<PAGE>
As filed with the Securities and Exchange Commission on January 28, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM S-1
REGISTRATION STATEMENT
Under The Securities Act of 1933
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RELEASENOW.COM CORPORATION
(Exact name of Registrant as Specified in its Charter)
----------------
Delaware 7373 13-3763161
(Primary standard (I.R.S. Employer
(State or other industrial Identification No.)
jurisdiction classification code
of incorporation or number)
organization)
990 Commercial Street
San Carlos, CA 94070
(650) 622-1000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
----------------
MICHAEL J. MAULICK
President and Chief Executive Officer
RELEASENOW.COM CORPORATION
990 Commercial Street
San Carlos, CA 94070
(650) 622-1000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
Please send copies of all communications to:
WARREN T. LAZAROW, ESQ. JORGE DEL CALVO, ESQ.
VALERIE L. RUSSELL, ESQ. STANTON D. WONG, ESQ.
COLBY R. GARTIN, ESQ. GABRIELLA A. LOMBARDI, ESQ.
ALAN C. WANG, ESQ. MARY A. HELVEY, ESQ.
Brobeck, Phleger & Harrison LLP Pillsbury Madison & Sutro LLP
Two Embarcadero Place 2550 Hanover Street
2200 Geng Road Palo Alto, CA 94304
Palo Alto, CA 94303 (650) 233-4500
(650) 424-0160
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
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If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Title Of Each Class Of
Securities To Be Proposed Maximum Amount Of
Registered Aggregate Offering Price (1) Registration Fee
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<S> <C> <C>
Common stock, par value
$.001 .................. $50,000,000 $13,200
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</TABLE>
(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(o) of the Securities Act of 1933.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated January 28, 2000
PROSPECTUS
Shares
[LOGO OF RELEASENOW.COM]
Common Stock
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This is our initial public offering of shares of common stock. We are
offering shares. No public market currently exists for our shares.
We propose to list the shares on the Nasdaq National Market under the symbol
"RNOW." We anticipate the initial public offering price will be between $ to
$ per share.
Investing in the shares involves numerous risks. Risk Factors begin on page
5.
<TABLE>
<CAPTION>
Per
Share Total
----- -----
<S> <C> <C>
Public Offering Price............................................... $ $
Underwriting Discount............................................... $ $
Proceeds to ReleaseNow.com Corporation.............................. $ $
</TABLE>
The underwriters have a 30-day option to purchase up to an additional
shares from us and shares from an existing stockholder on the same terms
and conditions as set forth above to cover over-allotments, if any.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is accurate or complete. Any representation to the contrary is
a criminal offense.
Lehman Brothers expects to deliver the shares on or about , 2000.
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Lehman Brothers
CIBC World Markets
Wit Capital Corporation
, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................. 1
Risk Factors........................ 5
Use of Proceeds..................... 18
Dividend Policy..................... 18
Capitalization...................... 19
Dilution............................ 21
Selected Financial Data............. 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 23
Business............................ 31
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management....................... 49
Certain Transactions............. 62
Principal Stockholders........... 65
Description of Capital Stock..... 67
Shares Eligible for Future Sale.. 71
Underwriting..................... 73
Legal Matters.................... 76
Experts.......................... 76
Available Information............ 76
Index to Financial Statements.... F-1
</TABLE>
ABOUT THIS PROSPECTUS
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We and the selling stockholder are offering to
sell, and seeking offers to buy, shares of common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of
the time of delivery of this prospectus or of any sale of the common stock.
This preliminary prospectus is subject to completion prior to this offering.
Among other things, this preliminary prospectus describes our company as we
currently expect it to exist at the time of this offering.
See the section of this prospectus entitled "Risk Factors" for a discussion
of some factors that you should consider before investing in the common stock
offered in this prospectus.
Some of the statements under the captions "Prospectus Summary," "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere in this
prospectus are forward-looking statements. These forward-looking statements
include, but are not limited to, statements about our plans, objectives,
expectations and intentions and other statements contained in the prospectus
that are not historical facts. When used in this prospectus, the words
"expects," "anticipates," "intends," "plans," "believes," "seeks" and
"estimates" and similar expressions are generally intended to identify forward-
looking statements. Because these forward-looking statements involve risks and
uncertainties, they are important factors that could cause actual results to
differ materially from those expressed or implied by these forward-looking
statements, including our plans, objectives, expectations and intentions and
other factors discussed under "Risk Factors." We do not endorse any of the
statistical and marketing data provided by the various research organizations
set forth in this prospectus.
All trademarks and trade names appearing in this prospectus are the property
of their respective holders. The inclusion of other companies' brand names,
products and Web sites in this prospectus is not an endorsement of
ReleaseNow.com. These companies are not involved with the offering of our
securities.
Until , 2000, all dealers selling shares of common stock, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
i
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PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering and our financial statements and notes to those statements appearing
elsewhere in this prospectus.
Except as otherwise indicated, all information in this prospectus assumes
that the underwriters will not exercise the option granted by us and a selling
stockholder to purchase additional shares in this offering and assumes the
conversion of all of our preferred stock into common stock upon the closing of
this offering.
ReleaseNow.com
ReleaseNow.com is a leading provider of outsourced e-commerce solutions for
the marketing, sale and delivery of business and consumer software titles,
business-to-business software licenses and other digital goods online. Our
comprehensive e-commerce infrastructure, PowerCommerce, is built on industry
leading technologies and partnerships which we believe provides our customers a
best-of-class, one-stop solution for selling digital goods online. We believe
we are well positioned in three converging Internet markets: Internet
infrastructure, outsourced e-commerce and the online sale of digital goods. To
date, we have focused on selling software through our software publishers' and
online retailers' Web sites. Our PowerCommerce platform allows us to build,
deploy and maintain thousands of e-commerce stores. We construct and operate e-
commerce sites that reflect our customers' brand identity and provide advanced
marketing, merchandising and digital distribution capabilities. Our expertise
in systems integration allows us to integrate our customers' e-commerce sites
with their back office internal information systems for reporting and tracking.
We operate e-commerce sites, conduct the sale, provide data for reporting
requirements and offer fund settlement services, while allowing our customers
to control business critical e-commerce site content, including product
display, advertising and direct marketing content. We now manage hundreds of e-
commerce points of sale for our software publisher and retailer customers,
which include, as of December 31, 1999, Macromedia, Inc., Symantec Corporation,
Verity, Inc. and WebTrends Corporation.
We intend to leverage our capabilities to penetrate other digital goods
markets through in-house development and through strategic partnerships with
key technology and service companies such as Preview Systems, Inc.,
ClearCommerce Corp. and Responsys.com, Inc. For example, with the introduction
of the e-Business Center in the first quarter of 2000, we have leveraged our
capabilities in business-to-consumer software to move into the business-to-
business software market. The e-Business Center is capable of supporting
purchase order based transactions, volume licensing and custom pricing. The e-
Business Center also allows corporate purchasers to download software
applications and software licenses in real-time, eliminating the need for
physical shipments. This solution will allow us to address the critical needs
of the large and rapidly growing business-to-business software market. In
addition, we intend to pursue other digital content opportunities such as
music, video and electronic documents.
Due to the many benefits of the Internet as a medium for commercial
interaction, vendors and consumers are increasingly selling and buying goods
and services online. International Data Corporation, or IDC, estimates that the
total e-commerce market will increase from approximately $50.4 billion in 1998
to over $1.3 trillion by 2003. In addition to the many benefits associated with
the Internet for the online sale of physical goods such as toys, groceries and
flowers, the Internet provides significant incremental benefits to both buyers
and sellers of digital goods, such as computer software, music, books,
documents and images that can be delivered in electronic form. For example, the
sale and delivery of digital goods online eliminates the need for physical
inventory and fulfillment and related costs while enabling instant delivery and
immediate end-user gratification. In addition, online sales of digital goods
can facilitate cost-effective rental and subscription-based
1
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business models and shorten distribution times associated with new products and
enhancements, thereby reducing time-to-market.
The worldwide packaged software market, which according to IDC reached
$135.1 billion in 1998, has emerged as one of the first digital goods e-
commerce markets to experience widespread adoption of digital delivery. IDC
estimates that the market for the online sale of software reached $1.6 billion
in 1998 and will grow to approximately $32.9 billion by 2003. IDC also
estimates that the market for the sale of electronic licenses for corporate
software reached $20.1 billion in 1998 and will grow to over $174.5 billion by
2003.
The development of e-commerce capabilities for the sale and electronic
delivery of digital goods such as software requires significant expertise, as
well as up-front and ongoing expenditures in terms of both infrastructure
investment and development focus, which many customers cannot cost-effectively
sustain in-house. To address this need, we developed PowerCommerce, a
comprehensive and scalable infrastructure, to provide outsourced e-commerce
solutions for the marketing, sale and delivery of software and other digital
goods over the Internet. The PowerCommerce solution provides a number of
benefits, including:
. Comprehensive Outsourced Solution. Our technology platform provides
state-of-the-art e-commerce capabilities for marketing, transaction
processing, reporting and tracking customer data, systems integration,
electronic packaging of digital goods and digital distribution.
. Superior Purchase Experience. We believe we improve the online shopping
experience for end-users by providing a sophisticated user interface to
ease the use and navigation of the e-commerce site.
. Comprehensive e-Marketing Services. We leverage our experience in
Internet marketing to design comprehensive product and promotional
campaigns, track end-user buying preferences and provide access to a wide
range of services to prepare digital goods for sale.
. Rapid and Cost-Effective Development of Customized Solutions. The
flexibility of our PowerCommerce platform allows us to rapidly develop e-
commerce sites that can be customized to our customers' specific needs at
a lower cost and faster rate than typical in-house development.
Our objective is to be the outsourced e-commerce service provider of choice
for the marketing, sale and delivery of digital goods online. We seek to
achieve this objective through the following key elements of our strategy:
. Leverage Our Expertise in Digital Goods. We intend to leverage our
capabilities in software to move into other digital goods markets such as
electronic licenses for business-to-business software, music, video and
electronic documents.
. Enhance the End-User Experience. We intend to continue to update and
innovate the end-user experience by providing new capabilities such as
improved navigation and search, enhanced content and voice access for
real-time and Internet-enabled customer support.
. Extend Technology Leadership. We intend to continue to develop and expand
our technology through both in-house engineering development, strategic
technology partnerships and acquisitions.
. Establish Partnerships to Extend Services. We intend to continue to
develop strategic partnerships with a variety of industry partners
including developers of key e-commerce, Internet and digital delivery
technologies as well as providers of complementary services.
. Provide Integrated Customer Environment. We intend to provide an
integrated e-commerce environment for our customers in order to allow
them to monitor, manage and control their Web sites' business critical
content.
Our net revenues were $12.7 million for the year ended December 31, 1999,
and our net loss was $19.4 million. As of December 31, 1999, our accumulated
deficit was $32.4 million.
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We incorporated in Delaware on March 28, 1994 under the name Digital Money,
Inc. In February 1996, we changed our name to Release Software Corporation, and
on May 20, 1999 we changed our name to ReleaseNow.com Corporation. We
incorporated a wholly-owned subsidiary in Canada as a technical development
center, ReleaseNow.com Canada, Inc., in July 1999. We acquired Client Server
Designs, Inc. in May 1999. References to "us," "we," "our company" and
"ReleaseNow.com" include ReleaseNow.com Corporation, ReleaseNow.com Canada,
Inc. and Client Server Designs, Inc. Our principal executive offices are
located at 990 Commercial Street, San Carlos, California 94070. Our telephone
number is 650-622-1000. Our Web site address is www.releasenow.com. Information
contained on our Web site does not constitute a part of this prospectus.
The Offering
<TABLE>
<S> <C>
Common stock offered by
ReleaseNow.com.................. shares
Common stock outstanding after
the offering.................. shares
Use of proceeds.................. We expect to use the net proceeds of the
offering for general corporate purposes,
including working capital and capital
expenditures, enhancing our product
development efforts, expanding our sales and
marketing efforts, acquiring or licensing
technology, products or businesses and
expanding internationally. See "Use of
Proceeds."
Proposed Nasdaq National Market
symbol........................... RNOW
</TABLE>
The common stock to be outstanding after the offering is based on the number
of shares outstanding as of December 31, 1999. This excludes the following
issuances which we may make pursuant to plans or arrangements entered into
prior to December 31, 1999:
. 2,043,282 shares of common stock issuable upon exercise of outstanding
stock options at a weighted average exercise price of $2.53 per share;
and
. 146,291 shares of common stock issuable upon the exercise of outstanding
warrants at a weighted average exercise price of $1.20 per share.
In addition, this excludes the following issuances which we may make
pursuant to plans or arrangements entered into subsequent to December 31, 1999:
. 225,000 shares of common stock issuable upon exercise of outstanding
stock options at a weighted average exercise price of $5.00 per share;
. 1,650,000 shares of common stock issuable upon conversion of 1,650,000
shares of Series F preferred stock issued in January 2000;
. 7,500,000 shares of common stock available for grant under our 2000 Stock
Incentive Plan;
. 900,000 shares of common stock reserved for issuance under our 2000
Employee Stock Purchase Plan; and
. 189,080 shares of common stock.
3
<PAGE>
Summary Financial Data
The following table summarizes the financial data of our business. You
should read this information together with the financial statements and the
related notes and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this prospectus. See also Note
1 and Note 11 to the financial statements for an explanation of the
determination of the number of shares used in computing per share data.
<TABLE>
<CAPTION>
Period from
March 28, 1994
(inception)
Through Year Ended December 31,
December 31, -----------------------------------------
1995 1996 1997 1998 1999
-------------- ------- --------- --------- ----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues............ $ 19 $ 160 $ 2,349 $ 6,573 $ 12,749
Gross profit............ 7 36 450 691 1,666
Net loss................ (33) (1,637) (3,625) (7,856) (19,354)
Net loss available to
common stockholders.... -- -- -- -- (23,194)
Basic and diluted net
loss per share
available to common
stockholders........... $(16.50) $ (2.48) $ (2.83) $ (3.96) $ (8.24)
Shares used in per share
calculation............ 2,000 661,235 1,279,815 1,983,051 2,814,726
Pro forma basic and
diluted net loss per
share available to
common stockholders.... $ (1.59)
Shares used in pro forma
per share calculation.. 14,567,298
</TABLE>
The following table provides a summary of our balance sheet data as of
December 31, 1999. The pro forma as adjusted column reflects the sale of shares
of common stock in this offering at an assumed initial public offering price of
$ per share after deducting the underwriting discount and estimated offering
expenses payable by us. See "Use of Proceeds" and "Capitalization."
<TABLE>
<CAPTION>
As of December 31, 1999
----------------------------
Pro Forma
Actual As Adjusted
------------- --------------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.......................... $ 14,435 $
Short-term investments............................. 2,200
Working capital.................................... 11,528
Total assets....................................... 21,849
Long-term debt..................................... 861
Stockholders' equity............................... 15,363
</TABLE>
4
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RISK FACTORS
You should carefully consider the risks described below before making a
decision to buy our common stock. The risks and uncertainties described below
are not the only ones we face. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations. If any of the following risks actually occur, our business and
financial results could be harmed. In that case, the trading price of our
common stock could decline and you might lose all or part of your investment.
You should also refer to the other information set forth in this prospectus,
including our financial statements and the related notes.
We have a limited operating history, and limited information exists upon which
you can evaluate our business
We processed our first online transactions for the electronic download of
software in June 1996, and we are still in the early stages of development. We
face a number of risks encountered by early-stage companies, particularly
companies in the new and rapidly evolving e-commerce industry. These risks
include:
. uncertainty relating to competitive developments in the rapidly evolving
e-commerce market;
. our ability to effectively maintain customer relationships and develop
new relationships with third-party suppliers of digital goods;
. our ability to improve existing and implement new operational, financial
and management systems, procedures and controls;
. our ability to attract, retain and motivate qualified employees,
particularly key technical and management personnel;
. our ability to expand our sales, marketing and customer service
organization; and
. our ability to manage expanding operations.
Our failure to successfully address these risks could result in poor
financial performance. We cannot assure you that our business strategy will be
successful or that we will successfully address the risks detailed here.
We have a history of losses, we expect continued losses and we may not achieve
or maintain profitability
We have not yet been profitable. We have incurred significant losses since
inception and, as of December 31, 1999, we had an accumulated deficit of
approximately $32.4 million. We intend to continue to expend significant
financial resources on the expansion of our sales and marketing efforts and
continued development of our technology. As a result, we expect to incur
additional losses and continued negative cash flow from operations through at
least 2002. Further, future operating expenses depend upon a variety of
factors, including, among other things, estimates for planned operations and
future sales, many of which are outside of our control. As a result, our
operating expenses are difficult to forecast and could increase significantly
from current levels. A significant percentage of our expenses are fixed in the
short term. We may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. In addition, we cannot be
certain that our revenues will grow at a rate that will allow us to achieve or
maintain profitability or generate cash from operations in future periods. Any
significant shortfall in revenues relative to our planned expenditures would
harm our business.
We may experience fluctuations in our operating results that may affect our
stock price
Our quarterly and annual operating results have and will continue to
fluctuate significantly in the future due to a variety of factors, many of
which are outside of our control. If our annual or quarterly operating results
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<PAGE>
fall below the expectations of securities analysts and investors, the trading
price of our common stock would decline. Factors that will continue to
influence our operating results include:
. fluctuations in operating expenses required to expand our sales and
marketing capabilities and to broaden our infrastructure and service
capabilities;
. fluctuations in revenue recognized from the mix of products and services
sold;
. delays in deployment of customers' products that we offer for sale;
. market acceptance of customers' products relative to our expectations;
. introduction of new products or services by us or our competitors;
. our ability to attract and retain digital goods publishers, online
retailers and other clients and develop and maintain end-user
satisfaction;
. loss, fluctuation or material reduction of any customers representing a
significant portion of our revenues;
. price competition in the online distribution market and resulting effects
on our margins;
. costs related to acquisitions of technologies, assets or businesses;
. system failures that cause reduced transaction volumes;
. levels of product returns, credit card fraud and customer service calls;
and
. seasonality in digital goods purchasing patterns.
Due to the rapidly evolving nature of our business and our limited operating
history, we believe that period-to-period comparisons of our operating results
are not meaningful and should not be relied upon as an indication of future
performance. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
Our success depends on widespread acceptance of online distribution of software
and other digital goods
Electronic delivery is a relatively new method of distributing digital
goods, and the growth and market acceptance of this delivery method is
uncertain. Software is one of the first products to be distributed in this
manner. However, sales of software through digital delivery are not currently a
large portion of overall business-to-business and business-to-consumer software
sales. The market for electronic delivery of other digital goods is even less
developed. Our future revenues and any future profits, should they develop, are
substantially dependent upon the widespread acceptance and use of the Internet
as a method to deliver digital goods to businesses and consumers. Difficulties
experienced by end-users in downloading software products or other digital
goods, such as slow or interrupted delivery and files that are difficult to
locate following delivery, may prevent end-users from undertaking subsequent
electronic downloads. Factors that may continue to influence market acceptance
of electronic delivery include:
. availability and affordability of bandwidth sufficient to enable end-
users to rapidly and reliably download digital goods;
. rate of adoption of electronic delivery by existing producers and
retailers of digital goods;
. level of end-user comfort with, and the relative ease of, the electronic
downloading process; and
. quantity and quality of products that are available for electronic
delivery as compared to those available through physical delivery.
We believe that there is a maximum file size above which most end-users will
not be willing to purchase software or other digital goods through electronic
delivery because of current bandwidth limitations. We also believe that the
size of new digital goods will continue to increase and that these products may
not be suitable
6
<PAGE>
for electronic delivery in the absence of significant increases in bandwidth
availability. If electronic delivery does not achieve widespread market
acceptance for any reason, our business and results will be negatively
impacted. Even if widespread acceptance occurs, we might not overcome
substantial existing and future technical challenges associated with reliable
and consistent digital delivery.
Our success depends on the growth of the Internet as a commercial medium
If commerce on the Internet does not continue to grow or grows more slowly
than expected, our business would be seriously harmed. Although use of the
Internet is growing rapidly, the Internet may fail to become a viable medium of
commerce for a number of reasons, including:
. end-user concerns regarding Internet speed, bandwidth availability,
reliability, difficulty of use, cost, security risks and quality or
availability of service;
. inadequate development of the necessary network infrastructure; and
. increased governmental regulation and taxation.
Alternatively, if use of the Internet continues to grow exponentially, this
growth may overwhelm the existing Internet infrastructure, rendering e-commerce
unreliable. Delays in the development or adoption of new standards and
protocols required to handle increased levels of Internet activity could impede
the growth of the Internet as a commercial medium and have an adverse affect on
our business.
Our customer base is concentrated, and we could lose customers because our
contracts are for a short time period and can be terminated on short notice
Our three largest customers accounted for approximately 55% of our net
revenues in 1998, and our two largest customers accounted for approximately 73%
of our net revenues in 1999. We expect that a small number of our customers
will continue to account for a substantial portion of our sales for the
foreseeable future. In addition, all of our contracts are short term in nature
and are generally terminable for any reason on 30 or 60 days notice. Any of
these contracts might not be renewed or could otherwise end on short notice,
generally with no penalty. As a result of competition or fluctuations in
demand, we could be required to compromise with our customers with respect to
various contractual provisions in order to obtain additional business or
maintain our customer relationships. In addition, many of our principal
customers are now and may in the future be affected by rapid consolidation in
the Internet and software industries. Loss of any principal customer would
adversely affect our results.
We depend on Macromedia, Inc., and the termination of this relationship would
have a substantial and immediate adverse effect on our business
For the year ended December 31, 1999 we generated approximately 57% of our
net revenues from services provided to Macromedia, Inc. and the sale of
Macromedia software titles. We cannot assure you that Macromedia will continue
to provide us with software to sell, and if Macromedia limited or discontinued
selling its software through us, our business would be significantly and
immediately adversely affected. Macromedia has the right to terminate its
agreement with us upon 60 days notice with no penalty. We cannot assure you
that Macromedia will not terminate this agreement or that they will renew it on
satisfactory terms at the end of the current one year term which began on June
28, 1999. Macromedia has indicated to us that they intend to bring electronic
distribution of some of their products in-house. If Macromedia chooses to bring
in-house all or a significant portion of their electronic software delivery
sales or chooses to use a competitor's solution, it would have a substantial
and immediate adverse effect on our business, results of operations and
financial condition.
7
<PAGE>
Our success depends on software and digital goods providers supplying titles
for us to sell
If we cannot obtain sufficient quantity and quality of commercially popular
software titles, we may fail to attract new customers or end-users, either of
which could cause our business or operating results to suffer. The software
publishers that currently supply software to us may not continue to produce new
titles, and may not supply new or old titles to us. We have no long-term or
exclusive contracts or arrangements with any software publisher that guarantee
the availability of software products to us. In addition, end-users may not
like our product selection, particularly if it is limited by any of the
foregoing factors, and this too could harm our business or operating results.
We face these same risks with respect to selling digital goods other than
software.
We depend on third parties for information, forecasting and marketing
We depend on our customers to accurately forecast the schedule for
development and delivery of their products to the market and to us. If their
products are delayed, end-users could lose interest, and we could potentially
lose anticipated sales. In addition, we rely on our customers to successfully
market their software and generate demand for their products. If market
interest is insufficient, we could lose anticipated sales. Further, we rely on
our customers' forecasts relating to the demand for and longevity of their
products. If their forecasts are wrong, and we do not adjust our forecasts for
their inaccuracies, we might not meet our anticipated sales. Any of the
foregoing could harm our business and results of operations.
We have a new management team, and if they are unable to work together
effectively, our business may be harmed
Most of our management team was hired in 1999, and the group has only been
working together for a short time. For example, our Chief Financial Officer,
Joan P. Walsh, joined us in January 1999, our Vice President of Marketing and
Chief Marketing Officer, David A. Roman joined us in February 1999, our
President, Michael J. Maulick, joined us in May 1999 and became Chief Executive
Officer in November 1999 and our Vice President of Sales, Frank D. Maylett,
joined us in June 1999. In addition, our prior Chief Executive Officer, Carolyn
A. Rogers, was appointed Chairman of the Board in November 1999. Moreover,
several other key employees were hired in 1999. Because many of our officers
and key employees are new, there is a risk that our management team will not be
able to work together effectively, especially in the short term, to address the
challenges to our business. We also expect to add additional key personnel in
the near future, who will also need to be integrated into our management team.
If our management team is unable to work together, our operations could be
disrupted and our business harmed.
Intense competition in our industry could reduce or eliminate demand for our
services
Competition in the market for outsourced e-commerce solutions for digital
goods is intense, and we expect competition to increase in the future. If we
are not able to compete successfully, our business and financial results will
suffer. We face competition from the following sources:
. software publishers and online retailers who have or may choose to make
substantial initial and ongoing investments in order to develop and
manage their own e-commerce sites, including our potential customers or
partners;
. other providers of outsourced e-commerce solutions, including Digital
River, Inc. and NetSales, Inc.;
. other providers of tools and services enabling one or more of the
functions of e-commerce, such as transaction control, data security,
customer interaction, database marketing and electronic software
delivery, such as BroadVision Corporation and Preview Systems, Inc.;
. companies that sell and distribute software products over the Internet,
such as Intraware, Inc.;
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. high-traffic, branded Web sites that derive a substantial portion of
their revenues from e-commerce and may themselves offer, or provide means
for others to offer, software products;
. start-up companies that are developing product offerings; and
. traditional channels and methods of retail and corporate software sales,
such as mail order catalogs and retail superstores.
Several of our competitors are pursuing alliances, partnerships and business
combinations to increase product offerings. We have not yet developed a
significant number of corporate partnerships, and we believe that we may
therefore be at a competitive disadvantage to those companies. In addition, it
is possible that current or potential competitors may establish alliances or
cooperative relationships, or that new competitors may emerge and rapidly
acquire market share.
Many of our competitors have longer operating histories, substantially
greater financial, technical, marketing or other resources, and greater name
recognition than we do. We cannot be sure that we will have the resources or
expertise to compete successfully in the future. Our competitors may be able
to:
. respond more quickly than we can to new or emerging technologies and
changes in customer requirements;
. adopt more aggressive pricing policies and impede our ability to sell
additional services on terms favorable to us;
. develop and market new technologies that render our existing or future
services obsolete, unmarketable or less competitive;
. make strategic acquisitions or establish cooperative relationships among
themselves or with other providers of outsourced e-commerce solutions
which strengthen their ability to address the needs of our potential
customers; and
. provide customers with additional benefits at lower overall costs.
Our international business exposes us to additional risks
Software purchased by end-users in countries outside the United States
accounted for approximately 40% of our net revenues in 1998 and approximately
39% of our net revenues in 1999. Part of our strategy is to continue to
electronically distribute digital products to end-users in countries outside
the United States and to increase our international presence in the future.
Conducting business outside of the United States subjects us to risks,
including:
. higher instances of credit card fraud and difficulties in accounts
receivable collection;
. burdensome compliance with a variety of export restrictions and foreign
laws;
. changes in regulatory requirements, taxes and tariffs;
. foreign currency exchange rate fluctuations;
. difficulties in protecting intellectual property rights and evolving
piracy laws;
. difficulties and additional costs associated with international
operations; and
. political or economic instability or constraints on international trade.
Potential system failures could negatively affect or reduce demand for our
services
Our operating results and the success of our business depend on the
efficient and uninterrupted operation of our computer and communications
systems. Our services require the reliable online marketing, delivery,
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payment processing and data gathering that these systems and the underlying
network infrastructure are designed to provide. Our reputation and ability to
attract and retain clients and maintain adequate customer service levels depend
on these systems. Our systems and operations are vulnerable to damage or
interruption from:
. power loss, computer systems failures, Internet and telecommunications or
data network failures;
. operator negligence, improper operation by or supervision of employees,
physical and electronic break-ins, misappropriation, computer viruses and
similar events; and
. earthquake, fire, flood and other natural disasters.
Any of the foregoing could lead to interruptions, delays, security breaches,
loss of data or the inability to accept and fulfill end-user orders. Any
reduced order fulfillment performance would reduce the volume of goods sold and
the attractiveness of our product and service offerings to software publishers,
online retailers and end-users. We presently have limited system redundancy at
our principal site and carry limited business interruption insurance to
compensate for losses that may occur. We currently have no geographical system
redundancy. We have experienced periodic interruptions, affecting all or a
portion of our systems, which could continue to occur from time to time.
We depend on third parties to maintain and provide components for our
infrastructure and solutions
We, and our customers, depend upon Internet service providers to connect us
to the Internet and provide sufficient bandwidth. We also rely on a number of
suppliers to provide components of our solution, such as credit card processing
services, access to databases and encryption technology. If the cost of the
components or services third parties provide is increased, the operational
integrity of their networks is compromised or if these services are otherwise
unavailable, our reputation could be harmed, our business could suffer and we
could lose our customers to competitors. Although we believe we could find
alternative sources to supply necessary infrastructure components, we would
need to develop new working relationships and train our personnel in the use of
these alternatives, either or both of which could cause delay or interruption
of our services.
Our business could be harmed if online security risks or credit card fraud
occur
We rely on encryption and authentication technology licensed from third
parties to provide secure transmission of confidential information, such as
credit card numbers. Advances in computer capabilities, new discoveries in the
field of cryptography or other events or developments may compromise or breach
the algorithms we use, including our proprietary SalesAgent technology for
encryption and limiting use of software based on the payment option chosen. We
possess financial and other information with respect to our customers and their
end-users. If security with respect to this data is breached and proprietary
information about our customers or their end-users is misappropriated, it could
damage our reputation, hurt our business and expose us to liability. We also
assume the credit risk of loss associated with the sale and delivery of digital
goods. Fraudulent credit card data, even if payment is authorized by associated
financial institutions or credit organizations, expose us to liability. In
addition, if we incur significant instances of credit card fraud over an
extended period of time it may result in penalties and termination of our
credit card acceptance privileges. Loss of the credit card acceptance
privileges would severely impact our ability to process the sale of digital
goods where the payment method is by credit card. We may be required to expend
significant capital and other resources to protect against these security
breaches or fraudulent transactions.
If our technology and systems do not keep up with technological changes in the
e-commerce industry, our ability to compete effectively may be harmed
If we are unable to successfully use new technologies or adapt our
proprietary technology and transaction-processing systems to customer
requirements or emerging industry standards, our business could be harmed. The
Internet and e-commerce industries are characterized by rapid changes in user
requirements and preferences, new product and service introductions and
evolving industry standards. To be competitive, we must continue to enhance and
improve the responsiveness, functions and features of our electronic packaging,
transaction processing and client management systems, as well as our underlying
network infrastructure. Our success depends, in part, on our ability to either
internally develop or license leading technologies, enhance
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existing services and develop new services that address the increasingly
sophisticated and varied needs of customers, and respond to technological
advances and emerging industry standards and practices. Our proprietary
technology development entails promoting new or complementary sales methods,
including our PowerCommerce solutions, expanding the breadth and depth of
products and services offered and expanding our market presence through
relationships with, or acquisitions of, third parties. All of the foregoing
expose us to increased risks, including risks associated with the costs of
system modifications or additional development and the diversion of resources
from our existing businesses and technologies.
We must grow or scale our e-commerce transaction systems to accommodate
increased system traffic
We depend on our scalable modular architecture which currently allows us to
process thousands of transactions almost instantaneously across hundreds of
stores. We believe our architecture can be scaled to accommodate thousands of
stores simultaneously. However, we may not be able to accurately project the
rate or timing of increases, if any, in the use of our systems or expand and
upgrade our infrastructure in a timely manner. In addition, we may be required
to license third-party technology, which we may not be successful in securing.
Our inability to add software and hardware or to further develop and upgrade
existing technology, transaction-processing systems or network infrastructure
may cause unanticipated system disruptions, slower response times, degradation
in levels of customer service and impaired quality and speed of order
fulfillment, any of which could adversely affect our sales or service.
Additional network capacity may also not be available from third-party
suppliers when we need it. Our inability to expand our systems to handle
increased traffic could result in system disruptions, slower response times and
other difficulties in providing services to our customers and significantly
reduce demand for our services.
We may not be able to adequately protect our proprietary technology from
infringement or misappropriation
Our success depends in part on our proprietary technology. We have filed
five patents with respect to our proprietary technology, and rely on copyright
and trademark law, trade secret protection and confidentiality and/or license
agreements with our employees, customers, partners and others to protect our
proprietary rights. Our pending patents may never be issued and, even if
issued, may not provide us with any significant protection. We seek
registration of our trademarks and service marks in the United States and,
based upon anticipated use, internationally. The laws of some foreign countries
may not protect our intellectual property rights to the same extent as do the
laws of the United States. Third parties could obtain and use our technology
without authorization or remuneration. Other parties may also independently
develop substantially equivalent intellectual property. If we become involved
in litigation to defend our intellectual property rights, we could have to
spend significant amounts of money, regardless of the outcome, and the
litigation could divert our management's time and efforts.
We also cannot assure you that third parties will not claim our current or
future services infringe upon their rights. We have not conducted any search to
determine whether any of our services or technologies may be infringing upon
rights of third parties. As the number of services in our market increases and
capabilities increasingly overlap, companies such as ours may become
increasingly subject to infringement claims. In the past, we have received
correspondence with respect to claims alleging our infringement of proprietary
rights of third parties, and we may receive other notices in the future. As a
result of an infringement dispute, we may experience product delivery delays,
and we may need to develop non-infringing technology or enter into royalty or
licensing agreements which may be unavailable on acceptable terms. Any
infringement claims, with or without merit, could result in costly litigation
and could absorb significant management time. We could also be made a party to
lawsuits relating to the infringement by our customers of others' intellectual
property rights.
Sale, delivery and support of our products may entail the risk of legal claims
Claims may be made against us for:
. negligence;
. breach of warranty;
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. system failures;
. breach of contract;
. copyright or trademark infringement;
. defamation;
. obscenity;
. violation of privacy and personality rights; or
. other theories based on the nature and content of software products and
other materials and information delivered electronically.
These claims would be expensive and time-consuming to defend, distract
management and delay product deliveries even if we were ultimately successful
in the defense of these claims. Our insurance may not cover potential claims of
this type or may not be adequate to cover all defense costs or to indemnify us
for all liability that may be imposed. If any claims are asserted against us
and we are unable to promptly dispose of those claims or develop or license
non-offending or non-infringing technology, it could disrupt our business and
divert management and technical resources.
Changes to financial accounting standards may affect our reported results of
operations
We prepare our financial statements to conform with generally accepted
accounting principles, or GAAP. GAAP are subject to interpretation by the
American Institute of Public Accountants, the SEC and various bodies formed to
interpret and create appropriate accounting policies. A change in those
policies can have a significant effect on our reported results and may even
affect our reporting of transactions completed before a change is announced.
Accounting policies affecting many other aspects of our business, including
rules relating to purchase and pooling-of-interests accounting for business
combinations, employee stock purchase plans and stock option grants have
recently been revised or are under review. Changes to those rules or the
questioning of current practices may have a material adverse effect on our
reported financial results or on the way we conduct our business. In addition,
our preparation of financial statements in accordance with GAAP requires that
we make estimates and assumptions that affect the recorded amounts of assets
and liabilities, disclosure of those assets and liabilities at the date of the
financial statements and the recorded amounts of expenses during the reporting
period. A change in the facts and circumstances surrounding those estimates
could result in a change to our estimates and could impact our future operating
results.
Potential year 2000 risks may harm our business
Many existing computer systems and software products use two digits to
identify a year and cannot distinguish 21st century dates from 20th century
dates. If not corrected, system failures or miscalculations could cause
disruptions of operations at or beyond the year 2000, including a temporary
inability to process transactions, send invoices or engage in our normal
business activities.
Although we have not, as yet, suffered material adverse consequences, we
cannot assure you we are fully year 2000 compliant. Effects of the year 2000
problem may not yet have surfaced and could result in material adverse
consequences in the future. We depend on third-party equipment and services
that may not be year 2000 compliant. If year 2000 issues prevent Internet
access or credit card transaction processing, our operations may be adversely
affected by decreased sales, unanticipated expenses and exposure to litigation
risks. Further, the spending and purchasing patterns of customers or potential
customers may be affected by the year 2000 issue as individuals, corporations
and government agencies expend significant resources to correct or update their
current system for year 2000 compliance and may delay new software purchases.
We currently have no formal year 2000 contingency plan. Accordingly, our
failure to provide year 2000 compliant solutions could result in financial
loss, harm to our reputation and legal liability. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Year 2000
Compliance."
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If we become subject to new sales and other taxes, our business may be harmed
We currently collect sales or other similar taxes from end-users based on
information provided by our publishers and online retailers, but do not
typically collect sales tax for products purchased by end-users residing
outside California. The application of sales tax to interstate and
international sales over the Internet is unclear and evolving. Local, state or
foreign jurisdictions may seek to impose sales tax collection obligations on us
and other out-of-state or foreign companies selling products online. Should
these or other tax laws change or be applied retroactively to past sales, it
would harm our business and financial condition.
Increased government regulation could decrease our revenues and increase our
costs
A number of proposals have been made at the federal, state and local level
that would impose additional regulations or taxes on the sale of goods and
services over the Internet. The adoption of any of these proposals could
substantially impair our growth or the growth of e-commerce, or could adversely
affect our financial condition. While few laws or regulations currently apply
directly to Internet access or e-commerce, a number of laws and regulations may
be adopted with respect to the Internet, covering issues such as:
. end-user privacy;
. defamation and content regulation;
. pricing and taxation;
. quality of products and services; and
. intellectual property ownership and infringement.
The applicability to the Internet of the existing laws governing issues such
as property ownership, copyright, defamation, obscenity and personal privacy is
also uncertain, and we may be subject to claims that our services violate such
laws. It may also require significant time and management resources to respond
to any changes in these laws.
We may not be able to effectively attract, manage and retain qualified
personnel as our business expands and changes
Since inception, and particularly in the last twelve months, we have
experienced substantial change, expansion and disruption in our business and
operations, and we expect to continue to experience periods of rapid change.
Our past expansion has placed, and any future expansion would continue to
place, significant strains on our administrative, operational, financial and
other resources. From January 1, 1998 to December 31, 1999, we increased our
net number of employees from 37 to 97. We expect operating expenses and
staffing levels to increase substantially in the future. In particular, we
intend to hire a significant number of additional personnel in 2000 and
thereafter. Competition for qualified personnel is intense, particularly in
Silicon Valley where our offices are located, and we may not be able to
attract, assimilate or retain additional highly qualified personnel in the
future. Any future expansion will continue to challenge our ability to train,
motivate and manage our employees, and to attract and retain qualified senior
managers and technical persons, such as software designers and developers. Our
performance also depends on our ability to retain and motivate executive
officers and other key employees. The loss of the services or diminished
performance of any of our executive officers or other key employees could hurt
our ability to successfully develop our business. We do not have life insurance
on any member of management, and no member of management is subject to any
agreement pursuant to which he or she would be prohibited from competing with
us after termination of employment.
We may not be able to profit from growth in our business if we are unable to
effectively manage the growth
Our ability to successfully offer our solutions in rapidly evolving markets
requires an effective planning and management process. We have limited
experience in managing rapid growth. Recently, we have added engineering,
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sales, marketing, administrative and other management personnel. Our growth so
far has placed strains on our managerial, financial and personnel resources. We
expect these strains to continue in the future. The pace of our expansion,
together with the complexity of the technology involved in our solutions,
demands a significant amount of focus upon the operational needs of our
customers for service and support. Therefore, any increase in adoption of our
solutions will increase the strain on our resources. To reach our goals, we
will need to:
. continue hiring at a rapid pace while at the same time investing in our
infrastructure;
. increase the scale of our operations;
. implement an effective cash management system;
. establish and improve our financial and accounting systems, procedures,
controls and structures; and
. adopt and staff an investor relations program.
We may not succeed in achieving these goals or anticipating all of the
changing demands that growth will impose on our systems, procedures and
controls. If the systems we implement are inadequate to manage our future
growth, our results of operations and business may suffer.
We may not be able to successfully invest in or make acquisitions of other
companies
Since inception, we have acquired only one company, Client Server Designs,
Inc., and we have very limited experience in acquiring or making investments in
companies, technologies or services. In the future, we may acquire or invest in
other companies, products or technologies. Good candidates for acquisitions in
the high-tech industry are particularly difficult to assess because of rapidly
changing technological standards. If we make any acquisitions, we will be
required to assimilate the personnel, operations and products of the acquired
businesses, and train, retain and motivate key personnel from the acquired
businesses. Key personnel of any acquired company may decide not to work for
us. Moreover, acquisitions may cause disruptions in our operations and divert
management's attention from day-to-day operations, which could impair our
relationships with our current employees, customers and strategic partners. We
may be unable to maintain uniform standards, controls, procedures and policies
if we fail in our efforts to assimilate acquired businesses, which could make
management of our business very difficult.
Future sales by existing stockholders may cause our stock price to decline
If our existing stockholders, and members of management in particular, sell
our common stock in the public market following this offering, the market price
for our common stock could decline due to market perception of a sell-off by
key or informed stockholders. In addition, these sales might make it more
difficult for us to sell equity or debt securities in the future at a time and
a price that we deem appropriate.
Upon completion of this offering, we will have outstanding shares of
common stock, based upon shares outstanding as of December 31, 1999 and
assuming no exercise of outstanding options or warrants after that date. Of
these shares, all of the shares sold in this offering will be freely tradable,
without restriction, in the public market. Holders of 20,827,025 of these
shares are subject to agreements with us or our underwriters pursuant to which
the holders have agreed not to sell their shares for 180 days after the
effective date of the registration statement of which this prospectus is a
part. After these lock-up agreements expire 180 days from the effective date of
this offering, 18,427,025 of the shares outstanding as of December 31, 1999
will be eligible for sale in the public market. In addition, there are
1,650,000 shares of common stock available upon conversion of our Series F
preferred stock which were issued and sold in January 2000, which will not be
saleable until at least 180 days from the effective date of this offering.
In addition, as of December 31, 1999, there were 2,043,282 shares subject to
outstanding options, 146,291 shares subject to outstanding warrants and
8,400,000 shares that are or, upon effectiveness of our year 2000 equity plans,
will be reserved for issuance under our equity plans. None of these shares may
be sold in the
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public market until at least 180 days after the effective date of this
offering. Assuming an effective date of April 15, 2000, 594,850 of the
2,043,282 option shares outstanding as of December 31, 1999 will be vested and
eligible for sale when the 180 day lock-up agreements expire. In addition, at
that time, all of the shares underlying the warrants will be eligible for sale
in the public market. See "Shares Eligible for Future Sale."
We may not be able to secure additional future financing necessary to achieve
our business objectives
We have experienced negative cash flow from operations since inception and
expect to continue to experience significant negative cash flow from operations
through at least 2002. We believe that the net proceeds from this offering,
anticipated gross cash from operations and funds from equipment leases,
together with existing capital resources, will be sufficient to meet our
anticipated capital requirements for the next 12 months. However, our capital
requirements depend on several factors, including:
. the rate of market acceptance of e-commerce in general and our services
in particular;
. the costs of developing new products, services and technology; and
. the level of expansion of our sales, marketing and promotional efforts.
If our capital requirements exceed those currently planned, we may need
additional financing sooner than anticipated. Additional financing may not be
available when needed on favorable terms or at all. If additional funds are
raised through equity issuances, our stockholders will experience dilution, and
these securities may have rights, preferences and privileges senior to those of
our common stock. If adequate funds are not available or are not available on
acceptable terms, we may be unable to develop or enhance our services, take
advantage of future opportunities or respond to competitive pressures, or we
may have to sell or license our assets and technologies.
Existing stockholders may exert significant control over us
Our executive officers, directors and principal stockholders (greater than
5%) and their respective affiliates will beneficially own approximately %
of the outstanding shares of our common stock following the completion of this
offering. As a result, acting together, they may have the ability to direct our
affairs and business, including the election of directors and approval of
significant corporate transactions. This concentration of ownership may also
have the effect of delaying, deferring or preventing a change in control of our
company.
No public market for our common stock previously existed and the price of our
stock may be volatile
Prior to this offering, our common stock has never been sold in a public
market. We have filed an application for the quotation of our common stock on
the Nasdaq National Market. However, an active trading market for our common
stock may not develop or be maintained. If a market does not develop or is not
sustained, it may be difficult for you to sell your shares of common stock at a
price that is attractive to you or at all. The initial public offering price of
the common stock will be determined through negotiations between the
representatives of the underwriters and us and may not be representative of the
price that will prevail in the open market. See "Underwriting."
In addition, the trading price of our common stock will be highly volatile
and could be subject to wide fluctuations in response to factors such as:
. actual or anticipated variations in quarterly operating results;
. announcements of technological innovations or new services by us or our
competitors;
. changes in financial estimates by securities analysts;
. general market conditions and conditions or trends in the Internet and e-
commerce industries;
. announcements by us or our competitors of significant acquisitions;
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. development or maintenance of our strategic partnerships, joint ventures
or capital commitments;
. additions or departures of key personnel; and
. sales of common stock.
These factors and many others could affect our stock price. In addition, the
stock market in general, the Nasdaq National Market and the market for
technology and Internet-related companies in particular, have been experiencing
extreme price and volume fluctuations. These fluctuations have often been
unrelated or disproportionate to the operating performance of such companies.
In the past, securities class-action litigation has often been brought against
a company following periods of volatility in the market price of its stock. If
we become a target of similar litigation, it could result in substantial costs
and a diversion of management's attention and resources.
Additional shares of our common stock subject to registration rights may be
sold to the public
After this offering, based on our capitalization as of December 31, 1999,
the holders of approximately 15,475,849 shares of common stock and warrants to
purchase common stock are entitled to rights with respect to registration of
such shares under federal securities laws. In addition, holders of 1,650,000
shares of common stock issuable upon conversion of Series F preferred stock
that was issued subsequent to December 31, 1999 are similarly entitled to
registration rights. If these holders, by exercising their registration rights,
cause securities to be registered and sold in the public market, the sales
could have an adverse effect on the market price for our common stock.
Anti-takeover provisions in our certificate of incorporation, Delaware law and
our benefit plans could adversely affect the rights of our common stockholders
Anti-takeover provisions of Delaware law and in our certificate of
incorporation, bylaws and equity benefit plans may make a change in control of
our company more difficult, even if a change in control would be beneficial to
our stockholders. These provisions may allow our board of directors to prevent
or make changes in the management and control of our company. In particular,
our certificate of incorporation and bylaws will provide, among other things,
that:
. our board of directors will be able to issue up to 5,000,000 shares of
preferred stock with rights and privileges that might be senior to our
common stock, without the consent of the holders of the common stock;
. our authorized but unissued common stock is available for future issuance
without stockholder approval;
. our board of directors will be divided into three classes which will
serve staggered three year terms and the board of directors will be
authorized to fill vacancies, including newly created directorships;
. directors may be removed by the stockholders only for cause and only upon
a two-thirds vote of the outstanding shares of voting stock;
. stockholder actions must be effected at a duly called meeting and may not
be effected by written consent; and
. only the board of directors is permitted to call a special meeting of
stockholders, 120 days' advance written notice will be required for
stockholders to bring business or to nominate candidates for election as
directors before an annual meeting of stockholders and a two-thirds vote
of the stockholders is required to amend our certificate of incorporation
or our bylaws.
In addition, under Delaware law, our board of directors may adopt additional
anti-takeover measures in the future. Accordingly, the rights of holders and
the price of our common stock could be adversely affected by these anti-
takeover provisions. See "Description of Capital Stock."
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We may invest or spend the net proceeds of this offering in ways with which you
may not agree
We have no specific plans for the net proceeds of this offering. As a
consequence, our management will have broad discretion to allocate the net
proceeds of this offering to uses that you may not deem desirable.
Substantially all of the proceeds of the offering will be invested in short-
term, interest-bearing, investment grade securities for an indefinite period of
time pending use. See "Use of Proceeds."
You will incur immediate and substantial dilution
The initial public offering price is expected to be substantially higher
than the pro forma net book value per share of our outstanding common stock. As
a result, investors purchasing common stock in this offering will incur
immediate and substantial dilution in the amount of $ per share. In
addition, we have issued options and warrants to acquire our common stock at
prices significantly below the initial public offering price. To the extent
these options and warrants are exercised, there will be further dilution to
investors in this offering. See "Dilution."
You should not rely on forward-looking statements of third parties in this
prospectus
This prospectus contains forward-looking statements attributed to third
parties, for example IDC, relating to their estimates regarding growth of e-
commerce, electronic software delivery, software and related service markets
and spending. You should not place any reliance on these forward-looking
statements, which reflect third-party estimates as of the date of this
prospectus.
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USE OF PROCEEDS
We estimate the net proceeds from the offering to be approximately $ , or
$ if the underwriters exercise their over-allotment option in full, at an
assumed initial public offering price of $ per share and after deducting the
underwriting discount and estimated offering expenses.
We expect to use the net proceeds from the offering for general corporate
purposes, including working capital and capital expenditures, enhancing our
product development efforts, expanding our sales and marketing efforts,
acquiring or licensing technology, products or businesses and expanding
internationally. As of the date of this prospectus, we cannot specify the
particular uses for the net proceeds. Accordingly, our management will have
broad discretion in the application of the net proceeds. Pending use, the net
proceeds of the offering will be invested in short-term, interest-bearing,
investment grade securities.
DIVIDEND POLICY
We have never declared nor paid any dividends on our capital stock. We
currently intend to retain all available funds for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in
the foreseeable future. Any future determination to pay dividends will be at
the discretion of our board of directors and will depend on our results of
operations, financial condition, contractual and legal restrictions and other
factors it deems relevant.
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CAPITALIZATION
The following table sets forth our actual short-term debt and total
capitalization as of December 31, 1999. Additionally, our capitalization is
presented:
. on a pro forma basis to give effect to the automatic conversion of all
outstanding shares of preferred stock into common stock and preferred
stock warrants into common stock warrants upon the consummation of the
offering; and
. on a pro forma as adjusted basis to reflect our receipt of the estimated
net proceeds from the sale of shares of common stock offered in the
offering at an assumed initial public offering price of $ per share
and after deducting the underwriting discount and estimated offering
expenses.
<TABLE>
<CAPTION>
As of December 31, 1999
-------------------------------
Pro Pro Forma
Actual Forma As Adjusted
-------- -------- -----------
(in thousands, except share
and per share data)
<S> <C> <C> <C>
Short-term debt................................ $ 509 $ 509 $
======== ======== ====
Long-term debt, less current portion........... $ 861 $ 861 $
Stockholders equity:
Convertible preferred stock, $0.001 par
value; 17,709,657 shares authorized,
15,329,558 shares issued and outstanding,
actual; 5,000,000 shares authorized, no
shares issued and outstanding, pro forma and
pro forma as adjusted....................... 15 --
Common stock, $0.001 par value; 32,290,343
shares authorized, 5,497,467 shares issued
and outstanding, actual; 80,000,000 shares
authorized, 20,827,025 shares issued and
outstanding, pro forma, and shares
issued and outstanding, pro forma as
adjusted.................................... 5 20
Additional paid-in capital..................... 56,799 56,799
Employee notes receivable...................... (5,283) (5,283)
Unearned stock compensation.................... (3,740) (3,740)
Accumulated deficit............................ (32,433) (32,433)
-------- -------- ----
Total stockholders' equity................... 15,363 15,363
-------- -------- ----
Total capitalization....................... $ 16,224 $ 16,224 $
======== ======== ====
</TABLE>
The common stock to be outstanding after the offering is based on the number
of shares outstanding as of December 31, 1999. This excludes the following
issuances which we may make pursuant to plans or arrangements entered into
prior to December 31, 1999:
. 2,043,282 shares of common stock issuable upon exercise of outstanding
stock options at a weighted average exercise price of $2.53 per share;
and
. 146,291 shares of common stock issuable upon the exercise of outstanding
warrants at a weighted average exercise price of $1.20 per share.
In addition, this excludes the following issuances which we may make
pursuant to plans or arrangements entered into subsequent to December 31, 1999:
. 225,000 shares of common stock issuable upon exercise of outstanding
stock options at a weighted average exercise price of $5.00 per share;
19
<PAGE>
. 1,650,000 shares of common stock issuable upon conversion of 1,650,000
shares of Series F preferred stock issued in January 2000;
. 7,500,000 shares of common stock available for grant under our 2000 Stock
Incentive Plan;
. 900,000 shares of common stock reserved for issuance under our 2000
Employee Stock Purchase Plan; and
. 189,080 shares of common stock.
Please read the capitalization table together with the sections of this
prospectus entitled "Selected Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and related notes appearing elsewhere in this prospectus.
20
<PAGE>
DILUTION
As of December 31, 1999, our net tangible book value, on a pro forma basis
after giving effect to the conversion of our outstanding preferred stock into
common stock, was $15,363,000 or $0.74 per share of common stock. "Net tangible
book value" per share represents the amount of our total tangible assets
reduced by the amount of our total liabilities, divided by the total number of
shares of common stock outstanding. As of December 31, 1999 our net tangible
book value, on a pro forma basis as adjusted for the sale of shares of
common stock offered in the offering at an assumed initial public offering
price of $ per share and after deducting the underwriting discount and
estimated offering expenses, would have been $ per share. This represents an
immediate increase in the net tangible book value of $ per share to
existing stockholders and an immediate dilution of $ per share to new
investors purchasing shares of common stock in this offering. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $
Pro forma net tangible book value per share as of December 31,
1999.......................................................... $0.74
Increase per share attributable to new investors...............
-----
Pro forma net tangible book value per share after the offering...
---
Dilution per share to new investors.............................. $
===
</TABLE>
The following table summarizes on a pro forma basis as of December 31, 1999
the differences between the total consideration paid and the average price per
share paid by the existing stockholders and the new investors with respect to
the number of shares of common stock purchased from us based on an assumed
initial public offering price of $ per share:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ -------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 20,827,025 % $ % $
New investors...........
---------- ----- -------- ----------
Total................. 100.0% $ 100.0%
========== ===== ======== ==========
</TABLE>
The common stock to be outstanding after the offering is based on the number
of shares outstanding as of December 31, 1999. This excludes the following
issuances which we may make pursuant to plans or arrangements entered into
prior to December 31, 1999:
. 2,043,282 shares of common stock issuable upon exercise of outstanding
stock options at a weighted average exercise price of $2.53 per share;
and
. 146,291 shares of common stock issuable upon the exercise of outstanding
warrants at a weighted average exercise price of $1.20 per share.
In addition, this excludes the following issuances which we may make
pursuant to plans or arrangements entered into subsequent to December 31, 1999:
. 225,000 shares of common stock issuable upon exercise of outstanding
stock options at a weighted average exercise price of $5.00 per share;
. 1,650,000 shares of common stock issuable upon conversion of 1,650,000
shares of Series F preferred stock issued in January 2000;
. 7,500,000 shares of common stock available for grant under our 2000 Stock
Incentive Plan;
. 900,000 shares of common stock reserved for issuance under our 2000
Employee Stock Purchase Plan; and
. 189,080 shares of common stock.
21
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with our
financial statements and related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this prospectus. The statement of operations data for each of the three
years ended December 31, 1997, 1998 and 1999 and the balance sheet data as of
December 31, 1998 and 1999 are derived from financial statements that
PricewaterhouseCoopers LLP, independent accountants, have audited and are
included elsewhere in this prospectus. The balance sheet data as of December
31, 1995, 1996 and 1997 and the statement of operations data for the period
from March 28, 1994 (inception) through December 31, 1995 and for the year
ended December 31, 1996 are derived from audited financial statements not
included in this prospectus. Historical results are not necessarily indicative
of the results to be expected in the future.
<TABLE>
<CAPTION>
Period From
March 28, 1994
(inception)
Through Year Ended December 31,
December 31, -----------------------------------------
1995 1996 1997 1998 1999
-------------- ------- --------- --------- ----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues............ $ 19 $ 160 $ 2,349 $ 6,573 $ 12,749
Cost of net revenues.... 12 124 1,899 5,882 11,083
--------- ------- --------- --------- ----------
Gross profit............ 7 36 450 691 1,666
Operating expenses:
Sales and marketing.... 16 541 1,685 3,802 7,574
Product development and
operations............ 17 681 1,305 3,216 5,946
General and
administrative........ 7 390 1,049 1,432 2,902
Stock compensation
expense............... -- 4 45 189 4,499
Amortization of
acquired technology... -- -- -- -- 382
--------- ------- --------- --------- ----------
Total operating
expenses............. 40 1,616 4,084 8,639 21,303
--------- ------- --------- --------- ----------
Loss from operations.... (33) (1,580) (3,634) (7,948) (19,637)
Interest income......... -- 15 85 230 453
Interest expense........ -- (72) (76) (60) (170)
Other loss.............. -- -- -- (78) --
--------- ------- --------- --------- ----------
Net loss................ (33) (1,637) (3,625) (7,856) (19,354)
Deemed preferred stock
dividend............... -- -- -- -- (3,840)
--------- ------- --------- --------- ----------
Net loss available to
common stockholders.... $ (33) $(1,637) $ (3,625) $ (7,856) $ (23,194)
========= ======= ========= ========= ==========
Basic and diluted net
loss per share
available to common
stockholders........... $ (16.50) $ (2.48) $ (2.83) $ (3.96) $ (8.24)
Shares used in per share
calculation............ 2,000 661,235 1,279,815 1,983,051 2,814,726
Pro forma basic and
diluted net loss per
share.................. $ (1.59)
Shares used in pro forma
per share calculation.. 14,567,298
</TABLE>
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1995 1996 1997 1998 1999
----- ------ ------ ------ -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................. $ 1 $ 933 $2,773 $3,198 $14,435
Short-term investments..................... -- -- -- 2,100 2,200
Working capital (deficit).................. (48) 707 2,007 3,101 11,528
Total assets............................... 16 1,355 4,064 7,760 21,849
Long-term debt............................. -- -- 264 400 861
Total stockholders' equity (deficit)....... (33) 908 2,826 4,853 15,363
</TABLE>
22
<PAGE>
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 together with the financial statements and related
notes that are included elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth under
"Risk Factors" or in other parts of this prospectus.
