to all matters relating to this
------------------------
Agreement, each party is deemed to be an independent contractor. Neither party
shall represent itself as an employee, servant, agent or legal representative of
the other party for any purposes whatsoever. The term "Partner" is descriptive
and not indicative of legal partnership, joint venture or co-ownership of any
assets or interests.
15.0 GOVERNING LAW/DISPUTE RESOLUTION: The parties intend this Agreement to
--------------------------------
be construed in accordance with the laws of the State of California. Tribal
Voice, Inc.and PhotoLoft.com agree that they will attempt to settle any claim or
controversy arising out of this Agreement through consultation and negotiation
in the spirit of mutual friendship and cooperation. Any dispute which the
parties cannot resolve between themselves in good faith may be submitted to the
courts of the State of California.
16.0 LIMITATION OF LIABILITY: NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR
-----------------------
ANY LOST PROFIT OR OTHER COMMERCIAL DAMAGE, INCLUDING, WITHOUT LIMITATION,
INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES OF ANY NATURE
ARISING OUT OF THIS AGREEMENT.
17.0 INDEMNIFICATION BY PHOTOLOFT.COM: PhotoLoft.com, Inc. shall indemnify,
---------------------------------
defend, save and hold Partner harmless from any and all liabilities, including
attorney's fees and costs, arising out of claims that the PhotoLoft.com, Inc.
software and documentation, and the other intellectual property developed or
provided by PhotoLoft.com, Inc. hereunder infringe the patent, trademark,
copyright, trade secret or other proprietary or intellectual property rights of
others. Partner shall promptly notify PhotoLoft.com, Inc. in writing if
PhotoLoft.com, Inc. becomes subject to any such claims. PhotoLoft.com, Inc.
shall assume defense of such claim at its own expense and with counsel of its
own choosing.
18.0 MEMBER DATA: During the term of this Agreement members who enter via
------------
the Partner Co-Brand area shall provide only the necessary user information for
registration to access the Services being provided as if entering via the
PhotoLoft.com site. No prospective user shall be allowed to register to access
the service unless the user agrees to provide such information during the
registration process and agree to the terms and conditions as specified in the
Member Agreement
19.0 REVENUE SHARING: PhotoLoft.com agrees to share net advertising revenues
----------------
on page views originated by Partner community members. All advertising revenue
sharing is based on net income received by PhotoLoft.com after allowances are
made for commissions, agency fees, and any other fees. PhotoLoft.com will pay
advertising revenue sharing within 30 days after the end of the calendar
quarter. The percentage of revenue sharing that Partner will receive is based
on page views according to the following schedule:
PAGE VIEWS PER CALENDAR MONTH PERCENTAGE REVENUE SHARE
- --------------------------------- --------------------------
0 to 250,000 20.0%
250,001 to 500,000 30.0%
500,001 and above 40.0%
19.1 Photoloft.com will make commercially reasonable efforts to insure that
the commissions, agency fees, and any other fees do not exceed 40% or gross page
view advertising revenue.
20.0 ENTIRE AGREEMENT: This Agreement contains the entire agreement of the
-----------------
parties and supersedes all previous understandings and agreements between the
parties relating to the subject matter hereof.
21.0 NOTICES: Any notice or request required to be given under or in
--------
connection with this Agreement shall be in writing and given by facsimile or
postpaid registered or certified mail return receipt requested. The date of
receipt shall be deemed the date on which such notice or request has been given.
Until such time as written notice of a change of address is given by either
party to the other, any such notice or request shall be deemed sufficiently
addressed when directed to the addresses of the parties set out in the first
paragraph of this Agreement.
Initials of PhotoLoft.com _____ Initials of Tribal Voice, Inc. _____ 3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in as of the
Effective Date:
By:____________________ By:_____________________
Name: Jack Marshall Name:
Date: 5/7/99 Date: 5/3/99
Title: President Title: V.P Marketing
PhotoLoft.com, Inc.
Initials of PhotoLoft.com _____ Initials of Tribal Voice, Inc. _____ 4
<PAGE>
PHOTOLOFT.COM, INC.
CO-BRANDED MARKETING AGREEMENT
This Agreement is made this __May 12,1999___________________ (the
"Effective Date") between Netopia, Inc. a Delaware corporation, having a place
of business at 2470 Mariner Square Loop, Alameda, CA 94501 ("Partner"), and
PhotoLoft.com, Inc., a Nevada corporation having a place of business at 300
Orchid City Drive Suite #142, Campbell, California 95008 ("PhotoLoft.com").
RE CITALS
A. PhotoLoft.com offers certain proprietary software for the uploading,
editing and management of photos and images (the "Software") and services for
creation, maintenance and storage of on-line digital photo albums via its
PhotoLoft.com web site (the "Service").
B. PhotoLoft.com and Partner desire to provide the Service to Partner's
customers through the creation of a Co-Branded PhotoLoft.com site on
PhotoLoft.com's server (having the URL address http://www.PhotoLoft.com/netopia
to enable Partner's visitors and customers ("Visitors") to register to use
services or view photo albums from PhotoLoft.com.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:
1. CO-BRANDING.
-----------
1.1 Co-Branded Pages. Upon the Effective Date, PhotoLoft.com will
-----------------
promptly develop (a) a co-branded version of the standard Premium PhotoLoft.com
service offering (the "Co-Branded Pages") at the URL address
http://www.PhotoLoft.com/netopia showing the logo of Partner. The Co-Branded
-------------
Pages will offer users all of the functionality and look and feel of
PhotoLoft.com's standard Premium service offering with the sole exception of
adding Partner's logo. During the term of this Agreement, the Partner will
maintain Links on the Partners home page/front page, toolbar/menu bar, and other
appropriate locations to be agreed upon by PhotoLoft.com and Partner.
PhotoLoft.com reserves the right to make any additional page modifications to
the Co-Branded Pages after the initial design or refuse to include any design or
elements that interfere with the operations of the Co-Branded Pages or the
Service, provided, however, that the Co-Branded Pages at all times will offer
users all of the functionality and look and feel of PhotoLoft.com's standard
Premium service.