Overview
ReleaseNow.com is a leading provider of outsourced e-commerce solutions for
the marketing, sale and delivery of business and consumer software titles,
business-to-business software licenses and other digital goods online. Our
comprehensive e-commerce infrastructure, PowerCommerce, is built on industry
leading technologies and partnerships which we believe provides our customers a
best-of-class, one-stop solution for selling digital goods online. We believe
we are well positioned in three converging Internet markets: Internet
infrastructure, outsourced e-commerce and the online sale of digital goods. To
date, we have focused on selling software through our software publishers' and
online retailers' Web sites. From our inception in March 1994 through the first
half of 1996, we devoted substantially all of our efforts to developing our
electronic packaging technology, and in particular, our proprietary SalesAgent
technology for encrypting and limiting use of software based on the payment
option chosen; building sales momentum; creating marketing programs; recruiting
personnel; and raising capital. In 1996, we also began selling software with
advanced delivery options, which include the sale of software products over the
Internet in secure download-and-buy and try-and-buy formats. In 1997, we
introduced our first generation of online stores for software vendors to
display a limited number of products. In the first quarter of 1998, we began
offering online stores with more flexible database driven or dynamic pricing
and display of images. In the third quarter of 1999, with the introduction of
our PowerCommerce platform, we extended our service offerings to include a
powerful and robust e-commerce infrastructure which is designed to enable rapid
deployment of customized, dynamic stores that include sophisticated marketing
and merchandising programs. In the first quarter of 2000, we introduced the e-
Business Center, capable of supporting purchase order based transactions,
volume licensing and custom pricing, as well as allowing corporate purchasers
to download software applications and software licenses in real-time,
eliminating the need for physical shipment. We believe this solution will allow
us to better address the specific needs of the business-to-business software
market.
We generate revenue primarily from sales of third-party software. We
recognize the full sales amount as revenue for product sales in which we are
responsible for processing the order, performing credit authorization
procedures, delivering the product and collecting the proceeds from the sale.
We assume credit risk with respect to the customers, and we are responsible for
returns. We provide for estimated returns at the time of delivery based upon
historical data.
For transactions in which our role is limited to providing processing
services and we are not responsible for collecting the proceeds from the sale,
we recognize the net processing fees as revenue upon delivery of the product.
Net processing fee revenue has not been significant to date. In addition, we
generate revenue from one-time start-up fees related to deploying stores and
consulting and marketing fees. We expect that software product sales will
continue to represent the majority of our net revenues for the foreseeable
future.
Historically, a significant portion of our revenues has been derived from
customers outside of the United States, and we expect this trend to continue.
International revenues accounted for approximately 40% of net revenues in the
year ended December 31, 1998 and approximately 39% of net revenues in the year
ended December 31, 1999. Our revenues are denominated in United States dollars.
During the year ended December 31, 1999 we generated over 57% of our net
revenues from the sale of Macromedia software products. While we believe that
the percentage of our net revenues derived from the sale of Macromedia products
will decline, we expect these sales to continue to represent a significant
percentage of
23
<PAGE>
our net revenues for at least the next 12 months. We have no assurance that
Macromedia will continue to permit us to sell their software products. Although
Macromedia recently contracted with us to sell a number of additional products,
they have also indicated to us that they intend to bring electronic
distribution of some of their products in-house. If we were to stop selling
Macromedia products, there would be a material adverse effect on our net
revenues, operating results and financial position.
In May 1999, we acquired all of the capital stock of Client Server Designs,
Inc., a provider of systems integration and consulting services, in exchange
for 300,000 shares of our common stock and the assumption of certain
liabilities. Client Server Designs was not generating material revenues prior
to the acquisition. Through this acquisition we acquired a proprietary software
tool designed to facilitate rapid application development, design and system
enhancements. This acquisition may allow us to develop new systems and
integrate third-party technologies more quickly than prior to the Client Server
Designs acquisition.
Since inception, we have incurred significant losses. As of December 31,
1999, we have incurred cumulative losses of $32.4 million. We have a limited
operating history upon which investors may evaluate our business and prospects.
We intend to continue to expend significant financial and management resources
on the development of additional services, sales and marketing, improved
technology, expanded operations and improved financial systems. As a result, we
expect to incur additional losses and have continued negative cash flow from
operations through at least 2002. Our revenues may not increase or even
continue at their current levels, and we may not achieve or maintain
profitability or generate cash from operations in future periods. Our prospects
must be considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stages of development, particularly
companies in new and rapidly evolving markets such as digital commerce. We may
not be successful in addressing these risks, and our failure to do so would
harm our business. See "Risk Factors--We have limited operating history, and
limited information exists upon which you can evaluate our business" and "--We
have a history of losses, we expect continued losses and we may not achieve or
maintain profitability."
Results of Operations
The following table sets forth our statement of operations data for the
periods indicated and is expressed as a percentage of net revenues:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Statement of Operations
Data:
Net revenues.............. 100% 100% 100%
Cost of net revenues...... 81 89 87
------- ------- -------
Gross profit.............. 19 11 13
Operating expenses:
Sales and marketing...... 72 58 59
Product development and
operations.............. 55 49 47
General and
administrative.......... 45 22 23
Stock compensation
expense................. 2 3 35
Amortization of acquired
technology.............. -- -- 3
------- ------- -------
Total operating
expenses............... 174 132 167
------- ------- -------
Loss from operations...... (155) (121) (154)
Interest income........... 4 3 3
Interest expense.......... (3) (1) (1)
Other loss................ 0 (1) 0
------- ------- -------
Net loss.................. (154)% (120)% (152)%
======= ======= =======
</TABLE>
24
<PAGE>
Years Ended December 31, 1997, 1998 and 1999
Net Revenues. Net revenues increased from $2.3 million to $6.6 million to
$12.7 million for the years ended December 31, 1997, 1998 and 1999,
respectively. The increase was attributable primarily to growth in the number
of our software publisher and online retailer customers, growth in sales volume
with some of our existing customers and the increasing market acceptance of
digital delivery. Two customers accounted for 37% of net revenues, three
customers accounted for 55% of net revenues and two customers accounted for 73%
of net revenues for the years ended December 31, 1997, 1998 and 1999,
respectively. Macromedia represented 5%, 34% and 57% of net revenues in the
year ended December 31, 1997, 1998 and 1999, respectively.
Cost of Net Revenues. Cost of net revenues consists primarily of the amounts
payable to the software publishers and online retailers for products sold to
the end-user. Cost of net revenues increased from $1.9 million to $5.9 million
to $11.1 million for the years ended December 31, 1997, 1998 and 1999,
respectively, reflecting our growth in sales. Our gross profit margin decreased
from 19% in 1997 to 11% in 1998 and increased to 13% in 1999. The addition of
some lower margin customers in 1997 and 1998 contributed to the margin decline,
and the addition of some higher margin customers in 1999 contributed to margin
improvement.
Sales and Marketing. Sales and marketing expense consists primarily of
personnel and related expenses, advertising and promotional expenses, credit
card transaction fees, customer service costs and an allocation of our
facilities costs. Sales and marketing expense increased from $1.7 million to
$3.8 million to $7.6 million for the years ended December 31, 1997, 1998 and
1999, respectively. The increases from period to period were primarily due to
the expenses associated with the addition of sales and marketing personnel and
increased advertising and marketing expenditures. We expect that sales and
marketing expense will continue to increase in absolute dollars in the
foreseeable future compared to prior periods.
Product Development and Operations. Product development and operations
expense consists primarily of personnel and related expenses and consulting
associated with developing, enhancing and maintaining internal systems,
telecommunications infrastructure and an allocation of our facilities costs.
Product development and operations expense increased from $1.3 million to $3.2
million to $5.9 million for the years ended December 31, 1997, 1998 and 1999,
respectively. The increases from period to period were primarily due to
increased personnel and consultants required to enhance and maintain our
existing service offerings and also to develop new service offerings. We expect
that product development and operations expense will continue to increase in
absolute dollars in the foreseeable future compared to prior periods.
General and Administrative. General and administrative expense consists
primarily of compensation for personnel for general corporate functions,
including accounting, human resources, general management and fees for
professional and consulting services, as well as bad debt expense and an
allocation of our facilities costs. General and administrative expense
increased from $1.0 million to $1.4 million to $2.9 million for the years ended
December 31, 1997, 1998 and 1999, respectively. The increases from period to
period were primarily due to increases in the number of personnel and
consultants and increased use of professional services. We expect that these
expenses will increase in absolute dollars in the foreseeable future compared
to prior periods as we continue to hire new employees, incur additional
professional expenses relating to the development of our business and incur
costs associated with increased infrastructure and obligations as a public
company.
Stock Compensation Expense. Stock compensation expense is mainly
attributable to the difference between the fair market value of our common
stock and the exercise price of options to purchase that common stock on the
dates of the grants, and is being recognized on an accelerated basis over the
vesting periods of the related options, usually four years. We recognized nil,
$189,000 and $2.2 million of total stock compensation expenses related to
amortization of unearned compensation expense for the years ended December 31,
1997, 1998 and 1999, respectively. Additional compensation expense of
$2.2 million for the year ended December 31, 1999 was recognized in connection
with severance agreements and the transition of our former Chief Executive
Officer to Chairman of the Board.
25
<PAGE>
Amortization of Acquired Technology. Amortization of acquired technology
expense relates to the technology that we purchased as a result of the Client
Server Designs acquisition in May 1999. The technology is being amortized on a
straight-line basis over the estimated period of benefit, which is two years.
We amortized $382,000 of acquired technology in the year ended December 1999.
Interest Income. Interest income consists of earnings on our cash, cash
equivalents and short-term investments. Interest income increased from $85,000
to $230,000 to $453,000 for the years ended December 31, 1997, 1998 and 1999,
respectively. The increase resulted from changes in average cash and cash
equivalent balances over the respective periods. The increase was attributable
to interest earned on higher average cash and cash equivalent balances
resulting from the private sales of preferred stock and interest earned on
stock notes receivable.
Interest Expense. Interest expense consists of expenses related to our
financing obligations, which include primarily borrowings under equipment loans
and capital lease obligations. Interest expense increased from $76,000 for the
year ended December 31, 1997, decreased to $60,000 for the year ended December
31, 1998 and increased to $170,000 for the year ended December 31, 1999. The
increase for 1997 was primarily due to higher average financing obligations
resulting from borrowings under equipment loans and capital leases. The
decrease in 1998 was primarily due to lower average balances on our borrowings
under our equipment loans. The increase in 1999 was primarily due to additional
borrowings under our equipment leases.
Other Loss. In September 1998, we relocated to our current facility and
abandoned leasehold improvements related to the vacated premises. A $78,000
loss for the remaining capitalized leasehold improvements was recognized for
the year ended December 31, 1998.
Income Taxes. We incurred losses for the years ended December 31, 1997, 1998
and 1999. Accordingly, there were no provisions for income taxes. As of
December 31, 1999 we had $28.0 million of federal and $14.7 million of state
net operating loss carryforwards available to offset future taxable income,
which will expire in varying amounts beginning in 2011 and 2002 for federal and
state, respectively.
26
<PAGE>
Quarterly Results of Operations
The following table sets forth statement of operations data for the past
five quarters, including the quarter ended December 31, 1999. The information
for each of these quarters has been prepared on substantially the same basis as
the audited financial statements included elsewhere in this prospectus and, in
our opinion, includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operation for
these periods. Historical results are not necessarily indicative of the results
to be expected in the future, and results of the interim periods are not
necessarily indicative of our results of operations for the entire year.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------------
December 31, March 31, June 30, September 30, December 31,
1998 1999 1999 1999 1999
------------ --------- -------- ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues............ $ 1,726 $ 2,037 $ 2,408 $ 2,599 $ 5,705
Cost of net revenues... 1,577 1,773 2,020 2,299 4,991
------- ------- ------- ------- -------
Gross profit.......... 149 264 388 300 714
Operating expenses:
Sales and marketing.... 1,193 1,362 1,452 2,191 2,569
Product development and
operations............ 1,262 1,460 1,165 1,466 1,855
General and
administrative........ 434 546 617 925 814
Stock compensation
expense............... 119 288 825 738 2,648
Amortization of
acquired technology... -- -- 53 165 164
------- ------- ------- ------- -------
Total operating
expenses............. 3,008 3,656 4,112 5,485 8,050
------- ------- ------- ------- -------
Loss from operations.... (2,859) (3,392) (3,724) (5,185) (7,336)
Interest income......... 85 42 62 194 155
Interest expense........ (10) (31) (45) (59) (35)
------- ------- ------- ------- -------
Net loss................ $(2,784) $(3,381) $(3,707) $(5,050) $(7,216)
======= ======= ======= ======= =======
</TABLE>
Our quarterly and annual operating results will continue to fluctuate
significantly in the future due to a variety of factors, many of which are
outside our control. Additionally, as a result of our limited operating history
and the emerging nature of the online digital goods market in which we compete,
it is difficult for us to forecast our revenues or earnings accurately. Our
current and future expense levels are based largely on our investment plans and
estimates of future revenues and are, to a large extent, fixed. We may be
unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall. Any significant shortfall in revenues relative to our
planned expenditures would harm our business. Due to these factors, our
quarterly revenues and operating results are difficult to forecast. We believe
that period to period comparisons of our operating results may not be
meaningful and should not be relied upon as an indication of future
performance. In addition, it is likely that in one or more future quarters our
operating results will fall below the expectations of securities analysts and
investors. In that event, the trading price of our common stock would likely
fall. See "Risk Factors--We have a limited operating history, and limited
information exists upon which you can evaluate our business" and "--We may
experience fluctuations in our operating results that may impact our stock
price."
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through the
private placement of our preferred stock and equipment financings. As of
December 31, 1999, we had raised $41.6 million through the sale of our
preferred stock and had approximately $14.4 million of cash and cash
equivalents. In January 2000, we raised an additional $8.2 million through the
sale of our preferred stock.
Net cash used in operating activities in the years ended December 31, 1997,
1998 and 1999 was $2.9 million, $5.9 million and $10.9 million, respectively.
Net cash used in operating activities in each of
27
<PAGE>
these periods was primarily a result of net losses, offset in part by increases
in accounts payable, accrued expenses and non-cash expenses.
Net cash used in investing activities in the years ended December 31, 1997,
1998 and 1999 was $979,000, $3.6 million and $2.6 million, respectively. Net
cash used in investing activities was primarily related to the acquisition of
property and equipment and the purchase of short term investments.
Net cash provided by financing activities in the years ended December 31,
1997, 1998 and 1999 was $5.7 million, $9.9 million and $24.7 million,
respectively. Net cash provided by financing activities was due primarily to
the sale of shares of our preferred stock. We also entered into a capital
equipment loan of up to an aggregate of $1.0 million, bearing interest at an
effective rate of 14.5% per annum, of which $398,000 was drawn down in 1997 and
$58,000 remained outstanding as of December 31, 1999. The loan is
collateralized by all of our assets, excluding our intellectual property. As of
December 31, 1997 and 1998 we were in default of the reporting covenants under
this loan, for which waivers were obtained. Net cash in 1998 was also provided
by proceeds from a note agreement in aggregate principal amount of $492,000 for
the purchase of software. This note accrues interest at a rate of 13.6% per
annum and is collateralized by the purchased software. Borrowings are due in 12
quarterly installments of $49,525, with the remaining balance due October 1,
2001. As of December 31, 1999, we maintained an equipment lease line for up to
an aggregate of $1.4 million. As of December 31, 1999, we had approximately
$970,000 million of outstanding borrowings on this equipment lease line made in
several separate installments beginning in July 1999. Borrowings are due in 42
equal monthly installments beginning on their respective draw-down dates and
accrue interest at a rate of 8.3% per annum. Our equipment lease line has no
material financial or non-financial covenants.
We anticipate that we will continue to add computer hardware and software
resources, deploy additional commerce servers worldwide, expand our primary
office facility and hire additional personnel during the next 12 months. We may
also use cash to acquire or license technology, products or businesses. In
addition, we expect to continue to experience significant increases in our
operating expenses for the foreseeable future and believe that the funding of
our operating expenses will be a significant use of our cash resources.
We believe that the net proceeds from this offering, gross cash from
operations, if any, and equipment lease financings, together with existing
cash, cash equivalents and short-term investments, will be sufficient to meet
our anticipated cash needs for working capital and capital expenditures for the
next 12 months. However, we may seek to raise additional capital during that
period and thereafter. The sale of additional equity or convertible debt
securities could result in additional dilution to our stockholders. Financing
may not be available in amounts or on terms acceptable to us, if at all.
Market Risk Disclosure
At December 31, 1999, we had an investment portfolio of money market funds,
commercial securities and United States government bonds, including those
classified as short-term investments, of $2.2 million. These instruments, like
all fixed income instruments, are subject to interest rate risk. Our fixed
income portfolio will fall in value if interest rates increase. However, if
market interest rates were to increase immediately and uniformly by as much as
10% from levels as of December 31, 1999, the decline of the fair value of the
fixed income portfolio would not be material.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at their fair market
value and that the corresponding derivative gains or losses be either reported
in the statement of operations or as a deferred item, depending on the type of
hedge relationship that exists with respect to such derivatives. In July 1999,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 137, "Accounting for Derivative Instruments and
Hedging Activities--Deferral of the effective date of FASB
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Statement No. 133" ("SFAS No. 137"). SFAS No. 137 deferred the effective date
until the quarter ending June 30, 2000. We will adopt SFAS No. 133 in the
quarter ending June 30, 2000 and do not expect the adoption of this
pronouncement to have a material impact on our financial statements.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition," which
provides guidance on the recognition, presentation, and disclosure of revenue
in financial statements filed with the SEC. SAB 101 outlines the basic criteria
that must be met to recognize revenue and provides guidance for disclosures
related to revenue recognition policies. Management believes that the impact of
SAB 101 would have no material effect on the financial position or results of
operations of the Company.
Year 2000 Compliance
Many currently installed computer systems and software products worldwide
are coded to accept only two digit entries to identify a year in the date code
field. This could cause system failure or malfunction because systems are not
able to distinguish 21st century dates from 20th century dates. Accordingly,
prior to January 1, 2000, many companies, including ourselves, reviewed their
systems and updated those portions expected to cause year 2000 problems.
However, many companies, including ourselves and our customers, potential
customers, vendors and strategic partners, may not have discovered every
possible point of failure and may still need to upgrade their systems to comply
with applicable year 2000 requirements. Although we did not experience a major
catastrophe in connection with the beginning of the year 2000, significant
uncertainty still exists concerning the scope and magnitude of problems
associated with the year 2000 issue that may only become apparent at a future
date.
We are not currently aware of any year 2000 compliance problems relating to
our network applications or our information technology, referred to as IT, or
our non-IT systems that would have a material adverse effect on our business,
results of operations and financial condition. Our services, including
PowerCommerce Instant Solutions, PowerCommerce Plus Solutions and e-Marketing
Services, were designed and developed to be year 2000 compliant. Our internal
systems used to deliver our services and manage our information utilize third-
party software. We have contacted these vendors in order to assess their year
2000 compliance. Based on these vendors' representations, we believe that the
third-party hardware and software that we use is year 2000 compliant. We may,
however, experience unanticipated negative consequences, including material
costs caused by undetected errors or defects in the technology developed by us
or used in our internal systems. In particular:
. we may discover year 2000 compliance problems in our network and other
software that will require substantial revisions or replacements;
. there can be no assurance that third-party hardware or software
incorporated into our material IT and material non-IT systems will not
need to be revised or replaced, which could be time consuming and
expensive; and
. the failure to adequately address year 2000 compliance issues in our IT
and non-IT systems could result in claims of mismanagement,
misrepresentation or breach of contract and bring about litigation, which
could be costly to defend.
Any such worst-case scenario, if not quickly remedied, could result in lost
revenues, increased expenses and business interruptions, which could have a
material adverse effect on our business, results of operations and financial
condition. We have no formal contingency plan to address the effect of year
2000 noncompliance.
In April 1999, we formed a year 2000 task force to review all information
technology systems, including services provided to our customers. We have not
incurred any material costs associated with our year 2000 compliance efforts,
except for limited expenditures related to testing and compensation expense
associated with our salaried employees who have devoted a portion of their time
to the year 2000 task force. To date, we have spent $6,000 on testing and
$75,000 in compensation expense. We do not expect the ongoing costs of testing
to be material to our business.
If our year 2000 review proves inadequate and our business operations are
materially impacted, now or in the future, we could incur additional costs to
recover any lost information, replace impacted systems and
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rebuild damaged customer relationships. We believe any internal system that is
impacted could be replaced without significant difficulty, as replacement
systems are generally available on commercially reasonable terms. We have
regular data back-up procedures that would assist in the recovery of lost
business information.
We typically receive warranties from our software publishers with respect to
year 2000 compliance of the software products we sell, but we do not
independently verify the year 2000 compliance of these products. If these
software products are not year 2000 compliant, demand for these products could
decline if modifications are not made on a timely basis by the software
publisher. This in turn could adversely affect our business and results of
operations. In addition, we cannot guarantee that Internet access companies,
governmental agencies, utility companies, third-party service providers and
others not within our control will be year 2000 compliant. The failure of such
entities to be year 2000 compliant could result in a failure beyond our
control, such as a prolonged Internet, telecommunications or electrical
failure, which could prevent us from conducting business.
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BUSINESS
ReleaseNow.com is a leading provider of outsourced e-commerce solutions for
the marketing, sale and delivery of business and consumer software titles,
business-to-business software licenses and other digital goods online. Our
comprehensive e-commerce infrastructure, PowerCommerce, is built on industry
leading technologies and partnerships which we believe provides our customers a
best-of-class, one-stop solution for selling digital goods online. We believe
we are well positioned in three converging Internet markets: Internet
infrastructure, outsourced e-commerce and the online sale of digital goods. To
date, we have focused on selling software through our software publishers' and
online retailers' Web sites. Our PowerCommerce platform allows us to build,
deploy and maintain thousands of e-commerce stores. We construct and operate e-
commerce sites that reflect our customers' brand identity and provide advanced
marketing, merchandising and digital distribution capabilities. Our expertise
in systems integration also allows us to integrate our customers' e-commerce
sites with their back office internal information systems for reporting and
tracking. We operate e-commerce sites, conduct the sale, provide data for
reporting requirements and offer fund settlement services, while allowing our
customers to control business critical e-commerce site content, including
product display, advertising and direct marketing content. We now manage
hundreds of e-commerce points of sale for our software publisher and retailer
customers, which include, as of December 31, 1999, Macromedia, Inc., Miacomet,
Inc., Network ICE Corporation, Symantec Corporation, Verity, Inc. and WebTrends
Corporation.
We also intend to leverage our capabilities to penetrate other digital goods
markets, through in-house development and through strategic partnerships with
key technology and service companies such as Preview Systems, Inc., eCHARGE
Corporation and Responsys.com, Inc. For example, with the introduction of the
e-Business Center in the first quarter of 2000, we have leveraged our
capabilities in business-to-consumer software to move into the business-to-
business software market. The e-Business Center is capable of supporting
purchase order based transactions, volume licensing and custom pricing. The e-
Business Center also allows corporate purchasers to download software
applications and software licenses in real-time, eliminating the need for
physical shipments. We believe that this solution will allow us to address the
critical needs of the large and rapidly growing business-to-business software
market. In addition, we intend to pursue other digital content opportunities
such as music, video and electronic documents.
Industry Background
E-Commerce and the Online Sale and Delivery of Digital Goods
With the rapid growth of the Internet, vendors and consumers have
increasingly sold and bought goods and services online. IDC forecasts that the
number of online buyers worldwide will expand from approximately 30.8 million
in 1998 to approximately 182.6 million in 2003. IDC also estimates that the
total e-commerce market will increase from approximately $50.4 billion in 1998
to over $1.3 trillion by 2003. The Internet can provide many compelling
benefits as a medium for commerce, including:
. instantaneous seller and buyer interaction on a global scale, 24 hours a
day, seven days a week;
. reduced investment in physical retail locations;
. reduced sales and marketing costs;
. increased ability to sell directly to consumers; and
. cost-effective one-to-one marketing and relationships with end-users.
The Internet is also well-suited for the sale and delivery of goods such as
software, business-to-business software licenses, music, books and documents
and images that can be delivered in digital form. Significant benefits to both
buyers and sellers of digital goods extend beyond those associated with the
online sales of physical goods such as toys, groceries and flowers. Some of
these additional benefits include:
. instant delivery and immediate end-user gratification;
. elimination of physical inventory, physical fulfillment and related
costs;
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. cost-effective rental and subscription-based business models for digital
goods; and
. ability to shorten distribution times associated with new products and
enhancements, thereby reducing time-to-market.
E-commerce is more complex to implement for digital goods than physical
goods, as both the sale and delivery of digital goods take place online. In
addition to the basic building blocks necessary for traditional e-commerce,
digital e-commerce entails a number of requirements, including:
Electronic Packaging. For vendors to take full advantage of digital e-
commerce, it is necessary to properly electronically package digital content to
prevent piracy and provide flexible purchasing options. This result is achieved
by attaching encryption algorithms to digital content, which requires highly-
specialized technologies and expertise. In addition to protecting digital
content, electronic packaging enables the separation of the content from the
authorization to use it, enabling a variety of purchase options, such as
download-and-buy, try-and-buy, rental, pay-per-use and subscription.
Digital Delivery. Digital e-commerce requires the flexible management of
digital goods distribution to provide secure, automated and reliable
fulfillment of licenses or products and to track sales and customer data in
real-time. In addition, download management capabilities should allow
resumption of a digital download after an interruption in the download process
as well as re-installation of software for licensed users.
Real-time Fraud Detection. The electronic delivery of digital goods requires
that transaction processing, credit card authorization and fraud detection be
conducted in the seconds between the time of customer payment and the
commencement of download of the digital good. By contrast, fraud prevention and
payment processing for physical goods can be conducted in the period of time
between online order receipt and product shipment.
Systems with the technological sophistication to perform all of these
functions have only recently been fully enabled for use on the Internet. Thus,
although the sale of digital goods online contributed to a small portion of the
$50 billion e-commerce market in 1998, advances in electronic delivery
techniques for digital goods are expected to drive the rapid adoption of e-
commerce for digital goods. The worldwide packaged software market has emerged
as one of the first digital goods e-commerce markets to experience widespread
adoption of digital delivery. IDC estimates that the market for the online sale
of software reached $1.6 billion in 1998 and will grow to approximately $32.9
billion by 2003. IDC also estimates that the market for the sale of electronic
licenses for corporate software reached $20.1 billion in 1998 and will grow to
over $174.5 billion by 2003.
The Traditional Software Markets
The traditional software markets, which include the sale of both retail and
corporate software products, are large and continue to exhibit strong growth.
IDC estimates that the worldwide packaged software market will grow from
approximately $135.1 billion in 1998 to approximately $270.5 billion by 2003.
However, despite this strong growth, traditional sales channels have inherent
limitations and disadvantages for software publishers, retailers and end-users.
Retail Software. Traditional retail software sales channels include regional
and national superstore retail chains, catalog companies and small single
location stores. The limitations and disadvantages of traditional sales
channels include:
. length of time required to distribute physical products to end-users;
. intense competition for limited retail shelf space;
. costs associated with the return of products;
. investments in inventory and physical distribution infrastructure;
. packaging, sales and distribution expenses;
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. limited flexibility to rapidly implement pricing, availability and
product changes; and
. low end-user registration rates and limited ability to gather end-user
information.
Corporate Software. The purchase, sale and delivery of business-to-business
software licenses is currently a multi-step process which can span several
days, if not weeks. This process entails administrative and distribution costs
and can result in reduced customer satisfaction from long lead times and lost
revenue potential over the product life-cycle. Moreover, physical delivery of
software product fixes and product upgrades add to the potential lag-time and
expense.
Opportunity for Outsourced e-Commerce Solutions for Software and Other Digital
Goods
We believe that there are significant opportunities for third-party
outsourcing solutions to enable the electronic marketing, sale and delivery of
digital goods. E-commerce capabilities require substantial technical expertise
and involve substantial investment in e-commerce server software and Web and
online store development tools. According to the Gartner Group, the average
cost of developing an e-commerce site from scratch is approximately $1 million
and can be substantially higher. The average site takes five months to complete
and may take as long as a year, with labor constituting 79% of the budget. In
addition to these up-front costs, there are also ongoing costs associated with
the operation and maintenance of e-commerce sites, including credit card
transaction fees and fraud risks, site hosting costs and personnel costs.
Moreover, there are opportunity costs associated with revenues lost during the
time to develop and establish e-commerce capabilities. As a result, vendors
must choose to buy or internally develop and manage their own e-commerce
systems at great cost, or look to third-party solution providers with core
competencies in digital commerce and economies of scale in infrastructure
development and site maintenance.
The graphic depicts an oval with eleven spokes pointing outward. Enclosed in
the oval is the text: "The Power Commerce Engine: All the key elements of e-
marketing, e-sales and e-delivery. At the end of each spoke is text and an icon
illustrating the corresponding text. Each spoke represents a service that
ReleaseNow.com offers. The services shown include: Bank Clearance, Goods
Delivery (both Digital and Physical), Upgrades, e-Merchandising, 24x7 Customer
Support, Storefront Experience, e-Marketing, Fraud Control, Returns Processing,
Digital Packaging and Transaction Processing.
Requirements for a complete outsourced e-commerce solution.
More importantly, vendors of digital goods increasingly need to be able to
effectively market and merchandise products and services in a way that
differentiates their product offerings and attracts new end-users. Successful
e-merchandising requires an engaging end-user interface to simplify and improve
the purchasing experience as well as sophisticated marketing techniques. In
addition, the sale and delivery of digital
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goods is complex and requires special electronic packaging, encryption and
licensing capabilities with up-front and ongoing investments in secure,
reliable and scalable systems. Accordingly, we believe successful third-party
outsourced e-commerce solutions must address the following needs:
Digital Delivery Capabilities
. Security of Digital Downloads. E-commerce solutions should be secure to
prevent unauthorized use and reproduction of digital goods.
. Download Management and Scheduling. Management and scheduling
capabilities must provide a reliable and easy-to-use download process.
These functions should include customer tracking applications to allow
the reinstallation of purchased software on demand.
E-Merchandising Capabilities
. Flexible Purchasing Options. Purchasing options should support multiple
business models such as online business-to-business software licensing,
download-and-buy, try-and-buy, rental, subscription and pay-per-use.
. Sophisticated e-Commerce Marketing Techniques. To effectively compete
online, vendors must stay current with evolving and sophisticated e-
commerce marketing techniques which establish direct end-user
relationships. These e-merchandising techniques include tracking end-user
preferences and cross-selling and up-selling, as well as coupons,
discounts and gift certificates.
. Quality Product Presentation. Online display of products should be both
informative and attractive. This presentation requires high-quality
product imaging capabilities and expertise in the development of
editorial content for product descriptions and reviews.
E-Commerce Functions
. Established e-Commerce Transaction Processing and Infrastructure. E-
commerce solutions must address costly logistic requirements for e-
commerce presence, including dedicated high speed Internet access,
transaction support infrastructure, bank clearing, fraud screening,
encryption and security. Back office operations should ensure compliance
with tax and export regulations and territorial distribution agreements
and track transactions through an electronic audit trail.
Our Solution
Our comprehensive e-commerce infrastructure--built on industry leading
technologies and partnerships--enables the marketing, sales and delivery of
business and consumer software titles, business-to-business software licenses
and other digital goods online. To date, we have focused on selling software
through our software publishers' and online retailers' Web sites. Our e-
commerce technology platform, PowerCommerce, allows us to build, deploy and
maintain thousands of e-commerce stores through which we sell software. We
construct and operate e-commerce sites that reflect our customers' brand
identity and provide advanced marketing, merchandising and digital distribution
capabilities. We provide integration between our customers' e-commerce sites
and their back office internal information systems for reporting and tracking.
We operate e-commerce sites, conduct the sale, provide data for reporting
requirements and offer fund settlement services, while allowing our customers
to manage business critical e-commerce site content, such as product display,
advertising and direct marketing content. Our solution provides the following
benefits to our customers:
Comprehensive Outsourced Solutions. Our PowerCommerce platform provides
state-of-the-art e-commerce capabilities for marketing, transaction processing,
systems integration, packaging of digital goods and digital distribution. Our
comprehensive services provide a one-stop solution for capitalizing on the
market opportunity for selling digital goods online. We allow our customers to
focus on their core competencies, including product development, brand
recognition and the aggregation of site traffic.
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Superior Purchase Experience. By leveraging our PowerCommerce platform, we
are able to provide end-users with a secure, content-rich and engaging online
shopping and purchasing experience. We improve the online shopping experience
for end-users by providing a sophisticated user interface with enhanced
features to ease the use and navigation of an e-commerce site. These enhanced
features enable us to offer advanced merchandising capabilities, to provide
secure, reliable and simple downloads of software and other digital goods and
to build end-user brand loyalty.
Comprehensive e-Marketing Services. Our focus on enabling a wide range of e-
commerce marketing services is a key differentiator and gives our customers
access to sophisticated online marketing services. We leverage our experience
in Internet marketing to design comprehensive product and promotional
campaigns, track end-user buying preferences and provide access to a wide range
of services to prepare digital goods for sale. We believe these capabilities
help our customers to more efficiently build direct relationships with end-
users.
Rapid and Cost-Effective Development of Customized Solutions. The
flexibility of our PowerCommerce platform allows us to rapidly develop e-
commerce sites that can be customized to our customers' specific needs,
generally at a lower cost and faster rate than typical in-house development.
Our Strategy
Our objective is to be the outsourced e-commerce service provider of choice
for the marketing, sale and delivery of digital goods online. We seek to
achieve this objective through the following key elements of our strategy:
Leverage Our Expertise in Digital Goods. Our current focus on the digital
sale and delivery of software provides us with expertise to address the unique
and complex requirements of digital goods delivery. Our outsourced solutions
include comprehensive e-commerce capabilities for all aspects of the online
sale and delivery of digital goods. This specialization enables us to provide
solutions for the most difficult aspects of e-commerce such as electronic
packaging and delivery. We believe this specialization differentiates our
services and brings valuable expertise to our customers. We are leveraging our
capabilities to move into other digital goods markets. For example, with the
introduction of our e-Business Center in the first quarter of 2000, we are
entering the business-to-business software licensing market. In addition, we
intend to pursue other digital content opportunities such as music, video and
electronic documents.
Enhance the End-User Experience. We are committed to improving the end-user
online shopping and purchasing experience in order to promote greater online
sales for our customers. For our customers' online stores, we develop and
streamline the presentation, selection, purchase and delivery of goods. Our
solutions can eliminate hierarchical navigation through complex sites to avoid
losing buyers as they click through multiple pages. Our modular interface can
quickly customize an end-user environment to meet a customer's needs for the
display of a few or many products, digital or physical delivery and a variety
of selling options. We intend to continually update and innovate the end-user
experience by providing new capabilities such as improved navigation and
search, enhanced content and Internet-enabled voice access for real-time
customer support.
Extend Technology Leadership. We invest in technology in order to deliver a
comprehensive set of outsourced e-commerce services to our customers. Our
PowerCommerce platform is flexible and allows us to integrate new tools and
technologies and adapt to a rapidly growing market with a broad, diversified
customer base. We intend to add to our suite of digital packaging and delivery
options to solidify our focus on digital commerce. In addition to in-house
development of technical capabilities, we actively monitor technological
advances in our industry. We partner with third parties and plan to pursue
acquisitions in order to quickly add new technologies and capabilities. We
believe this nimble adoption and development of new technologies will allow us
to attract new customers, penetrate new markets and continue to accelerate our
customers' time-to-market.
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Establish Partnerships to Extend Services. We have established strategic
relationships with a variety of industry partners, including developers of e-
commerce, Internet and digital delivery technologies, providers of
complementary services, producers of enterprise software systems, systems
integrators, manufacturers of computer hardware, distributors and online
retailers. In addition, we can beneficially co-exist with traditional channel
partners by providing complementary services which leverage their distribution
capabilities with our expertise in e-commerce infrastructure. Our experienced
management team has strong ties to a variety of industries. Through these
industry relationships, we intend to continue developing partnerships with
complementary businesses. We intend to leverage our partnerships with the
following goals:
. securing new technologies and capabilities in order to extend our service
offerings;
. providing enhanced distribution through indirect channels;
. enhancing integration with customers' in-house services and applications;
. extending our geographic and market penetration; and
. providing the means to move into other markets.
Provide Integrated Customer Environment. We provide an integrated e-commerce
environment for our customers in order to allow them to monitor, manage and
control their business-critical content. We believe that the robust and
scalable internal systems we have developed to support our customers are
critical to our success. We strive to continually improve the frequency and
depth of our customer reports, which contain sales and end-user identification,
navigation and preference information. In addition, our systems integration
consulting capabilities will allow integration from our PowerCommerce platform
to our customers' internal accounting, marketing or inventory systems, enabling
us to serve as the customer's own "e-commerce department." We intend to
continue providing our customers with more advanced integration and control of
their e-commerce capabilities.
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Our Services
Through our PowerCommerce platform, we have developed a comprehensive
infrastructure to provide outsourced e-commerce solutions for the marketing,
sale and delivery of digital goods over the Internet. Our comprehensive e-
commerce services include selling software and other digital goods, online
store creation, marketing and merchandising. All PowerCommerce services are
built on the PowerCommerce platform, which includes a sophisticated database
for tracking products, pricing, customers and transactions, an electronic
shopping cart, electronic and physical fulfillment capabilities, shipping and
tax calculation, credit card processing, order security through Secure Socket
Layer and auto confirmation receipts, serial number capability and reporting,
as well as end-user customer service related to sale and delivery. The
following table summarizes our services suite:
The graphic represents three separate levels labeled e-Marketing Services,
Power Commerce Stores and Power Commerce Engine. The top two levels each depict
three separate pictures illustrating representative services and stores. The
left most graphic on top level illustrates e-Launch. The middle graphic
illustrates an e-Packaging solution for inxight. The right most graphic depicts
a screen for an e-Campaign. The left most graphic on the middle level depicts
an Instant Store created by ReleaseNow.com. The middle graphic shows a Power
Commerce Plus Store. The right most graphic shows an e-Business Center. The
lowest line addresses the capabilities of the Power Commerce platform. A
graphic on the left side of the level depicts a network server. The remainder
of the level presents text highlighting Power Commerce's capabilities. These
capabilities include; Store Creation and Hosting Powerful Searching;
Transaction Processing, Order Tracking and Reporting; and Fraud and Export
Control Fulfillment Management.
PowerCommerce Instant Solutions
PowerCommerce Instant Solutions provide customers with a rapid e-commerce
presence, enabling a fully developed e-commerce site, usually within five days.
We charge a nominal fee to build a store and we remit to software publishers a
percentage of revenues generated through the sale of software. PowerCommerce
Instant Solutions include:
. e-Button, which provides a graphical link on a publisher's site that
leads an end-user to a Web-based order form. We process the order for
digital or physical distribution. The e-Button is used by publishers
selling a single product; and
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. e-Store, which provides a complete solution for publishers with up to 20
titles. We build a branded store to reflect the customer's brand
identity. We set up and manage the store and conduct the sale for digital
or physical distribution.
A picture of a computer screen that displays a Power Commerce Store designed by
ReleaseNow.com. The top of the screen displays the Advanced Recognition
Technologies logo. Below the logo are links to specific areas of the store and
a graphic that shows the customer how many products are in the shopping cart.
The screen displays two products as well as short descriptions and pricing
information for each.
We built, manage and host an online store for
Advanced Recognition Technology, known as ART,
providing an end-to-end e-commerce solution from
online store design and creation to online
delivery capabilities. The Web-based store
enables end-users not only to order products
online, but also to download products directly to
their desktops in real-time, eliminating the need
to wait for a physical shipment.
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PowerCommerce Plus Solutions
PowerCommerce Plus Solutions build upon the capabilities of PowerCommerce
Instant Solutions with advanced capabilities for the marketing, sale and
delivery of digital goods, including:
. dynamic pricing and bundling of products, which enables real-time
updating of information and linking of products for sale;
. definable search categories and subcategories which can be readily
revised;
. advanced search capabilities that provide multiple search options,
including search by keywords and titles, to find products easily;
. coupons and gift certificates for flexible, one-to-one marketing and to
support sales promotions;
. advanced reporting to allow our customers to quickly measure responses to
campaigns and promotions; and
. cross-selling and up-selling at point of purchase to enable our customers
to offer enhanced or complementary products to end-users.
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PowerCommerce Plus Solutions include:
. PowerCommerce Plus Store, which supports up to 500 products. The
PowerCommerce Plus Store is built and hosted by us for publishers who
require advanced marketing and merchandising features;
. PowerCommerce Mega Store, which is a customized PowerCommerce Plus Store
for publishers and online retailers with up to 10,000 products. Online
retailers gain access to our inventory of thousands of software titles;
and
. PowerCommerce Custom Store, which is a completely customized solution
that leverages the full capabilities of the PowerCommerce architecture
and our array of consulting services.
A picture of a computer screen showing a PowerCommerce Plus Store created for
NewSoft. Along the left side of the graphic are internet links to other areas
of the store including a shopping cart, categories of software, solution
centers within the Store and Resources available to the customer. The top of
the main screen shows browser fields that enable customers to search the site
using various parameters. Below the search fields are pictures and
descriptions of four featured products, including a special of the month.
We created and host a PowerCommerce Plus Store for NewSoft America,
Inc., a developer and marketer of award-winning and multimedia software
solutions, including the Presto! product line of document imaging,
photo/video editing and optical character recognition (OCR) software,
as well as OCR development toolkits. Our PowerCommerce Plus solution
provides NewSoft advanced e-commerce capabilities in addition to
digital download functionality.
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PowerCommerce e-Business Center
The e-Business Center addresses critical business-to-business requirements,
including support for purchase orders, electronic volume licensing and custom
pricing. In addition, the e-Business Center allows corporate purchasers to
download software applications and software licenses in real-time, eliminating
the need for physical shipments. The e-Business Center provides key e-commerce
functionality such as intuitive navigation, product catalogs, transaction
processing, order tracking and customer service. It integrates with a software
publisher's Web site to provide a seamless e-commerce experience customized to
the needs of corporate customers. For example, a publisher can offer a
storefront that welcomes business software purchasers by name and displays
their unique pricing and account history.
e-Marketing Services
e-Marketing Services provide added functions to PowerCommerce Solutions as
follows:
. e-Campaign provides complete e-mail campaign management services,
including customized e-mail campaigns to promote our customers' brand
identities, campaign administration that includes tracking e-mail
responses and sales and use of a dedicated high capacity broadband e-mail
server.
The graphic depicts a computer screen shot of an e-mail message typical of an
e-Campaign for Verity, Inc. The top of the screen shows the Verity logo as well
as a slogan, "Connecting people with information." Below the logo is a picture
of the box for KeyView Pro, the product promoted in the e-mail. The text is a
letter addressed to a current owner of KeyView Pro advising her of the
availability of an upgrade at a special price.
We provide sophisticated e-marketing services to
Verity, Inc. Using our e-Campaign, Verity
communicates with its KeyView Pro installed base
through personalized e-mail messages that contain
interactive call-to-action buttons. For example,
Verity uses e-Campaign to alert KeyView Pro users
about software upgrades. A call-to-action button
connects the users directly to the KeyView Pro
online store, hosted by us, enabling users to
instantly purchase and download the upgrade over
the Internet.
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. e-Packaging uses industry-leading technology for preparing digital goods
for download or delivery. e-Packaging produces secure products with
flexible purchasing options, including the ability to try or rent a
product before buying. Our customers can offer these same options for
digital goods delivered over the Internet or on CDs or DVDs.
. e-Store On Disk gives vendors the option to deliver a complete or partial
Web-based store containing locked versions of their software on a CD or
DVD. This option allows the distribution of large amounts of content
directly to the end-user's desktop, offering an alternative to digital
downloads. The end-user is automatically connected to the online version
of the store to complete the purchase transaction and receive a key or
unlock code.
. Five Free Days is a new business process for the software industry. It is
a one-to-one e-mail-based solution to launch new software products. It
enables end-users to try a new software title for five days free of
charge, sends out a series of e-mails to encourage purchases, includes a
publishers's promotional e-coupon discount, gathers market data and
generates new leads through a tell-a-friend option.
A picture of a computer screen that shows Symantec's free trial center hosted
by ReleaseNow.com. The center shows the boxes of four of Symantec's products
and a short description of the products. Below each description are a "More
Info" button and a "Free Trial" button which allows the customer to take
advantage of the free trial offer.
The Symantec Free Trial Center, developed and hosted by ReleaseNow.com,
enables online shoppers to instantly download and try full versions of
popular Symantec products at no cost. The products currently include:
ACT 2000, Norton Anti-Virus and Norton Utilities.
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. The Updater is a one-to-one e-marketing solution to launch a software
upgrade. An introductory e-mail is sent to our customers' installed-base
describing the upgrade and providing an optional e-coupon and a direct
link to a specially created store that enables instant purchase and
download of the product. A second e-mail is automatically sent out a week
later to those who have not purchased the product, reminding them of the
upgrade and the promotional offer.
A picture of a computer screen showing a web shot from the On
The Go web site. The top of the screen shows the On The Go
logo. The left side contains a picture of their packaged
product, ExpensAble. The right side contains a description of
the ExpensAble product. The bottom of the picture shows a
link to the web page where the ExpensAble product may be
purchased for a discount.
We created and host an online store for On The Go Software
that enables its installed base of desktop product users to
purchase and rapidly download versions of its software
products for hand-held mobile devices.
. Boxed Delivery provides our customers the option for outsourced physical
fulfillment.
. Consulting/Integration Services provide our customers with systems
integration and engineering services to help them integrate their stores
with their in-house systems.
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Operations
We believe our efficient and technologically-advanced operational
capabilities provide advantages to our customers, as well as to their end-
users, including:
Scalable Deployment and Management Systems. We have developed a
comprehensive and scalable e-commerce infrastructure software application that
allows us to efficiently deploy, maintain, operate and merchandise large
numbers of online stores.
Electronic Packaging and Distribution Services. We are experienced in
packaging, tracking and delivering digital products from online stores or on
CDs or DVDs. Our production department packages digital products rapidly in
multiple formats, including compressed or "zipped" files, as well as versions
for download-and-buy, try-and-buy, rental, subscription or pay-per-use.
Design and Merchandising Services. We provide content design, merchandising
services and product and promotional campaigns. We maintain a staff of Web
designers and content editors who design stores and develop the product
descriptions and images for display.
Secure Datacenters. We host all PowerCommerce data operations with a co-
location partner that provides us with close proximity to the Internet and
direct high-speed connectivity to Europe and Japan. Our third-party partner
provides fully redundant power, networking support and physical security, and
can provide us with additional bandwidth on demand. The facility is rated to
withstand an 8.0 earthquake and is directly connected with automatic failover
to a second facility on the East Coast, where we intend to locate a second,
redundant PowerCommerce system. PowerCommerce uses Sun Netras and a clustered
group of Sun Enterprise servers running an Oracle database.
In addition, the system is designed to minimize single points of failure.
Multiple redundant fibrechannel RAID 0+1 disk arrays house the database. Load-
balancing routers provide redundant routing of the network. All servers are
automatically backed up using a dedicated backup system, and backup data is
stored in facilities off-site. Our PowerCommerce platform has interfaces to
multiple bank payment networks for credit card processing, which provides
redundancy and flexibility to meet customer preferences. We have also
integrated Web site monitoring in each of our servers with automated paging
capabilities. Further, we have implemented an escalation policy to notify
operations staff, management and customers of store operational issues.
Our Technology
Our e-commerce infrastructure is based on three main suites of technologies:
our proprietary PowerCommerce platform, which is used to implement online
stores; our complementary suite of electronic packaging and delivery
technologies, which provide advanced purchase and security capabilities; and
our proprietary integrated development and operations tools, which allow us to
efficiently and securely manage thousands of online stores. In addition,
supporting our entire technology infrastructure are advanced security measures.
These technologies are described below.
Online Store Technology. We developed our PowerCommerce platform
specifically to support an outsourced e-commerce business model for our
customers. We designed PowerCommerce to build and maintain tens of thousands of
stores hosting hundreds of thousands of products while offering advanced
merchandising capabilities. Based on the experience gained from our pioneering
e-commerce work on major customer accounts, we can efficiently create custom
solutions for our customers, including not only the typical custom graphics and
text, but also customized layout, store features and site navigation. Moreover,
PowerCommerce enables our design and merchandising team to implement online
store customizations directly without consuming engineering resources. We
believe these capabilities represent a competitive advantage.
PowerCommerce's proprietary "Micro-Module" architecture enables us to
rapidly and reliably add and integrate new features without disrupting existing
functionality, even while the system is running. PowerCommerce enables us to
implement our strategy of incrementally integrating new best of breed
44
<PAGE>
technologies, developed in-house or obtained from third parties, thereby
eliminating massive, time-consuming, and often error-prone new version
releases. This rapid integration can mean more nimble response to market
conditions.
We use industry standard technologies including a Sun Unix operating system,
an Oracle database and a Netscape Web server. We have also selected our
development environments to optimize different capabilities and functions,
including Perl for rapid development, integration and reliability, Java for
multi-threading capabilities and database support and C/C ++ where we consider
speed to be critical. PowerCommerce has been specifically designed to be
scalable by adding hardware to increase capacity without the need for software
changes.
Electronic Packaging Technologies. We have substantial experience in
electronically packaging titles as a service, and we believe we have the most
comprehensive suite of packaging technologies available. We can provide
customers with production services to electronically package titles and
deployment services to put electronically packaged titles in online stores or
on physical media such as CDs, DVDs or PC hard drives. Our proprietary
SalesAgent technology uses the latest encryption technologies to ensure
protection of the software, including RSA Security, Inc. and triple DES, as
well as an evolving suite of proprietary piracy-prevention technologies. We can
also customize our electronic packaging solution when required. Our broad
offering allows us to quickly adapt to new requirements or custom needs and
facilitates rapid time to market.
Advanced Software Development and Operations Tools. We use our proprietary
Rapid Application Development environment to build the integrated, in-house
application we use to run our business. These software tools are capable of
automatically generating complete software applications from industry-standard,
object-oriented models by assembling pre-built software components. Our tools
allow for creating, changing and maintaining applications many times faster
than traditional hand coding.
In addition, these proprietary software tools play a key role in our systems
integration services. We will provide integration into our clients' accounting,
inventory or marketing systems to give them full access, control and use of
their own transactional and end-user data. In addition to connecting into our
customers' back office systems, this integration may also require custom
business logic. Traditionally, business logic to meet specific customer
requirements has been manually coded, resulting in time-consuming and error-
prone projects. We can capture the business logic specifications in an object-
oriented diagram and automatically generate the software code for
implementation. Our tools allow for reuse of standard interface and business
components and can speed time to market with reduced probability of human
error, thereby allowing greater scale in integration capabilities.
Because we serve the needs of a broad and diversified client base, we need
to be able to reliably manage the functionality of many disparate businesses
accommodating different and evolving requirements. We have developed an
integrated in-house application that enables our operations to scale by
efficiently running our complex network of online stores, tracking production
and deployment of stores and content and accessing detailed customer and end-
user data. The system allows our employees to readily access and control all
aspects of our services, including contract terms, e-packaging production,
store deployments, merchandising, promotions, end-user customer service and
payment and remittance processing and reporting.
Security Measures. We maintain security at every level of our
infrastructure. The Oracle database, the Web servers, the firewall and the
network routers are all restrictively programmed for permission-based access.
All customer and credit card information is transmitted in encrypted format
over the Internet using standard Secure Socket Layer and then stored in our
secure Oracle database. Only authorized individuals who need access to credit
card information, such as customer service personnel, can obtain access through
proprietary software tools.
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<PAGE>
Sales and Marketing
Our sales and marketing efforts are focused on signing up vendors of digital
goods for our comprehensive, outsourced e-commerce solutions. We sell our
services to publishers and online retailers through a sales organization of 20
people. These employees are primarily located at our headquarters in Silicon
Valley, as well as in other targeted metropolitan areas throughout the United
States.
Our sales force consists of a team of experienced sales professionals
supported by systems engineers and account managers. We also have an inside
sales group to optimize lead qualification and close entry-level sales.
Our marketing team is divided into three groups. The corporate marketing
group employs a variety of programs to create market awareness and generate
demand for our services. Our corporate marketing activities include print
advertising, participation in key industry shows and events, speaking
engagements at relevant conferences, direct marketing, media and analyst
relations and extensive Web marketing aimed at bringing new prospects to our
Web site. Our product marketing group creates and introduces relevant sets of
solutions and services. Our marketing services group works directly with our
customers to create and run e-marketing programs that are intended to increase
the sales of their products.
Finally, our business development team is focused on creating relationships
and partnerships with key organizations in the areas of technologies,
distribution, international presence, original equipment manufacturer partners
and complementary e-commerce services.
Customers
We sell software through a network of software publishers and online
retailers. Online retailers include traditional store-based and direct-mail
retailers with an e-commerce presence, online retailers dedicated solely to
online sales and high traffic Web site operators who desire to add e-commerce
capabilities.
As of December 31, 1999, our representative customers included:
. Day-Timers, Inc. . Network ICE Corporation
. DeLorme Publishing Company, Inc. . NewSoft America, Inc.
. GameSpot, a unit of Ziff-Davis Inc. . Symantec Corporation
. Macromedia, Inc. . Verity, Inc.
. Miacomet, Inc. . WebTrends Corporation
Intellectual Property
We regard trademarks, copyrights, trade secrets and other intellectual
property as critical to our success, and rely on copyright, trademark, trade
secret protection and confidentiality and/or license agreements with employees,
clients, partners and others to protect our proprietary rights. Proprietary
rights relating to our technologies will be protected from unauthorized use by
third parties only to the extent that they are covered by valid and enforceable
trade secrets. In addition, the laws of certain foreign countries do not
protect our intellectual property rights to the same extent as do the laws of
the United States. Furthermore, independently developed similar or equivalent
technologies may duplicate any technology we develop. We have received a
trademark in the United States, the European Community and Tunisia for
"SALESAGENT." In addition, we have filed applications in the United States,
Canada, the European Community, Japan and Tunisia for additional trademarks.
Effective trademark and trade secret protection may not be available in every
country in which our products and services are made available online. We have
also filed five patent applications in connection with our proprietary
technology. Litigation may be necessary in the future to enforce our
intellectual property rights, to protect our trade secrets or to determine the
validity and scope of the proprietary rights of others. Litigation could result
in substantial costs and diversion of management resources. From time to time,
we may receive
46
<PAGE>
notice of claims of infringement of other parties' proprietary rights. The
defense of any such claims, whether such claims are with or without merit,
could be time-consuming, result in costly litigation and diversion of
technical and management personnel, cause product delivery delays or require
us to develop non-infringing technology or enter into royalty or licensing
agreements. These royalty or licensing agreements, if required, may not be
available on terms acceptable to us, or at all.
Competition
The market for outsourced e-commerce solutions for digital goods is
intensely competitive and subject to rapid technological change. To date, we
have focused on offering our services to software publishers and online
retailers and have been competing against other companies in this vertical
market. As we leverage our e-commerce expertise into other digital goods
markets, including corporate software licenses, we expect to experience
similar competitive dynamics.
Our primary source of competition comes from software publishers and online
retailers who have made or may choose to make substantial initial and ongoing
investments in order to develop and manage their own e-commerce sites,
including our potential customers or partners. We also face competition from
other providers of outsourced e-commerce solutions, including Digital River
and NetSales. Further, we compete with companies such as BroadVision and
Preview Systems that provide tools and services enabling one or more of the
transaction processing functions of electronic commerce, such as transaction
control, data security, customer interaction, database marketing and
electronic software delivery. In addition to these in-house and outsourced
providers, we also indirectly compete with companies that sell and distribute
software products over the Internet, such as Intraware, Inc., as well as with
high-traffic, branded Web sites that derive a substantial portion of their
revenues from e-commerce and may themselves offer, or provide means for others
to offer, software products. We also face competition from new start up
companies that are developing new product offerings. Finally, we compete with
traditional channels and methods of retail and corporate software sales, such
as mail order catalogs and retail superstores. Other competitors may enter the
market for our services.
Many of our competitors have longer operating histories, substantially
greater financial, technical, marketing or other resources, or greater name
recognition than we do. Our competitors may be able to respond more quickly
than we can to new or emerging technologies and changes in customer
requirements. Competition could seriously impede our ability to sell
additional services on terms favorable to us. Our current and potential
competitors may develop and market new technologies that render our existing
or future services obsolete, unmarketable or less competitive. Our current and
potential competitors have made and may continue to make strategic
acquisitions or establish cooperative relationships among themselves or with
other providers of outsourced e-commerce solutions, thereby increasing the
ability of their services to address the needs of our prospective customers.
Our current or potential competitors may also establish cooperative
relationships with our current or future channel partners, limiting or
eliminating our ability to sell through these channels. Competitive pressures
could reduce our market share or require the reduction of the prices of our
services, either of which could materially and adversely affect our business,
results of operations or financial condition.
We believe that, in addition to the foregoing, the primary competitive
factors in our market are as follows:
. comprehensiveness of the digital commerce solution;
. product design and technology that is adaptable to changing customer
requirements;
. strength of customer relationships;
. pricing;
. technology infrastructure capacity, reliability, security, speed and
accessibility;
. customer service;
. convenience and speed of fulfillment; and
. technical expertise to integrate our e-commerce systems with customers'
existing information technology infrastructure.
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<PAGE>
We believe that we presently compete favorably with respect to each of these
factors. However, the market for our services is still rapidly evolving and we
may not be able to compete successfully against current or potential
competitors. See "Risk Factors--Intense competition in our industry could
reduce or eliminate demand for our services."
Employees
As of December 31, 1999 we had 97 full-time employees, including 37 in
sales, marketing and customer service, 49 in product development and operations
and 11 in finance and administration. Our employees are not covered by any
collective-bargaining arrangements, and we consider our relations with our
employees to be good.
Facilities
Our principal executive offices are located in San Carlos, California, where
we lease 15,363 square feet. The lease term extends to October 15, 2004 with
one five-year renewal at our option. In addition, we lease an office suite in
Alameda, California on a month-to-month basis. We believe that our existing
facilities are adequate for our current requirements and that additional space
can be obtained on commercially reasonable terms to meet our future
requirements.
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MANAGEMENT
Executive Officers, Directors and Key Employees
The following table sets forth the names, ages and positions of our
executive officers, directors and key employees as of January 20, 2000:
<TABLE>
<CAPTION>
Name Age Position(s)
- ---- --- -----------
<S> <C> <C>
Executive Officers and
Directors
Michael J. Maulick...... 44 President, Chief Executive Officer and Director
Eric J. Holstege........ 42 Vice President of Engineering and Chief Technology Officer
Frank D. Maylett........ 37 Vice President of Sales
David A. Roman.......... 45 Vice President of Marketing and Chief Marketing Officer
Joan P. Walsh........... 45 Vice President of Finance and Chief Financial Officer
Carolyn A. Rogers....... 40 Chairman of the Board
Clydene Bultman......... 41 Director
Asad Jamal.............. 40 Director
Steven T. Jurvetson..... 32 Director
Douglas Lindgren........ 38 Director
David Shrigley.......... 51 Director
Key Employees
- -------------
Calisa A. Cole.......... 39 Vice President of Marketing Services
Ric Gagliardi........... 44 Vice President of Consulting Services
Scott Howard............ 41 Vice President of Human Resources
Charles S. Merrin....... 33 Vice President of Business Development
</TABLE>
Executive Officers and Directors
Mr. Maulick joined ReleaseNow.com in May 1999 as President and became our
Chief Executive Officer and a director in November 1999. Prior to joining
ReleaseNow.com, Mr. Maulick served in various positions having increasingly
higher levels of responsibility in engineering management in the New York State
development laboratories of IBM Corporation from July 1977 to October 1987.
From October 1987 to May 1999, Mr. Maulick served IBM in various sales
management positions, his final position with IBM being Vice President of
Americas of High End Server Growth Initiatives. Mr. Maulick holds a BS degree
from Marquette University and completed post baccalaureate studies at Syracuse
University and the University of Pennsylvania's Wharton School of Business.
Mr. Holstege joined ReleaseNow.com in November 1998 as Vice President of
Engineering and Chief Technology Officer. From April 1993 to November 1998, Mr.
Holstege served in various positions at Broderbund Software, Inc., a subsidiary
of Mattel, Inc., most recently as its Vice President and Internet Business Unit
Manager for their Blue Banner Division. Prior to Broderbund, Mr. Holstege was
Vice President of Engineering at Calera Recognition Systems, an optical
character recognition company. Mr. Holstege holds BS and MS degrees from the
California Institute of Technology.
Mr. Maylett joined ReleaseNow.com in June 1999 as Regional Director of Sales
and in October 1999 was promoted to Vice President of Sales. Prior to joining
ReleaseNow.com, from January 1996 to June 1999, Mr. Maylett was an executive at
IBM, serving most recently as regional sales manager for the Western United
States and Canada for a start-up organization within IBM. From June 1992 to
January 1996, Mr. Maylett was a Senior Account Manager at Novell, Inc. Mr.
Maylett holds a BS degree from the University of Phoenix.
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<PAGE>
Mr. Roman joined ReleaseNow.com in February 1999 as Vice President of
Marketing and in September 1999 became the Chief Marketing Officer. From
December 1997 to December 1998, he was the Vice President of Marketing for
Preview Systems, Inc., an electronic software distribution e-commerce company.
From March 1983 to November 1997, Mr. Roman was at Apple Computer, Inc., where
he held positions managing various marketing operations in the United States,
Europe, Japan and Australia, most recently as Vice President of Worldwide
Advertising. Mr. Roman holds a degree in Architecture and Industrial Design
from Queensland Institute of Technology in Australia. He also completed post
baccalaureate studies at the Polytechnic of Turin, Italy and holds an executive
MBA from INSEAD in France.
Ms. Walsh joined ReleaseNow.com in January 1999 as Vice President of Finance
and Chief Financial Officer. From May 1998 to December 1998, Ms. Walsh was
Corporate Controller at Kestrel Solutions Inc., a telecommunications company.
From May 1996 to April 1998, Ms. Walsh served as an independent financial
consultant for various Internet startups. From May 1993 to May 1996, Ms. Walsh
was Corporate Controller at PicoPower Technology, Inc., a producer of power
managed systems controller chips for the notebook PC market. Prior to that, Ms.
Walsh served as Vice President and Corporate Controller at Credence Systems
Corporation, a semiconductor equipment manufacturer. Ms. Walsh holds a BS
degree from University of Oregon and completed post baccalaureate studies at
Portland State University.
Ms. Rogers joined ReleaseNow.com in July 1998 as Chief Operating Officer and
Chief Financial Officer and served in those roles until September 1998. She
served as Chief Executive Officer from September 1998 to November 1999 and as a
director from November 1998 to November 1999 and has served as our Chairman of
the Board since November 1999. Prior to that, Ms. Rogers was a Vice President
and Investment Officer with J. & W. Seligman & Co. Incorporated, a financial
services company, from March 1996 to July 1998. From October 1992 to March
1995, Ms. Rogers served as Director of Strategic Marketing and Chief Financial
Officer at PicoPower Technology, Inc. Prior to that, Ms. Rogers was a Senior
Technology Analyst at Chase H&Q (formerly Hambrecht & Quist). Ms. Rogers holds
an MBA degree from the University of Pennsylvania's Wharton School of Business
and a BS degree from the University of Colorado at Boulder.
Ms. Bultman has served as a director since May 1999. Ms. Bultman has served
as a Technology Analyst at Galleon Management Group, an investment fund. From
1992 to January 2000, Ms. Bultman served as a technology and marketing
consultant working with a variety of companies in the Silicon Valley. Prior to
this, she served in several executive positions at Applied Materials Inc., a
leading semiconductor capital equipment company. Ms. Bultman holds a BS degree
from San Jose State University and an MS degree from the Sloan School of
Management at Stanford School of Business.
Mr. Jamal has served as a director since January 2000. Mr. Jamal has served
as the Chief Operating Officer of Draper Fisher Jurvetson ePlanet Partners,
Ltd., a venture capital firm, since September 1999. Prior to joining Draper
Fisher, from January 1996 to August 1999, he served as the Chief Executive
Officer of Saudi Investments Ltd., another venture capital firm. Mr. Jamal also
served as the Managing Director of Peregrine Investments Ltd., an investment
bank, from August 1994 to December 1995. Mr. Jamal holds a BS degree from the
London School of Economics and an ACA degree from the Institute of Chartered
Accountants in England and Wales.
Mr. Jurvetson has served as a director since February 1996. Mr. Jurvetson
has served as a Managing Director of Draper Fisher Jurvetson, a venture capital
firm, since June 1995. Prior to joining Draper Fisher Jurvetson, from September
1993 to June 1995, Mr. Jurvetson attended the Stanford University Graduate
School of Business. From July 1990 to September 1993, Mr. Jurvetson served as a
consultant with Bain & Company, a management consulting firm. Mr. Jurvetson
serves on the board of directors of Kana Communications, Inc., a provider of
online customer communications software and services for e-business marketing,
sales and services. Mr. Jurvetson holds BS and MS degrees from Stanford
University and an MBA degree from the Stanford Graduate School of Business.
Mr. Lindgren has served as a director since November 1998. Since April 1995,
Mr. Lindgren has served in various capacities with United States Trust Company
of New York, where he is currently a Managing Director. Mr. Lindgren has also
been the Chief Investment Officer of Excelsior Private Equity Fund II, Inc., a
private
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equity fund managed by United States Trust Company of New York, since its
inception in March 1997. Mr. Lindgren serves on the board of directors of
Lifeminders.com Inc., an online direct marketing company that provides
personalized content and advertisements via e-mail to its members. From January
1988 to March 1995, he served in various capacities for Inco Venture Capital
Management, Inc., including as President and Managing Principal from January
1993 through March 1995. Prior to joining Inco, Mr. Lindgren was employed at
Salomon Brothers Inc. and Smith Barney, Harris Upham & Co. Inc. Since 1993, he
has also been an Adjunct Professor of Finance at Columbia University's Graduate
School of Business, teaching courses on venture capital. Mr. Lindgren holds BA
and MBA degrees from Columbia University.
Mr. Shrigley has served as a director since January 2000. Mr. Shrigley
serves as an employee of Sevin Rosen Bayless Management, the operating
management company for each of the Sevin Rosen funds and entities. From
November 1996 to April 1999, Mr. Shrigley served as the Executive Vice
President of Sales, Marketing and Service at the BayNetworks division of Nortel
Networks Corporation, a provider of telephony, data, wireless and wireline
solutions for the Internet. Prior to joining Nortel Networks, from December
1978 to November 1996, Mr. Shrigley served as the Vice President of Marketing
at Intel Corporation. Mr. Shrigley also serves on the board of directors of
SonicWALL, Inc., a provider of Internet security for small and medium size
companies. Mr. Shrigley holds a BS degree from Franklin University.
Key Employees
Ms. Cole joined ReleaseNow.com in January 1999 as Director of Marketing and
in October 1999 was promoted to Vice President of Marketing Services. From
March 1997 to December 1998, Ms. Cole was the Director of Marketing Programs
for Infinity, a financial services company, where she managed a worldwide team
responsible for marketing financial risk management software to global banking
institutions. In July 1990, Ms. Cole founded Cole Communications, a Silicon
Valley marketing and public relations agency focused on emerging high-
technology companies and served as a principal of that agency until March 1997.
Ms. Cole holds a BA degree from Wellesley College and an MA degree from
Stanford University.
Mr. Gagliardi joined ReleaseNow.com in April of 1999. Prior to that, he
served as the President of Client Server Designs, Inc., a computer database
consulting company from September of 1993 to April of 1999. He has a BS degree
in Engineering from Harvey Mudd College.
Mr. Howard joined ReleaseNow.com in August of 1999 as Vice President of
Human Resources. Prior to that, Mr. Howard served in various positions of
increasingly higher levels of responsibility in human resources management at
3COM Corp. from October 1994 to August 1999. He has a BS in Psychology from UC
Davis and an MA in Education Psychology from Michigan State University.
Mr. Merrin joined ReleaseNow.com in June 1999 as Vice President of Business
Development. From May 1995 until June 1999, Mr. Merrin held various positions
at Broderbund Software, Inc., a subsidiary of Mattel, Inc., including Senior
Director and Business Unit Manager and Senior Product Manager. From September
1994 until December 1994, Mr. Merrin was Director of Sales for BIT Jugglers,
Inc., a software company. From August 1992 until September 1994, he was the
marketing manager for Merrin Information Services, a marketing and distribution
consulting company in the PC industry. From August 1992 to August 1996, Mr.
Merrin attended business school at Santa Clara University. Mr. Merrin holds a
BA degree from Washington University and an MBA degree from Santa Clara
University.
Board Composition
We have seven directors. Immediately following the offering, our board of
directors will consist of seven directors divided into three classes, with each
class serving for a term of three years, except for the first two classes who
will serve for one and two year terms, respectively, as follows:
<TABLE>
<CAPTION>
Class Expiration Member
- ----- ---------- ------
<S> <C> <C>
Class I........... 2001 Clydene Bultman, David Shrigley
Class II.......... 2002 Asad Jamal, Steven T. Jurvetson, Douglas Lindgren
Class III......... 2003 Michael J. Maulick, Carolyn A. Rogers
</TABLE>
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<PAGE>
At each annual meeting of stockholders, directors will be elected by the
holders of common stock to succeed directors whose terms are expiring. Our
officers serve at the discretion of the board of directors. There are no family
relationships among any of our directors or officers.
Board Committees
The audit committee was formed in July 1999 to review, act on and report 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 independent auditors and our accounting
practices. The audit committee is currently composed of Clydene Bultman,
Douglas Lindgren and David Shrigley.
The compensation committee was formed in July 1999 to review and approve all
forms of compensation and benefits for our executive officers and directors,
administer our stock purchase and stock option plans and make recommendations
to the board of directors regarding such matters. The compensation committee is
currently composed of Clydene Bultman, Steven T. Jurvetson and Douglas
Lindgren.
Director Compensation
Our directors receive no cash remuneration for serving on the board of
directors or on any committee, but are reimbursed for expenses incurred in
attending board and committee meetings. We do not provide additional
compensation for committee participation or special assignments of the board of
directors.
Directors who are also our employees are eligible to receive options and be
issued shares of common stock under our 2000 Stock Incentive Plan. Each
individual who first becomes a non-employee director after this offering will
receive an option grant for 15,000 shares of common stock on the date the
director joins the board, subject to vesting in three equal yearly
installments. In addition, at each annual stockholders' meeting, each non-
employee director who has been a director for at least six months will
automatically be granted an option to purchase 5,000 shares of common stock,
subject to vesting in one lump sum at the end of one year from the date of the
grant. See "--2000 Stock Incentive Plan."
Compensation Committee Interlocks and Insider Participation
No interlocking relationship exists between our board of directors or
compensation committee and the board of directors or compensation committee of
any other company.
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Executive Compensation
The following table sets forth information concerning the compensation
earned during the fiscal year ended December 31, 1999 by our former Chief
Executive Officer, our current Chief Executive Officer, each of our four other
most highly compensated executive officers whose total compensation during such
fiscal year exceeded $100,000 and one former executive officer whose total
compensation during such fiscal year exceeded $100,000. These individuals are
referred to in this prospectus as "named executive officers."
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------------------- ------------
All Other Securities
Name and Principal Annual Underlying All Other
Position Salary Bonus Compensation Options Compensation
- ------------------------ -------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Carolyn A. Rogers,
Chairman of the Board
and
Former Chief Executive
Officer ............... $175,000 $35,000 $33,449(1) -- --
Michael J. Maulick (2),
President, Chief
Executive Officer and
Director............... 121,970 58,333 -- 700,000 --
Eric J. Holstege,
Vice President of
Engineering and
Chief Technology
Officer................ 174,000 39,991 -- -- --
David A. Roman (2),
Vice President of
Marketing and Chief
Marketing Officer...... 142,577 20,833 -- 350,000 --
Joan P. Walsh (2),
Vice President of
Finance and Chief
Financial Officer ..... 134,199 25,000 -- 250,000(3) --
Frank D. Maylett (2),
Vice President of Sales
....................... 94,064(4) -- -- 175,000 --
Michael Vanneman (5),
Former Vice President
of Sales............... 161,417(6) -- -- -- $52,988(7)
</TABLE>
- --------
(1) Consists of forgiveness of loans and related payment of interest and taxes.
(2) Salary and bonus reflect less than one full year of compensation, as Mr.
Maulick joined us in May 1999, Ms. Walsh joined us in January 1999, Mr.
Roman joined us in February 1999 and Mr. Maylett joined us in June 1999.
(3) Ms. Walsh was granted an option to purchase an additional 100,000 shares in
January 2000.
(4) Includes $ earned as commissions.
(5) No longer employed by us as of October 1999.
(6) Includes $36,300 earned as commissions.
(7) Consists of severance and accrued but unused vacation payments.
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<PAGE>
Options Granted in Fiscal Year Ended December 31, 1999
The percentage of total options granted is based on an aggregate of
3,201,500 options granted during the fiscal year ended December 31, 1999 under
our 1996 and 1998 plans. All options were granted at an exercise price equal to
the fair market value of our common stock as determined by our board of
directors on the dates of grant. The following table provides information
regarding options to purchase common stock granted to our named executive
officers:
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------
Potential Realizable
Percent of Value at Assumed
Number of Total Options Annual Rates of Stock
Securities Granted to Price Appreciation
Underlying Employees in Exercise for Option Term
Options Fiscal Price Expiration ---------------------
Name Granted Year 1999 Per Share Date 5% 10%
- ---- ---------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Carolyn A. Rogers....... -- -- -- -- -- --
Michael J. Maulick...... 700,000 21.86% $2.50 5/27/09 $1,100,566 $2,789,049
Eric J. Holstege........ -- -- -- -- -- --
David A. Roman.......... 300,000 9.37% 1.75 4/14/09 330,170 836,715
50,000 1.56% 4.00 8/11/09 125,779 318,748
Joan P. Walsh (1)....... 225,000 7.03% 1.75 1/4/09 247,627 627,536
25,000 0.78% 4.00 8/11/09 62,889 159,374
Frank D. Maylett........ 50,000 1.56% 2.50 7/7/09 78,612 199,218
125,000 3.90% 4.00 10/13/09 314,447 796,871
Michael Vanneman (2).... -- -- -- -- -- --
</TABLE>
- --------
(1) Ms. Walsh was granted an option to purchase an additional 100,000 shares in
January 2000.
(2) No longer employed by us as of October 1999.
The options shown in the table were immediately exercisable upon grant and
are subject to vesting and a repurchase option in favor of the company. See "--
Stock Plans." The options held by Messrs. Maulick, Roman and Maylett and Ms.
Walsh are subject to special acceleration of vesting upon a change of control.
See "--Employment Agreements and Change of Control Arrangements."
Potential realizable values represent hypothetical gains if the options were
exercised at the end of their respective terms and are net of exercise price,
but before the payment of taxes associated with exercise. The 5% and 10%
assumed annual rates of appreciation are mandated by the rules of the
Securities and Exchange Commission and do not represent our estimate or
projection of our future common stock prices. Actual gains, if any, on stock
option exercises are dependent on the future performance of the common stock
and overall stock market conditions. The amounts reflected in the table may not
necessarily be achieved.
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<PAGE>
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table provides summary information concerning stock option
holdings of and exercises by our named executive officers during the fiscal
year ended December 31, 1999. The values of unexercised options have been
calculated by subtracting the exercise price from the fair market value of our
common stock as of the end of the last fiscal year.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Number of Value Realized Options at Fiscal Year- In-the-Money Options at
Shares (Market Price End Fiscal Year-End
Acquired on at Exercise ------------------------- -------------------------
Name Exercise Less Exercise Price) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carolyn A. Rogers (1)... 702,623 $518,396 -- -- -- --
Michael J. Maulick...... 700,000 -- -- -- -- --
Eric J. Holstege........ 507,770 380,828 -- -- -- --
David A. Roman.......... 75,000 56,250 275,000 -- $618,750 --
Joan P. Walsh........... 125,000 93,750 125,000 -- 225,000 --
Frank D. Maylett........ -- -- 175,000 -- 75,000 --
Michael Vanneman (2).... 57,933 161,084 22,749 -- 51,185 --
</TABLE>
- --------
(1) The vesting of shares held by Ms. Rogers was accelerated and Ms. Rogers is
fully vested as of November 1999.
(2) No longer employed by us as of October 1999.
Employment Agreements and Change of Control Arrangements
Michael J. Maulick, Eric J. Holstege, David A. Roman, Joan P. Walsh and
Frank D. Maylett are each employed pursuant to employment letter agreements
setting forth generally the terms of their respective job responsibilities,
salary, bonus and equity compensation. Each option held by Ms. Walsh and
Messrs. Roman and Maylett contains provisions with respect to the acceleration
of vesting on 50% of each of their then unvested option shares upon a change of
control of ReleaseNow.com. Mr. Holstege's offer letter provides for two option
grants, one of which vests over a one year period and is subject to full
acceleration upon a change of control and the other of which vests over the
standard four year period and is subject to acceleration of the vesting on 50%
of his then unvested option shares upon a change of control of ReleaseNow.com.
Mr. Maulick's offer letter provides for acceleration of the vesting on 50% of
his then unvested option shares upon a change of control of ReleaseNow.com and,
additionally, severance pay and the acceleration of a portion of his then
unvested option shares if he is terminated without cause or constructively
terminated. In connection with our prior Chief Executive Officer's appointment
as Chairman of the Board, we entered into a revised employment agreement with
our Chairman, Ms. Rogers, pursuant to which she will earn an annual salary of
$175,000 as an employee-director and has received an extension of the payment
terms of her $1,378,170 promissory note used to purchase 691,195 shares of our
common stock. In addition, the vesting of all shares currently held by Ms.
Rogers was fully accelerated, and future share issuances will not be subject to
vesting. Further, we forgave a $20,000 promissory note used to purchase 11,428
shares of our common stock and paid $13,449 in taxes accrued on that
forgiveness. If Ms. Rogers' employment is terminated, we will pay Ms. Rogers,
subject to specified conditions, a severance payment of six months of her then-
current salary. In addition to the foregoing named executive officers, five
other employees have been granted options subject to acceleration of the
vesting on 50% of their then unvested option shares upon a change of control of
ReleaseNow.com. In addition, our 1998 Stock Option/Stock Issuance Plan provides
that in the event of a change of control each outstanding option grant or
purchase right shall vest in full immediately prior to the consummation of the
transaction unless the successor corporation assumes the outstanding option or
purchase right.
Limitation of Liability and Indemnification Matters
Our certificate of incorporation limits the liability of directors and
officers to the maximum extent permitted by Delaware law. Delaware law provides
that a corporation's certificate of incorporation may contain
55
<PAGE>
a provision eliminating or limiting the personal liability of a director or
officer for monetary damages for breach of their fiduciary duties as directors
or officers, except for liability resulting from:
. breach of their duty of loyalty to the corporation or its stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or
. any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under the
federal or state securities laws and does not affect the availability of
equitable remedies such as injunctive relief or recission.
Our bylaws provide that we shall indemnify our directors and officers and
may indemnify our employees and agents to the fullest extent permitted by law.
We believe that indemnification under our bylaws covers at least negligence and
gross negligence on the part of indemnified parties. Our bylaws also permit us
to secure insurance on behalf of any officer, director, employee or other agent
for any liability arising out of his or her actions on our behalf, regardless
of whether the bylaws permit indemnification under those circumstances.
We have entered into agreements to indemnify our directors and officers, in
addition to the indemnification provided for in our bylaws and certificate of
incorporation and by Delaware law. These agreements, among other things,
indemnify our directors and officers for certain expenses (including attorneys'
fees), judgments, fines and settlement amounts incurred by the director or
officer in any action or proceeding, including any action by or in the right of
ReleaseNow.com, arising out of services as a director or officer of
ReleaseNow.com, any subsidiary of ReleaseNow.com or any other company or
enterprise to which the person provides services at our request. We believe
that these provisions and agreements are necessary to attract and retain
qualified directors and officers.
Stock Plans
1996 Stock Plan
Our 1996 stock plan was adopted by the board of directors and approved by
the stockholders in April 1996 and has been amended from time to time. As of
December 31, 1999, 920,167 shares of common stock have been issued upon
exercise of options granted under the 1996 plan, options to purchase 158,022
shares of common stock were outstanding, 781,386 shares of common stock have
been issued upon exercise of stock purchase rights and no shares of our common
stock remain available for future issuance under the 1996 plan. Unless
terminated sooner, the 1996 plan will terminate according to its terms in April
2006. The 1996 plan provided for the granting of incentive stock options within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, to
employees, officers and employee directors and the granting of nonstatutory
stock options and stock purchase rights to employees, officers, directors
(including non-employee directors) and consultants. The administrator
determined the term of options, which was prohibited from exceeding 10 years
(five years in the case of an incentive stock option granted to a stockholder
holding more than 10% of the voting shares of our company). To the extent an
optionee would have the right in any calendar year to exercise for the first
time one or more incentive stock options for shares having an aggregate fair
market value in excess of $100,000, any such excess options shall be treated as
nonstatutory stock options.
No option may be transferred by the optionee other than by will or the laws
of descent or distribution. Each option may be exercised during the lifetime of
the optionee only by such optionee. Options granted under the 1996 plan
generally become exercisable at the rate of 1/4 of the total number of shares
subject to the options twelve months after the vesting commencement date, and
1/48 of the total number of shares subject to the options each month
thereafter.
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<PAGE>
The restricted stock purchase agreements reflecting stock purchase rights
issued pursuant to the 1996 plan provide that the right must be exercised and
the shares must be paid for within no more than 30 days of the grant and the
purchase price for the stock must be at least 85% of the fair market value of
our common stock as of the date of grant (except in the case of a 10%
stockholder, in which case the purchase price must be at least 100% of the fair
market value). The stock purchase rights also generally provide that we shall
have a repurchase option exercisable upon the voluntary or involuntary
termination of the purchaser's employment for any reason (including death or
disability), unless the administrator determines otherwise. Our repurchase
right generally lapses at a rate of 1/4 of the total number of shares subject
to the repurchase right twelve months after the vesting commencement date, and
1/48 of the total number of shares subject to the repurchase right each month
thereafter.
The 1996 plan provides that in the event of a merger of our company with or
into another corporation or a sale of all or substantially all of our assets,
each outstanding option or purchase right shall be assumed or an equivalent
option or right substituted by the successor corporation. If the successor
corporation refuses to assume or substitute, each outstanding option and
purchase right shall terminate if unexercised upon consummation of the
transaction.
1998 Stock Option/Stock Issuance Plan.
Our 1998 plan was adopted by the board of directors and approved by the
stockholders in December 1998 and has been amended from time to time. As of
December 31, 1999, 2,094,779 shares of common stock have been issued upon
exercise of options granted under the 1998 plan, options to purchase 1,885,260
shares of common stock were outstanding, 21,000 shares of common stock have
been issued upon direct issuances of stock and no shares of our common stock
remain available for further issuance under the 1998 plan, as all such shares
will have been carried over into our successor equity plan, the 2000 plan,
described below. Unless terminated sooner, the 1998 plan will terminate
according to its terms in December 2008. The 1998 plan provided for the
granting of incentive stock options and nonstatutory stock options as in the
1996 plan, and stock issuances to employees, officers, directors (including
non-employee directors) and consultants. The administration of the 1998 plan,
term of options, transfer restrictions, generally-used vesting schedule and
limitations on exercise of over $100,000 in any calendar year for options under
the 1998 plan are substantially the same as under the 1996 plan.
The stock issuance agreements reflecting stock issued pursuant to the 1998
plan provide that the shares must be paid for concurrently with the grant and
the purchase price for such restricted stock must be at least 85% of the fair
market value as of the date of grant (except in the case of a 10% stockholder,
in which case the purchase price must be at least 110% of the fair market
value) and generally provide that we shall have a repurchase option exercisable
on substantially the same terms as the repurchase option on restricted stock
purchases under the 1996 plan.
The 1998 plan provides that in the event of a merger of our company with or
into another corporation or a sale of all or substantially all of our assets,
each outstanding option or purchase right shall be assumed or an equivalent
option or right substituted by the successor corporation. If the successor
corporation refuses to assume or substitute, each outstanding option and
purchase right shall vest in full immediately prior to the consummation of the
transaction and, thereafter, shall terminate upon consummation of the
transaction, except as may otherwise be determined by the administrator.
2000 Stock Incentive Plan
Introduction. The 2000 Stock Incentive Plan is intended to serve as the
successor program to our 1996 plan and 1998 plan. The 2000 plan was adopted by
the board in January 2000 and approved by the stockholders in 2000. The
2000 plan will become effective when the underwriting agreement for this
offering is signed. At that time, all outstanding options under our existing
1996 plan and 1998 plan will be transferred to the 2000 plan, and no further
option grants will be made under the 1996 plan or the 1998 plan. The
57
<PAGE>
transferred options will continue to be governed by their existing terms,
unless our compensation committee decides to extend one or more features of the
2000 plan to those options.
Shares Reserved. 7,500,000 shares of our common stock have been reserved for
future issuance and grant under the 2000 plan, including shares that will be
carried over from the 1996 plan and 1998 plan reserves plus an additional
increase of shares approved by the Board in connection with the approval of
the 2000 plan. The share reserve under our 2000 plan will automatically
increase on the first trading day in January each year, beginning with calendar
year 2001, by an amount equal to 4% of the total number of shares of our common
stock outstanding on the last trading day of December in the prior year. In no
event will any such annual increase exceed 3,000,000 shares. No participant in
the 2000 plan may be granted stock options or direct stock issuances for more
than 1,000,000 shares of common stock in total in any calendar year.
Programs. Our 2000 plan has five separate programs, some of which may be put
into effect by the board at some later date:
. the discretionary option grant program, under which options may be
granted to purchase shares of our common stock at an exercise price not
less than the fair market value of those shares on the grant date;
. the stock issuance program, under which shares of common stock which may
be issued will vest upon the attainment of performance milestones or
completion of a period of service or which are fully vested at issuance
as a bonus for past services;
. the salary investment option grant program, under which our executive
officers and other highly compensated employees may be given the
opportunity to apply a portion of their base salary to the acquisition of
special below market stock option grants;
. the automatic option grant program, under which option grants will
automatically be made at intervals to eligible non-employee board members
to purchase shares of common stock at an exercise price equal to the fair
market value of those shares; and
. the director fee option grant program, under which our non-employee board
members may be given the opportunity to apply a portion of any retainer
fee for the year to the acquisition of special below-market option
grants. No such retainer fee is currently being paid to any board member.
Eligibility. The individuals eligible to participate in our 2000 plan
include our officers and other employees, our board members and any consultants
we hire.
Administration. The discretionary option grant and stock issuance programs
will be administered by our compensation committee. This committee will
determine which eligible individuals are to receive option grants or stock
issuances under those programs, the time or times when the grants or issuances
are to be made, the number of shares subject to each grant or issuance, the
status of any granted option as either an incentive stock option or a
nonstatutory stock option, the vesting schedule to be in effect for the option
grant or stock issuance and the term for any granted option. The compensation
committee will also have the authority to select the executive officers and
other highly compensated employees who may participate in the salary investment
option grant program in the event that program is put into effect.
Plan Features. Our 2000 plan will include the following features:
. The exercise price for any options granted under the 2000 plan may be
paid in cash or in shares of our common stock valued at fair market value
on the exercise date. The option may also be exercised through a same-day
sale program without any cash outlay by the optionee.
. The compensation committee will have the authority to cancel outstanding
options under the discretionary option grant program, including any
transferred options from our 1996 plan and 1998 plan, in return for the
grant of new options for the same or different number of option shares
with an exercise price per share based upon the fair market value of our
common stock on the new grant date.
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<PAGE>
. Stock appreciation rights may be issued under the discretionary option
grant program. These rights will provide the holders with the election to
surrender their outstanding options for a payment from us equal to the
fair market value of the shares subject to the surrendered options less
the exercise price payable for those shares. None of the options under
our 1996 plan or 1998 plan have any stock appreciation rights.
Change in Control. The 2000 plan will include the following change in
control provisions which may result in the accelerated vesting of outstanding
option grants and stock issuances:
. In the event that we are acquired by merger or asset sale, each
outstanding option under the discretionary option grant program which is
not to be assumed by the successor corporation will immediately become
exercisable for all the option shares, and all outstanding unvested
shares will immediately vest, except to the extent our repurchase rights
with respect to those shares are to be assigned to the successor
corporation.
. The compensation committee will have complete discretion to grant one or
more options which will become exercisable for all the option shares in
the event those options are assumed in the acquisition but the optionee's
service with us or the acquiring entity is subsequently terminated. The
vesting of any outstanding shares under our 2000 plan may be accelerated
upon similar terms and conditions.
. The compensation committee may grant options and structure repurchase
rights so that the shares subject to those options or repurchase rights
will immediately vest in connection with a successful tender offer for
more than 50% of our outstanding voting stock or a change in the majority
of our board through one or more contested elections. Such accelerated
vesting may occur either at the time of such transaction or upon the
subsequent termination of the individual's service.
. The options currently outstanding under our 1996 plan will terminate in
the event we are acquired and the acquiring company does not assume those
options.
. The options currently outstanding under our 1998 plan will immediately
vest in the event we are acquired and the acquiring company does not
assume those options or stock purchase rights. Some of those options and
stock purchase rights, however, contain an additional vesting
acceleration feature which will result in the immediate vesting of those
options and, upon consummation of the acquisition, any of these options
remaining unexercised will terminate.
Salary Investment Option Grant Program. In the event the compensation
committee decides to put this program into effect for one or more calendar
years, each of our executive officers and other highly compensated employees
may elect to reduce his or her base salary by an amount not less than $10,000
nor more than $50,000. Each selected individual who makes such an election will
automatically be granted, on the first trading day in January for which his or
her salary reduction is to be in effect, an option to purchase that number of
shares of common stock determined by dividing the salary reduction amount by
two-thirds of the fair market value per share of our common stock on the grant
date. The option will have an exercise price per share equal to one-third of
the fair market value of the option shares on the grant date. As a result, the
option will be structured so that the fair market value of the option shares on
the grant date less the exercise price payable for those shares will be equal
to the amount of the salary reduction. The option will become exercisable in a
series of 12 equal monthly installments over the calendar year for which the
salary reduction is to be in effect.
Automatic Option Grant Program. Each individual who first becomes a non-
employee board member at any time after the effective date of this offering
will receive an option grant for 15,000 shares of common stock on the date such
individual joins the board. In addition, on the date of each annual
stockholders' meeting held after the effective date of this offering, each non-
employee board member who is to continue to serve as a non-employee board
member, including each of our current non-employee board members, will
automatically be granted an option to purchase 5,000 shares of common stock,
provided such individual has served on the board for at least six months.
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<PAGE>
Each automatic grant will have an exercise price per share equal to the fair
market value per share of our common stock on the grant date and will have a
term of 10 years, subject to earlier termination following the optionee's
cessation of board service. All options granted under this program will be
immediately exercisable for all of the option shares; however, we may
repurchase, at the exercise price paid per share, any shares purchased under
the option which are not vested at the time of the optionee's cessation of
board service. The 5,000 shares subject to each annual automatic grant will
vest one year after the date of grant. The shares subject to each initial
15,000 share automatic option grant will vest in a series of three installments
upon the optionee's completion of each 12 months of board service over the 36-
month period measured from the grant date. However, the shares will immediately
vest in full upon certain changes in control or ownership or upon the
optionee's death or disability while a board member.
Director Fee Option Grant Program. If this program is put into effect in the
future, then each non-employee board member may elect to apply all or a portion
of any cash retainer fee for the year to the acquisition of a below-market
option grant. No retainer fee is currently being paid to any board member. The
option grant will automatically be made on the first trading day in January in
the year for which the non-employee board member would otherwise be paid the
cash retainer fee in the absence of his or her election. The option will have
an exercise price per share equal to one-third of the fair market value of the
option shares on the grant date, and the number of shares subject to the option
will be determined by dividing the amount of the retainer fee applied to the
program by two-thirds of the fair market value per share of our common stock on
the grant date. As a result, the option will be structured so that the fair
market value of the option shares on the grant date less the exercise price
payable for those shares will be equal to the portion of the retainer fee
applied to that option. The option will become exercisable in a series of 12
equal monthly installments over the calendar year for which the election is in
effect. However, the option will become immediately exercisable for all the
option shares upon the death or disability of the optionee while serving as a
board member.
Additional Program Features. Our 2000 plan will also have the following
features:
. Outstanding options under the salary investment and director fee option
grant programs will immediately vest if we are acquired by a merger or
asset sale or if there is a successful tender offer for more than 50% of
our outstanding voting stock or a change in the majority of our board
through one or more contested elections.
. Limited stock appreciation rights will automatically be included as part
of each grant made under the salary investment option grant program and
the automatic and director fee option grant programs, and these rights
may also be granted to one or more officers as part of their option
grants under the discretionary option grant program. Options with this
feature may be surrendered to us upon the successful completion of a
hostile tender offer for more than 50% of our outstanding voting stock.
In return for the surrendered option, the optionee will be entitled to a
cash distribution from us in an amount per surrendered option share based
upon the highest price per share of our common stock paid in that tender
offer.
The board may amend or modify the 2000 plan at any time, subject to any
required stockholder approval. The 2000 plan will terminate no later than
September 2010.
2000 Employee Stock Purchase Plan
Introduction. Our 2000 Employee Stock Purchase Plan was adopted by the board
in January 2000 and approved by the stockholders in 2000. The plan will
become effective immediately upon the signing of the underwriting agreement for
this offering. The plan is designed to allow our eligible employees and the
eligible employees of our participating subsidiaries to purchase shares of our
common stock, at semi-annual intervals, with their accumulated payroll
deductions.
Shares Reserved. 900,000 shares of our common stock will initially be
reserved for issuance. The reserve will automatically increase on the first
trading day in January each year, beginning in calendar year 2001, by an
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amount equal to 1% of the total number of outstanding shares of our common
stock on the last trading day in December in the prior year. In no event will
any such annual increase exceed 600,000 shares.
Offering Periods. The plan will have a series of successive offering
periods, each with a maximum duration of 24 months. The initial offering period
will start on the date the underwriting agreement for the offering is signed
and will end on the last business day in January 2002. The next offering period
will start on the first business day in February 2002, and subsequent offering
periods will be set by our compensation committee.
Eligible Employees. Individuals scheduled to work more than 20 hours per
week for more than five calendar months per year may join an offering period on
the start date or any semi-annual entry date within that period. Semi-annual
entry dates will occur on the first business day of February and August each
year. Individuals who become eligible employees after the start date of an
offering period may join the plan on any subsequent semi-annual entry date
within that offering period.
Payroll Deductions. A participant may contribute up to 15% of his or her
cash earnings through payroll deductions, and the accumulated deductions will
be applied to the purchase of shares on each semi-annual purchase date. The
purchase price per share will be equal to 85% of the fair market value per
share on the participant's entry date into the offering period or, if lower,
85% of the fair market value per share on the semi-annual purchase date. Semi-
annual purchase dates will occur on the last business day of July and January
each year. In no event may any participant purchase more than 1,000 shares on
any purchase date, and not more than 225,000 shares may be purchased in total
by all participants on any purchase date.
Reset Feature. If the fair market value per share of our common stock on any
purchase date is less than the fair market value per share on the start date of
the two-year offering period, then that offering period will automatically
terminate, and a new two-year offering period will begin on the next business
day. All participants in the terminated offering will be transferred to the new
offering period.
Change in Control. Should we be acquired by merger or sale of all or
substantially all of our assets or more than 50% of our voting securities, then
all outstanding purchase rights will automatically be exercised immediately
prior to the effective date of the acquisition. The purchase price will be
equal to 85% of the market value per share on the participant's entry date into
the offering period in which an acquisition occurs or, if lower, 85% of the
fair market value per share immediately prior to the acquisition.
Plan Provisions. The following provisions will also be in effect under the
plan:
. The plan will terminate no later than the last business day of January
2010.
. The board may at any time amend, suspend or discontinue the plan.
However, certain amendments may require stockholder approval.
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CERTAIN TRANSACTIONS
We issued, in separate private placement transactions, the following shares
of preferred stock:
. 2,000,000 shares of Series A preferred stock at $0.50 per share in
February 1996 (as adjusted for 2-for-1 stock split in June 1996);
. an aggregate of 2,202,854 shares of Series B preferred stock at $0.70
per share in November 1996;
. an aggregate of 2,944,460 shares of Series C preferred stock at $1.868
per share in July and August 1997;
. an aggregate of 2,782,244 shares of Series D preferred stock at $3.49
per share in June 1998;
. an aggregate of 3,000,000 shares of Series E preferred stock at $4.00
per share in May 1999; and
. an aggregate of 4,050,000 shares of Series F Preferred Stock at $5.00
per share in December 1999 and January 2000.
Upon the closing of this offering, each share of preferred stock will
automatically convert into one share of common stock. As of December 31, 1999,
the purchasers of the preferred stock included, among others, the following
directors, officers and holders of more than 5% of a class of our capital
stock, and persons and entities associated with them:
<TABLE>
<CAPTION>
Series A Series B Series C Series D Series E Series F
Preferred Preferred Preferred Preferred Preferred Preferred
Investor Stock Stock Stock Stock Stock Stock
- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Draper Fisher funds
(1).................... 1,790,000 714,286 267,665 28,653 25,000 2,100,000
Steven T. Jurvetson
(1).................... 1,790,000 714,286 267,665 28,653 25,000 2,100,000
Asad Jamal (2).......... -- -- -- -- -- 2,000,000
Sevin Rosen funds (3)... -- 1,428,571 1,338,467 573,065 125,000 --
David Shrigley (3)...... -- 1,428,571 1,338,467 573,065 125,000 --
Star Ventures funds
(4).................... -- -- 802,997 372,492 500,000 --
Excelsior Private Equity
Fund II, Inc. (5)...... -- -- -- 1,676,229 115,000 100,000
Douglas Lindgren (5).... -- -- -- 1,676,229 115,000 100,000
Michael J. Maulick...... -- -- -- -- 5,000 --
Carolyn A. Rogers....... -- -- -- -- 5,000 --
</TABLE>
- --------
(1) Consists of 1,680,810 Series A shares, 670,715 Series B shares, 251,338
Series C shares, 26,905 Series D shares, 23,475 Series E shares and 93,900
Series F shares purchased by Draper Fisher Associates Fund III, L.P., and
109,190 Series A shares, 43,571 Series B shares, 16,327 Series C shares,
1,748 Series D shares, 1,525 Series E shares and 6,100 Series F shares
purchased by Draper Fisher Partners, LLC and 2,000,000 Series F shares
purchased by Draper Fisher Jurvetson ePlanet Ventures, L.P. Mr. Jurvetson,
a director of our company, is a managing director of each of Draper Fisher
Associates Fund III, L.P. and Draper Fisher Partners, LLC and is a member
of the investment committee for Draper Fisher Jurvetson ePlanet Ventures,
L.P., and shares voting and dispositive power with respect to all shares
held by such entities.
(2) Consists of 2,000,000 shares held by Draper Fisher Jurvetson ePlanet
Ventures, L.P. Mr. Jamal, a director of our company, is a member of the
investment committee for Draper Fisher Jurvetson ePlanet Ventures, L.P.
(3) Consists of 1,363,151 Series B shares, 1,279,739 Series C shares, 549,569
Series D shares and 119,875 Series E shares purchased by Sevin Rosen Fund V
L.P., 58,278 Series B shares, 54,713 Series C shares, 23,496 Series D
shares and 5,125 Series E shares purchased by Sevin Rosen V Affiliates Fund
L.P. and 7,142 Series B shares and 4,015 Series C shares purchased by Sevin
Rosen Bayless Management Company. Mr. Shrigley, a director of our company,
is an employee of Sevin Rosen Bayless Management Company, the operating
management company for each of the Sevin Rosen funds and entities.
Mr. Shrigley does not have voting or dispositive power with respect to the
shares held by such entities.
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(4) Consists of 655,360 Series C shares and 329,512 Series D shares purchased
by SVE Star Ventures Enterprises No. V, a German Civil Law Partnership
(with limitation of liability), 42,980 Series D shares and 125,000 Series E
shares purchased by SVM Star Ventures Managementgesellschaft mbH Nr. 3,
344,425 Series E shares purchased by SVE Star Ventures Enterprises No. VII,
a German Civil Law Partnership (with limitation of liability) and 147,637
Series C shares and 30,575 Series E shares purchased by SVM Star Ventures
Managementgesellschaft mbH Nr. 3 and Co. Beteiligungs KG Nr. 2.
(5) Consists of 1,676,229 Series D shares, 115,000 Series E shares and 100,000
Series F shares purchased by Excelsior Private Equity Fund II, Inc. Mr.
Lindgren, a director of our company, is the Chief Investment Officer of
Excelsior Private Equity Fund II, Inc., and shares voting and dispositive
power with respect to the shares held by this entity.
In connection with the issuance and sale of our Series F preferred stock, we
entered into an amended and restated Investors' Rights Agreement with all of
the holders of our preferred stock and warrants to purchase our preferred
stock. Pursuant to this agreement, these holders are provided with registration
rights and information rights. See "Description of Capital Stock--Registration
Rights." In addition, this agreement provides that in the event we create a
separate entity to operate in Europe or Asia and that entity proposes to sell
securities for equity financing purposes, we will give Draper Fisher Jurvetson
ePlanet Ventures, L.P., referred to as ePlanet, a right of first offer to
purchase up to 40% of those shares, subject to various exclusions. ePlanet will
be prohibited from owning more than 49% of any such entity. In addition,
ePlanet's right will terminate upon the earliest to occur of an initial public
offering of the foreign entity, a sale of all or substantially all of the
assets of the foreign entity, a merger or other series of transactions in which
the holders of the capital stock of the foreign entity immediately prior to the
transaction cease to own more than 50% of the voting power of the foreign
entity or ePlanet ceases to own more than 40% of the common stock issuable upon
conversion of the Series F preferred stock purchased from us by ePlanet in
December 1999. ePlanet's right will also terminate upon the sale of all or
substantially all of the assets of ReleaseNow.com or a merger or other series
of transactions in which our stockholders immediately prior to the transaction
cease to own more than 50% of our voting power.
We have entered into indemnification agreements with our officers and
directors and their related funds containing provisions which may require us,
among other things, to indemnify our officers and directors and their related
funds against certain liabilities that may arise by reason of their status or
service as officers or directors or deemed controlling persons (other than
liabilities arising from willful misconduct of a culpable nature) and to
advance their expenses, including tax payments, incurred as a result of any
proceeding against them as to which they could be indemnified. We also intend
to execute such agreements with our future directors and executive officers.
See "Management--Limitation of Liability and Indemnification Matters."
We have entered into employment agreements and option acceleration
agreements with each of Eric J. Holstege, Michael J. Maulick, Frank D. Maylett,
Carolyn A. Rogers, David A. Roman and Joan P. Walsh. See "Management--
Employment Agreements and Change of Control Arrangements."
We have permitted each of our executive officers and certain other employees
the ability to exercise their stock options prior to vesting in the underlying
shares. All such exercises are subject, if not otherwise accelerated, to
repurchase at cost upon an employee's termination of providing us services.
In June 1999, we entered into notes with some of our executive officers and
our Chairman of the Board to allow them to exercise options and purchase shares
of our common stock in the following amounts:
<TABLE>
<CAPTION>
Number
Note of Shares
Officer Name Amount Purchased
------------ ---------- ---------
<S> <C> <C>
Eric J. Holstege........................................ $1,008,408 507,770
Michael J. Maulick...................................... 1,750,000 700,000
Carolyn A. Rogers....................................... 1,378,170 691,195
David A. Roman.......................................... 151,191 75,000
Joan P. Walsh........................................... 236,792 125,000
</TABLE>
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Each note is secured by a pledge of the stock purchased with the proceeds of
the note, and the shares so purchased may not be transferred until released
from the pledge. In connection with Ms. Rogers' appointment as Chairman of the
Board in November 1999, we amended her note to provide that it will become
immediately due and payable one year after the earliest to occur of the end of
her employment with us, our initial public offering or our acquisition by
another company. Messrs. Holstege, Maulick and Roman's and Ms. Walsh's notes
accrue interest at a rate of 5.37% per annum, compounded annually, and Ms.
Rogers' note accrues interest at a rate of 6.08% per annum, compounded
annually. All of the notes become payable in one lump sum in June 2004. In
addition, all of the notes are subject to acceleration in the event the maker:
. fails to pay principal or interest when due;
. terminates employment with us, except that Ms. Rogers' repayment terms
in such event are extended as described above; or
. becomes insolvent.
All of the notes accelerate one year after the date we or substantially all
of our assets are acquired, subject to a reduced time frame in the event of a
pooling acquisition.
The holders of common stock issued upon conversion of our preferred stock
upon consummation of this offering and the holders of warrants are entitled to
registration rights. See "Description of Capital Stock--Registration Rights."
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PRINCIPAL STOCKHOLDERS
The following table indicates beneficial ownership of our common stock as of
December 31, 1999, assuming the conversion of preferred stock, by:
. each stockholder whom we know to beneficially own 5% or more of our
outstanding common stock;
. each of our directors and the named executive officers; and
. all of our current directors and executive officers as a group.
Unless otherwise indicated, the address of each beneficial owner listed
below is c/o ReleaseNow.com Corporation, 990 Commercial Street, San Carlos,
California, 94070. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission and generally includes voting
or dispositive power with respect to securities. Except as indicated by the
footnotes below, we believe, based on information furnished to us, that the
persons and entities named in the table below have sole voting and dispositive
power with respect to all shares of common stock shown as beneficially owned by
them, subject to community property laws, where applicable. The percentage of
shares beneficially owned is based on 20,827,025 shares of common stock
outstanding as of December 31, 1999 and shares of common stock outstanding
after the completion of this offering. In computing the number of shares of
common stock beneficially owned by a person and their percentage ownership,
options held by that person that are currently exercisable or exercisable
within 60 days of December 31, 1999 are deemed to be outstanding. These option
shares, however, are not deemed outstanding for the purpose of computing the
percentage ownership of any other stockholder.
<TABLE>
<CAPTION>
Percentage of
Shares
Beneficially
Number of Owned
Shares -----------------
Beneficially Before After
Name or Group of Beneficial Owners Owned Offering Offering
- ----------------------------------------------- ------------ -------- --------
<S> <C> <C> <C>
Draper Fisher Jurvetson funds (1).............. 4,925,604 23.7% %
400 Seaport Court, Suite 250
Redwood City, CA 94063
Sevin Rosen funds (2).......................... 3,465,103 16.6
550 Lytton Avenue
Palo Alto, CA 94301
Excelsior Private Equity Fund II, Inc. (3)..... 1,891,229 9.1
c/o U.S. Trust Corporation
114 West 47th Street
New York, NY 10036
Star Ventures funds (4)........................ 1,675,489 8.0
Possartstr 9
81679 Munchen Germany
Steven T. Jurvetson (2)........................ 4,925,604 23.7
Michael J. Maulick (9)......................... 705,000 3.4
Asad Jamal (5)................................. 2,000,000 9.6
Douglas A. Lindgren (3)........................ 1,891,229 9.1
Clydene Bultman................................ -- -- --
Carolyn A. Rogers (6).......................... 690,195 3.3
David Shrigley (1)............................. -- -- --
Eric J. Holstege (7)........................... 507,770 2.4
Michael Vanneman (8)........................... 85,682 *
Joan P. Walsh (10)............................. 250,000 1.2
David A. Roman (11)............................ 350,000 1.7
Frank D. Maylett (12).......................... 175,000 *
All current directors and executive officers as
a group (11 persons) (13)..................... 9,494,798 44.4
</TABLE>
- -------
* Represents beneficial ownership of less than 1% of our common stock.
(1) Consists of 2,747,143 shares held by Draper Fisher Associates Fund III,
L.P. and 178,461 shares held by Draper Fisher Partners, LLC and 2,000,000
shares held by Draper Fisher Jurvetson ePlanet Ventures, L.P. Mr.
Jurvetson, a
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<PAGE>
director of our company, is a managing director of each of Draper Fisher
Associates Fund III, L.P. and Draper Fisher Partners, LLC and is a member of
the investment committee for Draper Fisher Jurvetson ePlanet Ventures, L.P.,
shares voting and dispositive power with respect to the shares held by such
entities and disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest therein. Mr. Jamal, a director of our
company, is a member of the investment committee for Draper Fisher Jurvetson
ePlanet Ventures, L.P., shares voting and dispositive power with respect to
these shares and disclaims beneficial ownership of these shares except to
the extent of his pecuniary interest therein.
(2) Consists of 3,312,334 shares held by Sevin Rosen Fund V L.P., 141,612
shares held by Sevin Rosen V Affiliates Fund L.P. and 11,157 shares held
by Sevin Rosen Bayless Management Company. Mr. Shrigley, a director of
our company, is an employee of Sevin Rosen Bayless Management Company,
the operating management company for each of the Sevin Rosen funds and
entities. Mr. Shrigley does not have voting and dispositive power with
respect to the shares held by these entities.
(3) Consists of 1,891,229 shares held by Excelsior Private Equity Fund II,
Inc., for which Mr. Lindgren, a director of our company, serves as Chief
Investment Officer. Mr. Lindgren disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest therein.
(4) Consists of 984,872 shares held by SVE Star Ventures Enterprises No. V, a
German Civil Law Partnership (with limitation of liability), 344,425
shares held by SVE Star Ventures Enterprises No. VII, a German Civil Law
Partnership (with limitation of liability), 178,212 shares held by SVM
Star Ventures Managementgesellschaft mbH Nr. 3 & Co. Beteiligungs KG
Nr.2, and 167,980 shares held by SVM Star Ventures Managementgesellschaft
mbH Nr. 3.
(5) Consists of 2,000,000 shares held by Draper Fisher Jurvetson ePlanet
Ventures L.P. Mr. Jamal, a director of our company, is a member of the
investment committee for Draper Fisher Jurvetson ePlanet Ventures, L.P.,
shares voting and dispositive power with respect to these shares and
disclaims beneficial ownership of these shares except to the extent of
his pecuniary interest therein.
(6) Consists of 10,000 shares held by Ms. Rogers' children, and 680,195 held
by Ms. Rogers.
(7) Certain of these shares of common stock are subject to a right of
repurchase held by our company. This repurchase right lapsed with respect
to and Mr. Holstege acquired a vested interest in 213,678 shares on
December 31, 1999, and Mr. Holstege will continue to acquire a vested
interest in an additional 8,912 shares per month, so long as he continues
to provide services to our company.
(8) Mr. Vanneman is no longer an employee as of October 1999.
(9) Includes 700,000 shares of common stock subject to a right of repurchase
held by our company. This repurchase right lapses with respect to and Mr.
Maulick acquires a vested interest in 175,000 shares on May 27, 2000, and
14,583 shares per month thereafter, so long as Mr. Maulick continues to
provide services to our company.
(10) Includes 125,000 shares of common stock subject to a right of repurchase
held by our company. This repurchase right lapses with respect to and Ms.
Walsh acquired a vested interest in 56,250 shares on January 4, 2000, and
4,687 shares per month thereafter, so long as Ms. Walsh continues to
provide services to our company. Also includes 125,000 shares of common
stock issuable upon the exercise of stock options exercisable within 60
days of December 31, 1999.
(11) Includes 75,000 shares of common stock subject to a right of repurchase
held by our company. This repurchase right lapses with respect to and Mr.
Roman acquires a vested interest in 60,714 shares on February 17, 2000,
and 5,059 shares per month thereafter, so long as Mr. Roman continues to
provide services to our company. Also includes 275,000 shares of common
stock issuable upon the exercise of stock options which are fully
exercisable within 60 days of December 31, 1999.
(12) Includes 175,000 shares of common stock issuable upon the exercise of
options exercisable within 60 days of December 31, 1999.
(13) Includes 575,000 shares of common stock issuable upon the exercise of
stock options exercisable within 60 days of December 31, 1999.
The total number of outstanding shares used to calculate the percentages in
the above table does not include the exercise of the over-allotment option. If
the over-allotment option is exercised, we will sell up to additional
shares, and the selling stockholder, Matthew Klein, will sell up to shares.
Mr. Klein beneficially owns 4.9% of our common stock before the offering and
upon completion of the sale of the shares subject to the over-allotment
option, will beneficially own % of our common stock. During the past three
years Mr. Klein has served as a director, President, acting Chief Executive
Officer, Treasurer and Secretary of ReleaseNow.com. He no longer holds any of
these positions.
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DESCRIPTION OF CAPITAL STOCK
General
The following description of our securities and provisions of our amended
and restated certificate of incorporation and bylaws is only a summary. You
should also refer to the copies of our restated certificate and bylaws which
have been filed with the Securities and Exchange Commission as exhibits to our
registration statement, of which this prospectus forms a part, and to the
provisions of Delaware law.
Upon the closing of this offering and amendment of our restated certificate,
our authorized capital stock will consist of 80,000,000 shares of common stock,
par value $0.001, and 5,000,000 shares of preferred stock, par value $0.001.
Common Stock
As of December 31, 1999, there were 20,827,025 shares of common stock
outstanding and held of record by 130 stockholders, assuming conversion of all
shares of preferred stock into common stock. Based on the number of shares
outstanding as of that date and giving effect to the issuance of shares of
common stock in this offering, there will be shares of common stock
outstanding upon the closing of the offering, assuming no exercise of
outstanding options and warrants.
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of the stockholders. Holders of common stock are
entitled to receive dividends ratably, if any, as may be declared by the board
of directors out of legally available funds, subject to any preferential
dividend rights of any outstanding preferred stock. Upon our liquidation,
dissolution or winding up, the holders of common stock are entitled to receive
ratably our net assets available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding preferred stock.
Holders of common stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of common stock are, and the shares
offered by us in this offering will be, upon receipt of payment for the shares,
fully paid and nonassessable. The rights, preferences and privileges of holders
of common stock are subject to, and may be adversely affected by, the rights of
holders of shares of any series of preferred stock which we may designate and
issue in the future without further stockholder approval.