2. MARKETING BY PARTNER. Partner will provide a logo on visible areas
--------------------
of Partner's pages with a link to the Co-branded Pages. Partner will email all
current users announcing new photo and album sharing capability. Partner agrees
to place the PhotoLoft offer on customers' private pages.
3. MARKETING BY PHOTOLOFT.COM. PhotoLoft.com shall offer Partner's
----------------------------
customers a free Premium PhotoLoft.com account for a period of one (1) year.
Partner's customers will be identified by the co-branded entrance page which
will be referred to from Partner's site. Every image posted by Partner's
customer will be identified as having been posted by Partner's customer. Every
time that image is viewed by any user on the PhotoLoft.com branded site, a logo
of the Partner containing that image will also be displayed to that user. The
size and placement of the logo will be at the discretion of the PhotoLoft.com.
4. CO-PROMOTION: Upon completion of the Co-Branded Pages, the
------------
Co-Branded Software and associated links, PhotoLoft.com and Partner will issue a
joint press release. In addition, Partner will notify its installed base of
customers of the availability of PhotoLoft.com via e-mail or other mutually
agreed upon method.
Initials of PhotoLoft.com _____ Initials of Partner _____ 1
<PAGE>
5. LICENSES AND OWNERSHIP.
------------------------
5.1 Licenses by PhotoLoft.com to Partner. During the term of this
----------------------------------------
Agreement PhotoLoft.com hereby grants to Partner a non-exclusive, worldwide,
nontransferable, royalty free license to use PhotoLoft.com's trademarks and
logos, as the same may be modified from time to time by PhotoLoft.com, only for
the purposes of this Agreement. All representations of the PhotoLoft.com
trademarks and logos that Partner uses will be exact copies of those provided by
PhotoLoft.com, or shall first be submitted to PhotoLoft.com for approval.
PhotoLoft.com will supply Partner with electronic versions of the PhotoLoft.com
trademarks and logos for Partner's use.
5.2 Licenses by Partner to PhotoLoft.com. During the term of this
----------------------------------------
Agreement Partner hereby grants PhotoLoft.com a nonexclusive, worldwide,
nontransferable, royalty free license to use Partner's trademarks and logos, as
the same may be modified from time to time by Partner, only for the purposes of
this Agreement. All representations of the Partner trademarks and logos that
PhotoLoft.com uses will be exact copies of those provided by Partner, or shall
first be submitted to Partner for approval. Partner will supply PhotoLoft.com
with electronic versions of the Partner trademarks and logos for PhotoLoft.com's
use.
5.3 Ownership by PhotoLoft.com. PhotoLoft.com shall own all right,
----------------------------
title, and interest in the PhotoLoft.com trademarks and logos, the Co-Branded
Pages, the services offered by PhotoLoft.com at www.PhotoLoft.com and all
Intellectual Property Rights therein, including any derivatives, improvements
thereof. For purposes of this Agreement, "Intellectual Property Rights" shall
mean all patent rights, copyrights, trademarks, service marks, trade dress,
trade secrets and other intangible rights. PhotoLoft.com disclaims any
ownership interest in the images and content posted by its members to the
Partner Co-Branded area and the Service.
5.4 Ownership by Partner. Partner shall own all right, title, and
----------------------
interest in Partner's trademarks and logos, and all Intellectual Property Rights
therein, including any derivatives, or improvements thereof.
5.5 Joint Ownership. PhotoLoft.com and Partner shall jointly own the
----------------
data regarding the persons accessing the Co Branded Pages. Neither party shall
be required to account to the other party, or share any of the profits from the
use, if any, of such data.
5.6 No Implied Licenses. Except as specifically and clearly
---------------------
set forth in this Agreement, neither party shall be granted any right or license
to any of the other party's property, including intellectual property in its
respective software, web site or any portions thereof.
6. PAYMENT: The business terms for this Agreement are defined in
-------
Exhibit A.
7. REPRESENTATIONS AND WARRANTIES.
--------------------------------
7.1 Representations and Warranties of Partner. Partner hereby
---------------------------------------------
represents and warrants to PhotoLoft.com that: (i) Partner has the full power
and authority to enter into this Agreement and to carry out its obligations
under this Agreement; (ii) Partner has the full power and authority to grant the
rights and licenses granted to PhotoLoft.com in this Agreement; and (iii)
Partner owns the Partner trademarks and logos.
7.2 Representations and Warranties of PhotoLoft.com. PhotoLoft.com
-----------------------------------------------
hereby represents and warrants to Partner that (i) Photloft.com has the full
power and authority to enter into this Agreement and to carry out its
obligations under this Agreement; (ii) PhotoLoft.com has the full power and
authority to grant the rights and licenses granted to Partner in this Agreement;
and (iii) PhotoLoft.com owns the PhotoLoft.com trademarks and logos.
Initials of PhotoLoft.com _____ Initials of Partner _____ 2
<PAGE>
7.3 THE PHOTOLOFT.COM SERVICES FURNISHED AS A RESULT OF OR UNDER
THIS AGREEMENT ARE PROVIDED ON AN "AS IS" BASIS, WITHOUT ANY WARRANTIES OR
REPRESENTATIONS EXPRESS, IMPLIED OR STATUTORY; INCLUDING, WITHOUT LIMITATION,
WARRANTIES OF QUALITY, PERFORMANCE, NONINFRINGEMENT, MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE. NOR ARE THERE ANY WARRANTIES CREATED BY A COURSE OF
DEALING, COURSE OF PERFORMANCE OR TRADE USAGE. PHOTOLOFT.COM DOES NOT WARRANT
THAT THE SERVICES, WILL MEET PARTNER'S OR ANY END USERS' NEEDS OR BE FREE FROM
ERRORS, OR THAT THE OPERATION OF ITS WEB PAGES WILL BE UNINTERRUPTED. THE
FOREGOING EXCLUSIONS AND DISCLAIMERS ARE AN ESSENTIAL PART OF THIS AGREEMENT.
8. COVENANTS.
---------
8.1 Adult Content. PhotoLoft.com shall make reasonable commercial
--------------
efforts to prevent pornographic material from being publicly viewable on the
Co-Branded Pages. Accordingly, all members registering through the Co-Branded
Pages shall agree to be bound by the Member Agreement attached hereto as Exhibit
-------
B.