Preferred Stock
Upon the closing of this offering, all outstanding shares of our preferred
stock will automatically convert into shares of common stock. Pursuant to our
restated certificate, the board of directors will be authorized, without
further stockholder approval, to issue from time to time up to an aggregate of
5,000,000 shares of preferred stock in one or more series and to fix or alter
the designations, preferences, rights and any qualifications, limitations or
restrictions of the shares of each series, including the dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption,
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of these series. The board of
directors, without further stockholder approval, can issue preferred stock with
voting, conversion or other rights that could adversely affect the voting power
and other rights of common stockholders, including the loss of voting control
to others. The issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control. The issuance of preferred stock
may have the effect of decreasing the market price of the common stock. Upon
the closing of the offering, there will be no shares of preferred stock
outstanding, and we have no present plans to issue any shares of preferred
stock.
Warrants
As of December 31, 1999, we had warrants outstanding to purchase up to an
aggregate of 146,291 shares of our stock, exercisable as follows:
. up to 42,000 shares of Series A preferred stock at an exercise price of
$0.50 per share (as adjusted to reflect a 2-for-1 stock split in June
1996), which expires on July 31, 2003;
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<PAGE>
. up to 70,000 shares of Series B preferred stock at an exercise price of
$0.70 per share, which expires on July 31, 2003;
. up to 13,383 shares of Series C preferred stock at an exercise price of
$1.868 per share, which expires on July 10, 2002;
. up to 12,283 shares of Series D preferred stock at an exercise price of
$3.745 per share, which expires on April 16, 2006; and
. up to 8,625 shares of Series F preferred stock at an exercise price of
$4.00 per share, which expires September 9, 2006.
Registration Rights
We have entered into a registration rights agreement with some of our
stockholders. After this offering, based on our capitalization as of December
31, 1999, the holders of approximately 15,475,849 shares of common stock
issuable upon conversion of the outstanding preferred stock and issuable upon
the exercise of warrants will be entitled to registration rights with respect
to their shares. In addition, holders of 1,650,000 shares of common stock
issuable upon conversion of Series F preferred stock that was issued subsequent
to December 31, 1999 and are similarly entitled to registration rights. Any
group of holders of at least 30% of the securities with registration rights can
require us to register all or part of their shares at any time following six
months after this offering, so long as certain thresholds are met with respect
to the amount of securities to be sold. After we have completed two such
registrations we are no longer subject to these demand registration rights. In
addition, holders of registrable securities may also require us to include
their shares in future registration statements that we file, subject to a
cutback at the option of any underwriter of such an offering. Except in the
case of our initial public offering, in which a full cutback is permissible,
the underwriters must permit holders of registrable securities to sell at least
30% of the shares being offered. Holders of registrable securities may also
require us, twice in any 12 month period, to register their shares with the
Securities and Exchange Commission. Upon any of these registrations, these
shares will be freely tradable in the public market without restriction.
Anti-Takeover Effects of Provisions of Delaware Law and our Certificate of
Incorporation and Bylaws
Delaware Law. We are subject to the provisions of Section 203 of the
Delaware General Corporation Law. Subject to exceptions, Section 203 prohibits
a publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years from the date of
the transaction in which the person became an interested stockholder, unless
the interested stockholder attained this status with the approval of the board
of directors or unless the business combination is approved in a prescribed
manner. A "business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder.
Subject to exceptions, an "interested stockholder" is a person who, together
with affiliates and associates, owns, or within three years did own, 15% or
more of the corporation's voting stock. This statute could prohibit or delay
the accomplishment of mergers or other takeovers or change in control attempts
with respect to us and, accordingly, may discourage attempts to acquire us.
Charter Documents. Provisions of our restated certificate and bylaws may be
deemed to have an antitakeover effect and may delay, defer or prevent a tender
offer or takeover attempt that a stockholder might consider to be in his best
interest, including those attempts that might result in a premium over the
market price for the shares held by our stockholders. Our certificate of
incorporation also provides that all stockholder action must be effected at a
duly called meeting of stockholders and not by written consent. In addition,
our certificate of incorporation and bylaws do not permit our stockholders to
call a special meeting of stockholders. Only the board of directors is
permitted to call a special meeting of stockholders.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. Our bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates
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<PAGE>
for election as directors at an annual meeting of stockholders, must provide
timely notice thereof in writing. To be timely, a stockholder's notice must be
delivered to or mailed and received at our principal executive offices not less
than 120 days prior to the date of our annual meeting. Our bylaws also specify
requirements as to the form and content of a stockholder's notice. These
provisions may preclude stockholders from bringing matters before an annual
meeting of stockholders or from making nominations for directors at an annual
meeting of stockholders.
Authorized But Unissued Shares. The authorized but unissued shares of common
stock and preferred stock are available for future issuance without stockholder
approval. These additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional capital, stock
splits corporate, acquisitions, employee benefit plans and stockholder rights
plans. The existence of authorized but unissued shares of common stock and
preferred stock could render more difficult or discourage an attempt to obtain
control of us by means of a proxy contest, tender offer, merger or otherwise.
Classified Board of Directors; Removal. Upon the closing of this offering,
our directors will be divided into three classes. The number of directors will
be distributed among the three classes so that each class will consist of one-
third of the board of directors. The classification of the board of directors
will have the effect of requiring at least two annual stockholder meetings,
instead of one, to replace a majority of the directors which could have the
effect of delaying or preventing a change in control of ReleaseNow.com. Our
restated certificate will authorize only the board of directors to fill
vacancies, including newly created directorships. Our restated certificate will
also provide that directors may be removed by stockholders only for cause and
only by the affirmative vote of holders of two-thirds of the outstanding shares
of voting stock.
Supermajority Vote to Amend Charter and Bylaws. Upon the closing of this
offering, our restated certificate and bylaws will each provide that our bylaws
may only be amended by a two-thirds vote of the outstanding shares. In
addition, our restated certificate will provide specifically that its
provisions related to bylaw amendments, staggered board, calling of special
meetings of stockholders, procedure for stockholder actions and indemnification
may only be amended by a two-thirds vote of the outstanding shares.
Compliance with California law
We are currently subject to Section 2115 of the California General
Corporation Law. Section 2115 provides that, regardless of a company's legal
domicile, certain provisions of California corporate law will apply to that
company if more than 50% of its outstanding voting securities are held of
record by persons having addresses in California and the majority of the
company's operations occur in California. As an example of Section 2115's
effects, while we are subject to Section 2115, stockholders may cumulate votes
in electing directors. This means that each stockholder may vote the number of
votes equal to the number of candidates multiplied by the number of votes to
which the stockholder's shares are normally entitled in favor of one candidate.
This potentially allows minority stockholders to elect some members of the
board of directors. When we are no longer subject to Section 2115, cumulative
voting will not be allowed, unless it is specifically permitted in our
certificate of incorporation, and a holder of more than 50% of our voting stock
will be able to control the election of all directors. In addition to this
difference, Section 2115 has the following additional effects:
. enables removal of directors with or without cause with majority
stockholder approval;
. places limitations on the distribution of dividends;
. extends additional rights to dissenting stockholders in any
reorganization, including a merger, sale of assets or exchange of shares;
and
. provides for information rights and required filings in the event we
effect a sale of assets or complete a merger.
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We anticipate that our common stock will be qualified for trading as a
national market security on the Nasdaq National Market and that we may have at
least 800 stockholders of record by the record date for our 2001 annual meeting
of stockholders. If these two conditions occur, then we will no longer be
subject to Section 2115 as of the record date for our 2001 annual meeting of
stockholders.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Equiserve LLP.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering there has been no public market for our common stock.
As described below, only a limited number of shares will be available for sale
shortly after this offering due to contractual and legal restrictions on
resale. Nevertheless, sales of substantial amounts of our common stock in the
public market following the offering could cause the market price of our common
stock to decline and could affect our ability to raise capital on terms
favorable to us.
Upon completion of the offering, based on shares outstanding as of December
31, 1999 and assuming no exercise of outstanding options or warrants after that
date, we will have shares of common stock outstanding. Of this amount, all
of the shares offered by this prospectus will be freely tradable, without
restrictions, in the public market. The remaining 20,827,025 shares are
"restricted" under the Securities Act of 1933, which means they were originally
sold in offerings that were not subject to a registration statement filed with
the Securities and Exchange Commission. These restricted shares may be resold
only through registration under the Securities Act of 1933 or an exemption from
registration, such as provided through Rule 144 or Rule 701.
In addition to the 20,827,025 shares discussed above, as of December 31,
1999, there were outstanding options to purchase 2,043,282 shares of common
stock under our stock plans, warrants to purchase 146,291 shares of common
stock and 8,400,000 shares that are or, upon effectiveness of our year 2000
equity plans, will be reserved for issuance under our equity plans. At an
assumed effective date for this offering of April 15, 2000, 594,850 of the
2,043,282 outstanding option shares will be vested. The shares issuable upon
exercise of the options and warrants are also restricted, and may be sold only
upon registration under the Securities Act of 1933 or an exemption from
registration, such as provided through Rule 144 or Rule 701.
Lock-up Agreements
The holders of 20,827,025 shares of common stock, the holders of all of the
warrants and the holders of options which will be vested 180 days after an
assumed effective date of this offering of April 15, 2000 are subject to a 180-
day "lock-up" with respect to these shares. This generally means that they
cannot sell these shares during the 180 days following the date of this
prospectus, even if they are otherwise freely saleable pursuant to Rule 144,
Rule 701 or an effective registration statement. After the 180-day lock-up
period expires, these shares may be sold in accordance with Rule 144, Rule 701
or pursuant to an effective registration statement.
Rule 144
Generally
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares for at least one year, including the holding period
of any prior owner who is not an affiliate, is entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
. 1% of the then outstanding shares of our common stock (approximately
shares immediately after this offering); or
. the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the date on
which notice of sale is filed with the Securities and Exchange
Commission.
Sales under Rule 144 are also subject to manner of sale provisions, notice
requirements and the availability of current information about us.
Rule 144(k)
A person who is not an "affiliate" of ours for at least 90 days immediately
preceding his or her sale of our stock and who has beneficially owned his or
her shares for at least two years, including the holding period of
71
<PAGE>
any prior owner who is not an affiliate, is entitled to freely sell these
shares under Rule 144(k) without regard to the limitations described above.
Rule 701
Any of our employees or consultants who purchased shares under a written
compensatory plan or contract is entitled to rely on the resale provisions of
Rule 701, which permits nonaffiliates to resell their Rule 701 shares starting
90 days after the date of this prospectus without having to comply with the
public information, holding period, volume limitation or notice provisions of
Rule 144. However, the 180-day lock-up will preclude their sale until the end
of the lock-up period.
Affiliates
Persons deemed to be our affiliates may rely on Rule 144 to resell their
shares but are prohibited from using Rule 144(k). Affiliates may resell their
shares under Rule 701 beginning 90 days after the date of this prospectus by
complying with all aspects of Rule 144 except the holding period requirement.
However, the 180-day lock-up will preclude affiliates' resales until the end of
the lock-up period.
Registration Rights
Following this offering, we intend to register all outstanding option
shares, whether vested or unvested, plus an additional 8,400,000 shares that
are or, upon effectiveness of the offering, will be reserved for issuance under
our equity and employee stock purchase plans. Upon effectiveness of that
registration statement, the vested option shares will be freely tradable in the
public market. If the warrantholders do not net-exercise, their shares would
not be freely saleable under Rule 144. However, the holders of the warrants are
entitled to require us to register the shares underlying the warrants. See
"Capital Stock--Registration Rights."
Application of Rules
Pursuant to one or more of the above rules, the following securities
outstanding as of December 31, 1999 will be freely saleable upon expiration of
the 180-day lock-up period:
.18,427,025 shares of common stock;
. 146,291 shares of common stock issuable upon the exercise of warrants,
assuming a net-exercise and net of any shares used as purchase price for
the warrant shares; and
. 594,850 shares of common stock issuable upon the exercise of stock
options which are vested 180 days after an assumed effective date for
this offering of April 15, 2000.
The remaining 2,400,000 shares of common stock outstanding as of December
31, 1999 will be eligible for sale pursuant to Rule 144 as of December 30,
2000. In addition, 1,650,000 more shares of common stock which were issued
after December 31, 1999 will only become saleable in the public market after
January 14, 2001 pursuant to Rule 144.
72
<PAGE>
UNDERWRITING
Under the underwriting agreement, which is filed as an exhibit to the
registration statement relating to this prospectus, the underwriters named
below, for whom Lehman Brothers Inc., CIBC World Markets Corp. and Wit Capital
Corporation are acting as representatives, have each agreed to purchase from us
and the selling stockholder the respective number of shares of common stock
shown opposite its name below:
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Lehman Brothers Inc........................................
CIBC World Markets Corp....................................
Wit Capital Corporation....................................
----
Total....................................................
====
</TABLE>
The underwriting agreement provides that the underwriters' obligations to
purchase shares of common stock depend on the satisfaction of the conditions
contained in the underwriting agreement and that, if any of the shares of
common stock are purchased by the underwriters under the underwriting
agreement, all of the shares of common stock that the underwriters have agreed
to purchase under the underwriting agreement must be purchased. The conditions
contained in the underwriting agreement include the requirement that the
representations and warranties made by us to the underwriters are true, that
there is no material change in the financial markets and that we deliver to the
underwriters customary closing documents.
The representatives have advised us that the underwriters propose to offer
the shares of common stock directly to the public at the public offering price
set forth on the cover page of this prospectus, and to dealers, who may include
the underwriters, at this public offering price less a selling concession not
in excess of $ per share. The underwriters may allow, and the dealers may
reallow, a concession not in excess of $ per share to brokers and dealers.
After the offering, the underwriters may change the offering price and other
selling terms.
We and the selling stockholder have granted to the underwriters an option to
purchase up to a total of additional shares of common stock, exercisable
to cover over-allotments, if any, at the public offering price less the
underwriting discount shown on the cover page of this prospectus. The
underwriters may exercise this option at any time until 30 days after the date
of the underwriting agreement. If this option is exercised, each underwriter
will be committed, so long as the conditions of the underwriting agreement are
satisfied, to purchase a number of additional shares of common stock
proportionate to the underwriter's initial commitment, as indicated in the
table above and we will be obligated, under the over-allotment option, to sell
the shares of common stock to the underwriters.
The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by us and the selling stockholder.
These amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional shares.
<TABLE>
<CAPTION>
Paid by the
Paid by ReleaseNow.com Selling Stockholder
------------------------- -------------------------
No Exercise Full Exercise No Exercise Full Exercise
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Per share................ $ $ $ $
Total.................... $ $ $ $
</TABLE>
We will pay the expenses of the offering on behalf of the selling
stockholder, excluding underwriting discounts and commissions. We estimate that
the total expenses of the offering, excluding underwriting discounts and
commissions, will be approximately $ .
73
<PAGE>
We and the selling stockholder have agreed that, without the prior consent
of Lehman Brothers, we will not, directly or indirectly, offer, sell or
otherwise dispose of any shares of common stock or any securities that may be
converted into or exchanged for any shares of common stock for a period of 180
days from the date of this prospectus, except that we may, without their
consent, grant options and sell shares under our incentive and purchase plans,
although the shares may not be resold in the public market during the lock-up
period. All of our executive officers, directors and stockholders holding all
of the shares of our capital stock, including all of the holders of the
preferred stock and the warrants, have agreed under lock-up agreements that,
without prior written consent, they will not, directly or indirectly, offer,
sell or otherwise dispose of any shares of common stock or any securities that
may be converted into or exchanged for any shares of common stock for the
period ending 180 days after the date of this prospectus. See "Shares Eligible
for Future Sale."
Prior to the offering, there has been no public market for the shares of
common stock. The initial public offering price will be negotiated between the
representatives and us. In determining the initial public offering price of the
common stock, the representatives will consider, among other things and in
addition to prevailing market conditions:
. our historical performance and capital structure;
. estimates of our business potential and earning prospects;
. an overall assessment of our management; and
. the consideration of the above factors in relation to market valuations
of companies in related businesses.
Application will be made to have our common stock approved for quotation on
the Nasdaq National Market under the symbol "RNOW."
We and the selling stockholder have agreed to indemnify the underwriters
against liabilities, including liabilities under the Securities Act and
liabilities arising from breaches of the representations and warranties
contained in the underwriting agreement, and to contribute to payments that the
underwriters may be required to make for these liabilities.
Until the distribution of the common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters
and selling group members to bid for and purchase shares of common stock. As an
exception to these rules, the representatives are permitted to engage in
transactions that stabilize the price of the common stock. These transactions
may consist of bids or purchases for the purposes of pegging, fixing or
maintaining the price of the common stock.
The underwriters may create a short position in the common stock in
connection with the offering, which means that they may sell more shares than
are set forth on the cover page of this prospectus. If the underwriters create
a short position, then the representatives may reduce that short position by
purchasing common stock in the open market. The representatives also may elect
to reduce any short position by exercising all or part of the over-allotment
option.
The representatives also may impose a penalty bid on underwriters and
selling group members. This means that, if the representatives purchase shares
of common stock in the open market to reduce the underwriters' short position
or to stabilize the price of the common stock, they may reclaim the amount of
the selling concession from the underwriters and selling group members that
sold those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of these purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the securities by purchasers
in an offering.
74
<PAGE>
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters makes any representation that the
representatives will engage in these transactions or that these transactions,
once commenced, will not be discontinued without notice.
Wit Capital, a member of the National Association of Securities Dealers,
Inc. will participate in the offering as one of the underwriters. The National
Association of Securities Dealers, Inc. approved the membership of Wit Capital
on September 4, 1997. Since that time, Wit Capital has acted as an underwriter,
co-manager or selected dealer in over 170 public offerings.
Entities affiliated with Draper Fisher Jurvetson, a stockholder of
ReleaseNow.com, are stockholders of Wit Capital. Other than this relationship
and its participation in this offering, Wit Capital has no relationship with
ReleaseNow.com or any of its founders or significant stockholders.
A prospectus in electronic format is being made available on an Internet Web
site maintained by Wit Capital. In addition, pursuant to an e-Dealer Agreement,
all dealers purchasing shares from Wit Capital in the offering similarly have
agreed to make a prospectus in electronic format available on Web sites
maintained by each of the e-Dealers.
Fidelity Capital Markets, a division of National Financial Services
Corporation, is acting as an underwriter in this offering, and will be
facilitating electronic distribution of information through the Internet,
intranet and other proprietary electronic technology.
Any offers in Canada will be made only under an exemption from the
requirements to file a prospectus in the relevant province of Canada in which
the sale is made.
Purchasers of the shares of common stock offered in this prospectus may be
required to pay stamp taxes and other charges under the laws and practices of
the country of purchase, in addition to the offering price listed on the cover
page of this prospectus.
The representatives have informed us that they do not intend to confirm the
sales of shares of common stock offered by this prospectus to any accounts over
which they exercise discretionary authority in excess of 5% of the shares
offered by them.
At our request, the underwriters have reserved up to shares of the
common stock offered by this prospectus for sale to our officers, directors,
employees and their family members and to our business associates at the
initial public offering price set forth on the cover page of this prospectus.
These persons must commit to purchase no later than the close of business on
the day following the date of this prospectus. The number of shares available
for sale to the general public will be reduced to the extent these persons
purchase the reserved shares.
75
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
shares of common stock offered hereby will be passed upon for ReleaseNow.com by
Brobeck, Phleger & Harrison LLP, Palo Alto, California. As of the date of this
prospectus, attorneys employed by Brobeck, Phleger & Harrison LLP and funds
associated with the firm beneficially own an aggregate of 52,625 shares of our
common stock. Pillsbury Madison & Sutro LLP, Palo Alto, California, is acting
as counsel for the underwriters in connection with various legal matters
relating to the shares of common stock offered by this prospectus.
EXPERTS
The financial statements of ReleaseNow.com as of December 31, 1998 and 1999
and for each of the three years in the period ended December 31, 1999 included
in this prospectus have been so included in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given upon the authority
of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act of 1933 with respect to the
shares to be sold in the offering. This prospectus, which is a part of the
registration statement, does not contain all of the information contained in
the registration statement. For further information with respect to
ReleaseNow.com and the shares to be sold in the offering, reference is made to
the registration statement and the exhibits and schedules filed with the
registration statement. However, statements contained in this prospectus as to
the contents of any contract, agreement or other document referred to are not
necessarily complete. As a result, you should refer to the copy of the
contract, agreement or other document filed as an exhibit to the registration
statement, each statement being qualified in all respects by this reference.
You may read and copy all or any portion of the registration statement or
any reports, statements or other information that we file at the Securities and
Exchange Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can request copies of these documents, upon payment
of a duplicating fee, by writing to the Securities and Exchange Commission.
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the operation of the public reference rooms. Our filings
with the Securities and Exchange Commission, including the registration
statement, are also available to you without charge on their Web site
(http://www.sec.gov).
This prospectus contains statistical data regarding Internet usage and other
industry estimates that we obtained from industry publications, including
reports generated by the International Data Corporation and The Gartner Group.
These industry publications generally indicate that they have obtained their
information from sources believed to be reliable, but we do not guarantee the
accuracy and completeness of their information and we have not independently
verified their data.
76
<PAGE>
RELEASENOW.COM CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants.......................................... F-2
Consolidated Balance Sheet................................................. F-3
Consolidated Statement of Operations....................................... F-4
Consolidated Statement of Stockholders' Equity............................. F-5
Consolidated Statement of Cash Flows....................................... F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
RELEASENOW.COM CORPORATION
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
ReleaseNow.com Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of
ReleaseNow.com at December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
San Jose, California
January 21, 2000
F-2
<PAGE>
RELEASENOW.COM CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Pro Forma
Stockholder's
December 31, Equity at
------------------ December 31,
1998 1999 1999
-------- -------- -------------
(unaudited)
<S> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents................... $ 3,198 $ 14,435
Accounts receivable, net of allowance of $72
and $89, respectively...................... 102 153
Short-term investments...................... 2,100 2,200
Other current assets........................ 208 365
-------- --------
Total current assets....................... 5,608 17,153
-------- --------
Property and equipment, net.................. 1,858 2,999
Acquired technology, net..................... -- 928
Other non-current assets..................... 294 769
-------- --------
$ 7,760 $ 21,849
======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable............................ $ 1,662 $ 3,440
Accrued liabilities......................... 490 1,676
Equipment loan, current..................... 205 58
Note payable, current....................... 150 160
Capital lease obligation, current........... -- 291
-------- --------
Total current liabilities.................. 2,507 5,625
Equipment loan............................... 58 --
Note payable................................. 342 182
Capital lease obligation..................... -- 679
-------- --------
2,907 6,486
-------- --------
Commitments (Note 13)
Stockholders' equity:
Convertible preferred stock, issuable in
series, $0.001 par value; 17,709,657 shares
authorized; 9,929,558 and 15,329,558 shares
issued and outstanding, respectively,
actual; 5,000,000 shares authorized, no
shares issued and outstanding, pro forma... 10 15 $ --
Common Stock, $0.001 par value; 32,290,343
shares authorized, actual; 2,272,457 and
5,497,467 shares issued and outstanding,
respectively, actual; 80,000,000 shares
authorized, 20,827,025 shares issued and
outstanding, pro forma (unaudited)......... 2 5 20
Additional paid-in capital.................. 19,805 56,799 56,799
Employee notes receivable................... -- (5,283) (5,283)
Unearned stock compensation................. (1,885) (3,740) (3,740)
Accumulated deficit......................... (13,079) (32,433) (32,433)
-------- -------- --------
Total stockholders' equity................. 4,853 15,363 $ 15,363
======== ======== ========
$ 7,760 $ 21,849
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
RELEASENOW.COM CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1997 1998 1999
--------- --------- ----------
<S> <C> <C> <C>
Net revenues................................ $ 2,349 $ 6,573 $ 12,749
Cost of net revenues........................ (1,899) (5,882) (11,083)
--------- --------- ----------
Gross profit................................ 450 691 1,666
Operating expenses:
Sales and marketing........................ 1,685 3,802 7,574
Product development and operations......... 1,305 3,216 5,946
General and administrative................. 1,049 1,432 2,902
Stock compensation expense................. 45 189 4,499
Amortization of acquired technology........ -- -- 382
--------- --------- ----------
Total operating expenses.................. 4,084 8,639 21,303
--------- --------- ----------
Loss from operations........................ (3,634) (7,948) (19,637)
Interest income............................. 85 230 453
Interest expense............................ (76) (60) (170)
Other loss.................................. -- (78) --
--------- --------- ----------
Net loss.................................... (3,625) (7,856) (19,354)
Deemed preferred stock dividend............. -- -- (3,840)
--------- --------- ----------
Net loss available to common stockholders... $ (3,625) $ (7,856) $ (23,194)
========= ========= ==========
Net loss per share available to common
stockholders:
Basic and diluted.......................... $ (2.83) $ (3.96) $ (8.24)
========= ========= ==========
Weighted average shares.................... 1,279,815 1,983,051 2,814,726
========= ========= ==========
Pro forma net loss per share available to
common stockholders:
Basic and diluted (unaudited).............. $ (1.59)
==========
Weighted average shares (unaudited)........ 14,567,298
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
RELEASENOW.COM CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock Additional Unearned Total
----------------- ----------------- Note Paid-In Stock Accumulated Stockholders'
Shares Amount Shares Amount Receivable Capital Compensation Deficit Equity
---------- ------ --------- ------ ---------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996.................. 4,202,854 $ 4 2,005,000 $ 2 $ -- $ 2,500 $ -- $ (1,598) $ 908
Issuance of common
stock subject to
repurchase............ -- -- 759,986 1 (51) 52 -- -- 2
Issuance of common
stock pursuant to
exercise of stock
options............... -- -- 19,166 -- -- 1 -- -- 1
Repurchase of common
stock................. -- -- (619,865) (1) 51 (42) -- -- 8
Stock compensation
expense............... -- -- -- -- -- 35 -- -- 35
Issuance of Series C
convertible preferred
stock at $1.868 per
share................. 2,944,460 3 -- -- -- 5,481 -- -- 5,484
Issuance of Series C
warrants.............. -- -- -- -- -- 13 -- -- 13
Net loss............... -- -- -- -- -- -- -- (3,625) (3,625)
---------- --- --------- --- ------- ------- ------- -------- --------
Balance at December 31,
1997.................. 7,147,314 7 2,164,287 2 -- 8,040 -- (5,223) 2,826
Issuance of common
stock subject to
repurchase............ -- -- 16,400 -- -- 3 -- -- 3
Issuance of common
stock pursuant to
exercise of stock
options............... -- -- 91,770 -- -- 6 -- -- 6
Repurchase of common
stock................. -- -- -- -- -- -- -- -- --
Issuance of Series D
convertible preferred
stock at $3.49 per
share................. 2,782,244 3 -- -- -- 9,682 -- -- 9,685
Unearned stock
compensation.......... -- -- -- -- -- 2,074 (2,074) -- --
Amortization of
unearned stock
compensation.......... -- -- -- -- -- -- 189 -- 189
Net loss............... -- -- -- -- -- -- -- (7,856) (7,856)
---------- --- --------- --- ------- ------- ------- -------- --------
Balance at December 31,
1998.................. 9,929,558 10 2,272,457 2 -- 19,805 (1,885) (13,079) 4,853
Issuance of common
stock subject to
repurchase............ -- -- 2,518,893 3 (5,211) 5,208 -- -- --
Stock compensation
expense............... -- -- -- -- 2,313 -- -- 2,313
Issuance of common
stock pursuant to
exercise of stock
options............... -- -- 406,117 -- (110) 237 -- -- 127
Repayments of
stockholder notes
receivable............ -- -- -- -- 38 -- -- -- 38
Issuance of Series E
convertible preferred
stock at $4.00 per
share................. 3,000,000 3 -- -- -- 11,929 -- -- 11,932
Issuance of Series F
convertible preferred
stock at $5.00 per
share................. 2,400,000 2 -- -- -- 11,998 -- -- 12,000
Issuance of Series D
warrants.............. -- -- -- -- -- 38 -- -- 38
Issuance of Series F
warrants.............. -- -- -- -- -- 30 -- -- 30
Issuance of common
stock in conjunction
with the purchase of
Client Server
Designs............... -- -- 300,000 -- -- 1,200 -- -- 1,200
Allocation of discount
on preferred stock.... -- -- -- -- -- 3,840 -- -- 3,840
Deemed preferred stock
dividend.............. -- -- -- -- -- (3,840) -- -- (3,840)
Unearned stock
compensation.......... -- -- -- -- -- 4,041 (4,041) -- --
Amortization of
unearned stock
compensation.......... -- -- -- -- -- -- 2,186 -- 2,186
Net loss............... -- -- -- -- -- -- -- (19,354) (19,354)
---------- --- --------- --- ------- ------- ------- -------- --------
Balance at December 31,
1999.................. 15,329,558 $15 5,497,467 $ 5 $(5,283) $56,799 $(3,740) $(32,433) $ 15,363
========== === ========= === ======= ======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
RELEASENOW.COM CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.......................................... $(3,625) $(7,856) $(19,354)
Adjustments to reconcile net loss to net cash used
in operating activities:
Allowance for doubtful accounts.................. -- 72 17
Loss on abandonment of fixed asset............... -- 78 --
Depreciation and amortization.................... 188 549 1,592
Warrant expenses................................. 13 -- 68
Stock compensation expense....................... 45 189 4,499
Changes in assets and liabilities, excluding
effect of acquisition:
Accounts receivable.............................. (122) (26) (68)
Other current assets............................. 165 (174) (157)
Other assets..................................... (120) (175) (147)
Accounts payable................................. 310 1,193 1,778
Accrued liabilities.............................. 247 231 858
------- ------- --------
Net cash used in operating activities............ (2,899) (5,919) (10,914)
------- ------- --------
Cash flows from investing activities:
Purchase of short-term investments................ -- (2,100) (2,200)
Sale of short-term investments.................... -- -- 2,100
Purchase of property and equipment, net........... (979) (1,486) (2,278)
Cash used in acquisition of Client Server Designs,
Inc.............................................. -- -- (183)
------- ------- --------
Net cash used in investing activities............ (979) (3,586) (2,561)
------- ------- --------
Cash flows from financing activities:
Proceeds from issuance of convertible preferred
stock, net of issuance costs..................... 5,484 9,685 23,932
Proceeds from (repayment of) related party note
payable.......................................... (13) (35) --
Proceeds from equipment loan...................... 398 -- --
Repayment of equipment loan....................... (151) (212) (205)
Proceeds from notes payable....................... -- 492 --
Repayment of notes payable........................ -- -- (150)
Proceeds from line of credit...................... 300 -- --
Repayments on line of credit...................... (300) -- --
Proceeds from capital leases...................... -- -- 1,089
Repayment of capital lease obligations............ -- -- (119)
Repayment of stockholder notes.................... -- -- 38
Proceeds from issuance of common stock............ -- -- 127
------- ------- --------
Net cash provided by financing activities........ 5,718 9,930 24,712
------- ------- --------
Increase in cash and cash equivalents............. 1,840 425 11,237
Cash and cash equivalents at beginning of period.. 933 2,773 3,198
------- ------- --------
Cash and cash equivalents at end of period........ $ 2,773 $ 3,198 $ 14,435
======= ======= ========
Supplemental cash flow information:
Cash paid for interest............................ $ 43 $ 35 $ 118
Supplemental disclosure on non-cash investing and
financing activities:
Issuance of restricted common stock in exchange
for services..................................... $ 2 $ -- --
Issuance of restricted common stock pursuant to
the exercise of options in exchange for note
receivable....................................... $ 51 $ -- $ 5,210
Repurchase of restricted common stock pursuant to
cancellation of note receivable.................. $ (42) $ -- $ --
Issuance of common stock pursuant to the exercise
of options in exchange for employee receivable... $ -- $ 9 $ 111
Issuance of employee receivable to employees for
taxable stock compensation....................... $ -- $ -- $ 328
Issuance of common stock for acquisition of Client
Server Designs, Inc.............................. $ -- $ -- $ 1,200
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
RELEASENOW.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
ReleaseNow.com Corporation (the "Company") is a provider of outsourced e-
commerce solutions for the marketing, sale and delivery of software and other
digital goods over the Internet. To date, the Company's solutions have been
focused on selling software through its software publishers' and online
retailers' Web sites. More recently, the Company has extended its service
offerings to include an e-commerce infrastructure to enable deployment of
stores on the Internet. The Company was incorporated in Delaware in March 1994.
Principles of consolidated and basis of presentation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, ReleaseNow.com Canada, Inc. All significant
intercompany balances and transactions have been eliminated in consolidation.
Use of estimates
The preparation of consolidated 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 consolidated
financial statements and reported amounts of revenues and expenses during the
reporting period. Such estimates include the allowance for doubtful accounts,
the economic life of the intangible assets, the valuation of deferred tax
assets and the value of the Company's common stock. Actual results could differ
from those estimates.
Revenue recognition
The Company derives its revenue primarily from sales of third-party
software. The Company recognizes the full sales amount as revenue for product
sales in which the Company is responsible for processing the order, performing
credit authorization procedures, delivering the product and collecting the
proceeds from the sale. The Company assumes credit risk with respect to the
customers and is responsible for returns. The Company provides for estimated
returns at the time of delivery based upon historical data.
For transactions in which the Company's role is limited to providing
processing services and the Company is not responsible for collecting the
proceeds from the sale, the Company recognizes the net processing fees as
revenue upon delivery of the product. Net processing fee revenue has not been
significant to date.
Cash and cash equivalents
All highly liquid investments with a maturity of three months or less from
their date of purchase are considered to be cash equivalents.
Restricted cash
At December 31, 1999, the Company had a cash balance totaling $382,000 in
the form of certificates of deposit which were restricted from withdrawal. An
amount of $132,000 served as collateral to letters issued by the bank to the
Company's lessors as security deposits on long term leases and is included in
other non-current assets. The remaining $250,000 was held by the bank to serve
as collateral for charge-backs to the Company's merchant account, and is
included in cash and cash equivalents.
F-7
<PAGE>
RELEASENOW.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Short-term investments
The Company's short-term investments consist of debt securities with
maturities greater than three months at the time of issuance. The Company
classifies all short-term investments as available-for-sale in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS No. 115"). Accordingly, the
Company's short-term investments are carried at fair value as of the balance
sheet date. Unrealized gains and losses are reported net of related taxes as a
separate component of stockholder's equity. Additionally, the cost of
securities to be sold is based upon the specific identification method. At
December 31, 1998 and 1999, amortized cost approximated fair value and
unrealized gains and losses were insignificant.
The portfolio of short-term investments (including cash and cash
equivalents) consisted of the following:
<TABLE>
<CAPTION>
December 31,
--------------
1998 1999
------ -------
(in thousands)
<S> <C> <C>
Cash......................................................... $ 400 $ 22
Money market and money funds................................. 1,548 14,163
Certificates of deposits..................................... -- 250
Commercial paper............................................. 1,250 --
Bonds........................................................ 2,100 2,200
------ -------
$5,298 $16,635
====== =======
</TABLE>
Concentration of credit risk
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash, cash equivalents, accounts
receivable and short-term investments. The Company's cash and cash equivalents
are invested in high credit quality financial institutions. The Company's
accounts receivable are primarily derived from software sales from customers
located in the United States, Canada and Europe. International sales accounted
for approximately 40% and 39% of total net revenues for the years ended
December 31, 1998 and 1999, respectively. The Company maintains reserves for
potential credit losses; historically such losses have not been significant
and within management's expectations.
The following table summarizes the revenue from customers in excess of 10%
of total revenue:
<TABLE>
<CAPTION>
December 31,
----------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Company A..................................................... 20% 10% --
Company B..................................................... 17% -- --
Company C..................................................... -- 34% 57%
Company D..................................................... -- 11% --
Company E..................................................... -- -- 16%
</TABLE>
At December 31, 1998, one customer represented 21% of gross accounts
receivable. At December 31, 1999, one customer represented 16% of gross
accounts receivable.
Fair value of financial instruments
The Company's financial instruments, including cash and cash equivalents,
short-term investments, accounts receivable and accounts payable are carried
at cost, which approximates their fair value because of the
F-8
<PAGE>
RELEASENOW.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
short-term maturity of these instruments. The equipment loan and notes payable
are also carried at cost which approximate their fair value because the
implicit rates for these instruments approximate prevailing market rates.
Advertising costs
Advertising costs are recorded as an expense when incurred. The following
table sets forth advertising costs (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------
1997 1998 1999
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Advertising costs................................................ $206 $203 $323
</TABLE>
Product development and operations
Product development and operations expenses include expenses incurred to
develop, enhance, manage, monitor and operate the Company's electronic software
distribution systems. Effective January 1, 1999, the Company adopted the
provisions of Statement of Position No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP No. 98-1"). In
accordance with SOP No. 98-1, the costs to develop and enhance the Company's
electronic distribution systems incurred during the preliminary project stage
and the post implementation stage are expensed as incurred. Costs incurred
during the application and development stage, such as costs incurred in
connection with software configuration, development of interfaces, coding and
testing are capitalized and amortized on a straight-line basis-line over the
estimated periods of benefit, which is 2 years.
Property and equipment
Property and equipment including leasehold improvements, are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, generally three to five years, or the lease term of
the respective asset, whichever is shorter.
Intangible assets
Intangible assets resulting from the acquisition of Client Server Designs,
Inc. ("CSD") were estimated by management to be primarily associated with the
acquired technology (see Note 2). The recorded acquired technology is amortized
on a straight-line basis over the estimated periods of benefit, which is 2
years.
Impairment of long-lived assets
The Company evaluates the recoverability of its intangible assets in
accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of" ("SFAS No. 121"). SFAS No. 121 requires the Company to
review for impairment of long-lived assets and certain intangible assets
whenever events or changes in circumstances indicate that the carrying amount
of an asset might not be recoverable. When such an event occurs, the Company
estimates the future cash flows expected to result from the use of the asset
and its eventual disposition. If the undiscounted expected future cash flows
are less than carrying the amount of the asset, an impairment loss is
recognized. The Company has not identified any such impairment losses.
F-9
<PAGE>
RELEASENOW.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Stock-based compensation
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB No. 25") and Financial
Accounting Standards Board Interpretation No. 28, "Accounting for Stock
Appreciation Rights and Other Variable Stock Option or Award Plans," ("FIN No.
28") and complies with the disclosure provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"). Under APB No. 25, compensation expense is based on the difference,
if any, on the date of the grant, between the fair value of the Company's stock
and the exercise price. SFAS No. 123 defines a "fair value" based method of
accounting for an employee stock option or similar equity investment. The pro
forma disclosures of the difference between compensation expense included in
net loss and the related cost measured by the fair value method are presented
in Note 9. The Company accounts for equity instruments issued to non-employees
in accordance with the provisions of SFAS No. 123 and Emerging Issues Task
Force No. 96-18, "Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling Goods or Services"
("EITF 96-8").
Stock split
In December 1996, the Board of Directors authorized a two-for-one share
split of the Company's common stock and preferred stock. All references in the
consolidated financial statements to the number of shares and per share amounts
of the Company's common stock and preferred stock have been retroactively
restated to reflect the increased number of common stock and preferred stock.
Pro forma stockholders' equity (unaudited)
Upon consummation of the offering, the conversion rate for all outstanding
shares of Series A, Series B, Series C, Series D, Series E and Series F
preferred stock will be a ratio of one share of common stock for each share of
preferred stock. Simultaneously, the shares of preferred stock will convert
into shares of common stock at such one-for-one conversion rate. The pro forma
effects of these transactions are unaudited and have been reflected in the
accompanying pro forma Stockholders' Equity at December 31, 1999.
Net loss per share
The Company computes net loss per share available to common stockholders in
accordance with Statement of Financial Accounting Standards No. 128, "Earnings
per Share" ("SFAS No. 128") and SEC Staff Accounting Bulletin No. 98 ("SAB
98"). Under the provisions of SFAS No. 128 and SAB 98, basic and diluted net
loss per share available to common stockholders is computed by dividing the net
loss available to common stockholders for the period by the weighted average
number of common shares outstanding during the period. The calculation of
diluted net loss per share available to common stockholders excludes potential
common stock if the effect is anti-dilutive. Potential common shares are
comprised of unvested restricted common stock, incremental common shares
issuable upon the exercise of stock options and warrants and upon conversion of
Series A, Series B, Series C, Series D, Series E and Series F convertible
preferred stock. For the year ended December 31, 1999, net loss per share
available to common stockholders includes a charge of $3,840,000 to reflect the
deemed preferred stock dividend recorded in connection with the Series F
financing.
Income taxes
Income taxes are accounted for using an asset and liability approach, which
requires the recognition of taxes payable or refundable for the current year
and deferred tax liabilities and assets for the future tax consequences of
events that have been recognized in the Company's consolidated financial
statements or tax
F-10
<PAGE>
RELEASENOW.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
returns. The measurement of current and deferred tax liabilities and assets are
based on provisions of the enacted tax law; the effects of future changes in
tax laws or rates are not anticipated. The measurement of deferred tax assets
is reduced, if necessary, by the amount of any tax benefits that, based on
available evidence, are not expected to be realized.
The Company elected to be taxed as a Subchapter S Corporation from its
inception through February 28, 1996, whereby the tax effects of the Company's
activities were accrued directly to its stockholders. Effective March 1, 1996,
the Company elected to terminate its status as a Subchapter S Corporation for
income tax purposes. As a result, deferred income taxes were established on the
date the Subchapter S Corporation status was terminated. Additionally, the
Company offset its accumulated deficit on the date of Subchapter S election
termination against its additional paid-in-capital as reflected in the
statement of changes in Stockholders' Equity.
Segment information
Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 131, "Disclosure about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). The Company identifies
its operating segments based on business activities, management responsibility
and geographical location. The Company has organized its operations in a single
operating segment providing e-commerce solutions enabling the instant delivery
of digital goods over the Internet.
Comprehensive income
Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS No. 130"). SFAS No. 130 establishes standards for reporting
comprehensive income and its component in consolidated financial statements.
Comprehensive income, as defined, includes all changes in equity (net assets)
during a period from non-owner sources. To date, the Company has not had any
significant transactions that are required to be reported in comprehensive
income.
New accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes a new model for
accounting for derivatives and hedging activities and supercedes and amends a
number of existing accounting standards. SFAS No. 133 requires that all
derivatives be recognized in the balance sheet at their fair market value and
the corresponding derivative gains or losses be either reported in the
statement of operations or as a deferred item depending on the type of hedge
relationship that exists with respect to such derivatives. In July 1999, the
Financial Accounting Standards Board issued SFAS No. 137 "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date
of FASB statement No. 133" ("SFAS No. 137"). SFAS No. 137 deferred the
effective date until the first quarter ending June 30, 2000. The Company will
adopt SFAS No. 133 in its quarter ending June 30, 2000 and does not expect the
adoption of this pronouncement to have a material impact on its financial
condition or results of operations.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition," which
provides guidance on the recognition, presentation, and disclosure of revenue
in financial statements filed with the SEC. SAB 101 outlines the basic criteria
that must be met to recognize revenue and provides guidance for disclosures
related to revenue recognition policies. Management believes that the impact of
SAB 101 would have no material effect on the financial position or results of
operations of the Company.
F-11
<PAGE>
RELEASENOW.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 2--ACQUISITION
As discussed in Note 1, the Company completed the acquisition of all
outstanding capital stock of CSD. The transaction was completed pursuant to the
Agreement and Plan of Reorganization, dated as of May 18, 1999 among the
Company, CSD and certain shareholders of CSD. Through this acquisition, the
Company acquired a proprietary software tool which allows for systematic
application development, rapid interactive design cycles and integration of
third-party technologies. The acquisition was accounted for using the purchase
method of accounting and accordingly, the net assets acquired and results of
operations of CSD have been included in the Company's consolidated financial
statements since the acquisition date. The total purchase price of $1,239,000
consisted of 300,000 shares of the Company's common stock valued at $1,200,000
and other acquisition related expenses totaling approximately $39,000. The
total purchase price was allocated to assets acquired, including tangible and
intangible assets, and liabilities assumed, based on their respective estimated
fair values at the acquisition date. The total purchase price was allocated as
follows (in thousands):
<TABLE>
<S> <C>
Fair value of tangible assets........................................ $ 73
Acquired technology.................................................. 1,310
Fair value of liabilities assumed.................................... (144)
------
$1,239
======
</TABLE>
The acquisition was structured as a tax-free exchange of stock, and
therefore, the differences between the recognized fair values of acquired net
assets, and their historical tax bases are not deductible for tax purposes.
Accordingly, a deferred tax liability has been recognized for the difference
between the assigned value of intangible assets for book purposes and the tax
basis of such assets in accordance with Statement of Accounting Standards No.
109, "Accounting for Income Taxes."
The following table presents the unaudited pro forma net revenues and net
loss available to common stockholders for the years ended December 31, 1998 and
1999 as if the acquisition had been consummated as of January 1, 1998:
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------------
1998 1999
--------- ---------
(in thousands,
except share
per share amounts)
<S> <C> <C>
Net revenue........................................... $ 6,940 $ 12,762
Net loss available to common stockholders............. (8,124) (23,265)
Net loss per share available to common stockholders
Basic and diluted................................... (3.56) (7.95)
Weighted average shares............................. 2,283,051 2,928,151
</TABLE>
The unaudited pro forma results of operations do not necessarily reflect the
results that would have occurred had the acquisition occurred at the beginning
of the period presented or the results which may occur in the future.
F-12
<PAGE>
RELEASENOW.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 3--DETAILS OF BALANCE SHEET COMPONENTS
<TABLE>
<CAPTION>
December 31,
---------------
1998 1999
------ -------
(in thousands)
<S> <C> <C>
Property and equipment:
Equipment.................................................. $1,624 $ 3,085
Furniture and fixtures..................................... 182 349
Leasehold improvements..................................... 94 119
Software................................................... 724 1,408
------ -------
2,624 4,961
Less: Accumulated depreciation and amortization .......... (766) (1,962)
------ -------
$1,858 $ 2,999
====== =======
Intangible assets:
Acquired technology........................................ $ -- $ 1,310
Less: Accumulated amortization............................ -- (382)
------ -------
$ -- $ 928
====== =======
Accrued liabilities:
Accrued bonuses............................................ $ 172 $ 365
Accrued sales commission................................... 63 266
Accrued vacation........................................... 129 210
Accrued interest........................................... 62 46
Accrued legal and audit expenses........................... -- 295
Other...................................................... 64 494
------ -------
$ 490 $ 1,676
====== =======
</TABLE>
NOTE 4--RELATED PARTY TRANSACTIONS
From inception (March 1994), through early 1996, two of the Company's
significant stockholders provided certain advances to the Company for working
capital and property and equipment purchases totaling $55,000. In February
1996, the stockholders converted approximately $8,000 of such advances into
1,498,000 shares of restricted common stock. The Company entered into note
agreements with the stockholders for the remaining amounts due. The notes bore
interest at 5.32% per annum with principal and interest. One note was repaid in
1997 for an amount of $13,000. The remaining note, which totaled $35,000 at
December 31, 1997, was repaid in full during 1998.
NOTE 5--BORROWINGS
Equipment loan
In June 1996, the Company obtained a capital equipment financing line (the
"Equipment Loan") which provides for the purchase of fixed assets of up to
$1,000,000. The Equipment Loan bears interest at 8% per annum with an
additional 1% commitment fee on borrowing up to a maximum of $10,000.
Additionally, upon execution of a draw-down, the Company is committed to an
additional interest payment in the amount of 12% of the draw-down amount. The
additional interest is due as a final payment at the end of the term of each
borrowing under the line. Additional interest totaled $62,000 and $46,000 at
December 31, 1998 and 1999, respectively. The Company is required to repay the
borrowings in equal monthly installments of principal plus
F-13
<PAGE>
RELEASENOW.COM CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
interest over a 36 monthly period. The Company is required to maintain certain
reporting and non financial covenants. At December 31, 1997 and 1998, the
Company was in default of the reporting covenants for which waivers were
obtained. The loan is collateralized by all of the Company assets, excluding
intellectual property.
Note payable
In 1998, the Company entered into a note agreement with a bank for $492,000
to finance the purchase of software equipment. Borrowings under the note are
repayable in quarterly installments of $49,525 with the remaining balance due
October 1, 2001. The note bears interest at 13.602% per annum. The note is
collateralized by the software.
Future maturities for the note payable and the Equipment Loan as of
December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000.............................................................. $218,000
2001.............................................................. 182,000
--------
$400,000
========
</TABLE>
NOTE 6--INCOME TAXES
The Company elected to be taxed as a Subchapter S Corporation from its
inception through February 28, 1996. Upon termination of its Subchapter S
Corporation status, the Company established deferred tax assets for the tax
effect of the cumulative difference between book and tax basis of assets and
liabilities. The net deferred tax assets at that date was fully off-set by a
valuation allowance as there was no carry-back potential and ultimate
realization was uncertain. The statement of operations and the effective tax
rate for the year ended December 31, 1996 would not have been different if the
Company had been a C Corporation for the twelve months ended December 31, 1996
because the Company was in a loss position in 1996. Accordingly, no pro forma
information has been provided. Significant components of the Company's
deferred tax assets were as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1998 1999
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Net operating loss carryforwards................. $ 1,973 $ 4,707 $ 10,659
Depreciation and amortization.................... -- (25) (198)
Accruals and reserves............................ 37 93 122
Purchased technology, net........................ -- -- (371)
------- ------- --------
Total deferred tax assets........................ 2,010 4,775 10,212
Valuation allowance.............................. (2,010) (4,775) (10,212)
------- ------- --------
Net deferred tax assets.......................... $ -- $ -- $ --
======= ======= ========
</TABLE>
At December 31, 1999, the Company had approximately $28,000,000 of federal
and $14,700,000 of state net operating loss carryforwards available to offset
future taxable income which expire in varying amounts beginning in 2011 and
2002 for federal and state, respectively. Under the Tax Reform Act of 1986,
the amounts of benefits from net operating loss carryforwards may be impaired
or limited in certain circumstances. Events which cause limitations in the
amount of net operating losses that the Company may utilize in any one year
include, but are not limited to, a cumulative ownership change of more than
50%, as defined, over a three year period.
F-14
<PAGE>
RELEASENOW.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 7--CONVERTIBLE PREFERRED STOCK
The Company's Certificate of Incorporation, as amended, authorized
17,709,657 shares of convertible preferred stock. Convertible preferred stock
at December 31, 1999 consists of the following:
<TABLE>
<CAPTION>
Shares Proceeds Net
Date of ---------------------- Liquidation of Issuance
Series Issuance Authorized Outstanding Amount Costs
------ ------------- ---------- ----------- ----------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
A............. February 1996 2,042,000 2,000,000 $ 1,000 $ 991
B............. November 1996 2,272,854 2,202,854 1,542 1,521
C............. July 1997 2,957,843 2,944,460 5,500 5,484
D............. June 1998 2,936,960 2,782,244 9,710 9,685
E............. May 1999 3,000,000 3,000,000 12,000 11,932
F............. December 1999 4,500,000 2,400,000 12,000 12,000
---------- ---------- ------- -------
17,709,657 15,329,558 $41,752 $41,613
========== ========== ======= =======
</TABLE>
The holders of preferred stock have various rights and preferences as
follows:
Voting
Each share of Series A, B, C, D, E and F has voting rights equal to an
equivalent number of shares of common stock into which it is convertible.
Dividends
Holders of Series A, B, C, E and F convertible preferred stock are entitled
to receive non cumulative dividends of $0.040, $0.056, $0.149, $0.32 and $0.40
per share, respectively, when and if declared by the Board of Directors.
Holders of Series D convertible preferred stock are entitled to receive
cumulative dividends at $0.279 per share, when and if declared by the Board of
Directors. The holders of Series D, Series E and Series F convertible preferred
stock are also entitled to receive dividends on common stock, when and if
declared by the Board of Directors, based on the number of shares of common
stock held, assuming conversion of all preferred shares into common stock on an
as-if converted basis. No dividends have been declared to date.
Liquidation
In the event of any liquidation, or sale of the Company, the holders of
Series D, E and F convertible preferred stock are entitled to receive an amount
of $3.49, $4.00 and $5.00 per share, respectively, plus all accrued but unpaid
dividends, prior to and in preference to any distributions to Series A, Series
B and Series C convertible preferred stock. In the event funds are sufficient
to make a complete distribution to the holders of Series D, E and F, the
holders of Series A, B and C convertible preferred stock are entitled to
receive $0.50, $0.70 and $1.868 per share, respectively, plus any declared but
unpaid dividends, prior to and in preference to any distribution to the holders
of common stock.
If a liquidation, dissolution, merger or acquisition occurs prior to January
31, 2001, the remaining assets after the aforementioned distribution, if any,
shall be distributed among the holders of Series A, B, C, D, E and F preferred
stock and common stock pro rata based on the number of common stock held by
each, (assuming conversion of all such preferred stock).
If a liquidation or dissolution occurs on or subsequent to January 31, 2001,
the remaining assets after the aforementioned distributions, if any, shall be
distributed among the holders of Series D, E and F preferred stock and common
stock pro rata based on the number of shares of stock held by each holder
(assuming conversion of all such preferred stock).
F-15
<PAGE>
RELEASENOW.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Conversion
Each share of Series A, B, C, D, E and F convertible preferred stock is
convertible into one share of common stock, subject to adjustment for
dilution. Such conversion is automatic upon either the completion of a public
offering of common stock for which the aggregate proceeds exceed $15,000,000
and a per share price of $6.00, the completion of a public offering of common
stock for which the aggregate proceeds exceed $15,000,000 and a per share
price of $4.80 and consent of at least 70% of the then outstanding preferred
stock or by the consent of the holders of 70% of the then outstanding
convertible preferred stock and 50% of the then outstanding Series D, E and F
preferred stock.
NOTE 8--COMMON STOCK
The Company's Certificate of Incorporation, as amended, authorizes the
Company to issue 32,290,343 shares of common stock. The Company has the right
to repurchase, at the original issue price, a declining percentage of certain
of the shares of common stock issued to the individuals under written
agreements with such individuals. Shares subject to repurchase totaled 51,564
and 1,573,872 as of December 31, 1998 and 1999, respectively.
In 1997, the Company entered into several severance agreements with
employees who were also stockholders. Under these agreements, the Company
waived its rights to repurchase a total of 771,621 shares of which 270,216
shares were not vested at the termination date and permitted accelerated
vesting of the shares. Accordingly the Company recognized additional
compensation expense of approximately $35,000 as of December 31, 1997.
In 1999, the Company entered into a severance agreement with an employee
who was also a stockholder. Under the severance agreement, the Company
permitted the accelerated vesting of a total of 57,125 unvested options.
Accordingly, the Company recognized additional compensation expense of
approximately $222,000. Additionally, the Company permitted the accelerated
vesting of a total of 494,801 options as part of the transition of the
Company's Chief Executive Officer to Chairman of the Board. Additional
compensation expense of $1,958,000 was recognized at December 31, 1999.
At December 31, 1999, the Company had reserved shares of common stock for
future issuance as follows:
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Conversion of Series A preferred stock.......................... 2,042,000
Conversion of Series B preferred stock.......................... 2,272,854
Conversion of Series C preferred stock.......................... 2,957,843
Conversion of Series D preferred stock.......................... 2,936,960
Conversion of Series E preferred stock.......................... 3,000,000
Conversion of Series F preferred stock.......................... 4,500,000
Exercise of options under stock option plans.................... 3,956,575
----------
21,666,232
==========
</TABLE>
Preferred Stock Warrants
In connection with the Equipment Loan, the Company issued warrants to
purchase 42,000 and 70,000 shares of Series A and Series B preferred stock,
respectively, at $0.50 and $0.70 per share, respectively. The warrants expire
seven years from the date of issuance. The fair market value of the warrants
on the issuance date was approximately $16,000 and $38,000 as determined using
the Black-Scholes option pricing model and is recognized as additional
interest expense over the term of the equity financing line.
F-16
<PAGE>
RELEASENOW.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In connection with the Equipment Loan and the capital lease line ("Lease
Line"), the Company issued a warrant to purchase 13,383 shares of Series C
preferred stock at $1.868 per share, a warrant to purchase 12,283 shares of
Series D preferred stock at $3.75 per share and a warrant to purchase 8,625
shares of Series F preferred stock at $4.00 per share, respectively. The
warrants expire five years and seven years from the date of issuance,
respectively. The fair market value of the warrants on the issuance date was
$13,000, $38,000 and $30,000, respectively, as determined using the Black-
Scholes option pricing model and is recognized as interest expense over the
terms of the Equipment Loan and Lease Line.
The Company estimated the fair value of each warrant using the Black-Sholes
option pricing model using the following assumptions:
<TABLE>
<CAPTION>
Year Ended
December 31,
------------------
1997 1998 1999
---- ---- --------
<S> <C> <C> <C>
Risk-free interest rate................................. 6.7% 5.9% 5.7-6.2%
Expected lives.......................................... term term term
Dividend yield.......................................... 0.0 0.0 0.0
Expected volatility..................................... 80% 80% 80%
</TABLE>
NOTE 9--STOCK OPTION PLANS
The Company has two stock option plans, the 1996 Stock Plan ("1996 Plan")
and the 1998 Stock Option/Stock Issuance Plan ("1998 Plan"). The Plans provide
for the granting of stock options to employees, officers, non-employees, Board
members and consultants of the Company. Options granted under the Plans may be
either incentive stock options or nonstatutory stock options. Incentive stock
options ("ISO") may be granted only to Company employees, officers, non-
employees, Board members and officers. Nonqualified stock options ("NSO") may
be granted to Company employees and consultants. The Company has reserved
7,225,292 shares of common stock for issuance under the Plans.