- --
8.2 Member Data. During the term of this Agreement, any members
------------
entering via the Co-Branded pages shall provide only such information as is
necessary to register to access the Service in the same manner as if such member
was entering the Service through the PhotoLoft.com branded site.
8.3 Technical Support. PhotoLoft.com shall provide technical support
------------------
to the users of the Co-Branded Pages. Technical support shall be provided
through e-mail. In order to obtain support, users shall send their questions,
comments or requests to [email protected]. PhotoLoft.com shall use
reasonable efforts to respond in a timely manner. PhotoLoft.com shall also
provide technical support to Partner. Support to Partner shall be provided by
e-mail and telephone. Telephone support shall be provided Monday through Friday
9:00a.m to 5:00 p.m. Pacific Standard Time, except for holidays. Evening and
weekend support shall be provided via pager.
9. CONFIDENTIALITY.
---------------
9.1 Agreement as Confidential Information. The parties shall treat the
-------------------------------------
terms and conditions of this Agreement as Confidential Information. Each party
shall obtain the other's consent prior to any publication, presentation, public
announcement or press release concerning the existence or terms and conditions
of this Agreement.
9.2 Confidential Information. "Confidential Information" means all
-------------------------
information identified in written or oral format by the Disclosing Party as
confidential, trade secret or proprietary information, and, if disclosed orally,
summarized in written format within thirty (30) days of disclosure. "Disclosing
Party" is the party disclosing Confidential Information. "Receiving Party" is
the party receiving Confidential Information. The Receiving Party shall not
disclose the Confidential Information to any third party other than persons in
the direct employ of the Receiving Party who have a need to have access to and
knowledge of the Confidential Information solely for the purpose authorized
above. Each party shall take appropriate measures by instruction and agreement
prior to disclosure to such employees to assure against unauthorized use or
disclosure. The Receiving Party shall have no obligation with respect to
information which (i) was rightfully in possession of or known to the Receiving
Party without any obligation of confidentiality prior to receiving it from the
Disclosing Party; (ii) is, or subsequently becomes, legally and publicly
available without breach of this Agreement; (iii) is rightfully obtained by the
Receiving Party from a source other than the Disclosing Party without any
obligation of confidentiality; (iv) is disclosed by the Receiving Party under a
valid order created by a court or government agency, provided that the Receiving
Party provides prior written notice to the Disclosing Party of such obligation
and the opportunity to oppose such disclosure. Upon written demand of the
Disclosing Party, the Receiving Party shall cease using the Confidential
Information and return the Confidential Information and all copies, notes or
extracts thereof to the Disclosing Party within seven (7) days of receipt of
notice.
Initials of PhotoLoft.com _____ Initials of Partner _____ 3
<PAGE>
10. INDEMNITY AND LIMITATION OF LIABILITY.
-----------------------------------------
10.1 Indemnification by Partner. Partner shall defend, indemnify and
----------------------------
hold PhotoLoft.com harmless from any and all damages, liabilities, costs and
expenses (including, but not limited to reasonable attorneys' fees) incurred by
PhotoLoft.com as a result of (i) any breach of this Agreement; (ii) any claim
that the Partner trademarks or logos or any part thereof, infringes or
misappropriates any Intellectual Property Right of a third party; (iii) any
claim arising out of PhotoLoft.com 's display of Partner's trademark or logos.
PhotoLoft.com shall provide Partner with written notice of the claim and permit
Partner to control the defense, settlement, adjustment or compromise of any such
claim. PhotoLoft.com may employ counsel at its own expense to assist it with
respect to any such claim; provided, however, that if such counsel is necessary
because of a conflict of interest of either Partner or its counsel or because
Partner does not assume control, Partner will bear the expense of such counsel.
10.2 Indemnification by PhotoLoft.com. PhotoLoft.com shall defend,
----------------------------------
indemnify and hold Partner harmless from any and all damages, liabilities, costs
and expenses (including, but not limited to reasonable attorneys' fees) incurred
by Partner as a result of (i) any breach of this Agreement; (ii) any claim that
the Photoloft.com trademarks or logos or any part thereof, infringes or
misappropriates any Intellectual Property Right of a third party; or (iii) any
claim arising out of Partner's display of the PhotLoft.com trademarks or logos.
Partner shall provide PhotoLoft.com with written notice of the claim and permit
PhotoLoft.com to control the defense, settlement, adjustment or compromise of
any such claim. Partner may employ counsel at its own expense to assist it with
respect to any such claim; provided, however, that if such counsel is necessary
because of a conflict of interest of either PhotoLoft.com or its counsel or
because PhotoLoft.com does not assume control, PhotoLoft.com will bear the
expense of such counsel.
10.3 Limitation of Liability. EXCEPT AS SET FORTH IN SECTION 9 AND 10,
-----------------------
UNDER NO CIRCUMSTANCES WILL EITHER PARTY BE LIABLE TO THE OTHER UNDER ANY
CONTRACT, STRICT LIABILITY, NEGLIGENCE OR OTHER LEGAL OR EQUITABLE THEORY, FOR
ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS IN CONNECTION WITH THE
SUBJECT MATTER OF THIS AGREEMENT.
11. TERM AND TERMINATION.
----------------------
11.1 Term of Agreement. This Agreement shall be effective upon the
-------------------
Effective Date and shall remain in force for a period of three (3) years, and
shall be automatically renewed for successive periods of one (1) year unless
otherwise terminated as provided herein.
11.3 Termination for Cause. This Agreement may be terminated by a
-----------------------
party for cause immediately upon the occurrence of and in accordance with the
following:
(a) Insolvency Event. Either may terminate this Agreement by
delivering written notice to the other party upon the occurrence of any of the
following events: (i) a receiver is appointed for either party or its property;
(ii) either makes a general assignment for the benefit of its creditors; (iii)
either party commences, or has commenced against it, proceedings under any
bankruptcy, insolvency or debtor's relief law, which proceedings are not
dismissed within sixty (60) days; or (iv) either party is liquidated or
dissolved.