Options under the Plans may be granted for periods of up to ten years and at
prices no less than 85% of the estimated fair value of the shares on the date
of grant as determined by the Board of Directors, provided, however, that (i)
the exercise price of an ISO and NSO shall not be less than 100% and 85% of the
estimated fair value of the shares on the date of grant, respectively, and (ii)
the exercise price of an ISO and NSO granted to a 10% shareholder shall not be
less than 110% of the estimated fair value of the shares on the date of grant,
respectively. Options granted under the Plans vest at a rate of at least 20%
per year over no more than five years from the date the option is granted with
the initial vesting to occur no later than one year after the option grant
date. In the event that any of the shares issued upon exercise of an option is
subject to a right of repurchase in the Company's favor, such a repurchase
right shall lapse at the rate of at least 20% per year over five years (1996
Plan) and 25% per year over four years (1998 Plan) from the date the option is
granted.
F-17
<PAGE>
RELEASENOW.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table summarizes activity under the Plans for the years ended
December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
Options Outstanding
--------------------
Weighted
Options Average
Available Exercise
for Grant Shares Price
---------- ---------- --------
<S> <C> <C> <C>
Balance at December 31, 1996................ 768,000 227,000 $0.05
Additional shares authorized................ 720,236 -- --
Options granted at fair value............... (1,499,351) 1,499,351 0.09
Options exercised........................... -- (779,152) 0.07
Options canceled............................ 139,334 (139,334) 0.05
Options repurchased......................... 548,615 -- --
---------- ---------- -----
Balance at December 31, 1997................ 676,834 807,865 0.10
Additional shares authorized................ 1,555,056 -- --
Options granted at fair value............... (210,000) 210,000 0.33
Options granted below fair value............ (2,077,293) 2,077,293 1.60
Options exercised........................... -- (108,170) 0.09
Options canceled............................ 411,607 (411,607) 0.44
---------- ---------- -----
Balance at December 31, 1998................ 356,204 2,575,381 1.27
Additional shares authorized................ 3,950,000 -- --
Options granted below fair value............ (3,201,500) 3,201,500 2.62
Options exercised........................... -- (2,925,010) 1.86
Options canceled............................ 808,589 (808,589) 1.31
---------- ---------- -----
Balance at December 31, 1999................ 1,913,293 2,043,282 $2.53
========== ========== =====
</TABLE>
The following table summarizes information about stock options outstanding
and stock options vested and exercisable at December 31, 1999:
<TABLE>
<CAPTION>
Options
Options Outstanding Vested and
at December 31, 1999 Exercisable
--------------------- -----------
Weighted
Average
Remaining
Number Contractual
of Life Number of
Exercise Prices Shares (years) Shares
--------------- --------- ----------- -----------
<S> <C> <C> <C>
$0.07...................................... 57,000 7.5 35,185
0.18...................................... 33,021 7.9 15,624
0.50...................................... 31,667 8.3 9,167
0.75...................................... 10,834 8.5 1,979
1.75...................................... 752,760 9.1 57,626
2.50...................................... 546,000 9.5 --
4.00...................................... 612,000 9.7 6,249
--------- --- -------
2,043,282 9.3 125,830
========= === =======
</TABLE>
F-18
<PAGE>
RELEASENOW.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Fair value disclosures
Had compensation cost for the Company's stock-based compensation plan been
determined based on the fair value at the grant dates for the awards under a
method prescribed by SFAS No. 123, the Company's net loss would have been
increased to the pro forma amounts indicated below (in thousands, except per
share data):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Net loss available to common stockholders:
As reported................................... $(3,625) $(7,856) $(19,354)
======= ======= ========
Pro forma..................................... $(3,634) $(7,911) $(20,227)
======= ======= ========
Net loss per share available to common
stockholders:
As reported................................... $ (2.83) $ (3.96) $ (8.24)
======= ======= ========
Pro forma..................................... $ (2.84) $ (3.99) $ (7.19)
======= ======= ========
</TABLE>
The pro forma amounts reflect compensation expense related to 1997, 1998 and
1999 stock option grants only. In future years, the annual compensation expense
will increase relative to the fair value of the stock options granted in those
future years. The weighted average fair value of the options granted in 1997,
1998 and 1999 represented $0.02, $1.24 and $1.97, respectively.
The Company calculated the fair value of each option grant on the date of
grant using the minimum-value method with the following assumptions:
<TABLE>
<CAPTION>
Year Ended
December 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rates.......................... 6.0-6.5% 4.3-5.6% 5.0-6.3%
Expected lives (in years)......................... 4.0 4.0 4.0
Dividend yield.................................... 0.0% 0.0% 0.0%
Expected volatility............................... 0.0% 0.0% 0.0%
</TABLE>
Because the determination of the fair value of all options granted after the
Company becomes a public entity will include an expected volatility factor in
addition to the factors described in the preceding paragraph and because
additional option grants are expected to be made each year, the above pro forma
disclosures are not representative of the pro forma effects of option grants on
reported net loss for future years.
Stock-based compensation
In connection with certain stock option grants during the years ended
December 31, 1998 and 1999, the Company recognized unearned compensation
totaling $2,074,000 and $4,041,000, respectively, which is being recognized
over the vesting periods of the related options, generally four years, using an
appropriate accelerated method. Amortization expense recognized during the
years ended December 31, 1998 and 1999 totaled approximately $189,000 and
$2,186,000, respectively.
F-19
<PAGE>
RELEASENOW.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
If the stock based compensation for the year ended December 31, 1998 and
1999 allocated across the relevant function expense categories within operating
expenses, it would be allocated as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended
December 31,
---------------------
1998 1999
---------- ----------
<S> <C> <C>
Sales and marketing................................... $ 42,000 $ 677,000
Product development and operations.................... 89,000 700,000
General and administrative............................ 58,000 809,000
---------- ----------
$ 189,000 $2,186,000
========== ==========
</TABLE>
The Company recorded $62,000 of stock-based compensation expense for the
fair value for options granted to non-employees during the year ended December
31, 1999. The fair value of the options granted to non-employees was determined
using the Black-Scholes option pricing model, assuming a weighted average risk-
free rate of 5.73%, the term life of the options is 10 years and a price
volatility of 80%. No dividend yield was assumed as the Company has not paid
dividends and has no intention to do so.
NOTE 10--EMPLOYEE BENEFIT PLANS
Effective January 1, 1997, the Company adopted its 401(k) Profit Sharing
Plan (the "Plan"). All full-time employees who are at least 21 years old and
have completed three months of service are eligible to participate in the Plan.
Participants may contribute their earnings up to a maximum allowed under the
law. A discretionary profit sharing contribution may be made by the Company.
The Company has not made any contributions since inception.
NOTE 11--NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted net loss
per share for the periods indicated (in thousands, except share and per share
data);
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Numerator
Net loss.............................. $ (3,625) $ (7,856) $ (19,354)
Deemed preferred stock dividend....... -- -- (3,840)
----------- ----------- -----------
Net loss available to common
stockholders......................... $ (3,625) $ (7,856) $ (23,194)
Denominator
Weighted average shares............... 2,575,985 2,200,132 3,976,933
Weighted average unvested common
shares subject to repurchase......... (1,296,170) (217,081) (1,162,207)
----------- ----------- -----------
Denominator for basic and diluted
calculation........................... 1,279,815 1,983,051 2,814,726
=========== =========== ===========
Net loss per share available to common
stockholders basic and diluted........ $ (2.83) $ (3.96) $ (8.24)
=========== =========== ===========
</TABLE>
F-20
<PAGE>
RELEASENOW.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table sets forth common stock equivalents that are not
included in the diluted net loss per share calculation above because to do so
would be antidilutive for the periods indicated below:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1997 1998 1999
--------- ---------- ----------
<S> <C> <C> <C>
Weighted average effect of common stock
equivalents:
Unvested common stock subject to repurchase.. 1,296,170 217,081 1,162,207
Options outstanding.......................... 612,043 1,291,975 2,431,876
Shares resulting from the conversion of the
Series A convertible preferred stock........ 2,000,000 2,000,000 2,000,000
Series B convertible preferred stock........ 2,202,854 2,202,854 2,202,854
Series C convertible preferred stock........ 1,202,067 2,944,660 2,944,660
Series D convertible preferred stock........ -- 1,455,914 2,782,244
Series E convertible preferred stock........ -- -- 1,816,438
Series F convertible preferred stock........ -- -- 6,575
Warrants to purchase convertible preferred
stock...................................... 118,380 125,383 136,769
--------- ---------- ----------
Total common equivalents excluded from the
computation of earning per share as their
effect was antidilutive................... 7,431,514 10,237,867 15,483,623
========= ========== ==========
</TABLE>
NOTE 12--PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Pro forma net loss per share available to common stockholders for the years
ended December 31, 1998 and 1999 is computed using the weighted average number
of common shares outstanding, including the pro forma effects of the conversion
of the Company's Series A, Series B, Series C, Series D, Series E and Series F
convertible preferred stock into shares of the Company's common stock effective
upon the closing of the Company's initial public offering ("Offering") as if
such conversion occurred on January 1, 1998, or at date of original issuance,
if later. The resulting pro forma adjustment includes an increase in the
weighted average shares used to compute basic and diluted net loss per share of
8,603,429 and 11,752,572 for the years ended December 31, 1998 and 1999,
respectively. The calculation of diluted net loss per share available to common
stockholders excludes potential common shares as the effect would be anti-
dilutive. Pro forma common equivalent shares are composed of unvested
restricted common stock and incremental common shares issuable upon the
exercise of stock options and warrants.
NOTE 13--COMMITMENTS
Operating Lease
The Company leases office space and equipment under non-cancelable operating
leases expiring through the year 2004. Total rent expense was $100,000,
$196,000 and $371,000 for the years ended December 31, 1997, 1998 and 1999,
respectively.
Capital Lease
In April 1999, the Company obtained the Lease Line which provides for the
purchase of fixed assets up to $1,400,000. Borrowings are due in 42 equal
monthly installments beginning on their respective draw-down dates and accrue
interest at a rate of 8.296% per annum.
F-21
<PAGE>
RELEASENOW.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Future annual minimum lease payments under all noncancelable operating and
capital leases as of December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Year Ending December 31, Capital Operating
------------------------ ---------- ----------
<S> <C> <C>
2000................................................. $ 384,000 $ 428,000
2001................................................. 384,000 443,000
2002................................................. 385,000 445,000
2003................................................. 34,000 434,000
2004................................................. -- 374,000
---------- ----------
Total minimum lease payments......................... 1,187,000 $2,124,000
==========
Less: amount representing interest.................. (217,000)
----------
Present value of capital lease payments............. 970,000
Less: current portion............................... (291,000)
----------
Capital lease obligations, non-current portion...... $ 679,000
==========
</TABLE>
Total rent expense for the years ended December 31, 1997, 1998 and 1999 was
approximately $100,000, $194,000 and $371,000, respectively.
NOTE 14--SUBSEQUENT EVENTS
Offering of Series F Preferred Stock
In January 2000, the Company completed an additional offering of Series F
preferred stock. Pursuant to this offering, a total of 1,650,000 shares of
Series F preferred stock were sold at a price of $5.00 per share, for gross
proceeds to the Company of $8,250,000. The holders of these Series F preferred
stock have the same rights as those holders of the Series F shares issued prior
to December 31, 1999 as discussed in Note 7.
Initial Public Offering
In January 2000, the Company's Board of Directors authorized management to
file a registration statement with the Securities and Exchange Commission to
permit the Company to sell shares of its common stock to the public.
2000 Stock Option Plan
In January 2000, the Company's Board of Directors authorized the adoption of
the 2000 Stock Option Plan. The plan is intended to serve as the successor
program to the 1996 and 1998 Stock Option Plans, "The Plans". The 2000 plan
will become effective upon consummation of the offering. At that time, all
outstanding options under The Plans will be transferred to the 2000 plan, and
further option grants will be made under The Plans.
2000 Employee Stock Purchase Plan
In January 2000, the Company's Board of Directors authorized the adoption of
the 2000 Employee Stock Purchase Plan. The plan will become effective
immediately upon consummation of this offering. The plan is
F-22
<PAGE>
RELEASENOW.COM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
designed to allow the Company's eligible employees to purchase shares of the
Company's stock, at semi-annual intervals, with their accumulated payroll
deductions.
Participants may contribute up to 15% of their earnings through payroll
deductions, and the accumulated deductions will be applied to the purchase of
shares on each semi-annual purchase date. The purchase price per share will be
equal to 85% of the fair market value per share on the participants' entry date
into the offering period or, if lower, 85% of the fair market value per share
on the semi-annual purchase date. Semi-annual purchase dates will occur on the
last business days of April and October each year. In no event may any
participant purchase more than 1,000 shares on any purchase date, and not more
than 100,000 shares may be purchased in total by all participants on any
purchase date.
F-23
<PAGE>
Shares
[LOGO OF RELEASENOW.COM]
Common Stock
-----------
PROSPECTUS
, 2000
-----------
Lehman Brothers
CIBC World Markets
Wit Capital Corporation
<PAGE>
PART II
Information not Required in Prospectus
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of common stock being registered. All amounts are estimates
except the SEC registration fee, the NASD filing fee and The Nasdaq National
Market listing fee.
<TABLE>
<CAPTION>
Amount
To Be Paid
----------
<S> <C>
SEC registration fee............................................. $ 13,200
NASD filing fee.................................................. $ 5,500
Nasdaq National Market listing application fee................... $ 17,500
Printing and shipping fees....................................... $ 250,000
Legal fees and expenses.......................................... $ 750,000
Accounting fees and expenses..................................... $ 500,000
Blue Sky qualification fees and expenses......................... $ 15,000
Transfer agent and registrar fees................................ $ 20,000
Miscellaneous fees............................................... $ 78,800
----------
Total.......................................................... $1,400,000
==========
</TABLE>
--------
* To be filed by amendment.
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. Article VII, Section 6, of the
Registrant's Bylaws provides for mandatory indemnification of its directors and
officers and permissible indemnification of employees and other agents to the
maximum extent permitted by the Delaware General Corporation Law. The
Registrant's Restated Certificate of Incorporation (the "Certificate of
Incorporation ") provides that, pursuant to Delaware law, its directors shall
not be liable for monetary damages for breach of the directors' fiduciary duty
as directors to the Company or its stockholders. This provision in the
Certificate of Incorporation does not eliminate the directors' fiduciary duty,
and in appropriate circumstances equitable remedies such as injunctive or other
forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Company for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
actions leading to improper personal benefit to the director, and for payment
of dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws. The Registrant has entered into
Indemnification Agreements with its officers and directors, a form of which is
attached as Exhibit 10.1 hereto and incorporated herein by reference. The
Indemnification Agreements provide the Registrant's officers and directors with
further indemnification to the maximum extent permitted by the Delaware General
Corporation Law. The Registrant intends to purchase and maintain directors and
officers liabilities insurance. Reference is made to Section of the
Underwriting Agreement contained in Exhibit 1.1 hereto, indemnifying officers
and directors of the Registrant against certain liabilities.
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities
Since December 31, 1996, Registrant has issued and sold the following
securities:
1. Since December 31, 1996, Registrant has issued and sold shares of
common stock to directors, employees and consultants at prices ranging from $
to $ per share, upon exercise of stock options and stock purchase rights
pursuant to the Registrant's 1996 and 1998 Stock Plan.
2. From July 25, 1997 through August 4, 1997, Registrant issued and sold an
aggregate of 2,944,460 shares of Series C preferred stock to a total of 8
investors at $1.868 per share, for an aggregate purchase price of
$5,500,251.30.
3. On July 10, 1997, Registrant issued a warrant to purchase 13,383 shares
of Series C preferred stock to one investor at $1.868 per share.
4. Since December 17, 1998, Registrant has issued and sold 1,791,739 shares
of common stock to directors, employees and consultants at prices ranging from
$1.75 to $2.50 per share, upon exercise of stock options and stock purchase
rights pursuant to the Registrant's 1998 Stock Plans.
5. On June 23, 1998, Registrant issued and sold an aggregate of 2,782,244
shares of Series D preferred stock to a total of 8 investors at $3.49 per
share, for an aggregate purchase price of $9,710,031.60.
6. On April 16, 1999, Registrant issued a warrant to purchase 12,283 shares
of Series D preferred stock to one investor at $3.745 per share.
7. On May 24, 1999, Registrant issued and sold an aggregate of 3,000,000
shares of Series E preferred stock to a total of 24 investors at $4.00 per
share for an aggregate purchase price of $12,000,000.
8. On May 18, 1999, Registrant issued in exchange for all capital stock of
Client Server Designs, Inc., a California corporation, an aggregate of 300,000
shares of common stock to the acquired company's stockholders in connection
with the merger of Client Server Designs, Inc. with and into Registrant.
9. On September 9, 1999, Registrant issued a warrant to purchase 8,625
shares of Series F preferred stock to one investor at $4.00 per share.
10. On December 30, 1999, Registrant issued and sold an aggregate of
2,400,000 shares of Series F preferred stock to a total of seven investors at
$5.00 per share for an aggregate purchase price of $12,000,000.
11. On January 14, 2000, Registrant issued and sold an aggregate of
1,650,000 shares of Series F preferred stock to a total of 30 investors at
$5.00 per share for an aggregate purchase price of $8,250,000.
12. On January 26, 2000, Registrant issued 189,080 shares of common stock to
one individual in settlement of a legal claim.
The sales of the above securities were deemed to be exempt from registration
under the Securities Act in reliance upon Section 4(2) of the Securities Act or
Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b)
of the Securities Act as transactions by an issuer not involving any public
offering or transactions pursuant to compensation benefit plans and contracts
relating to compensation as provided under such Rule 701. The recipients of
securities in each such transaction represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof, and appropriate legends were affixed to the
share certificates issued in such transactions. All recipients had adequate
access, through their relationships with the Registrant, to information about
the Registrant.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Restated Certificate of Incorporation of Registrant.
3.2* Bylaws of Registrant.
4.1* Form of Registrant's Common Stock Certificate.
4.2* Amended and Restated Investors' Rights Agreement dated December
30, 1999.
4.3 Warrant to Purchase 42,000 shares of Series A preferred stock
dated as of July 31, 1996 granted by Registrant to Venture Lending
& Leasing Inc.
4.4 Warrant to Purchase 70,000 shares of Series B preferred stock
dated as of July 31, 1996 granted by Registrant to Venture Lending
& Leasing Inc.
4.5 Warrant to Purchase 13,383 shares of Series C preferred stock
dated as of July 10, 1997 granted by Registrant to Imperial Bank.
4.6 Warrant to Purchase 12,283 shares of Series D preferred stock
dated as of April 16, 1999 granted by Registrant to Comdisco, Inc.
4.7 Warrant to Purchase 8,625 shares of Series F preferred stock dated
as of September 9, 1999 granted by Registrant to Comdisco, Inc.
5.1* Opinion of Brobeck, Phleger & Harrison LLP regarding legality of
the securities being issued.
10.1 Form of Indemnification Agreement entered into by and between
Registrant and each of its directors and executive officers.
10.2 1996 Stock Plan and related agreements, as amended.
10.3 1998 Stock Option/Stock Issuance Plan, as amended, and related
agreements.
10.4 2000 Stock Incentive Plan and related agreements.
10.5 2000 Employee Stock Purchase Plan and related agreements.
10.6 Standard Industrial/Commercial Multi-Tenant Lease dated as of
August 10, 1998 by and between W.F. Batton Company, Inc. and
Registrant, as amended.
10.7*+ Electronic Software Distribution Agreement dated as of June 28,
1999 by and between Macromedia, Inc. and Registrant, as amended.
10.8 Loan Agreement dated June 26, 1996 as amended, by and between
Venture Lending and Leasing, Inc. and Registrant.
10.9 Master Lease Agreement and Addendum dated April 16, 1999 by and
between Comdisco, Inc. and Registrant.
10.10 Letter Agreement dated November 10, 1999 by and between Carolyn A.
Rogers and Registrant, Stock Purchase Agreement and promissory
note secured by Stock Pledge Agreement.
10.11 Employment Letter Agreement dated September 29, 1998 by and
between Eric J. Holstege and Registrant.
10.12 Employment Letter Agreement dated June 9, 1999 by and between
Frank D. Maylett and Registrant.
10.13 Employment Letter Agreement dated May 20, 1999 by and between
Michael J. Maulick and Registrant.
10.14 Employment Letter Agreement dated December 7, 1998 by and between
Joan P. Walsh and Registrant.
10.15 Employment Letter Agreement dated February 17, 1999 by and between
David A. Roman and Registrant.
10.16* Form of Stock Purchase Agreement, Promissory Note and Stock Pledge
Agreement by and between Registrant and Messrs. Holstege, Maulick,
Roman and Ms. Walsh.
21.1 Subsidiaries of Registrant.
23.1* Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit
5.1).
23.2 Consent of PricewaterhouseCoopers, LLP, Independent Accountants.
24.1 Power of Attorney (see page II-5 of the Registration Statement).
27.1 Financial Data Schedule.
</TABLE>
II-3
<PAGE>
- --------
* To be filed by amendment.
+ Confidential treatment will be requested for certain portions which have
been blacked out in the copy of the exhibit to be filed with the Securities
and Exchange Commission. The omitted information will be filed separately
with the Securities and Exchange Commission pursuant to the application for
confidential treatment.
(b) Financial Statement Schedule
<TABLE>
<S> <C>
Schedule II--Valuation and Qualifying Accounts........................... S-1
</TABLE>
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
consolidated financial statements or notes thereto.
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Delaware General Corporation Law, the Registrant's
Restated Certificate of Incorporation, the Registrant's Bylaws, the
Registrant's indemnification agreements or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act,
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered hereunder, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of San
Carlos, State of California, on this 28th day of January, 2000.
ReleaseNow.Com Corporation
/s/ Michael J. Maulick
By: _________________________________
Michael J. Maulick
Chief Executive Officer and
President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints, jointly and severally, Michael J. Maulick and
Joan P. Walsh, and each one of them, his or her true and lawful attorney-in-
fact and agents, each with full power of substitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same offering covered
by this Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) promulgated under the Securities Act of 1933, and all post-
effective amendments thereto, and to file the same, with all exhibits thereto
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents or
any of them, or his or their substitute or substitutes, may lawfully do or
cause to be done or by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael J. Maulick Chief Executive Officer, January 28, 2000
______________________________________ President and Director
(Michael J. Maulick) (Principal Executive
Officer)
/s/ /s/ Joan P. Walsh Vice President, Finance January 28, 2000
______________________________________ and Chief Financial
(Joan P. Walsh) Officer (Principal
Financial and Accounting
Officer)
/s/ Clydene Bultman Director January 28, 2000
______________________________________
(Clydene Bultman)
/s/ David Shrigley Director January 28, 2000
______________________________________
(David Shrigley)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Steven T. Jurvetson Director January 28, 2000
______________________________________
(Steven T. Jurvetson)
/s/ Asad Jamal Director January 28, 2000
______________________________________
(Asad Jamal)
/s/ Douglas Lindgren Director January 28, 2000
______________________________________
(Douglas Lindgren)
/s/ Carolyn A. Rogers Chairman of the Board January 28, 2000
______________________________________
(Carolyn A. Rogers)
</TABLE>
II-6
<PAGE>
SCHEDULE I
To the Stockholders and Board of
ReleaseNow.com Corporation
In connection with our audits of the consolidated financial statements of
ReleaseNow.com Corporation as of December 31, 1998 and 1999 and for each of the
three years in the period ended December 31, 1999, which financial statements
are included in the Registration Statement, we have also audited the financial
data schedule listed in Item 16 herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents in all
material respects, the information required to be included therein.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
San Jose, California
January 21, 2000
S-1
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Allowance Deferred
for Tax Asset
Doubtful Valuation
Accounts Account
--------- -----------
<S> <C> <C>
Balance, December 31, 1996.............................. -- 680,000
Increase to allowance................................. -- 1,330,000
Decrease to allowance................................. -- --
-------- -----------
Balance, December 31, 1997.............................. -- 2,010,000
Increase to allowance................................. 183,000 2,765,000
Decrease to allowance................................. (111,000) --
-------- -----------
Balance, December 31, 1998.............................. 72,000 4,775,000
Increase to allowance................................. 17,000 5,437,000
Decrease to allowance................................. -- --
-------- -----------
Balance, December 31, 1999.............................. $ 89,000 $10,212,000
======== ===========
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Restated Certificate of Incorporation of Registrant.
3.2* Bylaws of Registrant.
4.1* Form of Registrant's Common Stock Certificate.
4.2* Amended and Restated Investors' Rights Agreement dated December
30, 1999.
4.3 Warrant to Purchase 42,000 shares of Series A preferred stock
dated as of July 31, 1996 granted by Registrant to Venture Lending
& Leasing Inc.
4.4 Warrant to Purchase 70,000 shares of Series B preferred stock
dated as of July 31, 1996 granted by Registrant to Venture Lending
& Leasing Inc.
4.5 Warrant to Purchase 13,383 shares of Series C preferred stock
dated as of July 10, 1997 granted by Registrant to Imperial Bank.
4.6 Warrant to Purchase 12,283 shares of Series D preferred stock
dated as of April 16, 1999 granted by Registrant to Comdisco, Inc.
4.7 Warrant to Purchase 8,625 shares of Series F preferred stock dated
as of September 9, 1999 granted by Registrant to Comdisco, Inc.
5.1* Opinion of Brobeck, Phleger & Harrison LLP regarding legality of
the securities being issued.
10.1 Form of Indemnification Agreement entered into by and between
Registrant and each of its directors and executive officers.
10.2 1996 Stock Plan and related agreements, as amended.
10.3 1998 Stock Option/Stock Issuance Plan, as amended, and related
agreements.
10.4 2000 Stock Incentive Plan and related agreements.
10.5 2000 Employee Stock Purchase Plan and related agreements.
10.6 Standard Industrial/Commercial Multi-Tenant Lease dated as of
August 10, 1998 by and between W.F. Batton Company, Inc. and
Registrant, as amended.
10.7+* Electronic Software Distribution Agreement dated as of June 28,
1999 by and between Macromedia, Inc. and Registrant, as amended.
10.8 Loan Agreement, dated June 26, 1996 as amended, by and between
Venture Lending and Leasing, Inc. and Registrant.
10.9 Master Lease Agreement and Addendum dated April 16, 1999 by and
between Comdisco, Inc. and Registrant.
10.10 Letter Agreement dated November 10, 1998 by and between Carolyn A.
Rogers and Registrant, Stock Purchase Agreement and promissory
note secured by Stock Pledge Agreement.
10.11 Employment Letter Agreement dated September 29, 1998 by and
between Eric J. Holstege and Registrant.
10.12 Employment Letter Agreement dated June 9, 1999 by and between
Frank D. Maylett and Registrant.
10.13 Employment Letter Agreement dated May 21, 1999 by and between
Michael J. Maulick and Registrant.
10.14 Employment Letter Agreement dated December 7, 1998 by and between
Joan P. Walsh and Registrant.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.15 Employment Letter Agreement dated February 17, 1999 by and between
David A. Roman and Registrant.
10.16* Form of Stock Purchase Agreement, Promissory Note and Stock Pledge
Agreement by and between Registrant and Messrs. Holstege, Maulick,
Roman and Ms. Walsh.
21.1 Subsidiaries of Registrant.
23.1* Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit
5.1).
23.2 Consent of PricewaterhouseCoopers, LLP, Independent Accountants.
24.1 Power of Attorney (see page II-5 of the Registration Statement).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
+ Confidential treatment will be requested for certain portions which have been
blacked out in the copy of the exhibit to be filed with the Securities and
Exchange Commission. The omitted information will be filed separately with
the Securities and Exchange Commission pursuant to the application for
confidential treatment.
<PAGE>
EXHIBIT 4.3
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE A MAXIMUM OF
21,000 SHARES OF SERIES A PREFERRED STOCK
RELEASE SOFTWARE CORPORATION
(Void after July 31, 2003)
This certifies that VENTURE LENDING & LEASING, INC., a Maryland
corporation, or assigns (the "Holder"), for value received, is entitled to
purchase from RELEASE SOFTWARE CORPORATION, a Delaware corporation (the
"Company"), 21,000 fully paid and nonassessable shares of the Company's Series A
Preferred Stock ("Preferred Stock") for cash at a price of $1.00 per share (the
"Stock Purchase Price") at any time or from time to time up to and including
5:00 p.m. (Pacific time) on July 31, 2003 (the "Expiration Date"), upon
surrender to the Company at its principal office at 200 Middlefield Road, Suite
202 Menlo Park, CA 94025 (or at such other location as the Company may advise
Holder in writing) of this Warrant properly endorsed with the Form of
Subscription attached hereto duly filled in and signed and upon payment in cash
or by check of the aggregate Stock Purchase Price for the number of shares for
which this Warrant is being exercised determined in accordance with the
provisions hereof. The Stock Purchase Price and the number of shares purchasable
hereunder are subject to adjustment as provided in Section 4 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares.
-------------------------------------------------------
(a) Unless an election is made pursuant to clause (b) of this Section
1, this Warrant shall be exercisable at the option of the Holder, at any time or
from time to time, on or before the Expiration Date for all or any portion of
the shares of Preferred Stock (but not for a fraction of a share) which may be
purchased hereunder for the Stock Purchase Price multiplied by the number of
shares to be purchased. In the event, however, that pursuant to the Company's
Certificate of Incorporation, as amended, an event causing automatic conversion
of the Company's Preferred Stock shall have occurred prior to the exercise of
this Warrant, in whole or in part, then this Warrant shall be exercisable for
<PAGE>
the number of shares of Common Stock of the Company into which the Preferred
Stock not purchased upon any prior exercise of the Warrant would have been so
converted (and, where the context requires, reference to "Preferred Stock" shall
be deemed to include such Common Stock). The Company agrees that the shares of
Preferred Stock purchased under this Warrant shall be and are deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares. Subject to the provisions of Section 2,
certificates for the shares of Preferred Stock so purchased, together with any
other securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense within a reasonable time after the rights represented by this
Warrant have been so exercised. Except as provided in clause (b) of this Section
1, in case of a purchase of less than all the shares which may be purchased
under this Warrant, the Company shall cancel this Warrant and execute and
deliver a new Warrant or Warrants of like tenor for the balance of the shares
purchasable under the Warrant surrendered upon such purchase to the Holder
hereof within a reasonable time. Each stock certificate so delivered shall be in
such denominations of Preferred Stock as may be requested by the Holder hereof
and shall be registered in the name of such Holder or such other name as shall
be designated by such Holder, subject to the limitations contained in Section 2.
(b) The Holder, in lieu of exercising this Warrant by the payment of
the Stock Purchase Price pursuant to clause (a) of this Section 1, may elect, at
any time on or before the Expiration Date, to receive that number of shares of
Preferred Stock equal to the quotient of: (i) the difference between (A) the Per
Share Price (as hereinafter defined) of the Preferred Stock, less (B) the Stock
Purchase Price then in effect, multiplied by the number of shares of Preferred
Stock the Holder would otherwise have been entitled to purchase hereunder
pursuant to clause (a) of this Section 1 (or such lesser number of shares as the
Holder may designate in the case of a partial exercise of this Warrant); over
(ii) the Per Share Price.
(c) For purposes of clause (b) of this Section 1, "Per Share Price"
means the product of: (i) the greater of (A) the average of the closing bid and
asked prices of the Company's Common Stock as quoted by NASDAQ or listed on any
exchange, whichever is applicable, as published in the Western Edition of The
---
Wall Street Journal for the ten (10) trading days prior to the date of the
- -------------------
Holder's election hereunder or, (B) if applicable at the time of or in
connection with the exercise under clause (b) of this Section 1, the gross sales
price of one share of the Company's Common Stock pursuant to a registered public
offering or that amount
2
<PAGE>
which shareholders of the Company will receive for each share of Common Stock
pursuant to a merger, reorganization or sale of assets; and (ii) that number of
shares of Common Stock into which each share of Preferred Stock is convertible.
If the Company's Common Stock is not quoted by NASDAQ or listed on an exchange,
the Per Share Price of the Preferred Stock (or the equivalent number of shares
of Common Stock into which such Preferred Stock is convertible) shall be the
price per share which the Company would obtain from a willing buyer for shares
sold by the Company from authorized but unissued shares as such price shall be
agreed upon by the Holder and the Company or, if agreement cannot be reached
within ten (10) business days of the Holder's election hereunder, as such price
shall be determined by a panel of three (3) appraisers, one (1) to be chosen by
the Company, one (1) to be chosen by the Holder and the third to be chosen by
the first two (2) appraisers. If the appraisers cannot reach agreement within 30
days of the Holder's election hereunder, then each appraiser shall deliver its
appraisal and the appraisal which is neither the highest nor the lowest shall
constitute the Per Share Price. In the event either party fails to choose an
appraiser within 30 days of the Holder's election hereunder, then the appraisal
of the sole appraiser shall constitute the Per Share Price. Each party shall
bear the cost of the appraiser selected by such party and the cost of the third
appraiser shall be borne one-half by each party. In the event either party fails
to choose an appraiser, the cost of the sole appraiser shall be borne one-half
by each party.
2. Limitation on Transfer.
----------------------
(a) The Warrant and the Preferred Stock shall not be transferable
except upon the conditions specified in this Section 2, which conditions are
intended to insure compliance with the provisions of the Securities Act. Each
holder of this Warrant or the Preferred Stock issuable hereunder will cause any
proposed transferee of the Warrant or Preferred Stock to agree to take and hold
such securities subject to the provisions and upon the conditions specified in
this Section 2.
(b) Each certificate representing (i) this Warrant, (ii) the Preferred
Stock, (iii) shares of the Company's Common Stock issued upon conversion of the
Preferred Stock and (iv) any other securities issued in respect of the Preferred
Stock or Common Stock issued upon conversion of the Preferred Stock upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of this Section 2 or
unless such securities have been registered under the Securities Act or sold
under Rule 144) be stamped or otherwise imprinted with a legend substantially in
the
3
<PAGE>
following form (in addition to any legend required under applicable state
securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
(c) The Holder of this Warrant and each person to whom this Warrant is
subsequently transferred represents and warrants to the Company (by acceptance
of such transfer) that it will not transfer the Warrant (or securities issuable
upon exercise hereof unless a registration statement under the Securities Act
was in effect with respect to such securities at the time of issuance thereof)
except pursuant to (i) an effective registration statement under the Securities
Act, (ii) Rule 144 under the Securities Act (or any other rule under the
Securities Act relating to the disposition of securities), or (iii)an opinion of
counsel, reasonably satisfactory to counsel for the Company, that an exemption
from such registration is available.
3. Shares to be Fully Paid; Reservation of Shares. The Company covenants
----------------------------------------------
and agrees that all shares of Preferred Stock which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved, for the
purpose of issue or transfer upon exercise of the subscription rights evidenced
by this Warrant, a sufficient number of shares of authorized but unissued
Preferred Stock, or other securities and property, when and as required to
provide for the exercise of the rights represented by this Warrant. The Company
will take all such action as may be necessary to assure that such shares of
Preferred Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Preferred Stock may be listed. The Company will not take
any action which would result in any adjustment of the Stock Purchase Price (as
defined in Section 4 hereof) (i) if the total number of shares of Preferred
Stock issuable after such action upon exercise of all outstanding warrants,
together with all shares of Preferred Stock then outstanding and all shares of
Preferred Stock then issuable upon exercise of all options and upon the
conversion of all convertible securities then outstanding, would exceed the
total number of
4
<PAGE>
shares of Preferred Stock then authorized by the Company's Certificate of
Incorporation, or (ii) if the total number of shares of Common Stock issuable
after such action upon the conversion of all such shares of Preferred Stock
together with all shares of Common Stock then outstanding and then issuable upon
exercise of all options and upon the conversion of all convertible securities
then outstanding would exceed the total number of shares of Common Stock then
authorized by the Company's Articles of Incorporation.
4. Adjustment of Stock Purchase Price Number of Shares. The Stock
---------------------------------------------------
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 4. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.
4.1 Subdivision or Combination of Stock. In case the Company shall at
-----------------------------------
any time subdivide its outstanding shares of Preferred Stock into a greater
number of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Preferred Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
4.2 Dividends in Preferred Stock, Other Stock, Property,
----------------------------------------------------
Reclassification. If at any time or from time to time the holders of Preferred
- ----------------
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
(a) Preferred Stock, or any shares of stock or other securities
whether or not such securities are at any time directly or indirectly
convertible into or exchangeable for Preferred Stock, or any rights or options
to subscribe for, purchase or otherwise acquire any of the foregoing by way of
dividend or other distribution, or
(b) any cash paid or payable otherwise than as a cash dividend,
or
(c) Preferred Stock or other or additional stock or other
securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares
5
<PAGE>
or similar corporate rearrangement, (other than shares of Preferred Stock issued
as a stock split, adjustments in respect of which shall be covered by the terms
of Section 4.1 above), then and in each such case, the Holder hereof shall, upon
the exercise of this Warrant, be entitled to receive, in addition to the number
of shares of Preferred Stock receivable thereupon, and without payment of any
additional consideration therefore, the amount of stock and other securities and
property (including cash in the cases referred to in clauses (b) and (c) above)
which such Holder would hold on the date of such exercise had he been the holder
of record of such Preferred Stock as of the date on which holders of Preferred
Stock received or became entitled to receive such shares and/or all other
additional stock and other securities and property.
4.3 Reorganization, Reclassification, Consolidation, Merger or Sale.
---------------------------------------------------------------
If any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation shall be effected
in such a way that holders of Preferred Stock Shall be entitled to receive
stock, securities or assets with respect to or in exchange for Preferred Stock,
then, as a condition of such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provisions shall be made whereby the holder
hereof shall thereafter have the right to purchase and receive(in lieu of the
shares of the Preferred Stock of the Company immediately theretofore purchasable
and receivable upon the exercise of the rights represented hereby) such shares
of stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Preferred Stock equal to the
number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby. In any such case,
appropriate provision shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Stock Purchase Price and
of the number of shares purchasable and receivable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be possible, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The Company will not effect any such consolidation,
merger or sale unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or the
corporation purchasing such assets shall assume by written instrument, executed
and mailed or delivered to the registered Holder hereof at the last address of
such Holder appearing on the books of the Company, the obligation to deliver to
such Holder such shares of stock,
6
<PAGE>
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase.
4.4 Intentionally Deleted.
---------------------
4.5 Notice of Adjustment. Upon any adjustment of the Stock Purchase
--------------------
Price, and/or any increase or decrease in the number of shares purchasable upon
the exercise of this Warrant the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company. The
notice shall be signed by the Company's chief financial officer and shall state
the Stock Purchase Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
4.6 Other Notices. If at any time:
-------------
(a) the Company shall declare any cash dividend upon its
Preferred Stock;
(b) the Company shall declare any dividend upon its Preferred
Stock payable in stock or make any special dividend or other distribution to the
holders of its Preferred Stock;
(c) the Company shall offer for subscription pro rata to the
holders of its Preferred Stock any additional shares of stock of any class or
other rights;
(d) there shall be any capital reorganization or reclassification
of the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another corporation;
(e) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(f) the Company shall take or propose to take any other action,
notice of which is actually provided to holders of the Preferred Stock;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the holder of this Warrant at the address of
such holder as shown on the books of the Company, (i) at least 20 day's prior
written notice of the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights or
for determining rights to vote in respect of any such reorganization,
7
<PAGE>
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, or other action and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, or other action, at least 20 day's written notice of the date when
the same shall take place. Any notice given in accordance with the foregoing
clause (i) shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Preferred Stock shall be
entitled thereto. Any notice given in accordance with the foregoing clause (ii)
shall also specify the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, or other action as the case may
be.
4.7 Certain Events. If any change in the outstanding Preferred Stock
--------------
of the Company or any other event occurs as to which the other provisions of
this Section 4 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the Holder of the Warrant in accordance
with the essential intent and principles of such provisions, then the Board of
Directors of the Company shall make an adjustment in the number and class of
shares available under the Warrant, the Stock Purchase Price and/or the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such purchase rights as aforesaid. The adjustment
shall be such as will give the Holder of the Warrant upon exercise for the same
aggregate Stock Purchase Price the total number, class and kind of shares as he
would have owned had the Warrant been exercised prior to the event and had he
continued to hold such shares until after the event requiring adjustment.
5. Issue Tax. The issuance of certificates for shares of Preferred Stock
---------
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax in respect thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than that of the then Holder of the Warrant being exercised.
6. Closing of Books. The Company will at no time close its transfer books
----------------
against the transfer of any Warrant or of any shares of Preferred Stock issued
or issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of this Warrant.
7. No Voting or Dividend Rights; Limitation of Liability. Nothing
-----------------------------------------------------
contained in this Warrant shall be
8
<PAGE>
construed as conferring upon the Holder hereof the right to vote or to consent
as a shareholder in respect of meetings of shareholders for the election of
directors of the Company or any other matters or any rights whatsoever as a
shareholder of the Company. No dividends or interest shall be payable or accrued
in respect of this Warrant or the interest represented hereby or the shares
purchasable hereunder until, and only to the extent that, this Warrant shall
have been exercised. No provisions hereof, in the absence of affirmative action
by the holder to purchase shares of Preferred Stock, and no mere enumeration
herein of the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for the Stock Purchase Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by its creditors.
8. Intentionally Deleted.
---------------------
9. Registration Rights. The Holder hereof shall be entitled, with respect
-------------------
to the shares of Preferred Stock issued upon exercise hereof or the shares of
Common Stock or other securities issued upon conversion of such Preferred Stock
as the case may be, to all of the registration rights set forth in the Investor
Rights Agreement dated as of February 26, 1996 to the same extent and on the
same terms and conditions as possessed by the Purchasers. The company shall take
such action as may be reasonably necessary to assure that the granting of such
registration rights to the Holder does not violate the provisions of such
agreement or any of the Company's charter documents or rights of prior Grantees
of registration rights.
10. Rights and Obligations Survive Exercise of Warrant. The rights and
--------------------------------------------------
obligations of the Company, of the Holder of this Warrant and of the holder of
shares of Preferred Stock issued upon exercise of this Warrant, contained in
Sections 6 and 8 shall survive the exercise of this Warrant.
11. Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
12. Notices. Any notice, request or other document required or permitted
-------
to be given or delivered to the holder hereof or the Company shall be deemed to
have been given (i) upon receipt if delivered personally or by courier (ii) upon
confirmation of receipt if by telecopy or (iii) three business days after
deposit in the US mail, with postage prepaid and certified or registered, to
each such holder at its address as shown on the books of the Company or to the
Company at the address indicated therefor in the first paragraph of this
Warrant.
9
<PAGE>
13. Binding Effect on Successors. This Warrant shall be binding upon any
----------------------------
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Preferred Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assign of the holder hereof. The Company will, at the time of the
exercise of this Warrant, in whole or in part, upon request of the Holder hereof
but at the Company's expense, acknowledge in writing its continuing obligation
to the Holder hereof in respect of any rights (including, without limitation,
any right to registration of the shares of Common Stock) to which the holder
hereof shall continue to be entitled after such exercise in accordance with this
Warrant; provided, that the failure of the holder hereof to make any such
request shall not affect the continuing obligation of the Company to the Holder
hereof in respect of such rights.
14. Descriptive Headings and Governing Law. The descriptive headings of
--------------------------------------
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.
15. Lost Warrants or Stock Certificates. The Company represents and
-----------------------------------
warrants to the Holder hereof that upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
any Warrant or stock certificate and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant or stock certificate, the Company at its expense will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
16. Fractional Shares. No fractional shares shall be issued upon exercise
-----------------
of this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Stock Purchase Price.
17. Representations of Holder. With respect to this Warrant, Holder
-------------------------
represents and warrants to the Company as follows:
10
<PAGE>
17.1 Experience. It is experienced in evaluating and investing in
----------
companies engaged in businesses similar to that of the Company; it understands
that investment in the Warrant involves substantial risks; it has made detailed
inquiries concerning the Company, its business and services, its officers and
its personnel; the officers of the Company have made available to Holder any and
all written information it has requested; the officers of the Company have
answered to Holder's satisfaction all inquiries made by it; in making this
investment it has relied upon information made available to it by the Company;
and it has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of investment in the Company
and it is able to bear the economic risk of that investment.
17.2 Investment. It is acquiring the Warrant for investment for its
----------
own account and not with a view to, or for resale in connection with, any
distribution thereof. It understands that the Warrant, the shares of Preferred
Stock issuable upon exercise thereof and the shares of Common Stock issuable
upon conversion of the Preferred Stock, have not been registered under the
Securities Act of 1933, as amended, nor qualified under applicable state
securities laws.
17.3 Rule 144. It acknowledges that the Warrant, the Preferred Stock
--------
and the Common Stock must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. It has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act.
17.4 Access to Data. It has had an opportunity to discuss the
--------------
Company's business, management and financial affairs with the Company's
management and has had the opportunity to inspect the Company's facilities.
18. Additional Representations and Covenants of the Company. The Company
-------------------------------------------------------
hereby represents, warrants and agrees as follows:
18.1 Corporate Power. The Company has all requisite corporate power
---------------
and corporate authority to issue this Warrant and to carry out and perform its
obligations hereunder.
18.2 Authorization. All corporate action on the part of the Company,
-------------
its directors and shareholders necessary for the authorization, execution,
delivery and performance by the Company of this has been taken. This Warrant is
a valid and binding obligation of the Company, enforceable in accordance with
its terms.
11
<PAGE>
18.3 Offering. Subject in part to the truth and accuracy of Holder's
--------
representations set forth in Section 17 hereof, the offer, issuance and sale of
the Warrant is, and the issuance of Preferred Stock upon exercise of the Warrant
and the issuance of Common Stock upon conversion of the Preferred Stock will be
exempt from the registration requirements of the Securities Act, and are exempt
from the qualification requirements of any applicable state securities laws; and
neither the Company nor anyone acting on its behalf will take any action
hereafter that would cause the loss of such exemptions.
18.4 Stock Issuance. Upon exercise of the Warrant, the Company will
--------------
use its best efforts to cause stock certificates representing the shares of
Preferred Stock purchased pursuant to the exercise to be issued in the
individual names of Holder, its nominees or assignees, as appropriate at the
time of such exercise. Upon conversion of the shares of Preferred Stock to
shares of Common Stock, the Company will issue the Common Stock in the
individual names of Holder, its nominees or assignees, as appropriate.
18.5 Articles and By-Laws. The Company has provided Holder with true
--------------------
and complete copies of the Company's Articles or Certificate of Incorporation,
By-Laws, and each Certificate of Determination or other charter document
setting, forth any rights, preferences and privileges of Company's capital
stock, each as amended and in effect on the date of issuance of this Warrant.
18.6 Conversion of Preferred Stock. As of the date hereof, each share
-----------------------------
of the Preferred Stock is convertible into one share of the Common Stock.
18.7 Financial and Other Reports. From time to time up to the earlier
---------------------------
of the Expiration Date or the complete exercise of this Warrant, the Company
shall furnish to Holder (i) within 90 days after the close of each fiscal year
of the Company an audited balance sheet and statement of changes in financial
position at and as of the end of such fiscal year, together with an audited
statement of income for such fiscal year; (ii) within 45 days after the close of
each fiscal quarter of the Company, an unaudited balance sheet and statement of
cash flows at and as of the end of such quarter, together with an unaudited
statement of income for such quarter; and (iii) promptly after sending, making
available, or filing, copies of all reports, proxy statements, and financial
statements that the Company sends or makes available to its shareholders and all
registration statements and reports that the Company files with the SEC or any
other governmental or regulatory authority.
12
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 31st day of July, 1996.
RELEASE SOFTWARE CORPORATION
By: /s/ Mark Benning
------------------
Title: VP Sales & Finance
------------------
13
<PAGE>
FORM OF SUBSCRIPTION
--------------------
(To be signed only upon exercise of Warrant)
TO:______________________________
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder,______________ (___) (1) shares of Preferred Stock of_____
and herewith makes payment of_________________________________________________
___________________________ Dollars ($______) therefor, and requests that the
certificates for such shares be issued in the name of, and delivered to,
___________________________ , whose address is_______________________________.
The undersigned represents that it is acquiring such Preferred Stock
for its own account for investment and not with a view to or for sale in
connection with any distribution thereof (subject, however, to any requirement
of law that the disposition
thereof shall at all times be within its control.
DATED:________________________
______________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant)
(Address)
______________________________
______________________________
(1) Insert here the number of shares called for on the face of the Warrant (or,
in the case of a partial exercise, the portion thereof as to which the
Warrant is being exercised), in either case without making any adjustment
for additional Preferred Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of the
Warrant, may be deliverable upon exercise.
14
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned, the holder of the within Warrant,
hereby sells, assigns and transfers all of the rights of the undersigned under
the within Warrant, with respect to the number of shares of Preferred Stock
covered thereby set forth hereinbelow, unto:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
Dated:__________________________
________________________________
(Signature must conform in all
respects to name ,of holder as
specified on the face of the
Warrant)
15
<PAGE>
EXHIBIT 4.4
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAW. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE
SHARES OF SERIES B PREFERRED STOCK
RELEASE SOFTWARE CORPORATION
(Void after July 31, 2003)
This certifies that VENTURE LENDING & LEASING, INC., a Maryland
corporation, or assigns (the "Holder"), for value received, is entitled to
purchase from RELEASE SOFTWARE CORPORATION, a Delaware corporation (the
"Company"), that number of fully paid and nonassessable shares of the Company's
Series B Preferred Stock ("Preferred Stock") equal to $49,000 divided by the per
share price paid by investors in the Company's Series B Preferred Stock
Financing (the "Series B Purchase Price") for cash at a price per share equal to
the Series B Purchase Price (the "Stock Purchase Price") at any time following
the closing of the Company's Series B Preferred Stock Financing up to and
including 5:00 p.m. (Pacific time) on July 31, 2003 (the "Expiration Date"),
upon surrender to the Company at its principal office at 200 Middlefield Road,
Suite 202 Menlo Park, CA 94025 (or at such other location as the Company may
advise Holder in writing) of this Warrant properly endorsed with the Form of
Subscription attached hereto duly filled in and signed and upon payment in cash
or by check of the aggregate Stock Purchase Price for the number of shares for
which this Warrant is being exercised determined in accordance with the
provisions hereof. The Stock Purchase Price and the number of shares purchasable
hereunder are subject to adjustment as provided in Section 4 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares.
-------------------------------------------------------
(a) Unless an election is made pursuant to clause (b) of this Section
1, this Warrant shall be exercisable at the option of the Holder, at any time or
from time to time, on or before the Expiration Date for all or any portion of
the shares of Preferred Stock (but not for a fraction of a share) which may be
purchased hereunder for the Stock Purchase Price multiplied by the number of
shares to be purchased. In the event, however, that pursuant to the Company's
Certificate of Incorporation, as amended, an event causing automatic conversion
of the Company's Preferred Stock shall have occurred prior to the exercise of
this Warrant, in
<PAGE>
whole or in part, then this Warrant shall be exercisable for the number of
shares of Common Stock of the Company into which the Preferred Stock not
purchased upon any prior exercise of the Warrant would have been so converted
(and, where the context requires, reference to "Preferred Stock" shall be deemed
to include such Common Stock). The Company agrees that the shares of Preferred
Stock purchased under this Warrant shall be and are deemed to be issued to the
holder hereof as the record owner of such shares as of the close of business on
the date on which this Warrant shall have been surrendered and payment made for
such shares. Subject to the provisions of Section 2, certificates for the shares
of Preferred Stock so purchased, together with any other securities or property
to which the Holder hereof is entitled upon such exercise, shall be delivered to
the Holder hereof by the Company at the Company's expense within a reasonable
time after the rights represented by this Warrant have been so exercised. Except
as provided in clause (b) of this Section 1, in case of a purchase of less than
all the shares which may be purchased under this Warrant, the Company shall
cancel this Warrant and execute and deliver a new Warrant or Warrants of like
tenor for the balance of the shares purchasable under the Warrant surrendered
upon such purchase to the Holder hereof within a reasonable time. Each stock
certificate so delivered shall be in such denominations of Preferred Stock as
may be requested by the Holder hereof and shall be registered in the name of
such Holder or such other name as shall be designated by such Holder, subject to
the limitations contained in Section 2.
(b) The Holder, in lieu of exercising this Warrant by the payment of
the Stock Purchase Price pursuant to clause (a) of this Section 1, may elect, at
any time on or before the Expiration Date, to receive that number of shares of
Preferred Stock equal to the quotient of: (i) the difference between (A) the Per
Share Price (as hereinafter defined) of the Preferred Stock, less (B) the Stock
Purchase Price then in effect, multiplied by the number of shares of Preferred
Stock the Holder would otherwise have been entitled to purchase hereunder
pursuant to clause (a) of this Section 1 (or such lesser number of shares as the
Holder may designate in the case of a partial exercise of this Warrant); over
(ii) the Per Share Price.
(c) For purposes of clause (b) of this Section 1, "Per Share Price"
means the product of: (i) the greater of (A) the average of the closing bid and
asked prices of the Company's Common Stock as quoted by NASDAQ or listed on any
exchange, whichever is applicable, as published in the Western Edition of The
---
Wall Street Journal for the ten (10) trading days prior to the date of the
- -------------------
Holder's election hereunder or, (B) if applicable at the time of or in
connection with the exercise under clause (b) of this Section 1, the gross sales
price of one share of the Company's Common
2
<PAGE>
Stock pursuant to a registered public offering or that amount which shareholders
of the Company will receive for each share of Common Stock pursuant to a merger,
reorganization or sale of assets; and (ii) that number of shares of Common Stock
into which each share of Preferred Stock is convertible. If the Company's Common
Stock is not quoted by NASDAQ or listed on an exchange, the Per Share Price of
the Preferred Stock (or the equivalent number of shares of Common Stock into
which such Preferred Stock is convertible) shall be the price per share which
the Company would obtain from a willing buyer for shares sold by the Company
from authorized but unissued shares as such price shall be agreed upon by the
Holder and the Company or, if agreement cannot be reached within ten (10)
business days of the Holder's election hereunder, as such price shall be
determined by a panel of three (3) appraisers, one (1) to be chosen by the
Company, one (1) to be chosen by the Holder and the third to be chosen by the
first two (2) appraisers. If the appraisers cannot reach agreement within 30
days of the Holder's election hereunder, then each appraiser shall deliver its
appraisal and the appraisal which is neither the highest nor the lowest shall
constitute the Per Share Price. In the event either party fails to choose an
appraiser within 30 days of the Holder's election hereunder, then the appraisal
of the sole appraiser shall constitute the Per Share Price. Each party shall
bear the cost of the appraiser selected by such party and the cost of the third
appraiser shall be borne one-half by each party. In the event either party fails
to choose an appraiser, the cost of the sole appraiser shall be borne one-half
by each party.
2. Limitation on Transfer.
----------------------
(a) The Warrant and the Preferred Stock shall not be transferable
except upon the conditions specified in this Section 2, which conditions are
intended to insure compliance with the provisions of the Securities Act. Each
holder of this Warrant or the Preferred Stock issuable hereunder will cause any
proposed transferee of the Warrant or Preferred Stock to agree to take and hold
such securities subject to the provisions and upon the conditions specified in
this Section 2.
(b) Each certificate representing (i) this Warrant, (ii) the Preferred
Stock, (iii) shares of the Company's Common Stock issued upon conversion of the
Preferred Stock and (iv) any other securities issued in respect of the Preferred
Stock or Common Stock issued upon conversion of the Preferred Stock upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of this Section 2 or
unless such securities have been registered under the Securities Act or sold
under Rule 144) be stamped or otherwise imprinted with a legend substantially in
the
3
<PAGE>
following form (in addition to any legend required under applicable State
securities laws).
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
(c) The Holder of this Warrant and each person to whom this Warrant is
subsequently transferred represents and warrants to the Company (by acceptance
of such transfer) that it will not transfer the Warrant (or securities issuable
upon exercise hereof unless a registration statement under the Securities Act
was in effect with respect to such securities at the time of issuance thereof)
except pursuant to (i) an effective registration statement under the Securities
Act, (ii) Rule 144 under the Securities Act (or any other rule under the
Securities Act relating to the disposition of securities), or (iii) an opinion
of counsel, reasonably satisfactory to counsel for the Company, that an
exemption from such registration is available.
3. Shares to be Fully paid; Reservation of Shares. The Company covenants
----------------------------------------------
and agrees that all shares of Preferred Stock which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved, for the
purpose of issue or transfer upon exercise of the subscription rights evidenced
by this Warrant, a sufficient number of shares of authorized but unissued
Preferred Stock, or other securities and property, when and as required to
provide for the exercise of the rights represented by this Warrant. The Company
will take all such action as may be necessary to assure that such shares of
Preferred Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Preferred Stock may be listed. The Company will not take
any action which would result in any adjustment of the Stock Purchase Price (as
defined in Section 4 hereof) (i) if the total number of shares of Preferred
Stock issuable after such action upon exercise of all outstanding warrants,
together with all shares of Preferred Stock then outstanding and all shares of
Preferred Stock then issuable upon exercise of all options and upon the
conversion of all convertible securities then outstanding, would exceed the
total number of
4
<PAGE>
shares of Preferred Stock then authorized by the Company's Certificate of
Incorporation, or (ii) if the total number of shares of Common Stock issuable
after such action upon the conversion of all such shares of Preferred Stock
together with all shares of Common Stock then outstanding and then issuable upon
exercise of all options and upon the conversion of all convertible securities
then outstanding would exceed the total number of shares of Common Stock then
authorized by the Company's Articles of Incorporation.
4. Adjustment of Stock Purchase Price Number of Shares. The Stock
---------------------------------------------------
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 4. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.
4.1 Subdivision or Combination of Stock. In case the Company shall at any
-------------------------------------
time subdivide its outstanding shares of Preferred Stock into a greater number
of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Preferred Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
4.2 Dividends in Preferred Stock, other Stock, Property, Reclassification.
---------------------------------------------------------------------
If at any time or from time to time the holders of Preferred Stock (or any
shares of stock or other securities at the time receivable upon the exercise of
this Warrant) shall have received or become entitled to receive, without payment
therefor,
(a) Preferred Stock, or any shares of stock or other securities
whether or not such securities are at any time directly or indirectly
convertible into or exchangeable for Preferred Stock, Or any rights or options
to subscribe for, purchase or otherwise acquire any of the foregoing by way of
dividend or other distribution, or
(b) any cash paid or payable otherwise than as a cash dividend,
or
(c) Preferred Stock or other or additional stock or other
securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares
5
<PAGE>
or similar corporate rearrangement, (other than shares of Preferred Stock issued
as a stock split, adjustments in respect of which shall be covered by the terms
of Section 4.1 above), then and in each such case, the Holder hereof shall, upon
the exercise of this Warrant, be entitled to receive, in addition to the number
of shares of Preferred Stock receivable thereupon, and without payment of any
additional consideration therefore, the amount of stock and other securities and
property (including cash in the cases referred to in clauses (b) and (c) above)
which such Holder would hold on the date of such exercise had he been the holder
of record of such Preferred Stock as of the date on which holders of Preferred
Stock received or became entitled to receive such shares and/or all other
additional stock and other securities and property.
4.3 Reorganization, Reclassification, Consolidation, Merger or Sale.
---------------------------------------------------------------
If any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation shall be effected
in such a way that holders of Preferred Stock Shall be entitled to receive
stock, securities or assets with respect to or in exchange for Preferred Stock,
then, as a condition of such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provisions shall be made whereby the holder
hereof shall thereafter have the right to purchase and receive(in lieu of the
shares of the Preferred Stock of the Company immediately theretofore purchasable
and receivable upon the exercise of the rights represented hereby) such shares
of stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Preferred Stock equal to the
number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby. In any such case,
appropriate provision shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Stock Purchase Price and
of the number of shares purchasable and receivable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be possible, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The Company will not effect any such consolidation,
merger or sale unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or the
corporation purchasing such assets shall assume by written instrument, executed
and mailed or delivered to the registered Holder hereof at the last address of
such Holder appearing on the books of the Company, the obligation to deliver to
such Holder such shares of stock,
6
<PAGE>
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase.
4.4 Intentionally Deleted.
---------------------
4.5 Notice of Adjustment. Upon any adjustment of the Stock Purchase
--------------------
Price, and/or any increase or decrease in the number of shares purchasable upon
the exercise of this Warrant the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company. The
notice shall be signed by the Company's chief financial officer and shall state
the Stock Purchase Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
4.6 Other Notices. If at any time:
-------------
(a) the Company shall declare any cash dividend upon its
Preferred Stock;
(b) the Company shall declare any dividend upon its Preferred
Stock payable in stock or make any special dividend or other distribution to the
holders of its Preferred Stock;
(c) the Company shall offer for subscription pro rata to the
holders of its Preferred Stock any additional shares of stock of any class or
other rights;
(d) there shall be any capital reorganization or reclassification
of the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another corporation;
(e) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(f) the Company shall take or propose to take any other action,
notice of which is actually provided to holders of the Preferred Stock;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the holder of this Warrant at the address of
such holder as shown on the books of the Company, (i) at least 20 day's prior
written notice of the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights or
for determining rights to vote in respect of any such reorganization,
7
<PAGE>
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, or other action and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, or other action, at least 20 day's written notice of the date when
the same shall take place. Any notice given in accordance with the foregoing
clause (i) shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Preferred Stock shall be
entitled thereto. Any notice given in accordance with the foregoing clause (ii)
shall also specify the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, or other action as the case may
be.
4.7 Certain Events. If any change in the outstanding Preferred Stock
--------------
of the Company or any other event occurs as to which the other provisions of
this Section 4 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the Holder of the Warrant in accordance
with the essential intent and principles of such provisions, then the Board of
Directors of the Company shall make an adjustment in the number and class of
shares available under the Warrant, the Stock Purchase Price and/or the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such purchase rights as aforesaid. The adjustment
shall be such as will give the Holder of the Warrant upon exercise for the same
aggregate Stock Purchase Price the total number, class and kind of shares as he
would have owned had the Warrant been exercised prior to the event and had he
continued to hold such shares until after the event requiring adjustment.
5. Issue Tax. The issuance of certificates for shares of Preferred Stock
---------
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax in respect thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than that of the then Holder of the Warrant being exercised.
6. Closing of Books. The Company will at no time close its transfer books
----------------
against the transfer of any Warrant or of any shares of Preferred Stock issued
or issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of this Warrant.
7. No Voting or Dividend Rights; Limitation of Liability. Nothing
-----------------------------------------------------
contained in this Warrant shall be
8
<PAGE>
construed as conferring upon the Holder hereof the right to vote or to consent
as a shareholder in respect of meetings of shareholders for the election of
directors of the Company or any other matters or any rights whatsoever as a
shareholder of the Company. No dividends or interest shall be payable or accrued
in respect of this Warrant or the interest represented hereby or the shares
purchasable hereunder until, and only to the extent that, this Warrant shall
have been exercised. No provisions hereof, in the absence of affirmative action
by the holder to purchase shares of Preferred Stock, and no mere enumeration
herein of the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for the Stock Purchase Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by its creditors.
8. Intentionally Deleted.
----------------------
9. Registration Rights. The Holder hereof shall be entitled, with respect
-------------------
to the shares of Preferred Stock issued upon exercise hereof or the shares of
Common Stock or other securities issued upon conversion of such Preferred Stock
as the case may be, to all of the registration rights set forth in the Investor
Rights Agreement dated as of February 26, 1996 to the same extent and on the
same terms and conditions as possessed by the Purchasers. The company shall take
such action as may be reasonably necessary to assure that the granting of such
registration rights to the Holder does not violate the provisions of such
agreement or any of the Company's charter documents or rights of prior Grantees
of registration rights.
10. Rights and Obligations Survive Exercise of Warrant. The rights and
--------------------------------------------------
obligations of the Company, of the Holder of this Warrant and of the holder of
shares of Preferred Stock issued upon exercise of this Warrant, contained in
Sections 6 and 8 shall survive the exercise of this Warrant.
11. Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
12. Notices. Any notice, request or other document required or permitted
-------
to be given or delivered to the holder hereof or the Company shall be deemed to
have been given (i) upon receipt if delivered personally or by courier (ii) upon
confirmation of receipt if by telecopy or (iii) three business days after
deposit in the US mail, with postage prepaid and certified or registered, to
each such holder at its address as shown on the books of the Company or to the
Company at the address indicated therefor in the first paragraph of this
Warrant.
9
<PAGE>
13. Binding Effect on Successors. This Warrant shall be binding upon any
----------------------------
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Preferred Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assign of the holder hereof. The Company will, at the time of the
exercise of this Warrant, in whole or in part, upon request of the Holder hereof
but at the Company's expense, acknowledge in writing its continuing obligation
to the Holder hereof in respect of any rights (including, without limitation,
any right to registration of the shares of Common Stock) to which the holder
hereof shall continue to be entitled after such exercise in accordance with this
Warrant; provided, that the failure of the holder hereof to make any such
request shall not affect the continuing obligation of the Company to the Holder
hereof in respect of such rights.
14. Descriptive Headings and Governing Law. The descriptive headings of
--------------------------------------
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.
15. Lost Warrants or Stock Certificates. The Company represents and
-----------------------------------
warrants to the Holder hereof that upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
any Warrant or stock certificate and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant or stock certificate, the Company at its expense will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
16. Fractional Shares. No fractional shares shall be issued upon exercise
-----------------
of this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Stock Purchase Price.
17. Representations of Holder. With respect to this Warrant, Holder
-------------------------
represents and warrants to the Company as follows:
10
<PAGE>
17.1 Experience. It is experienced in evaluating and investing in
----------
companies engaged in businesses similar to that of the Company; it understands
that investment in the Warrant involves substantial risks; it has made detailed
inquiries concerning the Company, its business and services, its officers and
its personnel; the officers of the Company have made available to Holder any and
all written information it has requested; the officers of the Company have
answered to Holder's satisfaction all inquiries made by it; in making this
investment it has relied upon information made available to it by the Company;
and it has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of investment in the Company
and it is able to bear the economic risk of that investment.
17.2 Investment. It is acquiring the Warrant for investment for its
----------
own account and not with a view to, or for resale in connection with, any
distribution thereof. It understands that the Warrant, the shares of Preferred
Stock issuable upon exercise thereof and the shares of Common Stock issuable
upon conversion of the Preferred Stock, have not been registered under the
Securities Act of 1933, as amended, nor qualified under applicable state
securities laws.
17.3 Rule 144. It acknowledges that the Warrant, the Preferred Stock
--------
and the Common Stock must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. It has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act.
17.4 Access to Data. It has had an opportunity to discuss the
--------------
Company's business, management and financial affairs with the Company's
management and has had the opportunity to inspect the Company's facilities.
18. Additional Representations and Covenants of the Company. The Company
-------------------------------------------------------
hereby represents, warrants and agrees as follows:
18.1 Corporate Power. The Company has all requisite corporate power
---------------
and corporate authority to issue this Warrant and to carry out and perform its
obligations hereunder.
18.2 Authorization. All corporate action on the part of the Company,
-------------
its directors and shareholders necessary for the authorization, execution,
delivery and performance by the Company of this has been taken. This Warrant is
a valid and binding obligation of the Company, enforceable in accordance with
its terms.
11
<PAGE>
18.3 Offering. Subject in part to the truth and accuracy of Holder's
--------
representations set forth in Section 17 hereof, the offer, issuance and sale of
the Warrant is, and the issuance of Preferred Stock upon exercise of the Warrant
and the issuance of Common Stock upon conversion of the Preferred Stock will be
exempt from the registration requirements of the Securities Act, and are exempt
from the qualification requirements of any applicable state securities laws; and
neither the Company nor anyone acting on its behalf will take any action
hereafter that would cause the loss of such exemptions.
18.4 Stock Issuance. Upon exercise of the Warrant, the Company will
--------------
use its best efforts to cause stock certificates representing the shares of
Preferred Stock purchased pursuant to the exercise to be issued in the
individual names of Holder, its nominees or assignees, as appropriate at the
time of such exercise. Upon conversion of the shares of Preferred Stock to
shares of Common Stock, the Company will issue the Common Stock in the
individual names of Holder, its nominees or assignees, as appropriate.
18.5 Articles and By-Laws. The Company has provided Holder with true
--------------------
and complete copies of the Company's Articles or Certificate of Incorporation,
By-Laws, and each Certificate of Determination or other charter document
setting, forth any rights, preferences and privileges of Company's capital
stock, each as amended and in effect on the date of issuance of this Warrant.
18.6 Conversion of Preferred Stock. As of the date hereof, each share
-----------------------------
of the Preferred Stock is convertible into one share of the Common Stock.
18.7 Financial and Other Reports. From time to time up to the earlier
---------------------------
of the Expiration Date or the complete exercise of this Warrant, the Company
shall furnish to Holder (i) within 90 days after the close of each fiscal year
of the Company an audited balance sheet and statement of changes in financial
position at and as of the end of such fiscal year, together with an audited
statement of income for such fiscal year; (ii) within 45 days after the close of
each fiscal quarter of the Company, an unaudited balance sheet and statement of
cash flows at and as of the end of such quarter, together with an unaudited
statement of income for such quarter; and (iii) promptly after sending, making
available, or filing, copies of all reports, proxy statements, and financial
statements that the Company sends or makes available to its shareholders and all
registration statements and reports that the Company files with the SEC or any
other governmental or regulatory authority.
12
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 31st day of July, 1996.
RELEASE SOFTWARE CORPORATION
By: /s/Mark Benning
---------------
Title: VP Sales & Finance
------------------
13
<PAGE>
Exhibit 4.5
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: Release Software Corporation, a Delaware Corporation
Number of Shares: 35,714 (subject to Section 1.9)
Class of Stock: Series B Preferred (subject to Section 1.9)
Initial Exercise Price: $0.70 per share (subject to Section 1.9)
Issue Date: July 10, 1997
--
Expiration Date: July 10, 2002 (Subject to Article 4.1)
--
THIS WARRANT CERTIFIES THAT, in consideration of the payment of $l.00 and
for other good and valuable consideration, IMPERIAL BANK or IMPERIAL BANCORP, at
their option, ("Holder") is entitled to purchase the number of fully paid and
nonassessable shares of the class of securities (the "Shares") of the
corporation (the "Company") at the initial exercise price per Share (the
"Warrant Price") all as set forth above and as adjusted pursuant to Article 2 of
this Warrant, subject to the provisions and upon the terms and conditions set
forth of this Warrant.
ARTICLE 1. EXERCISE
--------
1.1 Method of Exercise. Holder may exercise this Warrant by delivering
------------------
this Warrant and a duly executed Notice of Exercise in substantially the form
attached as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
----------------
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.5.
1.3 Omitted.
-------
1.4 Omitted.
-------
1.5 Fair Market Value. If the Shares are traded regularly in a public
-----------------
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
<PAGE>
its Notice of Exercise to the Company. If the Shares are not regularly traded in
a public market, the Board of Directors of the Company shall determine fair
market value in its reasonable good faith judgment. The foregoing
notwithstanding, if Holder advises the Board of Directors in writing that Holder
disagrees with such determination, then the Company and Holder shall promptly
agree upon a reputable investment banking firm to undertake such valuation. If
the valuation of such investment banking firm is greater than that determined by
the Board of Directors, then all fees and expenses of such investment banking
firm shall be paid by the Company. In all other circumstances, such fees and
expenses shall be paid by Holder.
1.6 Delivery of Certificate and New Warrant. Promptly after Holder
---------------------------------------
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.7 Replacement of Warrants. On receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.8 Repurchase on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------
1.8.1. "Acquisition". For the purpose of this Warrant,
-----------
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets (including intellectual property) of the
Company, or any reorganization, consolidation, or merger of the Company where
the holders of the Company's securities before the transaction beneficially own
less than 50% of the outstanding voting securities of the surviving entity after
the transaction.
1.8.2. Assumption of Warrant. If upon the closing of any
---------------------
Acquisition the successor entity assumes the obligations of this Warrant, then
this Warrant shall be exercisable for the same securities, cash, and property as
would be payable for the Shares issuable upon exercise of the unexercised
portion of this Warrant as if such Shares were outstanding on the record date
for the Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly. The Company shall use reasonable efforts to cause the surviving
corporation to assume the obligations of this Warrant.
1.8.3. Nonassumption. If upon the closing of any Acquisition the
-------------
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the Acquisition on the
same terms as other holders of the same class of securities of the Company.
1.8.4. Purchase Right. Notwithstanding the foregoing, at the
--------------
election of Holder, the Company shall purchase the unexercised portion of this
Warrant for cash upon the closing of any Acquisition for an amount equal to (a)
the fair market value of any consideration that would have been received by
Holder in consideration of the Shares had Holder exercised the unexercised
portion of this
2
<PAGE>
Warrant immediately before the record date for determining the shareholders
entitled to participate in the proceeds of the Acquisition, less (b) the
aggregate Warrant Price of the Shares, but in no event less than zero; provided,
however, that the purchase right under this Section 1.8.4 shall not be effective
if the accountants for the Company determine that it would result in the
disallowance of pooling of interest treatment.
1.9 Adjustment in Underlying Preferred Stock Price and Exercise Price.
-----------------------------------------------------------------
If on or before August 15, 1997, the Company sells and issues to any investors,
preferred stock with aggregate gross proceeds to the Company of at least
$3,000,000, this Warrant shall concurrent with the issuance of such shares of
preferred stock automatically be adjusted to instead be exercisable for shares
of the same series and class and bearing the same rights, preferences, and
privileges, of such shares of stock, with the Warrant Price hereunder adjusted
to equal the per share purchase price of such stock, and the number of such
shares subject to this Warrant adjusted to equal (i) Twenty-Five Thousand
Dollars ($25,000.00), divided by (ii) such modified per share Warrant Price.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
--------------------------
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
----------------------------
dividend on its common stock payable in common stock, or other securities,
subdivides the outstanding common stock into a greater amount of common stock,
then upon exercise of this Warrant, for each Share acquired, Holder shall
receive, without cost to Holder, the total number and kind of securities to
which Holder would have been entitled had Holder owned the Shares of record as
of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any reclassification,
------------------------------------------
exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
Warrant, Holder shall be entitled to receive, upon exercise or conversion of
this Warrant, the number and kind of securities and property that Holder would
have received for the Shares if this Warrant had been exercised immediately
before such reclassification, exchange, substitution, or other event. Such an
event shall include any automatic conversion of the outstanding or issuable
securities of the Company of the same class or series as the Shares to common
stock pursuant to the terms of the Company's Articles of Incorporation upon the
closing of a registered public offering of the Company's common stock. The
Company or its successor shall promptly issue to Holder a new Warrant for such
new securities or other property. The new Warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 2 including, without limitation, adjustments to the
Warrant Price and to the number of securities or property issuable upon exercise
of the new Warrant. The provisions of this Section 2.2 shall similarly apply to
successive reclassifications, exchanges, substitutions, or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
---------------------------------
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the number
----------------------------------
of Shares issuable upon exercise of this Warrant shall be subject to adjustment,
from time to time, in the manner set forth on Exhibit A, if attached, in the
event of Diluting Issuances (as defined on Exhibit A).
3
<PAGE>
2.5 No Impairment. The Company shall not, by amendment of its Articles of
-------------
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out all the provisions of this Article 2 and in
taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant
-----------------------------
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
--------------------------------------------
3.1 Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this
Warrant is not greater than the fair market value of the Shares as of the date
of this Warrant.
(b) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
------------------------
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of
4
<PAGE>
common stock will be entitled to exchange their common stock for securities or
other property deliverable upon the occurrence of such event); and (3) in the
case of the matter referred to in (e) above, the same notice as is given to the
holders of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
------------------
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all communiques to the shareholders of the Company, (b)
within ninety (90) days after the end of each fiscal year of the Company, the
annual audited financial statements of the Company certified by independent
public accountants of recognized standing and (c) within forty-five (45) days
after the end of each of the first three quarters of each fiscal year, the
Company's quarterly, unaudited financial statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company
-----------------------------------------------------
agrees that the Shares shall be subject to the registration rights set forth on
Exhibit B.
ARTICLE 4. MISCELLANEOUS.
-------------
4.1 Term: Notice of Expiration. This Warrant is exercisable, in whole or
--------------------------
in part, at any time and from time to time on or before the Expiration Date set
forth above. The Company shall give Holder written notice of Holder's right to
exercise this Warrant in the form attached as Appendix 2 not more than 90 days
and not less than 30 days before the Expiration Date. If the notice is not so
given, the Expiration Date shall automatically be extended until 30 days after
the date the Company delivers the notice to Holder.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
-------------------------------------------
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company). The Company
shall not require Holder to provide an opinion of counsel if the transfer is to
an affiliate of Holder or if there is no material question as to the
availability of current information as referenced in Rule 144(c), Holder
represents that it has complied with Rule 144(d) and (e) in reasonable detail,
the selling broker represents that it has complied with Rule 144(f), and the
Company is provided with a copy of Holder's notice of proposed sale.
5
<PAGE>
4.4 Transfer Procedure. Subject to the provisions of Section 4.2. Holder
------------------
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder, if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
4.5 Notices. All notices and other communications from the Company to the
-------
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys' Fees. In the event of any dispute between the parties
---------------
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
Release Software Corporation
By: /s/ Mark Benning
----------------------------
Name: Mark Benning
----------------------------
Title: CFO
----------------------------
6
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase ________ shares of the
Series B Preferred Stock of Release Software Corporation pursuant to the terms
of the attached Warrant, and tenders herewith payment of the purchase price of
such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to ____________ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
Christine McCarthy
Chief Financial Officer
Controllers Department
Imperial Bank or Imperial Bancorp
P.O. Box 92991
Los Angeles, CA 90009
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
IMPERIAL BANK or IMPERIAL BANCORP
_________________________________
(Signature)
_________________________________
(Date)
7
<PAGE>
APPENDIX 2
NOTICE THAT WARRANT IS ABOUT TO EXPIRE
--------------------------------------
____________, ____
Christine McCarthy
Chief Financial Officer
Controllers Department
Imperial Bank or Imperial Bancorp
P.O. Box 92991
Los Angeles, CA 90009
Dear Christine:
This is to advise you that the Warrant issued to you described below will expire
on July 10, 2002.
--
Issuer: Release Software Corporation
Issue Date: July 10, 1997
--
Class of Security Issuable: Series B Preferred (Subject to Section 1.9)
Exercise Price Per Share: $0.70 (Subject to Section 1.9)
Number of Shares Issuable: 35,714 (Subject to Section 1.9)
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any questions you
may have concerning exercise of the Warrant. This is your only notice of pending
expiration.
RELEASE SOFTWARE CORPORATION
By: ________________________
Its: ________________________
8
<PAGE>
EXHIBIT A
---------
Anti-Dilution Provisions
------------------------
In the event of the issuance (a "Diluting Issuance") by the Company, after
the Issue Date of the Warrant, of securities at a price per share less than the
Warrant Price, then the number of shares of common stock issuable upon
conversion of the Shares shall be adjusted in accordance with those provisions
(the "Provisions") of the Company's Articles (Certificate) of Incorporation
which apply to Diluting Issuances.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
9
<PAGE>
EXHIBIT B
---------
Registration Rights
-------------------
The Shares shall be deemed "registrable securities" or otherwise entitled
to "piggy back" registration rights in accordance with the terms of the
following agreement (the "Agreement") between the Company and its investor(s):
Investors' Rights Agreement dated July , 1997
-------------------------------------------------
The Company represents and warrants that all consents necessary to make Holder a
party to the Agreement have been obtained.
10
<PAGE>
EXHIBIT 4.6
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series D Preferred Stock of
RELEASE SOFTWARE CORPORATION
Dated as of April 16, 1999 (the "Effective Date")
WHEREAS, Release Software Corporation, a Delaware corporation (the
"Company") has entered into a Master Lease Agreement dated as of April 16, 1999,
Equipment Schedule No. VL-1 and VL-2 dated as of April 16, 1999, and related
Summary Equipment Schedules (collectively, the "Leases") with Comdisco, Inc., a
Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Series D Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
For value received, the Company hereby grants to the Warrantholder, and the
Warrantholder is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe for and purchase from the Company that
number of fully paid and non assessable shares of the Company's Series D
Preferred Stock ("Preferred Stock") equal to Forty Six Thousand Five Hundred
Dollars ($46,000) ("Aggregate Purchase Price") divided by the Exercise Price
("Exercise Price"). The Exercise Price shall equal the numeric average of (a)
$3.49 per share (the price per share of Series D Preferred Stock) and (b) the
price per share in the next round ("Next Round"), so long as the Next Round
occurs within ninety (90) days of the date herein, provided however, if the Next
Round is not successfully completed within ninety (90) days of the date herein,
then the Exercise Price shall be equal to $3.49 per share. Next Round shall be
defined as (i) next private round of equity financing, (ii) the Company's
initial public offering (as defined below), (iii) merger or acquisition. The
number and purchase price of such shares are subject to adjustment as provided
in Section 8 hereof.
Notwithstanding the term of this Warrant Agreement as set forth above, the
right to purchase Preferred Stock as granted shall expire, if not previously
exercised, immediately upon the closing of either of the following events:
(i) the issuance and sale of shares of Common Stock of the Company in the
Company's first public offering of securities for its own account pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Initial Public Offering"), provided that the underwriters so request that
the Warrantholder exercise at that time.
(ii) upon the closing of a merger or consolidation of the Company with or
into another corporation when the Company is not the surviving corporation, or
the sale of all or substantially all of the Company's properties and assets to
any other person (the "Merger") provided in which Warrantholder realizes a value
for its shares equal to three (3) times the Exercise Price and acquirer so
request that the Warrantholder exercise at that time.
The Company shall notify the Warrantholder if the Initial Public Offering
or Merger is proposed within a reasonable period of time prior to the filing of
a registration statement or the closing of the Merger and if the
-1-
<PAGE>
Company fails to deliver such written notice within a reasonable period of time,
anything to the contrary in this Warrant Agreement notwithstanding, the rights
to purchase will not expire until ten (10) business days after the Company
delivers such notice to the Warrantholder. Such notice shall also contain such
details of the proposed Initial Public Offering or Merger as are reasonable in
the circumstances and notice that this Warrant Agreement is expected to expire
upon closing thereof. If such closing does not take place, the Company shall
promptly notify the Warrantholder that such proposed transaction has been
terminated. Anything to the contrary in this Warrant Agreement notwithstanding,
the Warrantholder may rescind any exercise of its purchase rights promptly after
such notice of termination of the proposed transaction if the exercise of
warrants occurred after the Company notified the Warrantholder that the Initial
Public Offering or Merger was proposed or if the exercise were otherwise
precipitated by such proposed Initial Public Offering or Merger. In the event of
such rescission, the Warrants will continue to be exercisable on the same terms
and conditions.
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period of (i) seven (7) years.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an Initial Public
Offering, and if the Company's Registration Statement relating to such
public offering has been declared effective by the SEC, then the fair
market value per share shall be the product of (x) the initial "Price to
Public" specified in the final prospectus with respect to the offering and
(y) the number of shares of Common Stock into which each share of Preferred
Stock is convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection
with the Company's Initial Public Offering, and:
-2-
<PAGE>
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the product of (x) the average of the closing
prices over a five (5) day period ending three days before the day the
current fair market value of the securities is being determined and
(y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise; or
(b) if actively traded over-the-counter, the fair market value
shall be deemed to be the product of (x) the average of the closing
bid and asked prices quoted on the NASDAQ system (or similar system)
over the five (5) day period ending three days before the day the
current fair market value of the securities is being determined and
(y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Preferred Stock shall be the product of (x)
the highest price per share which the Company could obtain from a willing
buyer (not a current employee or director) for shares of common Stock sold
by the Company, from authorized but unissued shares as determined in good
faith by its Board of Directors and (y) the number of shares of Common
Stock into which each share of Preferred Stock is convertible at the time
of such exercise, unless the Company shall become subject to a Merger,
acquisition or other consolidation pursuant to which the Company is not the
surviving party, in which case the fair market value of Preferred Stock
shall be deemed to be the value received by the holders of the Company's
Preferred Stock on a common equivalent basis pursuant to such Merger or
acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
(a) Authorization and Reservation of Shares. During the term of this
---------------------------------------
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to
-3-
<PAGE>
any other person (hereinafter referred to as a "Merger Event"), then, as a part
of such Merger Event, lawful provision shall be made so that the Warrantholder
shall thereafter be entitled to receive, upon exercise of the Warrant, the
number of shares of preferred stock or other securities of the successor
corporation resulting from such Merger Event, equivalent in value to that which
would have been issuable if Warrantholder had exercised this Warrant immediately
prior to the Merger Event. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant Agreement with respect to the
rights and interest of the Warrantholder after the Merger Event to the end that
the provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
------------------------------------
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution. The
Warrantholder shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable to
-------------------
the Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit IV (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold, (b)
the number of shares to be issued, and (c) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred.
(f) Notice of Adjustments. If: (i) the Company shall declare any dividend
---------------------
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event;
(iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least twenty (20) days written notice prior to the proposed effective date
thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
-4-
<PAGE>
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by overnight mail or certified mail, postage
prepaid, addressed to the Warrantholder, at the address as shown on the books of
the Company.
(g) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder is given a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
------------------------------
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
----------------------
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
-----------------
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital of the Company consists of (A) 29,709,657
shares of Common Stock, of which 2,222,457 shares are issued and
outstanding, (B) 2,042,000 shares of Series A Preferred Stock, of which
2,000,000 shares are issued and outstanding and are convertible into
2,000,000 shares of Common Stock at a price of $0.50 per share, (C)
2,0272,854 shares of Series B Preferred Stock, of which 2,202,854 shares
are issued and outstanding and are convertible into 2,202,854 shares of
Common Stock at a price of $0.70 per share, (D) 2,957,843 shares of Series
C Preferred Stock, of which 2,944,460 shares are issued and outstanding and
are convertible into 2,944,460 shares of Common Stock at a price of $1.87
per share, and (E) 2,936,960 shares of Series D Preferred Stock, of which
2,782,244 shares are issued and outstanding and are convertible into
2,782,244 shares of Common Stock at a price of $3.49 per share.
(ii) As of February 281, 1999, the Company has reserved 3,275,292
shares of Common Stock for issuance under its 1996 and 1998 Stock Option
Plan, under which 1,478,525 and 1,568,190 options are outstanding at an
average price of $0.92 and $1.75 per share, respectively. There are no
other options, warrants, conversion privileges or other rights presently
outstanding to purchase or otherwise acquire any authorized but unissued
shares of the Company's capital stock or other securities of the Company,
except for Warrants A, B, and C.
-5-
<PAGE>
(iii) In accordance with the Company's Certified Articles of
Incorporation, no shareholder of the Company has preemptive rights to
purchase new issuances of the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in this
----------------------------------------
Warrant Agreement and Amended and Restated Investor Rights Agreement, the
Company is not, pursuant to the terms of any other agreement currently in
existence, under any obligation to register under the 1933 Act any of its
presently outstanding securities or any of its securities which may hereafter be
issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the Warrantholder,
------------------------
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
-------------
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without
-6-
<PAGE>
expense to such holder, one or more new certificates for the Warrant or for such
shares of Preferred Stock not bearing any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
--------------
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment. Warrantholder is an investor in securities of companies in the
development stage and acknowledges that it is able to fend for itself and can
bear the economic risk of its investment.
(e) Risk of No Registration. The Warrantholder understands that if the
-----------------------
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1933 Act (the "1933 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act, as amended, or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
-------------------
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
(g) Legends. It is understood that the Preferred Stock issuable upon
-------
exercise of the rights under this Warrant Agreement may bear one or all of the
following legends:
(i) THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF
COUNSEL (WHICH MAY BE IN-HOUSE COUNSEL) SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 OF SUCH ACT.
(ii) Any legend required by State securities laws.
11. TRANSFERS.
---------
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the books
of the Company upon receipt by the Company of a notice of transfer in the form
attached hereto as Exhibit III (the "Transfer Notice"), at its principal offices
and the payment to the company of all transfer taxes and other governmental
charges imposed on such transfer.
12. MARKET STANDOFF
---------------
Each holder of the Preferred Stock issued upon exercise of the rights
hereunder agrees that, during the period specified by the underwriter or
underwriters of Common Stock (or other securities) of the Company,
following the effective date of a registration statement of the Company
filed under the 1933 Act, it shall not, to the extent requested by such
underwriter, directly or indirectly sell, offer or contract to sell
(including, without limitation, any short sale) grant any option to
purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of the Company at any time
during such period except Preferred Stock included in such registration.
13. MISCELLANEOUS.
--------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
-7-
<PAGE>
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
----------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
California.
(d) Counterparts. This Warrant 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.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, Attention: Venture Lease
Administration, cc: Legal Department, Attention.: General Counsel, (and/or, if
by facsimile, (847) 518-5465 and (847)518-5088) and (ii) to the Company at 990
Commercial Street, San Carlos, CA 94070, Attention: Joan Walsh (and/or if by
facsimile, (650) 508-2490) or at such other address as any such party may
subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions
--------
of the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
----------
a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. The Company shall
also supply such other documents as the Warrantholder may from time to time
reasonably request.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company: RELEASE SOFTWARE CORPORATION
By: /s/ Joan P. Walsh
-----------------------------
Title: CFO
-----------------------------
Warrantholder: COMDISCO, INC.
By: /s/ Jill C. Hanses
------------------------------
Title: JILL C. HANSES
------------------------------
SENIOR VICE PRESIDENT
-9-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To: ________________________
(1) The undersigned Warrantholder hereby elects to purchase ______ shares of
the Series D Preferred Stock of ______________, pursuant to the terms of
the Warrant Agreement dated the _______ day of __________________________,
19__ (the "Warrant Agreement") between ____________________ and the
Warrantholder, and tenders herewith payment of the purchase price for such
shares in full, together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series D Preferred Stock of
_____________________, the undersigned hereby confirms and acknowledges the
investment representations and warranties made in Section 10 of the Warrant
Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series D Preferred Stock in the name of the undersigned or in such other
name as is specified below.
__________________________________
(Name)
__________________________________
(Address)
Warrantholder: COMDISCO, INC.
By: __________________________
Title: __________________________
Date: __________________________
-10-
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned _____________________________, hereby acknowledge receipt
of the "Notice of Exercise" from Comdisco, Inc., to purchase ______ shares of
the Series D Preferred Stock of _______________, pursuant to the terms of the
Warrant Agreement, and further acknowledges that ______ shares remain subject to
purchase under the terms of the Warrant Agreement.
Company:
By: _________________________
Title: _________________________
Date: _________________________
-11-
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
________________________________________________________________
(Please Print)
whose address is _______________________________________________
________________________________________________________________
Dated: __________________________________
Holder's Signature: _____________________
Holder's Address: _____________________
_________________________________________
Signature Guaranteed: _________________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant Agreement.
-12-
<PAGE>
EXHIBIT IV
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
RELEASE SOFTWARE CORPORATION
The undersigned, Matthew Klein and James L. Brock, hereby certify
that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of Release Software Corporation, a Delaware corporation, which is
the present name of the corporation. The name under which said corporation was
originally incorporated is Digital Money, Inc., and the date of filing of said
corporation's original certificate of incorporation with the Delaware Secretary
of State is March 28, 1994.
TWO: The Certificate of Incorporation of said corporation shall be
amended and restated to read in full as follows:
ARTICLE I
The name of this corporation is Release Software Corporation.
ARTICLE II
The address of the corporation's registered office in the State of Delaware
is 1013 Centre Road, in the City of Wilmington, County of New Castle, 19805.
The name of its registered agent at such address is Corporate Agents, Inc.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two classes
----------------
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the corporation is authorized to issue is
Twenty-Nine Million Seven Hundred Nine Thousand Six Hundred Fifty-Seven
(29,709,657) shares. Nineteen Million Five Hundred (19,500,000) shares shall be
Common Stock, par value $0.001 per share, and Ten Million Two Hundred Nine
-----
Thousand Six Hundred Fifty-Seven (10,209,657) shares shall be designated
Preferred Stock, par value $0.001 per share, of which Two Million Forty Two
-----
Thousand (2,042,000) shares have been designated "Series A Preferred Stock,"
Two Million Two Hundred Seventy Two Thousand Eight Hundred Fifty Four
(2,272,854) shares have been designated "Series B Preferred Stock," Two Million
Nine Hundred Fifty Seven Thousand Eight Hundred Forty Three (2,957,843) shares
have been designated "Series C Preferred Stock" and Two Million Nine Hundred
Thirty Six Thousand Nine Hundred Sixty (2,936,960) shares have been designated
"Series D Preferred Stock."
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 03:00 PM 06/22/1998
981241108 - 2389257
<PAGE>
B. Rights, Preferences and Restrictions of Preferred Stock. The rights,
-------------------------------------------------------
preferences, restrictions and other matters relating to the Preferred Stock are
as follows:
1. Dividend Provisions.
-------------------
(a) The holders of shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be
entitled to received dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of this corporation) on the Common Stock of this
corporation, at the rate of 8% of the Original Series A Issue Price (as defined
below) per annum, 8% of the Original Series B Issue Price (as defined below) per
annum, 8% of the Original Series C Issue Price (as defined below) and 8% of the
Original Series D Issue Price (as defined below) per annum, respectively, (i)
payable quarterly when, as and if declared by the Board of Directors or (ii),
with respect to the Series D Preferred Stock, in the event of any liquidation,
dissolution or winding up of this corporation. Such dividends shall be non
cumulative with respect to the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, and shall be cumulative with respect to the
Series D Preferred Stock.
(b) After payment of such dividends, any additional dividends or
distributions shall be distributed among all holders of Common Stock and all
holders of Series D Preferred Stock pro rata based on the number of shares of
Common Stock held by each (assuming conversion of all such Series D Preferred
Stock).
2. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series D
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this corporation to the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Common
Stock by reason of their ownership thereof, an amount per share equal to the sum
of (i) $3.49 for each outstanding share of Series D Preferred Stock (the
"Original Series D Issue Price") and (ii) all accrued but unpaid dividends on
such share. If upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series D Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then the entire assets and funds of the corporation
legally available for distribution shall be distributed ratably among the
holders of the Series D Preferred Stock pro rata based upon the number of shares
of Series D Preferred Stock held by them.
(b) Upon the completion of the distribution required by
subparagraph (a) of this Section 2, the holders of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets of
this corporation to the holders of Common Stock by reason of their ownership
thereof, (A) in the case of the Series A Preferred Stock, an amount per share
equal to the sum of (i) $.50 for each outstanding share of Series A Preferred
Stock (the "Original
-2-
<PAGE>
Series A Issue Price") and (ii) an amount equal to the declared but unpaid
dividends on such share; (B) in the case of Series B Preferred Stock, an amount
per share equal to the sum of (i) $.70 for each outstanding share of Series B
Preferred Stock (the "Original Series B Issue Price") and (ii) an amount equal
to declared but unpaid dividends on such share; and (C) in the case of the
Series C Preferred Stock, an amount per share equal to the sum of (i) $1.868 for
each outstanding share of Series C Preferred Stock (the "Original Series C Issue
Price") and (ii) an amount equal to declared but unpaid dividends on such share.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then the
entire assets and funds of the corporation legally available for distribution
shall be distributed ratably among the holders of the Series Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock in proportion to the
aggregate preferential amounts owed such holders in respect of such shares.
(c) (i) If a liquidation, dissolution or winding up of this
corporation occurs prior to January 31, 2001, then upon the completion of the
distribution required by subparagraphs (a) and (b) of this Section 2, the
remaining assets of the corporation available for distribution to stockholders
shall be distributed among the holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Common
Stock pro rata based on the number of shares of Common Stock held by each
(assuming conversion of all such Preferred Stock).
(ii) If a liquidation, dissolution or winding up of this
corporation occurs on or after January 31, 2001, then upon the completion of the
distribution required by subparagraphs (a) and (b) of this Section 2, the
holders of the Series D Preferred Stock and Common Stock of this corporation
shall receive all of the remaining assets of this corporation pro rata based on
the number of shares of Common Stock held by each (assuming conversion of all
such Series D Preferred Stock).
(d) (i) For purposes of this Section 2, unless otherwise
agreed by holders of at least seventy percent (70%) of the then outstanding
shares of Preferred Stock (voting together as a single class and on an as-
converted basis), a liquidation, dissolution or winding up of this corporation
shall be deemed to be occasioned by, or to include, (i) the acquisition of this
corporation or a change in control of this corporation by another entity by
means of any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation, but excluding any
merger effected primarily for the purpose of changing the domicile of this
corporation) that results in the transfer of fifty percent (50%) or more of the
outstanding voting power of this corporation; or (ii) a sale of all or
substantially all of the assets of this corporation.
(ii) In any such events, if the consideration received by
the corporation is other than cash, its value will be deemed its fair market
value. Any securities shall be valued as follows:
-3-
<PAGE>
(A) Securities not subject to investment letter or other
similar restrictions on free marketability:
(1) If traded on a securities exchange or through
NASDAQ-NMS, the value shall be deemed to be the average of the closing prices of
the securities on such exchange over the thirty (30) day period ending three (3)
days prior to the closing;
(2) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty (30) day period ending three (3) days
prior to the closing; and
(3) If there is no active public market, the
value shall be the fair market value thereof, as mutually determined by the
corporation and the holders of at least a majority of the voting power of all
then outstanding shares of Preferred Stock.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (A)(1), (2) or (3) to reflect the approximate fair
market value thereof, as mutually determined by the corporation and the holders
of at least a majority of the voting power of all then outstanding shares of
such Preferred Stock.
(iii) In the event the requirements of this subsection 2(c) are
not complied with, this corporation shall forthwith either:
(A) cause such closing to be postponed until such time
as the requirements of this Section 2 have been complied with; or
(B) cancel such transaction, in which event the rights,
preferences and privileges of the holders of Preferred Stock shall revert to and
be the same as such rights, preferences and privileges existing immediately
prior to the date of the first notice referred to in subsection 2(d)(iv) hereof.
(iv) The corporation shall give each holder of record of
Preferred Stock written notice of such impending transaction not later than
twenty (20) days prior to the stockholders' meeting called to approve such
transaction, or twenty (20) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction and the provisions of
this Section 2, and the corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall in no event take place
sooner than twenty (20) days after the corporation has given the first notice
provided for herein or soon than ten (10) days after the corporation has given
notice of any material changes provided for herein; provided, however, that such
periods may be shortened upon the written consent of the holders of Preferred
Stock that are entitled to
-4-
<PAGE>
such notice rights or similar notice rights and that represent at least a
majority of the voting power of all then outstanding shares of such Preferred
Stock.
3. Conversion. The holders of the Preferred Stock shall have
----------
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall be
----------------
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of this corporation or any transfer agent
for such stock, into such number of fully paid and nonassesable shares of Common
Stock as is determined by dividing the Original Series A Issue Price for the
Series A Preferred Stock, the Original Series B Issue Price for the Series B
Preferred Stock, the Original Series C Issue Price for the Series C Preferred
Stock or the Original Series D Issue Price for the Series D Preferred Stock by
the Conversion Price applicable to such series of Preferred Stock, determined as
hereafter provided, in effect on the date the certificate is surrendered for
conversion. The initial Conversion Price per share for shares of Series A
Preferred Stock shall be the Original Series A Issue Price; the initial
Conversion Price per share for shares of Series B Preferred Stock shall be the
Original Series B Issue Price; the initial Conversion Price per share for shares
of Series C Preferred Stock shall be the Original Series C Issue Price; and the
initial Conversion Price per share for shares of Series D Preferred Stock shall
be the Original Series D Issue Price; provided, however, that the Conversion
Price for each series of Preferred Stock shall be subject to adjustment as set
forth in subsection 3(d).
(b) Automatic Conversion. Each share of Series A Preferred
--------------------
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock shall automatically be converted into shares of Common Stock at the
Conversion Price at the time in effect for such series of Preferred Stock
immediately upon the earlier of (i) the corporation's sale of its Common Stock
in an underwritten public offering pursuant to a registration statement under
the Securities Act of 1933, as amended, at a public offering price (prior to
underwriting commissions and expenses) of at least $15,000,000 in the aggregate,
before deduction of underwriting discounts and registration expenses, at a per
share offering price to the public of at least 150% of the Original Series D
Issue Price (as adjusted for stock splits, reverse stock splits,
recapitalizations and similar events) ( a "Qualified IPO"), (ii) upon the
-------------
corporation's sale of its Common Stock in an underwritten public offering
pursuant to a registration statement under the Securities Act of 1933, as
amended, at a public offering price (prior to underwriting commissions and
expenses) of at least $15,000,000 in the aggregate, before deduction of
underwriting discounts and registration expenses, at a per share offering price
to the public of at least 120% of the Original Series D Issue Price (as adjusted
for stock splits, reverse stock splits, recapitalizations and similar events);
provided, however, that the automatic conversion of the shares of Preferred
- -------- -------
Stock upon such public offering was approved by the written consent of the
holders of at least seventy percent (70%) of the then outstanding shares of
Preferred Stock, voting together as a single class and on an as-converted basis,
or (iii) the date specified by written consent or agreement of (A) the holders
of at least seventy percent (70%) of the then outstanding shares of Preferred
Stock, voting together as a single class and on an as-converted basis and (B)
the holders of at least fifty percent (50%) of the then outstanding shares of
Series D Preferred Stock, voting together as a separate class.
-5-
<PAGE>
(c) Mechanics of Conversion. Before any holder of Preferred Stock
-----------------------
shall be entitled to convert the same into shares of Common Stock, he shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of this corporation or of any transfer agent for the Preferred Stock, and shall
give written notice to this corporation at its principal corporate office, of
the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. This corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten offering of securities
registered pursuant to the Securities Act of 1933, the conversion shall be
conditioned upon the closing with the underwriters of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive the
Common Stock upon conversion of the Preferred Stock shall not be deemed to have
converted such Preferred Stock until immediately prior to the closing of such
sale of securities.
(d) Conversion Price Adjustments of Preferred Stock for Certain
-----------------------------------------------------------
Dilutive Issuances, Splits and Combinations. The Conversion Price of the
- -------------------------------------------
Preferred Stock shall be subject to adjustment from time to time as follows:
(i) (A) If the corporation shall issue, after the date upon
which any shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock were first issued (the "Purchase
Date" with respect to such series of Preferred Stock), any Additional Stock (as
defined below) without consideration or for a consideration per share less than
the Conversion Price for such series in effect immediately prior to the issuance
of such Additional Stock, the Conversion Price for such series in effect
immediately prior to each such issuance shall forthwith (except as otherwise
provided in this clause (i)) be adjusted to a price determined by multiplying
such Conversion Price by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such issuance plus
the number of shares of Common Stock that the aggregate consideration received
by the corporation for such issuance would purchase at such Conversion Price;
and the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance plus the number of shares of such
Additional Stock so issued; provided that for the purposes of this subsection
3(d)(i)(A), all shares of Common Stock issuable upon conversion and/or exercise
of any outstanding Preferred Stock, options, warrants or convertible securities,
shall be deemed to be outstanding.
(B) No adjustment of the Conversion Price of any series of
Preferred Stock shall be made in an amount less than one cent per share,
provided that any adjustments which are not required to be made by reason of
this sentence shall be carried forward and shall be either taken into account in
any subsequent adjustment made prior to three (3) years
-6-
<PAGE>
from the date of the event giving rise to the adjustment being carried forward,
or shall be made at the end of three (3) years from the date of the event giving
rise to the adjustment being carried forward. Except to the limited extent
provided for in subsections (E)(3) and (E)(4), no adjustment of such Conversion
Price pursuant to this subsection 3(d)(i) shall have the effect of increasing
the Conversion Price above the Conversion Price in effect immediately prior to
such adjustment.
(C) In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid before deducting
any reasonable discounts, commissions or other expenses allowed, paid or
incurred by this corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on or
after the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of subsection 3(d)(t) and subsection 3(d) (ii):
(1) The aggregate maximum number of shares of Common
Stock deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but without
taking into account potential antidilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in subsections 3
(d)(i)(C) and (d)(i)(D)), if any, received by the corporation upon the issuance
of such options or rights plus the minimum exercise price provided in such
options or rights for the Common Stock covered thereby.
(2) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange (assuming the satisfaction
of any conditions to exercisability, including without limitation, the passage
of time, but without taking into account potential antidilution adjustments) for
any such convertible or exchangeable securities or upon the exercise of options
to purchase or rights to subscribe for such convertible or exchangeable
securities and subsequent conversion or exchange thereof shall be deemed to have
been issued at the time such securities were issued or such options or rights
were issued and for a consideration equal to the consideration, if any, received
by the corporation for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if any, to be received by
the corporation upon the conversion or exchange of such securities or the
exercise of any
-7-
<PAGE>
related options or rights (the consideration in each case to be determined in
the manner provided in subsections 3(d)(i)(C) and (d)(i)(D)).
(3) In the event of any change in the number of shares
of Common Stock deliverable or in the consideration payable to this corporation
upon exercise of such options or rights or upon conversion of or in exchange for
such convertible or exchangeable securities, including, but not limited to, a
change resulting from the antidilution provisions thereof, the Conversion Price
of the Preferred Stock, to the extent in any way affected by or computed using
such options, rights or securities, shall be recomputed to reflect such change,
but no further adjustment shall be made for the actual issuance of Common Stock
or any payment of such consideration upon the exercise of any such options or
rights or the conversion or exchange of such securities.
(4) Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
the Conversion Price of the Preferred Stock, to the extent in any way affected
by or computed using such options, rights, or securities or options or rights
related to such securities, shall be recomputed to reflect the issuance of only
the number of shares of Common Stock (and convertible or exchangeable securities
which remain in effect) actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the exercise
of the options or rights related to such securities.
(5) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to subsections 3(d)(i)(E)(1)
and (2) shall be appropriately adjusted to reflect any change, termination or
expiration of the type described in either subsection 3(d)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection 3(d)(i)(E)) by this
corporation after the Purchase Date other than:
(A) Common Stock issued pursuant to a transaction described
in subsection 3(d)(iii) hereof;
(B) up to an aggregate of 2,275,292 shares of Common Stock
(or such greater number as shall be approved by this corporation's Board of
Directors) issuable or issued to employees consultants, or directors of this
corporation directly or pursuant to a stock option plan or restricted stock plan
approved by the Board of Directors of this corporation;
(C) Capital stock or warrants or options to purchase
capital stock issued to vendors or issued in connection with bona fide equipment
lease financings, credit facilities, strategic licensing transactions, or
similar transactions, the terms of which are approved by the Board of Directors;
provided, however, that the aggregate amount of capital stock issued, or
- -------- -------
issuable upon the exercise of warrants or options issued, pursuant to this
-8-
<PAGE>
subsection 3(d)(ii)(C) shall not exceed five percent (5%) of this corporation's
capital stock (on a fully-diluted basis assuming exercise of all options and
warrants and conversion of all convertible securities).
(D) Capital stock or warrants or options to purchase
capital stock issued in connection with bona fide acquisitions or mergers, the
terms of which are approved by at least two-thirds of the members of the Board
of Directors of this Corporation;
(E) Capital stock or warrants or options to purchase
capital stock the issuance of which is determined to be excluded from the
definition of "Additional Stock" upon the written consent of the holders of at
least (1) seventy percent (70%) of the then outstanding Preferred Stock and (2)
fifty percent (50%) of the then outstanding Series D Preferred Stock (without
any requirement of an amendment to this Amended and Restated Certificate of
Incorporation); and
(F) Shares of Common Stock issued or issuable upon
conversion of Preferred Stock.
(iii) In the event the corporation should at any time or from
time to time after the Purchase Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Preferred Stock and Series B Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents with the number of shares
issuable with respect to Common Stock Equivalents determined from time to time
in the manner provided for deemed issuances in subsection 3(d)(i)(E).
(iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Preferred Stock shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be decreased in proportion to such decrease in
outstanding shares.
(e) Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 3(d)(iii), then,
in each such case for the purpose of this subsection 3(e), the holders
-9-
<PAGE>
of the Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the corporation entitled to receive such distribution.
(f) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 3 or in Section 2) provision shall be made so that the holders of
the Preferred Stock shall thereafter be entitled to receive upon conversion of
the Preferred Stock the number of shares of stock or other securities or
property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 3 with respect to the rights of the holders of the
Preferred Stock after the recapitalization to the end that the provisions of
this Section 3 (including adjustment of the Conversion Price then in effect and
the number of shares purchasable upon conversion of the Preferred Stock) shall
be applicable after that event as nearly equivalent as may be practicable.
(g) No Impairment. This corporation will not, by amendment of
-------------
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Preferred Stock against impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Preferred Stock, and the number of
shares of Common Stock to be issued shall be rounded to the nearest whole share.
Whether or not fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of Preferred Stock the
holder is at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Preferred Stock pursuant to this Section 3, this
corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This corporation shall, upon the written request at any
time of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (A) such adjustment and readjustment,
(B) the Conversion Price for such series of Preferred Stock at the time in
effect, and (C) the number of shares of Common Stock and the amount, if
-10-
<PAGE>
any, of other property which at the time would be received upon the
conversion of a share of Preferred Stock.
(i) Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Preferred Stock, at least 20 days prior
to the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Preferred Stock, and if or any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Preferred Stock,
in addition to such other remedies as shall be available to the holder of such
Preferred Stock, this corporation will take such corporate action as may, in the
opinion of its counsel, be neccessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in best efforts to obtain the
requisite stockholder approval of any necessary amendment to these articles.
(k) Notices. Any notice required by the provisions of this
-------
Section 3 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of
this corporation.
4. Voting Rights.
-------------
(a) Subject to subsection 4(b) below, the holder of each share
of Preferred Stock shall have the right to one vote for each share of Common
Stock into which such Preferred Stock could then be converted (with any
fractional share determined on an aggregate conversion basis being rounded to
the nearest whole share), and with respect to such vote, such holder shall have
full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, notwithstanding any provision
hereof, to notice of any stockholders' meeting in accordance with the Bylaws of
this corporation, and shall be entitled to vote, together with holders of Common
Stock, with respect to any question upon which holders of Common Stock have the
right to vote.
(b) So long as at least one million (1,000,000) shares of
Preferred Stock shall remain outstanding (subject to appropriate adjustment for
any stock split, reverse stock split, stock dividend, recapitalization or
similar transaction), (i) the holders of shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock, voting together
-11-
<PAGE>
as a class and on an as-converted basis, shall have the right to elect two
members of the Board of Directors of this corporation (the "Series A, B and C
Directors"), (ii) the holders of shares of Series D Preferred stock, voting as a
separate series, shall have the right to elect one member of the Board of
Directors of this corporation (the "Series D Director"), (iii) the holders of
shares of Common Stock, voting separately as a class, shall have the right to
elect two members of the Board of Directors of this corporation (the "Common
Directors"), and (iv) each additional member of the Board of Directors, if any
(collectively, the "Other Directors"), shall be elected by the vote of the
holders of the Preferred stock and, the holders of the Common Stock, voting
separately as two classes, and with respect to the Preferred stock, on an as-
converted basis, in accordance with subsection 4(a). So long as at least one
million (1,000,000) shares of Preferred Stock shall remain outstanding (subject
to appropriate adjustment for any stock split, reverse stock split, stock
dividend, recapitalization or similar transaction), the Series A, B and C
Directors may be removed from the Board of Directors only by the affirmative
vote of the holders of at least a majority of the Series A Preferred stock,
Series B Preferred Stock and Series C Preferred Stock, voting together as a
class and on an as-converted basis, the Series D Director may be removed from
the Board of Directors only by the affirmative vote of the holders of a majority
of the Series D Preferred Stock, voting as a separate series, the Common
Directors may be removed from the Board of Directors only by the affirmative
vote of the holders of a majority of the Common Stock, voting separately as a
class, and any Other Directors may be removed from the Board of Directors upon
the affirmative vote of either the holders of a majority of the Preferred Stock,
voting separately as a class and on an as-converted basis, or the holders of a
majority of the Common Stock, voting separately as a class. If a vacancy on the
Board of Directors is to be filled by the Board of Directors, only a director or
directors elected by the same class or classes of stockholders as those who
would be entitled to vote to fill such vacancy, if any, shall vote to fill such
vacancy.
5. Protective Provisions.
---------------------
(a) So long as any shares of Preferred Stock are outstanding,
this corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least seventy percent
(70%) of the shares of Preferred Stock outstanding (voting together as a single
class and on an as-converted basis):
(i) Authorize or issue any equity security senior or pari
----
passu to the Preferred Stock as to dividend rights or redemption rights or
- -----
liquidation preferences;
(ii) Sell, convey, or otherwise dispose of or encumber all
or substantially all of its property or business or merge into or consolidate
with any other corporation (other than a wholly-owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the corporation is disposed of;
(iii) Whether by amendment of the corporation's Bylaws,
amendment of this Certificate of Incorporation or otherwise, alter or change the
rights, preferences or privileges of the shares of Preferred Stock, so as to
affect adversely such shares; or
-12-
<PAGE>
(iv) Take any action that would result in taxation of
the holders of shares of the Preferred Stock under Section 305 of the Internal
Revenue Code of 1986, as amended (or by comparable provision of the Internal
Revenue Code as herein from time to time amended);
(v) Effect a material change in the nature of the
Company's business as conducted on the date hereof; or
(vi) Approve or authorize the incurrence of any
indebtedness or the issuance of any guarantee of any obligation of any other
person or entity (other than a subsidiary) if the aggregate amount of the
principal amount of such indebtedness and the principal amount of the
indebtedness so guaranteed shall exceed $7,500,000;
Further, so long as at least 1,000,000 shares of Preferred Stock
remain outstanding and unless unanimously approved by the Board of Directors of
this corporation, this corporation shall not take any of the following actions
without first obtaining the approval (by vote or written consent, as provided by
law) of the holders of at least seventy percent (70%) of the then outstanding
shares of Preferred Stock:
(vii) make any loans or advances to its employees or any
members of their immediate families, other than travel advances and other
advances made in the ordinary course of business or loans to employees made
pursuant to promissory notes issued for the purchase of shares under a stock
option plan or restricted stock plan approved by the Board of Directors of this
corporation; or
(viii) guarantee any indebtedness or obligation of any
other party other than in the ordinary course of business.
(b) In addition, so long as at least 500,000 shares of Series D
Preferred Stock are outstanding, this corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least fifty percent (50%) of the shares of Series D Preferred
stock outstanding
(i) Authorize or issue any equity security senior or
pari passu to the Series D Preferred Stock as to dividend rights or redemption
- ----------
rights or liquidation preferences;
(ii) Whether by amendment of the corporation's Bylaws,
amendment of this Certificate of Incorporation or otherwise, alter or change the
rights, preferences or privileges of the shares of Series D Preferred stock, so
as to affect adversely such shares; or
(iii) Amend Section 3(b) of this Article IV so as to
affect adversely the Series D Preferred Stock.
-13-
<PAGE>
6. Status of Converted Stock. In the event any shares of Preferred
-------------------------
Stock shall be converted pursuant to Section 2 or Section 3 hereof, the shares
so converted shall be canceled and shall not be issuable by the corporation. The
Certificate of Incorporation of this corporation shall be appropriately amended
to effect the corresponding reduction in the corporation's authorized capital
stock.