Initials of PhotoLoft.com _____ Initials of Partner _____ 4
<PAGE>
(b) Default. Either party may terminate this Agreement effective upon
written notice to the other if the other party violates any covenant, agreement,
representation or warranty contained herein in any material respect or defaults
or fails to perform any of its obligations or agreements hereunder in any
material respect, which violation, default or failure is not cured within thirty
(30) days after notice thereof from the non-defaulting party stating its
intention to terminate this Agreement by reason thereof.
11.4 Survival of Rights and Obligations Upon Termination. Sections 6,
-----------------------------------------------------
7, 8, 9, 10 and 12 shall survive termination or expiration of this Agreement.
11.5 Return of Materials Upon Termination. On or before ten (10) days
-------------------------------------
after the termination of this Agreement, each party shall deliver to the other
party all such other party's Confidential Information and trademarks and logos,
including but not limited to all work product, diagrams, designs and schematics
in Partner's possession.
12. MISCELLANEOUS.
-------------
12.1 Force Majeure. Neither party shall be liable to the other for
--------------
delays or failures in performance resulting from causes beyond the reasonable
control of that party, including, but not limited to, acts of God, labor
disputes or disturbances, material shortages or rationing, riots, acts of war,
governmental regulations, communication or utility failures, or casualties.
12.2 Relationship of Parties. The parties are independent contractors
------------------------
under this Agreement and no other relationship is intended, including a
partnership, franchise, joint venture, agency, employer/employee, fiduciary,
master/servant relationship, or other special relationship. Neither party shall
act in a manner which expresses or implies a relationship other than that of
independent contractor, nor bind the other party. The term Partner is
descriptive and does not imply a legal partnership, joint venture, or
co-ownership.
12.3 No Third Party Beneficiaries. Unless otherwise expressly
-------------------------------
provided, no provisions of this Agreement are intended or shall be construed to
confer upon or give to any person or entity other than PhotLoft.com and Partner
any rights, remedies or other benefits under or by reason of this Agreement.
12.4 Equitable Relief. Each party acknowledges that a breach by the
-----------------
other party of any confidentiality or proprietary rights provision of this
Agreement may cause the non-breaching party irreparable damage, for which the
award of damages would not be adequate compensation. Consequently, the
non-breaching party may institute an action to enjoin the breaching party from
any and all acts in violation of those provisions, which remedy shall be
cumulative and not exclusive, and a party may seek the entry of an injunction
enjoining any breach or threatened breach of those provisions, in addition to
any other relief to which the non-breaching party may be entitled at law or in
equity.
12.5 Attorneys' Fees. In addition to any other relief awarded, the
----------------
prevailing party in any action arising out of this Agreement shall be entitled
to its reasonable attorneys' fees and costs.
12.6 Notices. Any notice required or permitted to be given by either
-------
party under this Agreement shall be in writing and shall be personally delivered
or sent by a reputable overnight mail service (e.g., Federal Express), or by
first class mail (certified or registered), or by facsimile confirmed by first
class mail (registered or certified), to the party at the address indicated
above. Notices will be deemed effective (i) three (3) working days after
deposit, postage prepaid, if mailed, (ii) the next day if sent by overnight
mail, or (iii) the same day if sent by facsimile and confirmed as set forth
above.
Initials of PhotoLoft.com _____ Initials of Partner _____ 5
<PAGE>
12.7 Non Assignment. Neither this Agreement nor any rights under this
----------------
Agreement may be transferred, assigned or delegated by either party without the
prior written consent of the other party, which consent shall not be withheld
unreasonably.
12.8 Governing Law. This Agreement shall be governed by California law.
-------------
12.9 Entire Agreement. This Agreement contains the entire
-----------------
agreement between the parties and supercedes all previous understandings,
agreements, correspondence and memorandums between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in as of the
Effective Date:
PHOTOLOFT.COM: PARTNER:
By:/S/ Jack Marshall By:/S/ Alan Lefkof
-------------------- --------------------
Name: Jack Marshall Name:
Title:_________________ Title:_________________
Date:__________________ Date:__________________
TABLE OF EXHIBITS
EXHIBIT A - BUSINESS TERMS
EXHIBIT B - MEMBER AGREEMENT
Initials of PhotoLoft.com _____ Initials of Partner _____ 6
<PAGE>
EXHIBIT A
BUSINESS TERMS
1. ADVERTISING
a. PhotoLoft.com will be solely responsible for selling the ads shown on the
Co-Brand Pages. PhotoLoft.com will insure that no ads are shown on the
Co-Branded Pages for companies that are directly competitive with Partner.
Partner agrees to provide PhotoLoft.com a complete list of companies that it
considers to be its direct competitors and that Partner will be responsible for
updating such list on behalf of PhotoLoft.com.
b. PhotoLoft.com will pay to Partner fifteen percent (15%) of all
advertising revenues actually received by PhotoLoft.com. Partner understands
that PhotoLoft.com may use third party agencies to manage the sales of such
advertising, and that such agencies deduct their ad sales commissions prior to
making any payments to PhotoLoft.com. As a result Partner's revenue share is on
those amounts actually received by PhotoLoft.com.
2. REPORTING AND PAYMENT
a. PhotoLoft.com shall make all payments due to Partner within thirty (30)
days of the end of each calendar quarter for all amounts received under Exhibit
A, Section 1(b) and Exhibit A, Section 2(b) during such calendar quarter. Such
payments will be accompanied by a report which shall provide all reasonably
necessary information for computation of the amounts due Partner, if any, for
the applicable period. Such report shall also provide Partner with statistics
on the number of users that sign up to use the service on the Co-Branded Pages
and shall provide Partner with the last name and zip code of all such users.
c. PhotoLoft.com agrees to keep accurate books of account and records at its
principal place of business covering all amounts receives for advertising sales
and commissions on commerce related to the Co-Branded Pages. Upon reasonable
notice of not less than seven (7) business days, but in no event more than once
per year (unless the immediately preceding audit showed a material
underpayment), Partner shall have the right, subject to suitable confidentiality
measures, to cause a certified public accountant at Partner's sole expense to
inspect those portions of the books of account and records which relate to the
royalties owed Partner, to confirm that the correct amount owing Partner under
this Agreement has been paid. PhotoLoft.com shall maintain such books of account
and records which support each statement for at least two years after the
termination or expiration of this contract or for at least two years after the
final payment made by PhotoLoft.com to Partner, whichever is later.