7. Redemption. The Preferred Stock is not redeemable.
----------
C. Common Stock.
-------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the corporation, the assets of the corporation shall be distributed as
provided in subparagraph (b) of Section 2 of this Article IV.
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of the corporation.
ARTICLE VI
The number of directors of the corporation shall be fixed from time to time
by a bylaw or amendment thereof duly adopted by the Board of Directors.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws of
the corporation shall so provide.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the corporation may be kept
(subject to any provision
-14-
<PAGE>
contained in the statutes) outside the State of Delaware at such place or places
as may be designated from time to time by the Board of Directors or in the
Bylaws of the corporation.
ARTICLE IX
A director of this corporation shall, to the full extent permitted by the
Delaware General Corporation Law as it now exists or as it may hereafter be
amended, not be liable to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. Neither any amendment nor
repeal of this Article IX, nor the adoption of any provision of this Amended and
Restated Certificate of Incorporation inconsistent with this Article IX, shall
eliminate or reduce the effect of this Article IX in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article IX,
would accrue or arise prior to such amendment, repeal or adoption of an
inconsistent provision.
ARTICLE X
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
*********
The foregoing Amended and Restated Certificate of Incorporation has been
duly adopted by this corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
-15-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this certificate on
June 22, 1998.
RELEASE SOFTWARE CORPORATION
By: /s/ Matthew Klein
---------------------------
Matthew Klein, President
By: /s/ James L. Brock
---------------------------
James L. Brock, Secretary
<PAGE>
EXHIBIT 4.7
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
RELEASENOW.COM CORPORATION
Dated as of September 9, 1999 (the "Effective Date")
WHEREAS, ReleaseNow.com Corporation, a Delaware corporation (the "Company")
has entered into a Master Lease Agreement dated as of April 16, 1999, Equipment
Schedule No. VL-1 and VL-2 dated as of April 16, 1999, and related Summary
Equipment Schedules (collectively, the "Leases") with Comdisco, Inc., a Delaware
corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for Phase II of such Leases, the right to purchase shares of its Warrant Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases in and consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE WARRANT STOCK.
--------------------------------------------
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 8,625 fully paid and non-assessable
shares of the Company's Warrant Stock (as defined herein) at a purchase price of
$4.00 per share (the "Exercise Price"). For purposes of this Warrant Agreement,
the term Warrant Stock shall mean the Company's Common Stock, unless (I) the
Company does not successfully complete the sale of Common Stock of the Company
in the Company's first public offering of securities for its own account
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "Initial Public Offering") by March 31, 2000, or (ii) the
Company closes a private investment round of preferred stock prior to the
closing of the Initial Public Offering, or (iii) an acquisition of all or
substantially all of the outstanding stock or assets of the Company, prior to
closing of an Initial Public Offering, in all such cases Warrant Stock shall
mean the Company's Series E Preferred Stock or Series F Preferred Stock (so long
as such series has the same rights, preferences, and privileges of the Series E
Preferred Stock), if any in the case of (ii) above. If Warrant Stock shall mean
Series E Preferred Stock, the Company shall immediately undertake to obtain
Stockholder approval to amend its Amended and Restated Certificate of
Incorporation to increase the authorized number of shares of its Series E
Preferred Stock to include 8,625 shares of Series E Preferred Stock so
Warrantholder shall hold a Series E Preferred Stock warrant. If Warrant Stock
shall mean Series F Preferred Stock, the Company shall immediately undertake to
obtain Stockholder approval to amend its Amended and restated Certificate of
Incorporation to increase its authorized number of share of its Preferred Stock
and reserve 8,625 shares of Series F Preferred Stock for issuance upon the
exercise of such Warrant. The number and purchase price of such shares are
subject to adjustment as provided for in Section 8 hereof.
<PAGE>
2. TERM OF THE WARRANT AGREEMENT
-----------------------------
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Warrant Stock as granted herein shall commence on the
Effective Date and shall be exercisable for a period of seven (7) years.
Notwithstanding the term of this Warrant Agreement as set forth above, the
right to purchase Warrant Stock as granted shall expire, if not previously
exercised, immediately upon the closing of either of the following events:
(i) an Initial Public Offering, provided that the underwriters so request
that the Warrantholder exercise at that time.
(ii) upon the closing of a merger or consolidation of the Company with or
into another corporation when the Company is not the surviving corporation, or
the sale of all or substantially all of the Company's properties and assets to
any other person (the "Merger") provided in which Warrantholder realizes a value
for its shares equal to three (3) times the Exercise Price and acquirer so
request that the Warrantholder exercise at that time.
The Company shall notify the Warrantholder if the Initial Public Offering
or Merger is proposed within a reasonable period of time prior to the filing of
a registration statement or the dosing of the Merger and if the Company fails to
deliver such written notice within a reasonable period of time. anything to the
contrary In this Warrant Agreement withstanding, the rights to purchase will not
expire until ton (10) business d" after the Company delivers such notice to the
Warrantholder. Such notes shall also contain such details of the proposed
Initial Public Offering or Merger as am reasonable in the circumstances and
notice that this Warrant Agreement Is expected to expire upon closing thereof.
If such dosing does not take place, the Company shall promptly notify the
Warrantholder that such proposed transaction has been terminated. Anything to
the contrary in this Warrant Agreement notwithstanding, the Warrantholder may
rescind any exercise of its purchase rights promptly after such notice of
termination of the proposed transaction if the exercise of warrants occurred
after the Company notified the Warrantholder that the Initial Public Offering or
Merger was proposed or if the exercise were otherwise precipitated by such
proposed Initial Public Offering or Merger, In the event of such rescission, the
Warrants will continue to be exercisable on the same terms and conditions.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder in whole or in part t any time, or from firm to time. prior to
the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise In the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and In no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for ft number of shares of Warrant Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, If any,
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will Issue Warrant Stock in accordance with the following formula:
X = Y (A-B)
-------------
A
Where: X = the number of shares of Warrant Stock to be issued to the
Warrantholder.
2
<PAGE>
Y = the number of shares of Warrant Stock requested to be exercised under
this Warrant Agreement.
A = the fair market value of one (1) share of Warrant Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of Warrant
Stock shall mean with respect to each share of Warrant Stock-
(i) if the exercise is in connection with an Initial Public Offering, and
if the Company's Registration Statement relating to such public offering has
been declared effective by the SEC, then the fair market value per share shall
be the initial "Price to Public" specified in the final prospectus with respect
to the offering:
(ii) If this Warrant is exercised after, and not in connection with the
Company's Initial Public Offering, and
(a) If traded on a securities exchange, the fair market value per
share shall be deemed to be the average of the closing prices over a five
(5) day period ending three days before the day the current fair market
value of the securities is being determined; or
(b) If actively traded over-the-counter, the fair market value per
share shall be deemed to be the average of the closing bid and asked prices
quoted on the NASDAQ system (or similar system) over Me live (5) day period
ending three days before the day the current fair market value of the
securities Is being determined:
(iii) If at any time the Common Stock Is not listed an any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value per share of Warrant Stock shall be the highest price
per share which the Company could obtain from a willing buyer (not a current
employee or director) for shares of Common Stock sold by the company, from
authorized but unissued shares, as determined in good faith by its Board of
Directors, unless the Company shall become subject to a merger, acquisition or
other consolidation pursuant to which the Company is not the surviving party, in
which case the fair market value of Common Stock shall be deemed to be the value
received by the holders of the Company's Warrant Stock on a common equivalent
basis pursuant to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
During the term of this Warrant Agreement. the Company will at all TIMES
have authorized and reserved a sufficient number of shares of ITS Warrant Stock
to provide for the exercise of the rights to purchase Warrant Stock as provided
for herein.
5. NO FRACTIONAL SHARES OR SCRIP
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
3
<PAGE>
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Warrant Stock
purchasable hereunder are subject to adjustment. as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of Warrant stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Warrant Stock purchasable) shall be applicable to
the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
------------------------------------
combine or subdivide its Warrant Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (I)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution. The
Warrantholder shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Warrant Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Warrant Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
4
<PAGE>
(e) Antidilution Rights. Additional antidilution rights applicable to the
-------------------
Warrant Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit IV (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any dilutive issuance of its stock or
other equity security to occur after the Effective Date of this Warrant, which
notice shall include (a) the price at which such stock or security is to be
sold, (b) the number of shares to be issued, and (c) such other information as
necessary for Warrantholder to determine if a dilutive event has occurred.
(f) Notice of Adjustments. If: (I) the Company shall declare any dividend
---------------------
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall, if such Warrant Stock is Series E Preferred
Stock or Series F Preferred Stock, offer for subscription prorata to the holders
of any class of its Warrant Stock any additional shares of stock of any class or
other rights; (iii) there shall be any Merger Event; (iv) there shall be an
initial public offering; or (v) there shall be any voluntary dissolution,
liquidation or winding up of the Company; then, in connection with each such
event, the Company shall send to the Warrantholder: (A) at least twenty (20)
days' prior written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend, distribution, subscription
rights (specifying the date on which such the holders of Preferred Stock shall
be entitled thereto) or for determining rights to vote in respect of such Merger
Event, dissolution, liquidation or winding up; (B) in the case of any such
Merger Event, dissolution, liquidation or winding up, at least twenty (20) days'
prior written notice of the date when the same shall take place (and specifying
the date on which the holders of Warrant Stock shall be entitled to exchange
their Warrant Stock for securities or other property deliverable upon such
Merger Event, dissolution, liquidation or winding up); and (C) in the case of a
public offering, the Company shall give the Warrantholder at least twenty (20)
days written notice prior to the effective date hereof.
Each such written notice shall set forth, in reasonable detail, (I) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) Reservation of Warrant Stock. The Warrant Stock issuable upon exercise
----------------------------
of the Warrantholder's rights has been duly and validly reserved and, when
Issued In accordance with the provisions of this Warrant Agreement will be
validly Issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever, provided, however, that
the Warrant Stock issuable pursuant to this Warrant Agreement may be subject to
restrictions on transfer under state and/or Federal securities laws. The Company
has made available to the Warrantholder true, correct and complete copies of Its
Charter and Bylaws. as amended. attached hereto as Exhibit IV. The Issuance of
certificates for Shares of Warrant Stock upon exercise of the Warrant Agreement
shall be made without charge to the Warrantholder for any issuance tax In
respect thereof, or other cost Incurred by the Company In connection with such
exercise and the related issuance of shares of Warrant Stock. The Company shall
not be required to pay any tax which may be payable In respect of any transfer
involved and the issuance and delivery of any certificate in a name other than
that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of Me Company
hereunder, including the Issuance to
5
<PAGE>
Warrantholder of the right to acquire the shares of Warrant Stock, have been
duly authorized by all necessary corporate action on the part of the Company,
and the Leases and this Warrant Agreement are not consistent with the Company's
Charter or Bylaws, do not contravene any law or governmental rule, regulation or
order applicable to k do not and will not contravene any provision of, or
constitute a default under, any Indenture, mortgage, contract or other
instrument to which it is a party or by which it is bound, and the Leases and
this Warrant Agreement constitute legal, valid and binding agreements of the
Company. enforceable in accordance with their respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice to,
----------------------
registration with, or taking of any other action in respect of any state.
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock.
-----------------
Preferred Stock or any other securities of the Company have been duly authorized
and validly Issued and are fully paid and nonassessable. All outstanding shares
of Common tock, Preferred Stock and any other securities were Issued in full
compliance with all Federal and state securities laws. In addition, as of August
10. 1999:
(i) The authorized capital of the Company consists of (A) 20,500,000 shares
of Common Stock, of which 5,320,246 shares are issued and outstanding, (B)
2,042,000 shares of Series A Preferred Stock, of which 2,000,000 are issued and
outstanding and are convertible into 2,000,000 shares of Common Stock at a price
of $0.50 per share, (C) 2,272,854 shares of Series B Preferred Stock, of which
2,202,854 shares are issued and outstanding and are convertible Into 2,202.854
shares of Common Stock at a price of $0.70 per share, (D) 2,957,B43 shares of
Series C Preferred Stock, of which 2,944,460 shares are issued and outstanding
and are convertible into 2,944,460 shares of Common Stock at a price of $1.87
per share, (E) 2,936,960 shares of Series D Preferred Stock, of which 2,782,244
shares are issued and outstanding and are convertible into 2,782,244 shares of
Common Stock at a price of $3.49 per share, and (F) 3,000,000 shares of Series E
Preferred Stock, of which 3,000,000 shares are issued and outstanding and are
convertible into 3,000,000 shares of Common Stock at a price of $4.00 per share.
(ii) As of August 10. 1999, the Company has reserved 5.775,292 shares of
Common Stock for Issuance under its 1998 Stock Option Plan. under which
1,618,772 options are outstanding at an average price of $1.82 per share. There
are no other options, warrants, conversion privileges or other rights presently
outstanding to purchase or otherwise acquire any authorized but unissued shares
of the Company's capital stock or other securities of the Company, except for
Warrants A, B, C and D.
(iii) In accordance with the Company's certified Articles of Incorporation,
no shareholder of the Company has preemptive rights to purchase new issuances of
the Company's capital stock.
(e) Insurance. The Company has in full force and effort insurance policies.
---------
with extended coverage insuring the Company and its property and business
against such losses and risks, and in such amounts, as are customary for
corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in this
----------------------------------------
Warrant Agreement and the Amended and Restated Investor Rights Agreement, the
Company is not pursuant to the terms of any other agreement currently in
existence, under any obligation to register under the 1933 Act any of its
presently outstanding securities or any of its securities which may hereafter be
issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof. the issuance of the Warrant Stork upon
exercise of this Warrant will constitute a
6
<PAGE>
transaction exempt from (i) the registration requirements of Section 5 of the
1933 Act. In reliance upon Section 4(2) thereof, and (ii) the qualification
requirements of the applicable state securities laws.
(h) Compliance with Rule 144. At the written request of the Warrantholder,
------------------------
who proposes to sell Warrant Stock issuable upon the exercise of the Warrant in
compliance with Rule 144 promulgated by the Securities and Exchange Commission,
the Company shall furnish to the Warrantholder, within ten days after receipt of
such request, a written statement confirming the Company's compliance with the
filing requirements of the Securities and Exchange Commission as set forth in
such Rule, as such Rule may be amended from time to time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered Into by the Company in reliance
upon the following representations and movements of the Warrantholder:
(a) Investment Purpose. The right to acquire Warrant Stock issuable upon
------------------
exercise of the Warrantholder's rights contained herein will be acquired for
investment and not with a view to the sale or distribution of any part thereof,
and the Warrantholder has no present Intention of selling or engaging In any
public distribution of the same except pursuant to a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Warrant Stock
-------------
issuable upon exercise of this Warrant is not registered under the 1933 Act or
qualified under applicable state securities laws on the ground that the issuance
contemplated by this Warrant Agreement will be exempt from the registration and
qualifications requirements thereof, and (ii) that the Company's reliance on
such exemption Is predicated on the representations set forth in this Section
10.
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Warrant Stock
issuable upon exercise of such rights unless and until (I) it shall have
notified the Company of the proposed disposition, and (ii) if requested by the
Company, it shall have furnished the Company with an opinion of counsel (which
counsel may either be inside or outside counsel to the Warrantholder)
satisfactory to the Company and its counsel to the effect that (A) appropriate
action necessary for compliance with the 1933 Act has been taken, or (B) an
exemption from the registration requirements of the 1933 Act is available.
Notwithstanding the foregoing, the restrictions imposed upon the transferability
of any of its rights to acquire Warrant Stock or Common Stock issuable on the
exercise of such rights do not apply to transfers from the beneficial owner, and
shall terminate as to any particular share of Warrant Stock when (1) such
security shall have been effectively registered under the 1933 Act and sold by
the holder thereof in accordance with such registration or (2) such security
shall have been sold without registration in compliance with Rule 144 under the
1933 Act, or (3) a letter shall have been issued to the Warrantholder at its
request by the staff of the Securities and Exchange Commission or a ruling shall
have been issued to the Warrantholder at its request by such Commission stating
that no action shall be recommended by such staff or taken by such Commission,
as the case may be, if such security is transferred without registration under
the 1933 Act in accordance with the conditions set forth in such letter or
ruling and such letter or ruling specifies that no subsequent restrictions on
transfer are required. Whenever the restrictions imposed hereunder shall
terminate, as hereinabove provided, the Warrantholder or holder of a share of
Warrant Stock then outstanding as to which such restrictions have terminated
shall be entitled to receive from the Company, without expense to such holder,
one or more new certificates for the Warrant or for such shares of Warrant Stock
not bearing any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
--------------
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
-----------------------
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1933 Act, or file reports pursuant to Section 15(d) of the
Securities Exchange Act of 1934 (the "1934 Act"), or if a
7
<PAGE>
registrable statement covering the securities under the 1933 Act is not in
effect when it desires to sell (I) the rights to purchase Warrant Stock pursuant
to this Warrant Agreement, or (ii) the Warrant Stock issuable upon exercise of
the right to purchase, it may be required to hold such securities for an
indefinite period. The Warrantholder also understands that any sale of its
rights of the Warrantholder to purchase Warrant Stock which might be made by it
in reliance upon Rule 144 under the 1933 Act may be made only in accordance with
the terms and conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
-------------------
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
(g) Legends. It is understood that the Warrant Stock issuable upon exercise
-------
of the rights under this Warrant Agreement may bear one or all of the following
legends:
(i) THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL (WHICH MAY BE IN-HOUSE
COUNSEL) SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.
(ii) Any legend required by State securities laws.
11. TRANSFERS.
---------
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable In whole or in part
by the Warrantholder and any successor transferee. provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the books
of the Company upon receipt by the Company of a notice of transfer in the form
attached hereto as Exhibit III (the "Transfer Notice"), at its principal offices
and the payment to the Company of all transfer taxes and other governmental
charges Imposed on such transfer.
12. MARKET STANDOFF
---------------
Each holder of the Warrant Stock issued upon exercise of the tights
hereunder agrees that. during the period specified by the underwriter or
underwriters of Common Stock (or other securities) of the Company, following the
effective date of a registration statement of the Company filed under the 1933
Act, it shall not, to the extent requested by such underwriter, directly or
indirectly sell, offer or contract to sell (including, without limitation, any
short sale) grant any option to purchase or otherwise transfer or dispose of
(other then to donee who agree to be similarly bound) any securities of the
Company at any time during such period except Warrant Stock included in such
registration.
13. MISCELLANEOUS.
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
California.
8
<PAGE>
(d) Counterparts. This Warrant 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.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (I) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, Attention: Venture Lease
Administration, cc: Legal Department, Attention: General Counsel, (and/or, if by
facsimile, (847) 518-5465 and (847) 518-5088) and (ii) to the Company at 990
Commercial Street, San Carlos, CA 94070, Attention: Joan Walsh (and/or if by
facsimile, (650) 508-2490) or at such other address as any such party may
subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
--------
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by a
----------
written instrument signed by the Company and the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. The Company shall
also supply such other documents as the Warrantholder may from time to time
reasonably request.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed by its officers thereunto duly authorized as of the
Effective Date.
Company: RELEASENOW.COM CORPORATION
By:
--------------------------------------------
Title:
-----------------------------------------
Warrantholder: COMDISCO, INC.
By:
--------------------------------------------
Title:
-----------------------------------------
10
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To:
---------------------------------------
(1) The undersigned Warrantholder hereby elects to purchase __________ shares
of the Warrant Stock of ____________________, pursuant to the terms of the
Warrant Agreement dated the _____ day of __________________, 19__ (the
"Warrant Agreement") between ______________________________ and the
Warrantholder, and tenders herewith payment of the purchase price for such
shares in full, together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Warrant Stock of
____________________________, the undersigned hereby confirms and
acknowledges the investment representations and warranties made in Section
10 of the Warrant Agreement.
(3) Please issue a certificate representing said shares of Warrant Stock in the
name of the undersigned or in such other name as is specified below.
- ----------------------------------
(Name)
- ----------------------------------
(Address)
Warrantholder: COMDISCO, INC.
By:
-------------------------------
Title
-----------------------------
Date:
-----------------------------
11
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned ______________________________, hereby acknowledge receipt
of the "Notice of Exercise" from Comdisco, Inc., to purchase _____ shares of the
Warrant Stock of ____________________, pursuant to the terms of the Warrant
Agreement, and further acknowledges that _____ shares remain subject to purchase
under the terms of the Warrant Agreement.
Company:
By:
---------------------------------------
Title:
------------------------------------
Date:
-------------------------------------
12
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form
and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
- -----------------------------------------------------------------------------
(Please Print)
whose address is
-------------------------------------------------------------
- -----------------------------------------------------------------------------
Dated:
--------------------------------------------
Holder's Signature:
-------------------------------
Holder's Address:
---------------------------------
--------------------------------------------------
Signature Guaranteed:
--------------------------------------------------
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant Agreement.
13
<PAGE>
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is entered into as of the
___th day of ____________, _________ by and between ReleaseNow.com Corporation,
a Delaware corporation (the "Company") and the indemnitees listed on the
signature pages hereto (each an "Indemnitee" and collectively, the
"Indemnitees").
RECITALS
A. The Company and the Indemnitees recognize the continued difficulty in
obtaining liability insurance for its directors, officers, employees,
controlling persons, agents and fiduciaries, the significant increases in the
cost of such insurance and the general reductions in the coverage of such
insurance.
B. The Company and the Indemnitees further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, controlling persons, agents and fiduciaries to expensive litigation
risks at the same time as the availability and coverage of liability insurance
has been severely limited.
C. The Indemnitees do not regard the current protection available as
adequate under the present circumstances, and the Indemnitees and other
directors, officers, employees, controlling persons, agents and fiduciaries of
the Company may not be willing to serve in such capacities without additional
protection.
D. The Company (i) desires to attract and retain the involvement of
highly qualified groups, such as the Indemnitees, to serve the Company and, in
part, to induce each Indemnitee to be involved with the Company and (ii) wishes
to provide for the indemnification and advancing of expenses to each Indemnitee
to the maximum extent permitted by law.
E. In view of the considerations set forth above, the Company desires
that each Indemnitee be indemnified by the Company as set forth herein.
NOW, THEREFORE, the Company and each Indemnitee hereby agrees as
follows:
1. Indemnification.
---------------
a. Indemnification of Expenses. The Company shall
---------------------------
indemnify and hold harmless each Indemnitee (including its respective directors,
officers, partners, employees, agents and spouses) and each person who controls
any of them or who may be liable within the meaning of Section 15 of the
Securities Act of 1933, as amended (the "Securities Act"), or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") to the fullest
extent permitted by law if such Indemnitee was or is or becomes a party to or
witness or other participant in, or is threatened to be made a party to or
witness or other participant in, or is threatened to be made a party to or
witness or other participant in, any threatened, pending or completed action,
suit, proceeding or alternative dispute resolution mechanism, or any hearing,
inquiry or investigation that such Indemnitee believes might lead to the
institution of any such
<PAGE>
action, suit, proceeding or alternative dispute resolution mechanism, whether
civil, criminal, administrative, investigative or other (hereinafter a "Claim")
by reason of (or arising in part out of) any event or occurrence related to the
fact that Indemnitee is or was a director, officer, employee, controlling
person, agent or fiduciary of the Company, or any subsidiary of the Company, or
is or was serving at the request of the Company as a director, officer,
employee, controlling person, agent or fiduciary of another corporation,
partnership, joint venture, trust or other enterprise, or by reason of any
action or inaction on the part of such Indemnitee while serving in such capacity
including, without limitation, any and all losses, claims, damages, expenses and
liabilities, joint or several (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of, any
action, suit, proceeding or any claim asserted) under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, at common
law or otherwise, which relate directly or indirectly to the registration,
purchase, sale or ownership of any securities of the Company or to any fiduciary
obligation owed with respect thereto (hereinafter an "Indemnification Event")
against any and all expenses (including attorneys' fees and all other costs,
expenses and obligations incurred in connection with investigating, defending a
witness in or participating in (including on appeal), or preparing to defend, be
a witness in or participate in, any such action, suit, proceeding, alternative
dispute resolution mechanism, hearing, inquiry or investigation), judgments,
fines, penalties and amounts paid in settlement (if such settlement is approved
in advance by the Company, which approval shall not be unreasonably withheld) of
such Claim and any federal, state, local or foreign taxes imposed on Indemnitee
as a result of the actual or deemed receipt of any payments under this Agreement
(collectively, hereinafter "Expenses"), including all interest, assessments and
other charges paid or payable in connection with or in respect of such Expenses.
Such payment of Expenses shall be made by the Company as soon as practicable but
in any event no later than five days after written demand by the Indemnitee
therefor is presented to the Company.
b. Reviewing Party. Notwithstanding the foregoing, (i)
---------------
the obligations of the Company under Section 1(a) shall be subject to the
condition that the Reviewing Party (as described in Section 10(e) hereof) shall
not have determined (in a written opinion, in any case in which the Independent
Legal Counsel referred to in Section 10(d) hereof is involved) that Indemnitee
would not be permitted to be indemnified under applicable law, and (ii) each
Indemnitee acknowledges and agrees that the obligation of the Company to make an
advance payment of Expenses to Indemnitee pursuant to Section 2(a) (an "Expense
Advance") shall be subject to the condition that, if, when and to the extent
that the Reviewing Party determines that Indemnitee would not be permitted to be
so indemnified under applicable law, the Company shall be entitled to be
reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all
such amounts theretofore paid; provided, however, that if Indemnitee has
commenced or thereafter commences legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be indemnified
under applicable law, any determination made by the Reviewing Party that
Indemnitee would not be permitted to be indemnified under applicable law shall
not be binding and Indemnitee shall not be required to reimburse the Company for
any Expense Advance until a final judicial determination is made with respect
thereto (as to which all rights of appeal therefrom have been exhausted or
lapsed). Indemnitee's obligation to reimburse the Company for any Expense
Advance shall be unsecured and no interest shall be charged thereon. If there
has not been a Change in Control (as defined in Section 10(c) hereof), the
Reviewing Party shall be selected by the Board of Directors, and if
2
<PAGE>
there has been such a Change in Control (other than a Change in Control which
has been approved by a majority of the Company's Board of Directors who were
directors immediately prior to such Change in Control), the Reviewing Party
shall be the Independent Legal Counsel referred to in Section 10(d) hereof. If
there has been no determination by the Reviewing Party or if the Reviewing Party
determines that Indemnitee substantively would not be permitted to be
indemnified in whole or in part under applicable law, Indemnitee shall have the
right to commence litigation seeking an initial determination by the court or
challenging any such determination by the Reviewing Party or any aspect thereof,
including the legal or factual bases therefor, and the Company hereby consents
to service of process and to appear in any such proceeding. Any determination by
the Reviewing Party otherwise shall be conclusive and binding on the Company and
Indemnitee.
c. Contribution. If the indemnification provided for in
------------
Section 1(a) above for any reason is held by a court of competent jurisdiction
to be unavailable to an Indemnitee in respect of any losses, claims, damages,
expenses or liabilities referred to therein, then the Company, in lieu of
indemnifying such Indemnitee thereunder, shall contribute to the amount paid or
payable by such Indemnitee as a result of such losses, claims, damages, expenses
or liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Indemnitees, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the
Indemnitees in connection with the action or inaction which resulted in such
losses, claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In connection with the registration of the Company's
securities, the relative benefits received by the Company and the Indemnitees
shall be deemed to be in the same respective proportions that the net proceeds
from the offering (before deducting expenses) received by the Company and the
Indemnitees, in each case as set forth in the table on the cover page of the
applicable prospectus, bear to the aggregate public offering price of the
securities so offered. The relative fault of the Company and the Indemnitees
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Indemnitees and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and the Indemnitees agree that it would not be just
and equitable if contribution pursuant to this Section 1(c) were determined by
pro rata or per capita allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. In connection with the registration of the
Company's securities, in no event shall an Indemnitee be required to contribute
any amount under this Section 1(c) in excess of the lesser of (i) that
proportion of the total of such losses, claims, damages or liabilities which are
indemnified against, equal to the proportion of the total securities sold under
such registration statement which is being sold by such Indemnitee or (ii) the
proceeds received by such Indemnitee from its sale of securities under such
registration statement. No person found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not found guilty of such fraudulent
misrepresentation.
3
<PAGE>
d. Survival Regardless of Investigation. The
------------------------------------
indemnification and contribution provided for in this Section 1 will remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnitees or any officer, director, employee, agent or controlling person
of the Indemnitees.
e. Change in Control. The Company agrees that if there is
-----------------
a Change in Control of the Company (other than a Change in Control which has
been approved by a majority of the Company's Board of Directors who were
directors immediately prior to such Change in Control) then, with respect to all
matters thereafter arising concerning the rights of Indemnitees to payments of
Expenses under this Agreement or any other agreement or under the Company's
Certificate of Incorporation or Bylaws as now or hereafter in effect,
Independent Legal Counsel (as defined in Section 10(d) hereof) shall be selected
by the Indemnitees and approved by the Company (which approval shall not be
unreasonably withheld). Such counsel, among other things, shall render its
written opinion to the Company and Indemnitees as to whether and to what extent
Indemnitees would be permitted to be indemnified under applicable law. The
Company agrees to abide by such opinion and to pay the reasonable fees of the
Independent Legal Counsel referred to above and to fully indemnify such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto.
f. Mandatory Payment of Expenses. Notwithstanding any
-----------------------------
other provision of this Agreement, to the extent that Indemnitees have been
successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in the defense of any action, suit,
proceeding, inquiry or investigation referred to in Section 1(a) hereof or in
the defense of any claim, issue or matter therein, each Indemnitee shall be
indemnified against all Expenses incurred by such Indemnitee in connection
herewith.
2. Expenses; Indemnification Procedure.
-----------------------------------
a. Advancement of Expenses. The Company shall advance all
-----------------------
Expenses incurred by Indemnitees. The advances to be made hereunder shall be
paid by the Company to Indemnitees as soon as practicable but in any event no
later than five days after written demand by such Indemnitees therefor to the
Company.
b. Notice/Cooperation by Indemnitees. Indemnitees shall
---------------------------------
give the Company notice in writing as soon as practicable of any Claim made
against Indemnitees for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company at the Company's address (or such other address as the
Company shall designate in writing to Indemnitees).
c. No Presumptions; Burden of Proof. For purposes of this
--------------------------------
Agreement, the termination of any Claim by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitees
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law. In addition, neither the failure of the Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any
4
<PAGE>
particular belief, nor an actual determination by the Reviewing Party that
Indemnitee has not met such standard of conduct or did not have such belief,
prior to the commencement of legal proceedings by Indemnitee to secure a
judicial determination that Indemnitee should be indemnified under applicable
law, shall be a defense to Indemnitee's claim or create a presumption that
Indemnitee has not met any particular standard of conduct or did not have any
particular belief. In connection with any determination by the Reviewing Party
or otherwise as to whether Indemnitee is entitled to be indemnified hereunder,
the burden of proof shall be on the Company to establish that Indemnitee is not
so entitled.
d. Notice to Insurers. If, at the time of the receipt by
------------------
the Company of a notice of a Claim pursuant to Section 2(b) hereof, the Company
has liability insurance in effect which may cover such Claim, the Company shall
give prompt notice of the commencement of such Claim to the insurers in
accordance with the procedures set forth in each of the policies. The Company
shall thereafter take all necessary or desirable action to cause such insurers
to pay, on behalf of Indemnitees, all amounts payable as a result of such
action, suit, proceeding, inquiry or investigation in accordance with the terms
of such policies.
e. Selection of Counsel. In the event the Company shall
--------------------
be obligated hereunder to pay the Expenses of any Claim, the Company shall be
entitled to assume the defense of such Claim, with counsel approved by the
applicable Indemnitee, upon the delivery to such Indemnitee of written notice of
its election to do so. After delivery of such notice, approval of such counsel
by the Indemnitee and the retention of such counsel by the Company, the Company
will not be liable to such Indemnitee under this Agreement for any fees of
counsel subsequently incurred by such Indemnitee with respect to the same Claim;
provided that, (i) the Indemnitee shall have the right to employ such
Indemnitee's counsel in any such Claim at the Indemnitee's expense and (ii) if
(A) the employment of counsel by the Indemnitee has been previously authorized
by the Company, (B) such Indemnitee shall have reasonably concluded that there
is a conflict of interest between the Company and such Indemnitee in the conduct
of any such defense, or (C) the Company shall not continue to retain such
counsel to defend such Claim, then the fees and expenses of the Indemnitee's
counsel shall be at the expense of the Company. The Company shall have the right
to conduct such defense as it sees fit in its sole discretion, including the
right to settle any claim against any Indemnitee without the consent of such
Indemnitee.
3. Additional Indemnification Rights; Nonexclusivity.
-------------------------------------------------
a. Scope. The Company hereby agrees to indemnify
-----
Indemnitees to the fullest extent permitted by law, even if such indemnification
is not specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation, the Company's Bylaws or by statute. In
the event of any change after the date of this Agreement in any applicable law,
statute or rule which expands the right of a Delaware corporation to indemnify a
member of its Board of Directors or an officer, employee, controlling person,
agent or fiduciary, it is the intent of the parties hereto that Indemnitees
shall enjoy by this Agreement the greater benefits afforded by such change. In
the event of any change in any applicable law, statute or rule which narrows the
right of a Delaware corporation to indemnify a member of its Board of Directors
or an officer, employee, agent or fiduciary, such change, to the extent not
otherwise required by such law, statute or rule to be applied to this Agreement,
shall have no
5
<PAGE>
effect on this Agreement or the parties' rights and obligations hereunder except
as set forth in Section 8(a) hereof.
b. Nonexclusivity. The indemnification provided by this
--------------
Agreement shall be in addition to any rights to which Indemnitees may be
entitled under the Company's Certificate of Incorporation, its Bylaws, any
agreement, any vote of stockholders or disinterested directors, the General
Corporation Law of the State of Delaware, or otherwise. The indemnification
provided under this Agreement shall continue as to each Indemnitee for any
action such Indemnitee took or did not take while serving in an indemnified
capacity even though the Indemnitee may have ceased to serve in such capacity.
4. No Duplication of Payments. The Company shall not be liable
--------------------------
under this Agreement to make any payment in connection with any Claim made
against any Indemnitee to the extent such Indemnitee has otherwise actually
received payment (under any insurance policy, Certificate of Incorporation,
Bylaw or otherwise) of the amounts otherwise indemnifiable hereunder.
5. Partial Indemnification. If any Indemnitee is entitled
-----------------------
under any provision of this Agreement to indemnification by the Company for any
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which such Indemnitee is
entitled.
6. Mutual Acknowledgement. The Company and each Indemnitee
----------------------
acknowledge that in certain instances, Federal law or applicable public policy
may prohibit the Company from indemnifying its directors, officers, employees,
controlling persons, agents or fiduciaries under this Agreement or otherwise.
Each Indemnitee understands and acknowledges that the Company has undertaken or
may be required in the future to undertake with the Securities and Exchange
Commission to submit the question of indemnification to a court in certain
circumstances for a determination of the Company's rights under public policy to
indemnify the Indemnitees.
7. Liability Insurance. To the extent the Company maintains
-------------------
liability insurance applicable to directors, officers, employees, control
persons, agents or fiduciaries, each of the Indemnitees shall be covered by such
policies in such a manner as to provide Indemnitees the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
such Indemnitee is a director, or of the Company's officers, if such Indemnitee
is not a director of the Company but is an officer; or of the Company's key
employees, controlling persons, agents or fiduciaries, if such Indemnitee is not
an officer or director but is a key employee, agent, control person, or
fiduciary.
8. Exceptions. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
a. Claims Initiated by Indemnitee. To indemnify or
------------------------------
advance expenses to any Indemnitee with respect to Claims initiated or brought
voluntarily by such Indemnitee and not by way of defense, except (i) with
respect to actions or proceedings to
6
<PAGE>
establish or enforce a right to indemnify under this Agreement or any other
agreement or insurance policy or under the Company's Certificate of
Incorporation or Bylaws now or hereafter in effect relating to Claims for
Indemnifiable Events, (ii) in specific cases if the Board of Directors has
approved the initiation or bringing of such Claim, or (iii) as otherwise
required under Section 145 of the Delaware General Corporation Law, regardless
of whether such Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may
be; or
b. Claims Under Section 16(b). To indemnify any
--------------------------
Indemnitee for expenses and the payment of profits arising from the purchase and
sale by such Indemnitee of securities in violation of Section 16(b) of the
Exchange Act or any similar successor statute; or
c. Claims Excluded Under Section 145 of the Delaware
-------------------------------------------------
General Corporation Law. To indemnify any Indemnitee if (i) he did not act in
- -----------------------
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the Company, or (ii) with respect to any criminal action or
proceeding, the Indemnitee had reasonable cause to believe his conduct was
unlawful, or (iii) the Indemnitee shall have been adjudged to be liable to the
Company unless and only to the extent the court in which such action was brought
shall permit indemnification as provided in Section 145(b) of the Delaware
General Corporation Law.
9. Period of Limitations. No legal action shall be brought and
---------------------
no cause of action shall be asserted by or in the right of the Company against
any Indemnitee or any Indemnitee's estate, spouse, heirs, executors or personal
or legal representatives after the expiration of five years from the date of
accrual of such cause of action, and any claim or cause of action of the Company
shall be extinguished and deemed released unless asserted by the timely filing
of a legal action within such five-year period; provided, however, that if any
shorter period of limitations is otherwise applicable to any such cause of
action, such shorter period shall govern.
10. Construction of Certain Phrases.
-------------------------------
a. For purposes of this Agreement, references to the
"Company" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees,
agents or fiduciaries, so that if Indemnitee is or was a director, officer,
employee, agent, control person, or fiduciary of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee, control person, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise, each Indemnitee shall stand in the same position under the
provisions of this Agreement with respect to the resulting or surviving
corporation as each Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
b. For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on any Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee, agent
7
<PAGE>
or fiduciary of the Company which imposes duties on, or involves services by,
such director, officer, employee, agent or fiduciary with respect to an employee
benefit plan, its participants or its beneficiaries; and if any Indemnitee acted
in good faith and in a manner such Indemnitee reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan, such
Indemnitee shall be deemed to have acted in a manner "not opposed to the best
interests of the Company" as referred to in this Agreement.
c. For purposes of this Agreement a "Change in Control"
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or a corporation owned directly or indirectly by the stockholders of the Company
in substantially the same proportions as their ownership of stock of the
Company, (A) who is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 10% or more of the combined voting power
of the Company's then outstanding Voting Securities, increases his beneficial
ownership of such securities by 5% or more over the percentage so owned by such
person, or (B) becomes the "beneficial owner" (as defined in Rule 13d-3 under
said Exchange Act), directly or indirectly, of securities of the Company
representing more than 20% of the total voting power represented by the
Company's then outstanding Voting Securities, (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by the
Board of Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation other than a
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series of
transactions) all or substantially all of the Company's assets.
d. For purposes of this Agreement, "Independent Legal
Counsel" shall mean an attorney or firm of attorneys, selected in accordance
with the provisions of Section 2(e) hereof, who shall not have otherwise
performed services for the Company or any Indemnitee within the last three years
(other than with respect to matters concerning the right of any Indemnitee under
this Agreement, or of other indemnitees under similar indemnity agreements).
e. For purposes of this Agreement, a "Reviewing Party"
shall mean any appropriate person or body consisting of a member or members of
the Company's Board of Directors or any other person or body appointed by the
Board of Directors who is not a party to the particular Claim for which
Indemnitees are seeking indemnification, or Independent Legal Counsel.
8
<PAGE>
f. For purposes of this Agreement, "Voting Securities"
shall mean any securities of the Company that vote generally in the election of
directors.
11. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall
--------------------------------------
be binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns, including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company, spouses, heirs,
and personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect by purchase, merger, consolidation or
otherwise) to all, substantially all, or a substantial part, of the business
and/or assets of the Company, by written agreement in form and substance
satisfactory to each Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. This Agreement shall
continue in effect with respect to Claims relating to Indemnifiable Events
regardless of whether any Indemnitee continues to serve as a director, officer,
employee, agent, controlling person, or fiduciary of the Company or of any other
enterprise, including subsidiaries of the Company, at the Company's request.
13. Attorneys' Fees. In the event that any action is instituted
---------------
by an Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, any Indemnitee shall be entitled to be paid all Expenses incurred by
such Indemnitee with respect to such action, regardless of whether such
Indemnitee is ultimately successful in such action, and shall be entitled to the
advancement of Expenses with respect to such action, unless, as a part of such
action, a court of competent jurisdiction over such action determines that each
of the material assertions made by such Indemnitee as a basis for such action
was not made in good faith or was frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement to enforce or
interpret any of the terms of this Agreement, the Indemnitee shall be entitled
to be paid all Expenses incurred by such Indemnitee in defense of such action
(including costs and expenses incurred with respect to Indemnitee counterclaims
and cross-claims made in such action), and shall be entitled to the advancement
of Expenses with respect to such action, unless, as a part of such action, a
court having jurisdiction over such action determines that each of such
Indemnitee's material defenses to such action was made in bad faith or was
frivolous.
14. Notice. All notices and other communications required or
------
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given (a) five (5) days after deposit with
the U.S. Postal Service or other applicable postal service, if delivered by
first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c)
one business day after the business day of deposit with Federal Express or
similar overnight courier, freight prepaid, or (d) one day after the business
day of delivery by facsimile transmission, if deliverable by facsimile
transmission, with copy by first class mail, postage prepaid, and shall be
addressed if to Indemnitees, at each Indemnitee's address as set forth beneath
the Indemnitees' signatures to this Agreement and if to the Company at the
address of its
9
<PAGE>
principal corporate offices (attention: Secretary) or at such other address as
such party may designate by ten days' advance written notice to the other party
hereto.
15. Consent to Jurisdiction. The Company and each Indemnitee
-----------------------
each hereby irrevocably consents to the jurisdiction of the courts of the State
of Delaware for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agree that any action instituted
under this Agreement shall be commenced, prosecuted and continued only in the
Court of Chancery of the State of Delaware in and for New Castle County, which
shall be the exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be
------------
severable in the event that any of the provisions hereof (including any
provision within a single section, paragraph or sentence) are held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable, and the
remaining provisions shall remain enforceable to the fullest extent permitted by
law. Furthermore, to the fullest extent possible, the provisions of this
Agreement (including, without limitations, each portion of this Agreement
containing any provision held to be invalid, void or otherwise unenforceable,
that is not itself invalid, void or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. Choice of Law. This Agreement shall be governed by and its
-------------
provisions construed and enforced in accordance with the laws of the State of
Delaware, as applied to contracts between Delaware residents, entered into and
to be performed entirely within the State of Delaware, without regard to the
conflict of laws principles thereof.
18. Subrogation. In the event of payment under this Agreement,
-----------
the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable the
Company effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification,
------------------------
termination or cancellation of this Agreement shall be effective unless it is in
writing signed by all parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
20. Integration and Entire Agreement. This Agreement sets forth
--------------------------------
the entire understanding between the parties hereto and supersedes and merges
all previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
21. No Construction as Employment Agreement. Nothing contained
---------------------------------------
in this Agreement shall be construed as giving any Indemnitee any right to be
retained in the employ of the Company or any of its subsidiaries.
22. Corporate Authority. The Board of Directors of the Company
-------------------
and its stockholders have approved the terms of this Agreement.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
RELEASENOW.COM CORPORATION,
a Delaware corporation
By:________________________________
[Signature page to Indemnification Agreement]
<PAGE>
INDEMNITEE:
___________________________________
By:
Its:
[Signature page to Indemnification Agreement]
<PAGE>
EXHIBIT 10.2
RELEASE SOFTWARE CORPORATION
1996 STOCK PLAN
1. Purposes of the Plan. The purposes of this 1996 Stock Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights may also be granted
under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees appointed
-------------
pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" means the Committee appointed by the Board of
---------
Directors in accordance with Section 4(a) of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
------------
(f) "Company" means Release Software Corporation, a Delaware
-------
corporation.
(g) "Consultant" means any person, including an advisor, who is
----------
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(h) "Continuous Status as an Employee or Consultant" means the absence
----------------------------------------------
of any interruption or termination of service as an Employee or Consultant.
Continuous Status as an Employee or Consultant shall not be considered
interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any
other leave of absence approved by the Administrator, provided that such leave
is for a period of not more than ninety (90) days, unless reemployment upon the
expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to Company policy adopted from time to time; or (iv)
in the case of transfers between locations of the Company or between the
Company, its Subsidiaries or their respective successors. For purposes of this
Plan, a change in status from an Employee to a Consultant or from a Consultant
to an Employee will not constitute an interruption of Continuous Status as an
Employee or Consultant.
<PAGE>
(i) "Employee" means any person, including officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company, with the
status of employment determined based upon such minimum number of hours or
periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. The payment by the Company of a
director's fee to a Director shall not be sufficient to constitute "employment"
of such Director by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(k) "Fair Market Value" means, as of any date, the fair market value
-----------------
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, its Fair Market Value shall be the closing
------
sales price for such stock (or the closing bid, if no sales were reported), as
quoted on such system or exchange, or the exchange with the greatest volume of
trading in Common Stock for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but not
on the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock for the last
market trading day prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written option agreement.
(m) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
(n) "Option" means a stock option granted pursuant to the Plan.
------
(o) "Optioned Stock" means the Common Stock subject to an Option or a
--------------
Stock Purchase Right.
(p) "Optionee" means an Employee or Consultant who receives an Option
--------
or a Stock Purchase Right.
2
<PAGE>
(q) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code, or any successor provision.
(r) "Plan" means this 1996 Stock Plan.
----
(s) "Reporting Person" means an officer, director, or greater than ten
----------------
percent stockholder of the Company within the meaning of Rule 16a-2 under the
Exchange Act, who is required to file reports pursuant to Rule 16a-3 under the
Exchange Act.
(t) "Restricted Stock" means shares of Common Stock acquired pursuant
----------------
to a grant of a Stock Purchase Right under Section 10 below.
(u) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act,
----------
as the same may be amended from time to time, or any successor provision.
(v) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 12 of the Plan.
(w) "Stock Exchange" means any stock exchange or consolidated stock
--------------
price reporting system on which prices for the Common Stock are quoted at any
given time.
(x) "Stock Purchase Right" means the right to purchase Common Stock
--------------------
pursuant to Section 10 below.
(y) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
-------------------------
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is 2,275,292 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should
expire or become unexercisable for any reason without having been exercised in
full, the unpurchased Shares that were subject thereto shall, unless the Plan
shall have been terminated, become available for future grant under the Plan.
In addition, any Shares of Common Stock which are retained by the Company upon
exercise of an Option or Stock Purchase Right in order to satisfy the exercise
or purchase price for such Option or Stock Purchase Right or any withholding
taxes due with respect to such exercise shall be treated as not issued and shall
continue to be available under the Plan. Shares repurchased by the Company
pursuant to any repurchase right which the Company may have shall be available
for future grant under the Plan, provided that if the Company registers any
class of equity security pursuant to the Exchange Act, Shares repurchased by the
Company shall not be available for future grant under the Plan.
3
<PAGE>
4. Administration of the Plan.
--------------------------
(a) Initial Plan Procedure. Prior to the date, if any, upon which the
----------------------
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or a committee appointed by the Board.
(b) Plan Procedure After the Date, if any, Upon Which the Company
-------------------------------------------------------------
Becomes Subject to the Exchange Act.
- -----------------------------------
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3,
------------------------------
grants under the Plan may be made by different bodies with respect to directors,
non-director officers and Employees or Consultants who are not Reporting
Persons.
(ii) Administration With Respect to Reporting Persons. With
------------------------------------------------
respect to grants of Options or Stock Purchase Rights to Employees who are
Reporting Persons, such grants shall be made by (A) the Board if the Board may
make grants to Reporting Persons under the Plan in compliance with Rule 16b-3,
or (B) a committee designated by the Board to make such grants under the Plan,
which committee shall be constituted in such a manner as to permit grants under
the Plan to comply with Rule 16b-3. Once appointed, such committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the committee and thereafter directly make grants to
Reporting Persons under the Plan, all to the extent permitted by Rule 16b-3.
(iii) Administration With Respect to Consultants and Other
----------------------------------------------------
Employees. With respect to grants of Options or Stock Purchase Rights to
- ---------
Employees or Consultants who are not Reporting Persons, the Plan shall be
administered by (A) the Board or (B) a committee designated by the Board, which
committee shall be constituted in such a manner as to satisfy the legal
requirements relating to the administration of incentive stock option plans, if
any, of California corporate and securities laws, of the Code and of any
applicable Stock Exchange (the "Applicable Laws"). Once appointed, such
---------------
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
4
<PAGE>
(ii) to select the Consultants and Employees to whom Options and
Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder;
(vii) to determine whether and under what circumstances an Option
may be settled in cash under Section 9(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;
(ix) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Restricted Stock purchased by exercising such Stock
Purchase Rights; and
(x) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan; and
(xi) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options or Stock Purchase Rights to
participants who are foreign nationals or employed outside of the United States
in order to recognize differences in local law, tax policies or customs.
(d) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
holders of Options or Stock Purchase Rights.
5. Eligibility.
-----------
(a) Recipients of Grants. Nonstatutory Stock Options and Stock
--------------------
Purchase Rights may be granted to Employees and Consultants. Incentive Stock
Options may be granted only to Employees. An Employee or Consultant who has
been granted an Option or Stock Purchase Right may, if he or she is otherwise
eligible, be granted additional Options or Stock Purchase Rights.
(b) Type of Option. Each Option shall be designated in the written
--------------
option agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of Shares
5
<PAGE>
with respect to which Options designated as Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year (under
all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such
excess Options shall be treated as Nonstatutory Stock Options. For purposes of
this Section 5(b), Incentive Stock Options shall be taken into account in the
order in which they were granted, and the Fair Market Value of the Shares
subject to an Incentive Stock Option shall be determined as of the date of the
grant of such Option.
(c) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with such Optionee's right or the Company's right
to terminate his or her employment or consulting relationship at any time, with
or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement and provided further that, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the written option
agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board and
set forth in the applicable agreement, but shall be subject to the following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option that is:
6
<PAGE>
(A) granted to a person who, at the time of the grant
of such Option, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of the grant.
(B) granted to any person, the per Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) other Shares that (x) in the case of Shares acquired upon exercise of
an Option, have been owned by the Optionee for more than six months on the date
of surrender or such other period as may be required to avoid a charge to the
Company's earnings, and (y) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the Shares as to which such Option
shall be exercised, (4) authorization for the Company to retain from the total
number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (5) delivery
of a properly executed exercise notice together with such other documentation as
the Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price and any applicable income or employment
taxes, (6) delivery of an irrevocable subscription agreement for the Shares that
irrevocably obligates the option holder to take and pay for the Shares not more
than twelve months after the date of delivery of the subscription agreement, (7)
any combination of the foregoing methods of payment, or (8) such other
consideration and method of payment for the issuance of Shares to the extent
permitted under Applicable Laws. In making its determination as to the type of
consideration to accept, the Administrator shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, and reflected in the written option
agreement, which may include vesting requirements and/or performance criteria
with respect to the Company and/or the Optionee; provided that such Option shall
become exercisable at the rate of at least twenty percent (20%) per year over
five (5) years from the date the Option is granted. In the event that any of the
Shares issued upon exercise of an Option should be subject to a right of
repurchase in the Company's favor, such repurchase right shall lapse at the rate
of at least twenty percent (20%) per year over five (5) years from the date the
Option is granted.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the
7
<PAGE>
person entitled to exercise the Option and the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
not withstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares that thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. Subject to
----------------------------------------------------
Section 9(c), in the event of termination of an Optionee's Continuous Status as
an Employee or Consultant with the Company, such Optionee may, but only within
three (3) months (or such other period of time not less than thirty (30) days as
is determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option and not
exceeding three (3) months) after the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent that the Optionee
was entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate. No
termination shall be deemed to occur and this Section 9(b) shall not apply if
(i) the Optionee is a Consultant who becomes an Employee; or (ii) the Optionee
is an Employee who becomes a Consultant.
(c) Disability of Optionee.
----------------------
(i) Notwithstanding Section 9(b) above, in the event of
termination of an Optionee's Continuous Status as an Employee or Consultant as a
result of his or her total and permanent disability (within the meaning of
Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of termination, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate.
(ii) In the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of a disability which does not
fall within the meaning of total and permanent disability (as set forth in
Section 22(e)(3) of the Code), Optionee may, but only within six (6) months from
the date of such termination (but in no event later than the expiration
8
<PAGE>
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option which is an Incentive Stock Option ("ISO") (within the meaning of Section
422 of the Code) within---three (3) months of the date of such termination, the
Option will not qualify for ISO treatment under the Code. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within six
months (6) from the date of termination, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee
-----------------
during the period of Continuous Status as an Employee or Consultant since the
date of grant of the Option, or within thirty (30) days following termination of
Optionee's Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within six (6) months following the date of death (but in
no event later than the expiration date of the term of such Option as set forth
in the Option Agreement), by Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that had accrued at the date of death or, if earlier,
the date of termination of Optionee's Continuous Status as an Employee or
Consultant. To the extent that Optionee was not entitled to exercise the Option
at the date of death or termination, as the case may be, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(e) Rule 16b-3. Options granted to Reporting Persons shall comply
----------
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.
(f) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid (which price shall not be less than 85% of the
Fair Market Value of the Shares as of the date of the offer, or, in the case of
a person owning stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the price shall not be less than one hundred percent (100%) of the
Fair Market Value of the Shares as of the date of the offer), and the time
within which such person must accept such offer, which shall in no event exceed
thirty (30) days from the date upon which the Administrator made the
determination to grant the Stock Purchase Right. The offer shall be accepted by
execution of a Restricted Stock purchase agreement in the form determined by the
9
<PAGE>
Administrator. Shares purchased pursuant to the grant of a Stock Purchase Right
shall be referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines otherwise,
-----------------
the Restricted Stock purchase agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original purchase price paid by
the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine, but at a minimum rate of 20% per year.
(c) Other Provisions. The Restricted Stock purchase agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) Rights as a Stockholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 12
of the Plan.
11. Stock Withholding to Satisfy Withholding Tax Obligations. At the
--------------------------------------------------------
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option or Stock Purchase Right, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by one or some
combination of the following methods: (a) by cash payment, or (b) out of
Optionee's current compensation, (c) if permitted by the Administrator, in its
discretion, by surrendering to the Company Shares that (i) in the case of Shares
previously acquired from the Company, have been owned by the Optionee for more
than six months on the date of surrender, and (ii) have a fair market value on
the date of surrender equal to or less than Optionee's marginal tax rate times
the ordinary income recognized, or (d) by electing to have the Company withhold
from the Shares to be issued upon exercise of the Option, or the Shares to be
issued in connection with the Stock Purchase Right, if any, that number of
Shares having a fair market value equal to the amount required to be withheld.
For this purpose, the fair market value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date").
--------
Any surrender by a Reporting Person of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3.
10
<PAGE>
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option or Stock Purchase Right as to which the election is made;
and
(c) all elections shall be subject to the consent or disapproval of
the Administrator.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Optionee shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
12. Adjustments Upon Changes in Capitalization, Merger or Certain Other
-------------------------------------------------------------------
Transactions.
- ------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock that have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or that have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination, recapitalization or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
11
<PAGE>
(c) Merger or Sale of Assets. In the event of a proposed sale of all
------------------------
or substantially all of the Company's assets or a merger of the Company with or
into another corporation where the successor corporation issues its securities
to the Company's stockholders, each outstanding Option or Stock Purchase Right
shall be assumed or an equivalent option or right shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the successor corporation does not agree to assume the Option or Stock
Purchase Right or to substitute an equivalent option or right, in which case
such Option or Stock Purchase Right shall terminate upon the consummation of the
merger or sale of assets.
(d) Certain Distributions. In the event of any distribution to the
---------------------
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option or Stock Purchase Right to reflect the effect of such
distribution.
13. Non-Transferability of Options and Stock Purchase Rights. Options and
--------------------------------------------------------
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised or purchased during the lifetime of
the Optionee or Stock Purchase Rights Holder only by the Optionee or Stock
Purchase Rights Holder.
14. Time of Granting Options and Stock Purchase Rights. The date of grant
--------------------------------------------------
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Board; provided
however that in the case of any Incentive Stock Option, the grant date shall be
the later of the date on which the Administrator makes the determination
granting such Incentive Stock Option or the date of commencement of the
Optionee's employment relationship with the Company. Notice of the
determination shall be given to each Employee or Consultant to whom an Option or
Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
15. Amendment and Termination of the Plan.
-------------------------------------
(a) Authority to Amend or Terminate. The Board may at any time amend,
-------------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made that would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 or with Section 422
of the Code (or any other applicable law or regulation, including the
requirements of any Stock Exchange), the Company shall obtain stockholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. No amendment or termination
----------------------------------
of the Plan shall adversely affect Options already granted, unless mutually
agreed otherwise between the Optionee and the Board, which agreement must be in
writing and signed by the Optionee and the Company.
12
<PAGE>
16. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any Stock Exchange. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required by law.
17. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
18. Agreements. Options and Stock Purchase Rights shall be evidenced by
----------
written agreements in such form as the Administrator shall approve from time to
time.
19. Stockholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any Stock Exchange upon which the Common Stock is listed. All Options
and Stock Purchase Rights issued under the Plan shall become void in the event
such approval is not obtained.