d. Partner agrees to keep accurate books of account and records at its
principal place of business covering all sales resulting from the use of Partner
supplied banners on the Co-Branded Pages. Upon reasonable notice of not less
than seven (7) business days, but in no event more than once per year (unless
the immediately preceding audit showed a material underpayment), PhotoLoft.com
shall have the right, subject to suitable confidentiality measures, to cause a
certified public accountant at PhotoLoft.com's sole expense to inspect those
portions of the books of account and records which relate to the royalties owed
PhotoLoft.com, to confirm that the correct amount owing PhotoLoft.com under this
Agreement has been paid. Partner shall maintain such books of account and
records which support each statement for at least two years after the
termination or expiration of this contract or for at least two years after the
final payment made by Partner to PhotoLoft.com, whichever is later.
Initials of PhotoLoft.com _____ Initials of Partner _____ 7
<PAGE>
EXHIBIT B
PHOTOLOFT.COM AND PARTNER PRIVATE LABEL MEMBER AGREEMENT
PhotoLoft.com, Terms and Conditions
AGREEMENT FOR USE OF PHOTOLOFT.COM WEB HOSTING AND E-COMMERCE SERVICES BEFORE
YOU USE OR ACCEPT THE WEB HOSTING OR E-COMMERCE SERVICES PROVIDED BY
PHOTOLOFT.COM, AND IN ORDER TO CONTINUE THE USE OF THESE SERVICES, CAREFULLY
READ THE TERMS AND CONDITIONS OF THIS AGREEMENT. BY INPUTTING SUBSCRIBER
INFORMATION, REGISTERING, OR ACTIVATING YOUR WEB HOSTING ACCOUNT or CLICKING ON
THE "I ACCEPT" BUTTON, YOU ARE AGREEING TO BE BOUND BY, AND ARE BECOMING A
PARTY TO, THIS AGREEMENT. IF YOU DO NOT ACCEPT AND AGREE TO ALL THE TERMS AND
CONDITIONS OF THIS AGREEMENT, DO NOT INPUT SUBSCRIBER INFORMATION, REGISTER, OR
ACTIVATE YOUR ACCOUNT.This agreement ("Agreement") becomes effective when you
complete all of the membership information required on the Member Registration
Form and indicate your agreement to this Member Agreement by "clicking" on the
"I ACCEPT" button when it is presented. This Agreement is between PHOTOLOFT.COM
("PhotoLoft"), a Nevada corporation, and the Member ("Member," "you," or
"your"). This Agreement sets forth the
terms and conditions under which you agree to use PhotoLoft's Web Hosting and
eCommerce Services ("Service" or "Services").
1. Terms of Service
A. Commencing on the date on which you initiate the Services, you will have use
of the Services pursuant to the terms and conditions set forth herein and in the
accompanying Acceptable Use Policy. In exchange, you will pay the current
charges for such Services, if applicable. The Free Basic PhotoLoft Account,
providing simple photo uploading capability, shall be free of charge. The
Premium PhotoLoft Account, providing greater functionality, shall be available
at the price regularly posted on the PhotoLoft Web site (www.photoloft.com). The
terms, conditions, and charges for the Services may be periodically modified.
Such modified terms, conditions, and charges can be found at the PhotoLoft Web
site (www.photoloft.com). After notice of a modification, your continued use of
the Services constitutes an affirmative agreement to be bound by such new terms,
conditions, and charges.
B. The Services shall continue until such time as you provide PhotoLoft with
notice that you wish to discontinue the Services, or the Services are
terminated and/or canceled by PhotoLoft, as set forth herein. For termination of
the Premium PhotoLoft Account, notice must have been received by PhotoLoft at
least two billing days prior to the yearly billing date in order to avoid
charges for the subsequent year.
C. PHOTOLOFT reserves the right to modify or discontinue the Services, and any
rates, terms, or conditions, at any time.
2. Modifications.
PhotoLoft may modify this Agreement and its Acceptable Use Policy at any time in
its sole discretion. Any modification is effective immediately upon either a
posting on the PhotoLoft Home Page, or by a message from PhotoLoft sent by
electronic mail, or by conventional mail. If any modification to this Agreement
is unacceptable to you, you may immediately terminate the Services. However, if
you do not terminate the Services, or continue to use the Services following
modification to this Agreement, your continued use will mean that you have
accepted that modification.
Initials of PhotoLoft.com _____ Initials of Partner _____ 8
<PAGE>
3. Fees.
For all Charges for the Services, PhotoLoft will bill your credit card.
Recurring charges are billed in advance of service. In the event legal action is
necessary to collect on balances due, you agree to reimburse PhotoLoft for all
expenses incurred to recover sums due, including attorneys fees and other legal
expenses. You are responsible for purchase of, and payment of charges for,
Internet Access Services and Telecommunications Services needed for use of the
Services.
4. Personal Information. You hereby certify that you are not a minor. A minor's
parent or legal guardian may authorize a minor to use his/her account(s) under
supervision by the parent or guardian. For purposes of identification, billing
and marketing, you must provide accurate, complete, and updated information to
register for use of the Services ("Member Registration Data"), including your
legal name, address, telephone number(s), and applicable payment data (for
example, a credit card number and expiration date). You must provide updated
information within 30 days of any changes in your Member Registration Data.
PhotoLoft may require a copy of a state-issued form of identification before
making changes to the billing information or registration data on a Customer's
account.
5. Provision of Services.
You understand and agree that temporary interruptions of the Services may occur
as normal events. You further understand and agree that PhotoLoft has no control
over third party networks you may access in the course of the use of the
Services, and therefore, delays and disruption of other network transmissions
are completely beyond the control of PhotoLoft.
6. Limitation of Liability
A. PhotoLoft will make reasonable efforts to provide continuous, uninterrupted,
expedient, and error-free Service to you. Under no circumstances shall PhotoLoft
be liable to you or any other person for any special, incidental, consequential,
or punitive damages of any kind, including without limitation, loss of profits,
loss of income or cost of replacement Services.
B. PhotoLoft's liability for damages in regards to extraordinary and
unreasonable interruptions of service, or for mistakes, omissions, delays,
errors and defects (including, but not limited to, interruption of service,
deletion of files, loss of or damage to data, and damages resulting from
computer viruses) in the provision of the Services, shall in no event exceed an
amount equal to the prorata charges to you for the period during which the
Services are affected. YOU HEREBY ACKNOWLEDGE THAT THIS PROVISION WILL APPLY
WHETHER OR NOT PHOTOLOFT IS GIVEN NOTICE OF THE POSSIBILITY OF SUCH DAMAGES AND
THAT THIS PROVISION WILL APPLY TO ALL CONTENT, MERCHANDISE OR SERVICES AVAILABLE
FROM PHOTOLOFT OR ITS AFFILIATES AND VENDORS.
C. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, PHOTOLOFT HEREBY DISCLAIMS
ANY AND ALL WARRANTIES INCLUDING IMPLIED WARRANTIES OF FITNESS, MERCHANTABILITY,
AND PERFORMANCE. D. PHOTOLOFT MAKES NO WARRANTY THAT THE SERVICES WILL MEET YOUR
REQUIREMENTS, OR THAT THE SERVICES WILL BE UNINTERRUPTED, TIMELY, SECURE, OR
ERROR FREE; NOR DOES PHOTOLOFT MAKE ANY WARRANTY AS TO THE ACCURACY OR
RELIABILITY OF ANY INFORMATION OBTAINED THROUGH THE SERVICES. YOU UNDERSTAND AND
AGREE THAT ANY MATERIAL AND/OR DATA UPLOADED, DOWNLOADED, OR OTHERWISE OBTAINED,
THROUGH THE USE OF THE SERVICES IS DONE AT YOUR OWN RISK, AND THAT YOU WILL BE
SOLELY RESPONSIBLE FOR ANY DAMAGE TO YOUR COMPUTER SYSTEM OR LOSS OF DATA THAT
RESULTS FROM THE UPLOAD OR DOWNLOAD OF SUCH MATERIAL AND/OR DATA. NO ORAL ADVICE
OR WRITTEN INFORMATION GIVEN BY PHOTOLOFT, ITS EMPLOYEES, LICENSORS, AGENTS OR
THE LIKE, WILL CREATE A WARRANTY, AND YOU MAY NOT RELY ON SUCH ORAL ADVICE OR
WRITTEN INFORMATION.
Initials of PhotoLoft.com _____ Initials of Partner _____ 9
<PAGE>
D. Through your use of the Services, you may have the opportunities to engage in
commercial transactions with other Internet users and vendors. You acknowledge
that all transactions relating to any merchandise or services offered by any
party, including, but not limited to the purchase terms, payment terms,
warranties, guarantees, maintenance and delivery terms relating to such
transactions, are agreed to solely between the seller or purchaser of such
merchandize and services and you. PHOTOLOFT MAKES NO WARRANTY REGARDING ANY
TRANSACTIONS EXECUTED THROUGH, OR IN CONNECTION WITH THE SERVICES, AND YOU
UNDERSTAND AND AGREE THAT SUCH TRANSACTIONS ARE CONDUCTED ENTIRELY AT YOUR OWN
RISK.
7. Indemnity
A. You agree to indemnify and hold PhotoLoft harmless from all claims, losses,
liens, expenses, suits and attorneys' fees ("Liabilities") for injuries to or
death of any person and for damages to or loss of any property which may in any
way arise out of or result from or in connection with your use of the Services,
except to the extent that such Liabilities arise from the willful misconduct of
PhotoLoft. B. You agree to indemnify PhotoLoft, its affiliates and subsidiaries,
in the event that your use of the Services (i) constitutes a violation of any
law, regulation or tariff (including, without limitation, copyright and
intellectual property laws); (ii) is defamatory, fraudulent or deceptive, (iii)
is intended to threaten, harass or intimidate, (iv) violates PhotoLoft's
Acceptable Use Policy as it is modified from time to time, or (v) interferes
with other customers' use or
enjoyment of the Services provided by PhotoLoft.
8. Compatibility
You are solely responsible for provisioning, configuration and maintenance of
all equipment and software on your premises, including, without limitation,
computer equipment, photography equipment and software, application software,
and modems. PhotoLoft shall not be responsible for delays in the provision of
Services resulting from incompatibility of such equipment and software, or
resulting from improper provisioning, configuration or maintenance of such
equipment and software
9. Advertising
You shall not use PhotoLoft's name or any language, pictures or symbols which
could, in PhotoLoft's judgment, imply PhotoLoft's endorsement in any (i) written
or oral advertising or presentation, or (ii) brochure, newsletter, book, or
other written material of whatever nature, without prior written consent.
10. Member Responsibilities and Use Limitations
A. You agree to comply with PhotoLoft's Acceptable Use Policy as it may be
modified from time to time, and to comply with the rules, regulations, and
policies applicable to any network you access. Any violation of such rules,
regulation and policies, or any network policy document issued by PhotoLoft,
shall be cause for PhotoLoft to suspend or terminate the Services.
B. You agree that you will not place or allow anyone using your account to place
any copyrighted material on the Service without the permission of the copyright
owner or persons authorized by the copyright owner to grant permission. You are
responsible for obtaining the necessary permission before permitting any
copyrighted material that belongs to others to be placed on the Service. You may
download the material available on the Service only for your personal,
non-commercial use. Except as authorized to use material without express
permission under the copyright laws, you are responsible for obtaining
permission before reusing any copyrighted material that is available on the
Service.
Initials of PhotoLoft.com _____ Initials of Partner _____ 10
<PAGE>
C. Nothing contained in this Agreement may be construed to convey to you any
interest, title, or license in the user ID, URL, IP Address, or domain name used
by you in connection with the Services.
D. PhotoLoft reserves the right to suspend or terminate the Services to you, or
to suspend or terminate any user ID, URL, IP Address, or domain name used by
you, in the event it is used in a manner which (i) constitutes violation of any
law, regulation or tariff (including, without limitation, copyright and
intellectual property laws); (ii) is defamatory, fraudulent, obscene or
deceptive; (iii) is intended to threaten, harass or intimidate; (iv) tends to
damage the name or reputation of PhotoLoft, its parent, affiliates and
subsidiaries; (vi) violates PhotoLoft's Acceptable Use Policy or (vii)
interferes with other customers' use and enjoyment of the Services provided by
PhotoLoft.
E. You understand and agree that any attempt to break security, or to access an
account which does not belong to you, shall be considered a material breach of
this Agreement, and such breach may result in suspension or termination of the
Services. You further agree to immediately notify PhotoLoft of (i) any
unauthorized use of your account and/or (ii) any breach, or attempted breach, of
security known to you.
11. License Grant and Copyright Notice
A. You retain all rights in any material uploaded to the Service by you or
others you authorize to use your account. You grant PhotoLoft and its designated
licensees a non-exclusive, paid-up, perpetual, and worldwide right to copy,
distribute, display, perform, publish, translate, adapt, modify, and otherwise
use such material in connection with the PhotoLoft Service regardless of the
medium, technology, or form in which it is
used.
B. The entire content of the Service is copyrighted by PhotoLoft as a collective
work under the United States copyright laws. Portions of the Service are
provided to PhotoLoft under license. The copying, reproduction, or publication
of any part of the Service is prohibited, unless expressly authorized in writing
by PhotoLoft. 1. Force Majeure Neither PhotoLoft nor you shall be responsible
for damages or for delays or failures in performance resulting from acts or
occurrences beyond their reasonable control, including, without limitation:
fire, lightning, explosion, power surge or failure, water, acts of God, war,
revolution, civil commotion or acts of civil or military authorities or public
enemies: any law, order, regulation, ordinance, or requirement of any government
or legal body or any representative of any such government or legal body; or
labor unrest, including without limitation, strikes, slowdowns, picketing, or
boycotts; inability to secure raw materials, transportation facilities, fuel or
energy shortages, or acts or omissions of other common carriers.
12. Cancellation, Termination, and Assignment
A. In the event that a ruling, regulation, or order issued by a judicial,
legislative or regulatory body causes PhotoLoft to believe that this Agreement
and/or the Services provided hereunder, may be in conflict with such rules,
regulations, or orders, PhotoLoft may suspend or terminate the Services, or
terminate this Agreement, without liability.
B. Cancellation Charges: PhotoLoft does not refund charges for unused service.
Initials of PhotoLoft.com _____ Initials of Partner _____ 11
<PAGE>
C. If you fail to pay any charge when due, including, but not limited to,
product charges, service charges, or taxes, or if you fail to perform or observe
any other material term or condition of this Agreement, or if you provide false
or inaccurate information which is required for the provision of the Services or
is necessary to allow PhotoLoft to bill you for the Services, and such condition
continues unremedied for thirty days, you shall be in default and PhotoLoft may
suspend or terminate the Services.
D. You may not assign your account for Services to anyone without the express
written consent of PhotoLoft. Upon reasonable notice, PhotoLoft may assign its
rights and obligations under this Agreement.
13. Notices.
Any notices in connection with this Agreement must be sent to each party as
follows: if
to PhotoLoft:
300 Orchard City Drive Suite 142
Campbell, CA 95008
Email:[email protected]
if to you:
Either the e-mail address supplied for your account, or the address
supplied by you as part of the Member Registration Data.
Any notices or communication under this Agreement will be deemed delivered to
the party receiving such communication (1) on the delivery date if delivered
personally to the party; (2) two business days after deposit with a commercial
overnight carrier, with written verification of receipt; (3) five business days
after the mailing date, if sent by US mail, return receipt requested; (4) on the
delivery date if transmitted by confirmed facsimile; or (5) on the delivery date
if transmitted by confirmed e-mail.
14. General:
A. This Agreement, and the provision of the Services, may be terminated at any
time by either party upon written notice to the other.
B. This Agreement shall be construed in accordance with the Laws of the State of
California.
C. Some jurisdictions do not allow the exclusion of certain warranties, in which
case such warranty exclusions may not apply to you.
D. This Agreement and the accompanying Acceptable Use Policy constitute the
entire agreement between you and PhotoLoft with respect to the Service and
supersede all other communications.
E. The provisions of this Agreement are for the benefit of PhotoLoft.com and its
service providers, licensors, employees, and agents; and each may assert and
enforce those provisions directly on its own behalf.
15. PhotoLoft.com Acceptable Use Policy
Important Note: This document is updated often. Please make a habit of reviewing
it from time to time to stay abreast of acceptable as well as inappropriate uses
of your PhotoLoft.com ("PhotoLoft") account. Reports of activity in violation of
this policy may be sent via e-mail to [email protected] This document is
divided into the following sections:
Introduction
General Information
Web Sites
Security
Network Management
Network Performance
Illegal Activity
Initials of PhotoLoft.com _____ Initials of Partner _____ 12
<PAGE>
Introduction
PhotoLoft.com has established an Acceptable Use Policy in order clarify the
duties and responsibilities of the Members. This document is intended to provide
a general understanding of PhotoLoft's Acceptable Use Policy. The following
factors guide the establishment and enforcement of PhotoLoft's usage policies:
Ensure reliable service to our customers
Ensure security and privacy of our systems and network, as well as the networks
and systems of others.
Comply with existing laws
Maintain our reputation as a responsible service provider
Encourage responsible use of the Internet and discourage activities which reduce
the usability and value of Internet services
Preserve the value of Internet resources as a conduit for free expression and
exchange of information
Preserve the privacy and security of individual users
We do not routinely monitor the activity of accounts except for measurements of
system utilization and the preparation of billing records. However, in our
efforts to promote good citizenship within the Internet community, we will
respond appropriately if we become aware of inappropriate use of our service.
If your account is used to violate the Acceptable Use Policy, we reserve the
right to terminate your service without notice. We may also suspend the
account, restrict access to it, or remove content from it if necessary or
appropriate. We prefer to advise customers of inappropriate behavior and any
necessary corrective action. However, flagrant violations of the Acceptable Use
Policy will result in immediate termination of service. Our failure to enforce
this policy, for whatever reason, shall not be construed as a waiver of our
right to do so at any time.
As a member of our photographic community, you must use your membership
responsibly. If you have any questions regarding this policy, please contact us
at [email protected]
General Information
Your PhotoLoft account provides you with the opportunity to upload, view,
organize, and print a variety of your photographs and images quickly and
conveniently. Your use of these services is subject to the following policy.
Violations of this policy may result in termination of your account with or
without notice in accordance with the Agreement for Use of PhotoLoft.com
Services that you accepted at the time you created your account.
In general, you may NOT use your PhotoLoft account:
Initials of PhotoLoft.com _____ Initials of Partner _____ 13
<PAGE>
In a manner that violates any law, regulation, treaty or tariff or infringes on
the legal rights of any third party;
In a manner which is defamatory, fraudulent, indecent, offensive or deceptive;
To threaten, harass, abuse or intimidate others;
To damage the name or reputation of PhotoLoft, its affiliates, or subsidiaries;
To break security on any computer network access an account that does not belong
to you; or
In a manner that interferes with other customers' use and enjoyment of the
services provided by PhotoLoft.
PhotoLoft reserves sole discretion to determine whether any use of the service
is a violation of this policy. Guidelines for using your account follows. This
information is only a guideline, and is not intended to be all-inclusive.
Web Sites
PhotoLoft provides storage space and access for photographs and images through
its Web Hosting service. PhotoLoft will not routinely monitor the contents of
your photo albums.
You are solely responsible for any information contained in your photo albums.
However, if complaints are received regarding language, content, or graphics
contained on your web site, PhotoLoft may, at its sole discretion, remove the
photographs hosted on PhotoLoft servers and terminate your Web Hosting service.
We may also suspend the account, restrict access to it, or remove content from
it if necessary or appropriate.
You may not use your web site to publish material that PhotoLoft determines, at
its sole discretion, to be unlawful, indecent, or objectionable. For purposes of
this policy, "material" refers primarily to photographs, but also extends to
cover all forms of communication that the PhotoLoft site may allow, including
narrative descriptions, other graphics (including illustrations, images,
drawings, logos), executable programs, video recordings, and audio recordings.
Unlawful content is that which violates any law, statute, treaty, regulation, or
order. This includes, but is not limited to: obscene material; defamatory,
fraudulent, or deceptive statements; threatening, intimidating, or harassing
statements, or material that violates the privacy rights or property rights of
others (copyrights or trademarks, for example).
Indecent content is that which depicts sexual or excretory activities in a
patently offensive matter as measured by contemporary community standards.
Objectionable content is otherwise legal content with which PhotoLoft concludes,
in its sole discretion, it does not want to be associated in order to protect
its reputation and brand image, or to protect its employees, shareholders and
affiliates. This includes, but is not limited to, all content that, in the sole
discretion of PhotoLoft, is determined to be advertising or otherwise for
commercial purposes, unless expressly permitted in writing by PhotoLoft.
Examples of prohibited web site content:
Materials that depict or describe scantily-clad and lewdly depicted male and/or
female forms or body parts, and which lack serious literary, artistic, political
or scientific value.
Initials of PhotoLoft.com _____ Initials of Partner _____ 14
<PAGE>
Materials that suggest or depict obscene, indecent, vulgar, lewd or erotic
behavior, and which lack serious literary, artistic, political or scientific
value.
Materials that hold PhotoLoft including its affiliates, employees or
shareholders up to public scorn or ridicule.
Materials that encourage the commission of a crime; or which tends to incite
violence; or which tends to degrade any person or group based on sex,
nationality, religion, color, age, marital status, sexual orientation,
disability or political affiliation. Materials including product
advertisements.
Security
You are responsible for any misuse of your account, even if the inappropriate
activity was committed by a friend, family member, guest, or employee.
Therefore, you must take steps to ensure that others do not gain access to your
account. In addition, you may not use your account to breach security of another
account or attempt to gain unauthorized access to another network or server.
You must adopt adequate security measures to prevent or minimize unauthorized
use of your account.
You may not attempt to circumvent user authentication or security of PhotoLoft.
This includes, but is not limited to, attempting to access data not intended for
you, logging into or making use of a server or account you are not expressly
authorized to access, or probing the security of other networks. Use or
distribution of tools designed for compromising security is prohibited. Examples
of these tools include, but are not limited to, password guessing programs,
cracking tools or network probing tools.
Users who violate systems or network security may incur criminal or civil
liability. PhotoLoft will cooperate fully with investigations of violations of
systems or network security at other sites, including cooperating with law
enforcement authorities in the investigation of suspected criminal violations.
Network Management
You are responsible for ensuring that the services obtained from PhotoLoft are
used in an appropriate manner by those who you encourage to view your photo
albums. Therefore, you must take steps to manage the use of the services
obtained from PhotoLoft in such a way that network abuse is minimized. You must
respond in a timely manner to complaints concerning misuse of the services
obtained from PhotoLoft. Failure to responsibly manage the use of the services
obtained from PhotoLoft may be cause for termination of services to you.
Network Performance
PhotoLoft accounts operate on shared resources. Excessive use or abuse of these
shared network resources by one customer may have a negative impact on all other
customers. Misuse of network resources in a manner which impairs network
performance is prohibited by this policy and may result in termination of your
account.
You are prohibited from excessive consumption of resources, including CPU time,
memory, disk space, and session time. You may not use resource-intensive
programs which negatively impact other customers or the performance of
PhotoLoft systems or networks. PhotoLoft reserves the right to terminate or
limit such activities.
Initials of PhotoLoft.com _____ Initials of Partner _____ 15
<PAGE>
Illegal Activity
Any activity on our network that is a violation of any state or federal law is a
violation of this policy and will result in immediate termination of service.
Prohibited activities include, but are not limited to:
Transmitting obscene materials
Intentionally spreading or threatening to spread computer viruses
Gaining or attempting to gain unauthorized access to any network, including
PhotoLoft's private network infrastructure
Accessing or attempting to access information not intended for you
Transmitting pirated software
Initials of PhotoLoft.com _____ Initials of Partner _____ 16
<PAGE>
LIST OF SUBSIDIARIES
Photoloft.com, Inc.
A California Corporation
<PAGE>
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