20. Information and Documents to Optionees and Purchasers. The Company
-----------------------------------------------------
shall provide financial statements at least annually to each Optionee and to
each individual who acquired Shares Pursuant to the Plan, during the period such
Optionee or purchaser has one or more Options or Stock Purchase Rights
outstanding, and in the case of an individual who acquired Shares pursuant to
the Plan, during the period such individual owns such Shares. The Company shall
not be required to provide such information if the issuance of Options or Stock
Purchase Rights under the Plan is limited to key employees whose duties in
connection with the Company assure their access to equivalent information. In
addition, at the time of issuance of any securities under the Plan, the Company
shall provide to the Optionee or the Purchaser a copy of the Plan and any
agreement(s) pursuant to which securities under the Plan are issued.
13
<PAGE>
RELEASE SOFTWARE CORPORATION
1996 STOCK PLAN
NOTICE OF STOCK OPTION GRANT
----------------------------
(NameofOptionee)
(AddressLine1)
(AddressLine2)
You have been granted an option to purchase Common Stock ("Common
------
Stock") of Release Software Corporation, a Delaware Corporation (the "Company")
- ----- -------
as follows:
Board Approval Date: (BoardAprvlDate)
Date of Grant (Later of Board
Approval Date or Commence-
ment of Employment/Consulting): (DateofGrant)
Issue Date: (IssueDate)
Exercise Price per Share: $(ExercisePrice)
Total Number of Shares Granted: (NoShares)
Total Exercise Price: $(TotalExercisePrice)
Type of Option: (ISO) Incentive Stock Option
-------
Nonstatutory Stock Option
-------
Term/Expiration Date: (ExpirationDate)
Vesting Commencement Date: (VCD)
Vesting Schedule: This Option may be exercised, in whole
or in part, in accordance with the
following schedule: 1/4 of the Shares
subject to the Option shall vest and
become exercisable on the 12-month
anniversary of the Vesting Commencement
Date and 1/48 of the total number of
Shares subject to the Option shall vest
on the (Mo_Vest_Date) day of each month
thereafter.
Termination Period: This Option may be exercised for 30 days
after termination of employment or
consulting relationship except as set
out in Sections 7 and 8 of the Stock
Option Agreement (but in no event later
than the Expiration Date).
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the 1996 Stock Plan and the Stock Option Agreement, both
of which are attached to and made a part of this document.
OPTIONEE: RELEASE SOFTWARE CORPORATION
By:
- -------------------------- ------------------------------
(NameofOptionee)
Title:
---------------------------
<PAGE>
RELEASE SOFTWARE CORPORATION
1996 STOCK PLAN
STOCK OPTION AGREEMENT
----------------------
1. Grant of Option. Release Software Corporation, a Delaware corporation
---------------
(the "Company"), hereby grants to (NameofOptionee) ("Optionee"), an option (the
------- --------
"Option") to purchase a total number of shares of Common Stock (the "Shares")
- ------- ------
set forth in the Notice of Stock Option Grant, at the exercise price per share
set forth in the Notice of Stock Option Grant (the "Exercise Price") subject to
--------------
the terms, definitions and provisions of the Company's 1996 Stock Plan (the
"Plan") adopted by the Company, which is incorporated herein by reference.
- -----
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is intended to qualify
as an Incentive Stock Option as defined in Section 422 of the Code.
2. Exercise of Option. This Option shall be exercisable during its Term in
------------------
accordance with the Vesting Schedule set out in the Notice of Stock Option Grant
and with the provisions of Section 9 of the Plan as follows:
(a) Right to Exercise.
(i) This Option may not be exercised for a fraction of a share.
(ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitation contained in Section
2(a)(i).
(iii) In no event may this Option be exercised after the date of
expiration of the Term of this Option as set forth in the Notice of Stock
Option Grant.
(b) Method of Exercise. This Option shall be exercisable by execution and
------------------
delivery of the Exercise Notice and Restricted Stock Purchase Agreement attached
hereto as Exhibit A (the "Exercise Agreement") or of any other form of written
------------------
notice approved for such purpose by the Company which shall state the election
to exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.
<PAGE>
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of
applicable law and the requirements of any stock exchange upon which the Shares
may then be listed. Assuming such compliance, for income tax purposes the
Shares shall be considered transferred to Optionee on the date on which the
Option is exercised with respect to such Shares.
3. Method of Payment. Payment of the Exercise Price shall be by any of the
-----------------
following, or a combination thereof, at the election of Optionee:
(a) cash;
(b) check
(c) surrender of other shares of Common Stock of the Company which (i) in
the case of Shares acquired pursuant to the exercise of a Company option, have
been owned by Optionee for more than six (6) months on the date of surrender,
and (ii) have a fair market value on the date of surrender equal to the Exercise
Price of the Shares as to which the Option is being exercised;
(d) If there is a public market for the Shares and they are registered
under the Securities Act, delivery of a properly executed exercise notice
together with irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds required to pay the exercise price;
or
(e) such other consideration as may be determined by the Administrator at
the time of grant, in its absolute discretion, to the extent permitted under the
Plan and the Delaware General Corporation Law.
4. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the stockholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations as promulgated by the
Federal Reserve Board. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
5. Termination of Relationship. In the event of termination of Optionee's
---------------------------
Continuous Status as an Employee or Consultant, Optionee may, to the extent
otherwise so entitled at the date of such termination (the "Termination Date"),
----------------
exercise this Option during the Termination Period set forth in the Notice of
Stock Option Grant. To the extent that Optionee was not entitled to exercise
this Option at such Termination Date, or if Optionee does not exercise this
Option within the Termination Period, the Option shall terminate.
<PAGE>
6. Disability of Optionee.
----------------------
(a) Notwithstanding the provisions of Section 6 above, in the event of
termination of Continuous Status as an Employee or Consultant as a result of
Optionee's total and permanent disability (as defined in Section 22(e)(3) of the
Code), Optionee may, but only within twelve (12) months from the Termination
Date (but in no event later than the Expiration Date set forth in the Notice of
Stock Option Grant and in Section 9 below), exercise this Option to the extent
Optionee was entitled to exercise it as of such Termination Date. To the
extent that Optionee was not entitled to exercise the Option as of the
Termination Date, or if Optionee does not exercise such Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.
(b) Notwithstanding the provisions of Section 6 above, in the event of
termination of Optionee's consulting relationship or Continuous Status as an
Employee as a result of any disability not constituting a total and permanent
disability (as set forth in Section 22(e)(3) of the Code), Optionee may, but
only within six (6) months from the Termination Date (but in no event later than
the Expiration Date set forth in the Notice of Stock Option Grant and in Section
9 below), exercise this Option to the extent Optionee was entitled to exercise
it as of such Termination Date; provided, however, that if this is an Incentive
Stock Option and Optionee fails to exercise this Incentive Stock Option within
three (3) months from the Termination Date, this Option will cease to qualify as
an Incentive Stock Option (as defined in Section 422 of the Code) and Optionee
will be treated for federal income tax purposes as having received ordinary
income at the time of such exercise in an amount generally measured by the
difference between the Exercise Price for the Shares and the fair market value
of the Shares on the date of exercise. To the extent that Optionee was not
entitled to exercise the Option at the Termination Date, or if Optionee does not
exercise such Option to the extent so entitled within the time specified in this
Section 6(b), the Option shall terminate.
7. Death of Optionee. In the event of the death of Optionee (a) during the
-----------------
Term of this Option and while an Employee or Consultant of the Company and
having been in Continuous Status as an Employee or Consultant since the date of
grant of the Option, or (b) within thirty (30) days after Optionee's Termination
Date, the Option may be exercised at any time within six (6) months following
the date of death (but in no event later than the Expiration Date set forth in
the Notice of Stock Option Grant and in Section 9 below), by Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that had accrued at
the Termination Date.
8. Non-Transferability of Option. This Option may not be transferred in any
-----------------------------
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.
9. Term of Option. This Option may be exercised only within the Term set
--------------
forth in the Notice of Stock Option Grant, subject to the limitations set forth
in Section 7 of the Plan.
<PAGE>
10. Tax Consequences. Set forth below is a brief summary as of the date of
----------------
this Option of certain of the federal and California tax consequences of
exercise of this Option and disposition of the Shares under the laws in effect
as of the Date of Grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of Incentive Stock Option. If this Option qualifies as an
----------------------------------
Incentive Stock Option, there will be no regular federal or California income
tax liability upon the exercise of the Option, although the excess, if any, of
the fair market value of the Shares on the date of exercise over the Exercise
Price will be treated as an adjustment to the alternative minimum tax for
federal tax purposes and may subject Optionee to the alternative minimum tax in
the year of exercise.
(b) Exercise of Nonstatutory Stock Option. If this Option does not qualify
-------------------------------------
as an Incentive Stock Option, there may be a regular federal income tax
liability and a California income tax liability upon the exercise of the Option.
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the fair market value
of the Shares on the date of exercise over the Exercise Price. If Optionee is
an employee, the Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.
(c) Disposition of Shares. In the case of a Nonstatutory Stock Option, if
---------------------
the Shares are held for at least one year, any gain realized on disposition of
the Shares will be treated as long-term capital gain for federal and California
income tax purposes. In the case of an Incentive Stock Option, if Shares
transferred pursuant to the Option are held for at least one year after exercise
and are disposed of at least two years after the Date of Grant, any gain
realized on disposition of the Shares will also be treated as long-term capital
gain for federal and California income tax purposes. If Shares purchased under
an Incentive Stock Option are disposed of within such one-year period or within
two years after the Date of Grant, any gain realized on such disposition will be
treated as compensation income (taxable at ordinary income rates) to the extent
of the difference between the Exercise Price and the lesser of (i) the fair
market value of the Shares on the date of exercise, or (ii) the sale price of
the Shares.
(d) Notice of Disqualifying Disposition of Incentive Stock Option Shares.
--------------------------------------------------------------------
If the Option granted to Optionee herein is an Incentive Stock Option, and if
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
such Incentive Stock Option on or before the later of (i) the date two years
after the Date of Grant, or (ii) the date one year after the date of exercise,
Optionee shall immediately notify the Company in writing of such disposition.
Optionee acknowledges and agrees that he or she may be subject to income tax
withholding by the Company on the compensation income recognized by Optionee
from the early disposition by payment in cash or out of the current earnings
paid to Optionee.
<PAGE>
11. Withholding Tax Obligations. Optionee understands that, upon exercising
---------------------------
a Nonstatutory Stock Option, he or she will recognize income for tax purposes in
an amount equal to the excess of the then fair market value of the Shares over
the Exercise Price. However, the timing of this income recognition may be
deferred for up to six months if Optionee is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). If Optionee
------------
is an employee the Company will be required to withhold from Optionee's
compensation, or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income.
Additionally, Optionee may at some point be required to satisfy tax withholding
obligations with respect to the disqualifying disposition of an Incentive Stock
Option. Optionee shall satisfy his or her tax withholding obligation arising
upon the exercise of this Option by one or some combination of the following
methods: (a) by cash payment, (b) out of Optionee's current compensation, (c)
if permitted by the Administrator, in its discretion, by surrendering to the
Company Shares which (i) in the case of Shares previously acquired from the
Company, have been owned by Optionee for more than six months on the date of
surrender, and (ii) have a fair market value on the date of surrender equal to
or greater than Optionee's marginal tax rate times the ordinary income
recognized, or (d) by electing to have the Company withhold from the Shares to
be issued upon exercise of the Option that number of Shares having a fair market
value equal to the amount required to be withheld. For this purpose, the fair
market value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined (the "Tax Date").
--------
If Optionee is subject to Section 16 of the Exchange Act (an
"Insider"), any surrender of previously owned Shares to satisfy tax withholding
-------
obligations arising upon exercise of this Option must comply with the applicable
provisions of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3").
----------
All elections by Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval of
the Administrator.
12. Market Standoff Agreement. (a) In connection with any underwritten
-------------------------
public offering by the Company of its equity securities pursuant to an effective
registration statement filed under the 1933 Act, including the Company's initial
public offering, Optionee shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise dispose
or transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to, any Shares without the prior written consent of
the Company or its underwriters. Such restriction (the "Market Stand-Off")
shall be in effect for such period of time from and after the effective date of
the final prospectus for the offering as may be requested by
<PAGE>
the Company or such underwriters. In no event, however, shall such period exceed
one hundred eighty (180) days and the Market Stand-Off shall in all events
terminate two (2) years after the effective date of the Company's initial public
offering.
(b) Any new, substituted or additional securities which are by reason
of any Recapitalization or Reorganization distributed with respect to the Shares
shall be immediately subject to the Market Stand-Off, to the same extent the
Shares are at such time covered by such provisions.
(c) In order to enforce the Market Stand-Off, the Company may impose
stop-transfer instructions with respect to the Shares until the end of the
applicable stand-off period.
<PAGE>
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
document.
RELEASE SOFTWARE CORPORATION
By:
--------------------------------
--------------------------------
(Print name and title)
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT OR CONSULTANCY AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK PLAN WHICH IS INCORPORATED
HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO
CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE
IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated:
------------------------ ------------------------------
(NameofOptionee)
<PAGE>
EXHIBIT A
---------
RELEASENOW.COM CORPORATION
1996 STOCK PLAN
EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
-------------------------------------------------------
ReleaseNow.com Corporation
990 Commercial Street
San Carlos, CA 94070
Attention: President
This Agreement ("Agreement") is made as of ___________________, by and
---------
between ReleaseNow.com Corporation, a Delaware corporation (the "Company"), and
-------
___________ ("Purchaser"). To the extent any capitalized terms used in this
---------
Agreement are not defined, they shall have the meaning ascribed to them in the
Company's 1996 Stock Plan.
1. Exercise of Option. Subject to the terms and conditions hereof, Purchaser
------------------
hereby elects to exercise his or her option to purchase __________ shares of
Common Stock (the "Shares") of the Company under and pursuant to the Company's
------
1996 Stock Plan (the "Plan") and the Stock Option Agreement dated
----
_______________ (the "Option Agreement"). The purchase price for the Shares
----------------
shall be $_____ per Share for a total purchase price of $____________. The term
"Shares" refers to the purchased Shares and all securities received in
------
replacement of the Shares or as stock dividends or splits, all securities
received in replacement of the Shares in a recapitalization, merger,
reorganization, exchange or the like, and all new, substituted or additional
securities or other properties to which Purchaser is entitled by reason of
Purchaser's ownership of the Shares.
2. Time and Place of Exercise. The purchase and sale of the Shares under this
--------------------------
Agreement shall occur at the principal office of the Company simultaneously with
the execution of this Agreement in accordance with the provisions of Section
2(b) of the Option Agreement. On such date, the Company will deliver to
Purchaser a certificate representing the Shares to be purchased by Purchaser
(which shall be issued in Purchaser's name) against payment of the purchase
price therefor by Purchaser by (a) check made payable to the Company, (b)
cancellation of indebtedness of the Company to Purchaser, (c) delivery of shares
of the Common Stock of the Company in accordance with Section 3 of the Option
Agreement, (d) such other consideration as determined by the Administrator in
accordance with the Plan, or (e) by a combination of the foregoing.
3. Limitations on Transfer. In addition to any other limitation on transfer
-----------------------
created by applicable securities laws, Purchaser shall not assign, encumber or
dispose of any interest in the Shares except in compliance with the provisions
below and applicable securities laws.
<PAGE>
(a) Right of First Refusal. Before any Shares held by Purchaser or any
----------------------
transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
------
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(a) (the "Right of First Refusal").
----------------------
(i) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the
------
Holder's bona fide intention to sell or otherwise transfer such Shares;
(ii) the name of each proposed purchaser or other transferee ("Proposed
--------
Transferee"); (iii) the number of Shares to be transferred to each Proposed
----------
Transferee; and (iv) the terms and conditions of each proposed sale or
transfer. The Holder shall offer the Shares at the same price (the
"Offered Price") and upon the same terms (or terms as similar as reasonably
--------------
possible) to the Company or its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not
less than all, of the Shares proposed to be transferred to any one or more
of the Proposed Transferees, at the purchase price determined in accordance
with subsection (iii) below.
(iii) Purchase Price. The purchase price ("Purchase Price") for
-------------- --------------
the Shares purchased by the Company or its assignee(s) under this Section
3(a) shall be the Offered Price. If the Offered Price includes
consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Board of Directors of the Company
in good faith.
(iv) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the
Holder to the Company (or, in the case of repurchase by an assignee, to the
assignee), or by any combination thereof within 30 days after receipt of
the Notice or in the manner and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed in
--------------------------
the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section
3(a), then the Holder may sell or otherwise transfer such Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided
that such sale or other transfer is consummated within 60 days after the
date of the Notice and provided further that any such sale or other
transfer is effected in accordance with any applicable securities laws and
the Proposed Transferee agrees in writing that the provisions of this
Section 3 shall continue to apply to the Shares in the hands of such
Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, or if the Holder
proposes to change the price or other terms to make them more favorable to
the Proposed Transferee, a new Notice shall be given to the Company, and
the Company and/or its assignees shall
<PAGE>
again be offered the Right of First Refusal before any Shares held by the
Holder may be sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to the
--------------------------------------
contrary contained in this Section 3(a) notwithstanding, the transfer of
any or all of the Shares during Purchaser's lifetime or on Purchaser's
death by will or intestacy to Purchaser's Immediate Family or a trust for
the benefit of Purchaser's Immediate Family shall be exempt from the
provisions of this Section 3(a). "Immediate Family" as used herein shall
----------------
mean spouse, lineal descendant or antecedent, father, mother, brother or
sister. In such case, the transferee or other recipient shall receive and
hold the Shares so transferred subject to the provisions of this Section,
and there shall be no further transfer of such Shares except in accordance
with the terms of this Section 3.
(b) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In
-----------------------------------------------------
the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce,
but excluding a transfer to Immediate Family as set forth in Section
3(a)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have an option to purchase all of the Shares
transferred at the greater of the purchase price paid by Purchaser pursuant
to this Agreement or the fair market value of the Shares on the date of
transfer. Upon such a transfer, the person acquiring the Shares shall
promptly notify the Secretary of the Company of such transfer. The right
to purchase such Shares shall be provided to the Company for a period of
thirty (30) days following receipt by the Company of written notice by the
person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock
------------------------------
to be transferred pursuant to Section 3(b)(i), the price per Share shall be
a price set by the Board of Directors of the Company that will reflect the
current value of the stock in terms of present earnings and future
prospects of the Company. The Company shall notify Purchaser or his or her
executor of the price so determined within thirty (30) days after receipt
by it of written notice of the transfer or proposed transfer of Shares.
However, if Purchaser does not agree with the valuation as determined by
the Board of Directors of the Company, Purchaser shall be entitled to have
the valuation determined by an independent appraiser to be mutually agreed
upon by the Company and Purchaser and whose fees shall be borne equally by
the Company and Purchaser.
(c) Assignment. The right of the Company to purchase any part of the
----------
Shares may be assigned in whole or in part to any stockholder or stockholders of
the Company or other persons or organizations; provided, however, that an
-------- -------
assignee, other than a corporation that is the parent or a 100% owned subsidiary
of the Company, must pay the Company, upon assignment of such right, cash equal
to the difference between the original purchase price and fair market value, if
the original purchase price is less than the fair market value of the Shares
subject to the assignment.
<PAGE>
(d) Restrictions Binding on Transferees. All transferees of Shares or any
-----------------------------------
interest therein will receive and hold such Shares or interest subject to the
provisions of this Agreement. Any sale or transfer of the Company's Shares
shall be void unless the provisions of this Agreement are satisfied.
(e) Termination of Rights. The right of first refusal granted the Company
---------------------
by Section 3(a) above and the option to repurchase the Shares in the event of an
involuntary transfer granted the Company by Section 3(b) above shall terminate
upon the first sale of Common Stock of the Company to the general public
pursuant to a registration statement filed with and declared effective by the
Securities and Exchange Commission under the Securities Act. Upon termination
of the right of first refusal described in Section 3(a) above, a new certificate
or certificates representing the Shares not repurchased shall be issued, on
request, without the legend referred to in Section 6(a)(ii) herein and delivered
to Purchaser.
4. Investment and Taxation Representations. In connection with the purchase
---------------------------------------
of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Purchaser is
purchasing these securities for investment for his or her own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the securities have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the securities must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the securities. Purchaser understands that the certificate(s)
evidencing the securities will be imprinted with a legend which prohibits the
transfer of the securities unless they are registered or such registration is
not required in the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701, each
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions. Rule 701 provides that if
the issuer qualifies under Rule 701 at the time of issuance of the securities,
such issuance will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the securities exempt under Rule
701 may be resold by Purchaser ninety (90) days thereafter, subject to the
satisfaction of certain of the conditions specified by Rule 144, including,
among other things: (1) the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the
<PAGE>
Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the
availability of certain public information about the Company, and the amount of
securities being sold during any three month period not exceeding the
limitations specified in Rule 144(e), if applicable. Notwithstanding this
paragraph (d), Purchaser acknowledges and agrees to the restrictions set forth
in paragraph (f) hereof.
In the event that the Company does not qualify under Rule 701 at the
time of purchase, then the securities may be resold by Purchaser in certain
limited circumstances subject to the provisions of Rule 144, which requires,
among other things: (1) the availability of certain public information about
the Company; (2) the resale occurring not less than two years after the party
has purchased, and made full payment of (within the meaning of Rule 144), the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than three years, (3) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934) and the amount of securities being sold during any three
month period not exceeding the specified limitations stated therein, if
applicable. PURCHASER UNDERSTANDS THAT PAYMENT FOR THE SHARES WITH A PROMISSORY
NOTE IS NOT DEEMED TO BE FULL PAYMENT UNDER RULE 144 UNLESS THE NOTE IS SECURED
BY ASSETS OTHER THAN THE SHARES.
(e) Purchaser further understands that at the time he or she wishes to sell
the securities there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the securities
under Rule 144 or 701 even if the two-year minimum holding period had been
satisfied.
(f) Purchaser further understands that in the event all of the applicable
requirements of Rule 144 or 701 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
(g) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection with the purchase or disposition of the Shares and
that Purchaser is not relying on the Company for any tax advice.
<PAGE>
5. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares shall
-------
bear the following legends (as well as any legends required by applicable state
and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer
-------------------
on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
6. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
7. Market Stand-off Agreement. (a) In connection with any underwritten
--------------------------
public offering by the Company of its equity securities pursuant to an effective
registration statement filed under the 1933 Act, including the Company's initial
public offering, Purchaser shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise dispose
or transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to, any Shares without the prior written consent of
the Company or its
<PAGE>
underwriters. Such restriction (the "Market Stand-Off") shall be in effect for
such period of time from and after the effective date of the final prospectus
for the offering as may be requested by the Company or such underwriters. In no
event, however, shall such period exceed one hundred eighty (180) days and the
Market Stand-Off shall in all events terminate two (2) years after the effective
date of the Company's initial public offering.
(b) Any new, substituted or additional securities which are by reason
of any Recapitalization or Reorganization distributed with respect to the Shares
shall be immediately subject to the Market Stand-Off, to the same extent the
Shares are at such time covered by such provisions.
(c) In order to enforce the Market Stand-Off, the Company may impose
stop-transfer instructions with respect to the Shares until the end of the
applicable stand-off period.
8. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions pursuant
-------------
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted, without giving effect to principles of conflicts of
law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the
---------------------------------------
entire agreement and understanding of the parties relating to the subject matter
herein and merges all prior discussions between them. No modification of or
amendment to this Agreement, nor any waiver of any rights under this Agreement,
shall be effective unless in writing signed by the parties to this Agreement.
The failure by either party to enforce any rights under this Agreement shall not
be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are held to
------------
be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement is the result of negotiations between and
------------
has been reviewed by each of the parties hereto and their respective counsel, if
any; accordingly, this Agreement shall be deemed to be the product of all of the
parties hereto, and no ambiguity shall be construed in favor of or against any
one of the parties hereto.
(e) Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be deemed sufficient when delivered personally or sent by
telegram or fax or forty-eight (48) hours after being deposited in the U.S. mail
as certified or registered mail with postage prepaid, and addressed to the party
to be notified at such party's address as set forth below or as subsequently
modified by written notice.
<PAGE>
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
(h) California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH
-----------------------------------
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
<PAGE>
The parties have executed this Exercise Notice and Restricted Stock
Purchase Agreement as of the date first set forth above.
COMPANY:
RELEASENOW.COM CORPORATION
By:
-------------------------------
Name:
-----------------------------
(print)
Title:
----------------------------
990 Commercial Street
San Carlos, CA 94070
PURCHASER:
----------------------------------
----------------------------------
(Signature)
----------------------------------
(Print Name)
Address:
----------------------------------
----------------------------------
I, , spouse of , have read and
---------------------- ------------
hereby approve the foregoing Agreement. In consideration of the Company's
granting my spouse the right to purchase the Shares as set forth in the
Agreement, I hereby agree to be irrevocably bound by the Agreement and further
agree that any community property or other such interest shall hereby be
similarly bound by the Agreement. I hereby appoint my spouse as my attorney-in-
fact with respect to any amendment or exercise of any rights under the
Agreement.
----------------------------------
Spouse of
------------------------
<PAGE>
RELEASE SOFTWARE CORPORATION
1996 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
-----------------------------------
This Restricted Stock Purchase Agreement (the "Agreement") is made as
---------
of ________ by and between Release Software Corporation, a Delaware corporation
(the "Company"), and (Purchaser) ("Purchaser") pursuant to the Company's 1996
------- ---------
Stock Plan (the "Plan"). To the extent any capitalized terms used in this
----
Agreement are not defined, they shall have the meaning ascribed to them in the
Plan.
1. Sale of Stock. Subject to the terms and conditions of this Agreement,
-------------
on the Purchase Date (as defined below) the Company will issue and sell to
Purchaser, and Purchaser agrees to purchase from the Company, (NoofShares)
shares of the Company's Common Stock (the "Shares") at a purchase price of
------
(PriceperShare) per Share for a total purchase price of (TotalPurchasePrice)
(the "Total Purchase Price"). The term "Shares" refers to the purchased Shares
-------------------- ------
and all securities received in replacement of or in connection with the Shares
pursuant to stock dividends or splits, all securities received in replacement of
the Shares in a recapitalization, merger, reorganization, exchange or the like,
and all new, substituted or additional securities or other properties to which
Purchaser is entitled by reason of Purchaser's ownership of the Shares.
2. Time and Place of Exercise. The purchase and sale of the Shares under
--------------------------
this Agreement shall occur at the principal office of the Company simultaneously
with the execution of this Agreement by the parties, or on such other date as
the Company and Purchaser shall agree (the "Purchase Date"). On the Purchase
-------------
Date, the Company will deliver to Purchaser a certificate representing the
Shares to be purchased by Purchaser (which certificate shall be issued in
Purchaser's name, against (a) payment of the purchase price therefor by
Purchaser by cancellation of amounts due to Purchaser for prior services
rendered by Purchaser to the Company (the "Debt") and (b) submission by
----
Purchaser of all amounts required to satisfy the Company's tax payment
obligations as set forth in Section 4(h) below). As of the Purchase Date, and
simultaneously with the issuance of the Shares to Purchaser, the Debt shall
automatically be deemed to be discharged in its entirety.
3. Limitations on Transfer. In addition to any other limitation on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares except in compliance with the
provisions below and applicable securities laws.
(a) Right of First Refusal. Before any Shares held by Purchaser or any
----------------------
transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
------
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(a) (the "Right of First Refusal").
----------------------
<PAGE>
(i) Notice of Proposed Transfer. The Holder of the Shares
---------------------------
shall deliver to the Company a written notice (the "Notice") stating: (A) the
------
Holder's bona fide intention to sell or otherwise transfer such Shares; (B) the
name of each proposed purchaser or other transferee ("Proposed Transferee"); (C)
-------------------
the number of Shares to be transferred to each Proposed Transferee; and (D) the
terms and conditions of each proposed sale or transfer. The Holder shall offer
the Shares at the same price (the "Offered Price") and upon the same terms (or
-------------
terms as similar as reasonably possible) to the Company or its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within
----------------------------------
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) Purchase Price. The purchase price ("Purchase Price") for
-------------- --------------
the Shares purchased by the Company or its assignee(s) under this Section 3(a)
shall be the Offered Price. If the Offered Price includes consideration other
than cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(iv) Payment. Payment of the Purchase Price shall be made, at
-------
the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed
--------------------------
in the Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in this Section 3(a), then the
Holder may sell or otherwise transfer such Shares to that Proposed Transferee at
the Offered Price or at a higher price, provided that such sale or other
transfer is consummated within 60 days after the date of the Notice and provided
further that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section 3 shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, or if the Holder
proposes to change the price or other terms to make them more favorable to the
Proposed Transferee, a new Notice shall be given to the Company, and the Company
and/or its assignees shall again be offered the Right of First Refusal before
any Shares held by the Holder may be sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Without limiting the
---- --------------------------------------
Company's rights under this Section 3(a), the transfer of any or all of the
Shares during Purchaser's lifetime or on Purchaser's death by will or intestacy
to Purchaser's Immediate Family or a trust for the benefit of Purchaser's
Immediate Family shall be exempt from the provisions of this Section 3(a).
"Immediate Family" as used herein shall mean spouse, lineal
----------------
<PAGE>
descendant or antecedent, father, mother, brother or sister. In such case, the
transferee or other recipient shall receive and hold the Shares so transferred
subject to the provisions of this Section, and there shall be no further
transfer of such Shares except in accordance with the terms of this Section 3.
(b) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In
-----------------------------------------------------
the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce, but
excluding a transfer to Immediate Family as set forth in Section 3(a)(vi) above)
of all or a portion of the Shares by the record holder thereof, the Company
shall have an option to purchase all of the Shares transferred at the greater of
the purchase price paid by Purchaser pursuant to this Agreement or the fair
market value of the Shares on the date of transfer. Upon such a transfer, the
person acquiring the Shares shall promptly notify the Secretary of the Company
of such transfer. The right to purchase such Shares shall be provided to the
Company for a period of thirty (30) days following receipt by the Company of
written notice by the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any
------------------------------
Shares to be transferred pursuant to Section 3(b)(i), the price per Share shall
be a price set by the Board of Directors of the Company, acting in good faith,
that will reflect the current fair market value of the Shares. The Company shall
notify Purchaser or his or her executor of the price so determined within thirty
(30) days after receipt by it of written notice of the transfer or proposed
transfer of Shares. The Board's determination of the price will be final and
binding.
(c) Assignment. The right of the Company to purchase any part of the
----------
Shares may be assigned by the Company, in whole or in part, to any stockholder
or stockholders of the Company or other persons or organizations.
(d) Restrictions Binding on Transferees. All transferees of Shares or
-----------------------------------
any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement. Any sale or transfer of the Company's Shares
shall be void unless the provisions of this Agreement are met.
(e) Termination of Rights. The right of first refusal granted the
---------------------
Company by Section 3(a) above and the option to repurchase the Shares in the
event of an involuntary transfer granted the Company by Section 3(b) above shall
terminate upon the first sale of Common Stock of the Company to the general
public pursuant to a registration statement filed with and declared effective by
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act"). Upon termination of the right of first refusal
--------------
described in Section 3(a), a new certificate or certificates representing the
Shares not repurchased shall be issued, on request, without the legend referred
to in Section 5(a)(ii) herein and delivered to Purchaser.
4. Investment and Taxation Representations. In connection with the
---------------------------------------
purchase of the Shares, Purchaser represents to the Company the following:
<PAGE>
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Purchaser is
purchasing these securities for investment for his or her own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the securities have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the securities
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the securities. Purchaser understands that the certificate evidencing
the securities will be imprinted with a legend which prohibits the transfer of
the securities unless they are registered or such registration is not required
in the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof (or from an affiliate of such issuer), in a non-public
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of issuance of the
securities, such issuance will be exempt from registration under the Securities
Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"),
------------
the securities exempt under Rule 701 may be resold by Purchaser ninety (90) days
thereafter, subject to the satisfaction of certain of the conditions specified
by Rule 144, including, among other things: (1) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Exchange Act); and (2) in the
case of an affiliate, the availability of certain public information about the
Company, and the amount of securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), if applicable.
Notwithstanding this Section 4(d), Purchaser acknowledges and agrees to the
restrictions set forth in Section 4(f) hereof.
In the event that the Company does not qualify under Rule 701 at the time
of purchase, then the securities may be resold by Purchaser in certain limited
circumstances subject to the provisions of Rule 144, which requires, among other
things: (1) the availability of certain public information about the Company;
(2) the resale occurring not less than one year after the party has purchased,
and made full payment of (within the meaning of Rule 144), the securities to be
sold; and, (3) in the case of an affiliate, or of a non-affiliate who has held
the securities less than two years, the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Exchange Act) and the amount of
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable. PURCHASER UNDERSTANDS THAT PAYMENT
<PAGE>
FOR THE SHARES WITH A PROMISSORY NOTE IS NOT DEEMED TO BE FULL PAYMENT UNDER
RULE 144 UNLESS THE NOTE IS SECURED BY ASSETS OTHER THAN THE SHARES.
(e) Purchaser further understands that at the time he or she wishes to
sell the securities there may be no public market upon which to make such a
sale, and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the securities
under Rule 144 or 701 even if the applicable minimum holding period had been
satisfied.
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 or 701 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
(g) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
(h) Purchaser understands that Purchaser will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
fair market value of the Shares on the Purchase Date. Consequently, Purchaser
shall be required to submit to the Company an amount equal to 34% of the Total
Purchase Price (or $_________) prior to delivery of the Shares to Purchaser by
the Company, which amount the Company is required to remit to the applicable
taxing authorities.
5. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
<PAGE>
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY
OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
Purchaser understands that transfer of the Shares may be restricted by Section
260.141.11 of the Rules of the California Corporations Commissioner, a copy of
which is attached to this Agreement.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
6. Market Standoff Agreement. (a) In connection with any underwritten
-------------------------
public offering by the Company of its equity securities pursuant to an effective
registration statement filed under the 1933 Act, including the Company's initial
public offering, Purchaser shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise dispose
or transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to, any Shares without the prior written consent of
the Company or its underwriters. Such restriction (the "Market Stand-Off") shall
be in effect for such period of time from and after the effective date of the
final prospectus for the offering as may be requested by the Company or such
underwriters. In no event, however, shall such period exceed one hundred eighty
(180) days and the Market Stand-Off shall in all events terminate two (2) years
after the effective date of the Company's initial public offering.
(b) Any new, substituted or additional securities which are by reason
of any Recapitalization or Reorganization distributed with respect to the Shares
shall be immediately subject to the Market Stand-Off, to the same extent the
Shares are at such time covered by such provisions.
(c) In order to enforce the Market Stand-Off, the Company may impose
stop-transfer instructions with respect to the Shares until the end of the
applicable stand-off period..
<PAGE>
7. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
[Signature Page Follows]
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
RELEASE SOFTWARE CORPORATION
By:_________________________________
Title:______________________________
Address:
990 Commercial Street
San Carlos, CA 94070
PURCHASER:
(Purchaser)
____________________________________
(Signature)
Address:
________________________
________________________
I, ________________________________, spouse of Purchaser, have read and hereby
approve the foregoing Agreement. In consideration of the Company's granting my
spouse the right to purchase the Shares as set forth in the Agreement, I hereby
agree to be irrevocably bound by the Agreement and further agree that any
community property or other such interest shall be similarly bound by the
Agreement. I hereby appoint my spouse as my attorney-in-fact with respect to
any amendment or exercise of any rights under the Agreement.
____________________________________
Spouse of (Purchaser)
<PAGE>
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
----------------------------------------------------
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: Restriction on Transfer.
---------- -----------------------
(a) The issuer of any security upon which a restriction on transfer has been
imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall cause a copy
of this section to be delivered to each issuee or transferee of such security at
the time the certificate evidencing the security is delivered to the issuee or
transferee.
(b) It is unlawful for the holder of any such security to consummate a sale or
transfer of such security, or any interest therein, without the prior written
consent of the Commissioner (until this condition is removed pursuant to Section
260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the Code
or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any custodian
or trustee for the account of the transferor or the transferor's ancestors,
descendants, or spouse; or to a transferee by a trustee or custodian for the
account of the transferee or the transferee's ancestors, descendants or
spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either acting as
such or as a finder) to a resident of a foreign state, territory or country
who is neither domiciled in this state to the knowledge of the broker-dealer,
nor actually present in this state if the sale of such securities is not in
violation of any securities law of the foreign state, territory or country
concerned;
(8) to a broker-dealer licensed under the Code in a principal transaction,
or as an underwriter or member of an underwriting syndicate or selling group;
(9) if the interest sold or transferred is a pledge or other lien given by
the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or 25121
of the Code, of the securities to be transferred, provided that no order under
Section 25140 or Subdivision (a) of Section 25143 is in effect with respect to
such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation, or
by a wholly owned subsidiary of a corporation to such corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or 25113 of
the Code, provided that no order under Section 25140 or Subdivision (a) of
Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who are
neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or to
the administrator of the unclaimed property law of another state;
(15) by the State Controller pursuant to the Unclaimed Property Law or by
the administrator of the unclaimed property law of another state if, in either
such case, such person (i) discloses to potential purchasers at the sale that
transfer of the securities is restricted under this rule, (ii) delivers to
each purchaser a copy of this rule, and (iii) advises the Commissioner of the
name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not involve
a change in the beneficial ownership of the securities; or
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirement of Section 25110
of the Code but exempt from that qualification requirement by subdivision (f)
of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
<PAGE>
Exhibit 10.3
RELEASENOW.COM CORPORATION
1998 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
(as amended & restated through November 10, 1999)
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSE OF THE PLAN
This 1998 Stock Option/Stock Issuance Plan is intended to promote the
interests of ReleaseNow.com Corporation, a Delaware corporation, by providing
eligible persons in the Corporation's employ or service with the opportunity to
acquire a proprietary interest, or otherwise increase their proprietary
interest, in the Corporation as an incentive for them to continue in such employ
or service.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two (2) separate equity
programs:
(i) the Option Grant Program under which eligible persons
may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock, and
(ii) the Stock Issuance Program under which eligible
persons may, at the discretion of the Plan Administrator, be issued shares
of Common Stock directly, either through the immediate purchase of such
shares or as a bonus for services rendered the Corporation (or any Parent
or Subsidiary).
B. The provisions of Articles One and Four shall apply to both equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board. However, any or all
administrative functions otherwise exercisable by the Board may be delegated to
the Primary Committee and/or the Secondary Committee. Members of the Primary
Committee and the Secondary Committee shall serve for such period of time as the
Board may determine and shall be subject to removal by the Board at any time.
The Board may also at any time terminate the functions of the Primary Committee
and/or the Secondary Committee and reassume all powers and authority previously
delegated to such committee or committees.
<PAGE>
B. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Option Grant and Stock
Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of those programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Option Grant and Stock Issuance Programs under its jurisdiction or any stock
option or stock issuance thereunder.
C. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
IV. ELIGIBILITY
A. The persons eligible to participate in the Plan are as follows:
(i) Employees,
(ii) non-employee members of the Board or the non-
employee members of the board of directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
B. The Plan Administrator shall have full authority to determine,
(i) with respect to the grants made under the Option Grant Program, which
eligible persons are to receive the option grants, the time or times when those
grants are to be made, the number of shares to be covered by each such grant,
the status of the granted option as either an Incentive Option or a Non-
Statutory Option, the time or times when each option is to become exercisable,
the vesting schedule (if any) applicable to the option shares and the maximum
term for which the option is to remain outstanding, and (ii) with respect to
stock issuances made under the Stock Issuance Program, which eligible persons
are to receive such stock issuances, the time or times when those issuances are
to be made, the number of shares to be issued to each Participant, the vesting
schedule (if any) applicable to the issued shares and the consideration to be
paid by the Participant for such shares.
C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Option Grant Program or to effect stock
issuances in accordance with the Stock Issuance Program.
2.
<PAGE>
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock. The maximum number of shares of Common
Stock that may be issued over the term of the Plan shall not exceed 6,976,484
shares. Such authorized share reserve consists of (i) the number of shares that
remain available for issuance, as of the Plan Effective Date, under the
Predecessor Plan as last approved by the Corporation's stockholders, including
shares subject to the outstanding options to be incorporated into the Plan and
the additional shares that would otherwise be available for future grant, plus
(ii) an additional increase of 1,000,000 shares of Common Stock effective as of
the date of adoption of the 1998 Plan, (iii) an additional increase of 500,000
shares of Common Stock as approved by the Board on April 14, 1999, and approved
by the stockholders on May 17, 1999, (iv) an additional increase of 1,300,000
shares of Common Stock as approved by the Board on May 27, 1999, and approved by
the stockholders on November 10, 1999 (v) an additional increase of 700,000
shares as approved by the Board on July 14, 1999, and approved by the
stockholders on November 10, 1999, (vi) an additional increase of 500,000 shares
of Common Stock as approved by the Board on October 13, 1999, and approved by
the stockholders on November 10, 1999, and (vii) an additional increase of
950,000 shares as approved by the Board on November 10, 1999 and subject to
stockholders' approval.
B. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-regrant provisions of Article
Two. Unvested shares issued under the Plan and subsequently repurchased by the
Corporation, at the option exercise or direct issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan.
C. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan and (ii) the number and/or class of securities and the exercise
price per share in effect under each outstanding option in order to prevent the
dilution or enlargement of benefits thereunder. The adjustments determined by
the Plan Administrator shall be final, binding and conclusive. In no event shall
any such adjustments be made in connection with the conversion of one or more
outstanding shares of the Corporation's preferred stock into shares of Common
Stock.
3.
<PAGE>
ARTICLE TWO
OPTION GRANT PROGRAM
--------------------
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
--------------
1. The exercise price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
(i) The exercise price per share shall not be less
than eighty-five percent (85%) of the Fair Market Value per share of
Common Stock on the option grant date.
(ii) If the person to whom the option is granted is a
10% Stockholder, the exercise price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common
Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Four and the documents evidencing the option, be payable in cash or
check made payable to the Corporation. Should the Common Stock be registered
under Section 12 of the 1934 Act at the time the option is exercised, then the
exercise price may also be paid as follows:
(i) in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(ii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to which
the Optionee shall concurrently provide irrevocable instructions (A) to a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable
Federal, state and local income and
4.
<PAGE>
employment taxes required to be withheld by the Corporation by reason of
such exercise and (B) to the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order to complete
the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Exercise and Term of Options. Each option shall be exercisable at
----------------------------
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option grant. However, no option shall have a term in excess of ten (10)
years measured from the option grant date.
C. Effect of Termination of Service.
--------------------------------
1. The following provisions shall govern the exercise of
any options held by the Optionee at the time of cessation of Service or death:
(i) Should the Optionee cease to remain in Service
for any reason other than death, Disability or Misconduct, then the period
during which each such outstanding option may be exercised shall be limited
to the three (3)-month period measured from the date of such cessation of
Service.
(ii) Should Optionee's Service terminate by reason of
Disability, then the period during which each such outstanding option may
be exercised shall be limited to the twelve (12)-month period measured from
the date of such cessation of Service.
(iii) Should the Optionee die while holding an
outstanding option under the Plan, then the personal representative of his
or her estate or the person or persons to whom the option is transferred
pursuant to the Optionee's will or the laws of inheritance shall have a
twelve (12)-month period measured from the date of the Optionee's death in
which to exercise such option.
(iv) Under no circumstances, however, shall any such
option be exercisable after the specified expiration of the option term.
(v) During the limited post-Service exercise period,
the option may not be exercised in the aggregate for more than the number
of vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if
5.
<PAGE>
earlier) upon the expiration of the option term, the option shall terminate
and cease to be outstanding for any vested shares for which the option has
not been exercised. However, the option shall, immediately upon the
Optionee's cessation of Service, terminate and cease to be outstanding with
respect to any and all option shares for which the option is not otherwise
at the time exercisable or in which the Optionee is not otherwise at that
time vested.
(vi) Should Optionee's Service be terminated for Misconduct,
then all outstanding options held by the Optionee shall terminate
immediately and cease to remain outstanding.
2. The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to:
(i) extend the period of time for which the option is to
remain exercisable following Optionee's cessation of Service or death from
the limited exercise period otherwise in effect for that option to such
greater period of time as the Plan Administrator shall deem appropriate,
but in no event beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of vested
shares of Common Stock for which such option is exercisable at the time of
the Optionee's cessation of Service but also with respect to one or more
additional installments in which the Optionee would have vested under the
option had the Optionee continued in Service.
D. Stockholder Rights. The holder of an option shall have no
------------------
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become the
holder of record of the purchased shares.
E. Unvested Shares. The Plan Administrator shall have the discretion
---------------
to grant options which are exercisable for unvested shares of Common Stock.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right. The Plan Administrator may not impose a vesting schedule upon
any option grant or the shares of Common Stock subject to that option which is
more restrictive than twenty percent (20%) per year vesting, with the initial
vesting to occur not later than one (1) year after the option grant date.
However, such limitation shall not be applicable to any option grants made to
individuals who are officers of the Corporation, non-employee Board members or
independent consultants.
6.
<PAGE>
F. First Refusal Rights. Until such time as the Common Stock is
--------------------
first registered under Section 12 of the 1934 Act, the Corporation shall have
the right of first refusal with respect to any proposed disposition by the
Optionee (or any successor in interest) of any shares of Common Stock issued
under the Plan. Such right of first refusal shall be exercisable in accordance
with the terms established by the Plan Administrator and set forth in the
document evidencing such right.
G. Limited Transferability of Options. During the lifetime of
----------------------------------
the Optionee, the option shall be exercisable only by the Optionee and shall not
be assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Four shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to
-----------
Employees.
B. Exercise Price. The exercise price per share shall not be
--------------
less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value of the
-----------------
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one (1) calendar
year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To
the extent the Employee holds two (2) or more such options which become
exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.
D. 10% Stockholder. If any Employee to whom an Incentive Option
---------------
is granted is a 10% Stockholder, then the option term shall not exceed five (5)
years measured from the option grant date.
III. CORPORATE TRANSACTION
A. The shares subject to each option outstanding under the Plan at
the time of a Corporate Transaction shall automatically vest in full so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for all of the shares of Common Stock at
the time subject to that option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. However, the shares subject to an
outstanding option shall not vest on such an accelerated basis if and to the
extent:
7.
<PAGE>
(i) such option is to be assumed by the successor corporation (or parent
thereof) in the Corporate Transaction and any repurchase rights of the
Corporation with respect to the unvested option shares are concurrently to be
assigned to such successor corporation (or parent thereof) or (ii) such option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the unvested option shares at the time of
the Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to those unvested option shares or (iii)
the acceleration of such option is subject to other limitations imposed by the
Plan Administrator at the time of the option grant.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction, had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction and (ii) the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
--------
securities shall remain the same.
E. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to structure one or more options so that those options shall
automatically accelerate and vest in full (and any repurchase rights of the
Corporation with respect to the unvested shares subject to those options shall
immediately terminate) upon the occurrence of a Corporate Transaction, whether
or not those options are to be assumed in the Corporate Transaction.
F. The Plan Administrator shall also have full power and
authority, exercisable either at the time the option is granted or at any time
while the option remains outstanding, to structure such option so that the
shares subject to that option will automatically vest on an accelerated basis
should the Optionee's Service terminate by reason of an Involuntary Termination
within a designated period (not to exceed eighteen (18) months) following the
effective date of any Corporate Transaction in which the option is assumed and
the repurchase
8.
<PAGE>
rights applicable to those shares do not otherwise terminate. Any option so
accelerated shall remain exercisable for the fully-vested option shares until
the expiration or sooner termination of the option term. In addition, the Plan
Administrator may provide that one or more of the Corporation's outstanding
repurchase rights with respect to shares held by the Optionee at the time of
such Involuntary Termination shall immediately terminate on an accelerated
basis, and the shares subject to those terminated rights shall accordingly vest
at that time.
G. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction shall remain exercisable as an Incentive Option
only to the extent the applicable One Hundred Thousand Dollar ($100,000)
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.
H. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options covering the same or different number of
shares of Common Stock but with an exercise price per share based on the Fair
Market Value per share of Common Stock on the new option grant date.
9.
<PAGE>
ARTICLE THREE
STOCK ISSUANCE PROGRAM
----------------------
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
A. Purchase Price.
--------------
1. The purchase price per share shall be fixed by the
Plan Administrator but shall not be less than eighty-five percent (85%) of the
Fair Market Value per share of Common Stock on the issue date. However, the
purchase price per share of Common Stock issued to a 10% Stockholder shall not
be less than one hundred and ten percent (110%) of such Fair Market Value.
2. Subject to the provisions of Section I of Article Four,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. Vesting Provisions.
------------------
1. Shares of Common Stock issued under the Stock
Issuance Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. However, the Plan Administrator may not impose a vesting schedule
upon any stock issuance effected under the Stock Issuance Program which is more
restrictive than twenty percent (20%) per year vesting, with initial vesting to
occur not later than one (1) year after the issuance date. Such limitation shall
not apply to any Common Stock issuances made to the officers of the Corporation,
non-employee Board members or independent consultants.
2. Any new, substituted or additional securities or
other property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to the
Participant's unvested shares of Common Stock by reason of any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's
10.
<PAGE>
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with respect to
any shares of Common Stock issued to the Participant under the Stock Issuance
Program, whether or not the Participant's interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while holding
one or more unvested shares of Common Stock issued under the Stock Issuance
Program or should the performance objectives not be attained with respect to one
or more such unvested shares of Common Stock, then those shares shall be
immediately surrendered to the Corporation for cancellation, and the Participant
shall have no further stockholder rights with respect to those shares. To the
extent the surrendered shares were previously issued to the Participant for
consideration paid in cash or cash equivalent (including the Participant's
purchase-money indebtedness), the Corporation shall repay to the Participant the
cash consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to such surrendered shares.
5. The Plan Administrator may in its discretion waive the surrender
and cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur upon the non-completion of the
vesting schedule applicable to those shares. Such waiver shall result in the
immediate vesting of the Participant's interest in the shares of Common Stock as
to which the waiver applies. Such waiver may be effected at any time, whether
before or after the Participant's cessation of Service or the attainment or non-
attainment of the applicable performance objectives.
C. First Refusal Rights. Until such time as the Common Stock is first
--------------------
registered under Section 12 of the 1934 Act, the Corporation shall have the
right of first refusal with respect to any proposed disposition by the
Participant (or any successor in interest) of any shares of Common Stock issued
under the Stock Issuance Program. Such right of first refusal shall be
exercisable in accordance with the terms established by the Plan Administrator
and set forth in the document evidencing such right.
II. CORPORATE TRANSACTION
A. Upon the occurrence of a Corporate Transaction, all outstanding
repurchase rights under the Stock Issuance Program shall terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, except to the extent: (i) those repurchase
rights are assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction or (ii) such accelerated vesting is
precluded by other limitations imposed by the Plan Administrator at the time the
repurchase right is issued.
11.
<PAGE>
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights with respect to those shares remain
outstanding, to provide that those rights shall automatically terminate on an
accelerated basis, and the shares of Common Stock subject to those terminated
rights shall immediately vest, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those repurchase rights are assigned
to the successor corporation (or parent thereof).
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
12.
<PAGE>
ARTICLE FOUR
MISCELLANEOUS
-------------
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay the
option exercise price under the Option Grant Program or the purchase price for
shares issued under the Stock Issuance Program by delivering a full-recourse,
interest bearing promissory note payable in one or more installments and secured
by the purchased shares. The terms of any such promissory note (including the
interest rate and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion. In no event may the maximum credit
available to the Optionee or Participant exceed the sum of (i) the aggregate
option exercise price or purchase price payable for the purchased shares (less
the par value of those shares) plus (ii) any Federal, state and local income and
employment tax liability incurred by the Optionee or the Participant in
connection with the option exercise or share purchase.
II. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective when adopted by the Board, but no
option granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Plan is approved by the Corporation's stockholders. If
such stockholder approval is not obtained within twelve (12) months after the
date of the Board's adoption of the Plan, then all options previously granted
under the Plan shall terminate and cease to be outstanding, and no further
options shall be granted and no shares shall be issued under the Plan. Subject
to such limitation, the Plan Administrator may grant options and issue shares
under the Plan at any time after the effective date of the Plan and before the
date fixed herein for termination of the Plan.
B. The Plan shall serve as the successor to the Predecessor Plan, and no
further option grants shall be made under the Predecessor Plan after the Plan
Effective Date. All options outstanding under the Predecessor Plan on the Plan
Effective Date shall be incorporated into the Plan at that time and shall be
treated as outstanding options under the Plan. However, each outstanding option
so incorporated shall continue to be governed solely by the terms of the
documents evidencing such option, and no provision of the Plan shall be deemed
to affect or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.
C. One or more provisions of the Plan, including the option/vesting
acceleration provisions of Article Two relating to Corporate Transactions, may,
in the Plan Administrator's discretion in accordance with applicable law, be
extended to one or more options incorporated from the Predecessor Plan which do
not otherwise contain such provisions.
13.
<PAGE>
D. The Plan shall terminate upon the earliest of (i) the expiration of
--------
the ten (10)-year period measured from the date the Plan is adopted by the
Board, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. All options and
unvested stock issuances outstanding at the time of a clause (i) termination
event shall continue to have full force and effect in accordance with the
provisions of the documents evidencing those options or issuances.
III. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws and regulations.
B. Options may be granted under the Option Grant Program and shares may
be issued under the Stock Issuance Program which are in each instance in excess
of the number of shares of Common Stock then available for issuance under the
Plan, provided any excess shares actually issued under those programs shall be
held in escrow until there is obtained stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess grants or issuances are
made, then (i) any unexercised options granted on the basis of such excess
shares shall terminate and cease to be outstanding and (ii) the Corporation
shall promptly refund to the Optionees and the Participants the exercise or
purchase price paid for any excess shares issued under the Plan and held in
escrow, together with interest (at the applicable Short Term Federal Rate) for
the period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.
IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.
V. WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock upon the
exercise of any options granted under the Plan or upon the direct issuance or
vesting of any shares issued under the Plan shall be subject to the satisfaction
of all applicable Federal, state and local income and employment tax withholding
requirements.
14.
<PAGE>
VI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options under the Plan
and the issuance of any shares of Common Stock (i) upon the exercise of any
option or (ii) under the Stock Issuance Program shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it and
the shares of Common Stock issued pursuant to it.
VII. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining such person) or of the Optionee or
the Participant, which rights are hereby expressly reserved by each, to
terminate such person's Service at any time for any reason, with or without
cause.
VIII. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income statement at
least annually to each individual holding an outstanding option under the Plan,
unless such individual is a key Employee whose duties in connection with the
Corporation (or any Parent or Subsidiary) assure such individual access to
equivalent information.
15.
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. Board shall mean the Corporation's Board of Directors.
-----
B. Code shall mean the Internal Revenue Code of 1986, as amended.
----
C. Common Stock shall mean the Corporation's common stock.
------------
D. Corporate Transaction shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting power
of the Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
E. Corporation shall mean ReleaseNow.com Corporation, a Delaware
-----------
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of ReleaseNow.com Corporation, which shall by appropriate
action adopt the Plan.
F. Disability shall mean the inability of the Optionee or the
----------
Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment and shall be determined by
the Plan Administrator on the basis of such medical evidence as the Plan
Administrator deems warranted under the circumstances.
G. Employee shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. Exercise Date shall mean the date on which the Corporation shall
-------------
have received written notice of the option exercise.
I. Fair Market Value per share of Common Stock on any relevant
-----------------
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market.
A-1.
<PAGE>
If there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price on
the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
(iii) If the Common Stock is at the time neither listed on
any Stock Exchange nor traded on the Nasdaq National Market, then the Fair
Market Value shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem appropriate.
J. Incentive Option shall mean an option which satisfies the
----------------
requirements of Code Section 422.
K. Involuntary Termination shall mean the termination of the Service
-----------------------
of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge
by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A)
a change in his or her position with the Corporation which materially
reduces his or her duties and responsibilities or the level of management
to which he or she reports, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and target bonuses
under any corporate-performance based bonus or incentive programs) by more
than fifteen percent (15%) or (C) a relocation of such individual's place
of employment by more than fifty (50) miles, provided and only if such
change, reduction or relocation is effected without the individual's
consent.
L. Misconduct shall mean the commission of any act of fraud,
----------
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
A-2.
<PAGE>
M. 1934 Act shall mean the Securities Exchange Act of 1934, as
--------
amended.
N. Non-Statutory Option shall mean an option not intended to satisfy
--------------------
the requirements of Code Section 422.
O. Option Grant Program shall mean the option grant program in effect
--------------------
under the Plan.
P. Optionee shall mean any person to whom an option is granted under
--------
the Plan.
Q. Parent shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
R. Participant shall mean any person who is issued shares of Common
-----------
Stock under the Stock Issuance Program.
S. Plan shall mean the Corporation's 1998 Stock Option/Stock Issuance
----
Plan, as set forth in this document.
T. Plan Administrator shall mean the Board, the Primary Committee, or
------------------
the Secondary Committee, acting in its capacity as administrator of the Plan.
U. Plan Effective Date shall mean December 17, 1998, the date the
-------------------
Plan was adopted by the Board.
V. Predecessor Plan shall mean the Corporation's pre-existing 1996
----------------
Stock Plan in effect immediately prior to the Plan Effective Date hereunder.
W. Primary Committee shall mean a committee of two (2) or more Board
-----------------
members appointed by the Board to exercise one or more administrative functions
under the Plan.
X. Secondary Committee shall mean a committee of one (1) or more
-------------------
Board members appointed by the Board to administer one or more administrative
functions under the Plan.
Y. Service shall mean the provision of services to the Corporation
-------
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
Z. Stock Exchange shall mean either the American Stock Exchange or
--------------
the New York Stock Exchange.
A-3.
<PAGE>
AA. Stock Issuance Agreement shall mean the agreement entered into by
------------------------
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
BB. Stock Issuance Program shall mean the stock issuance program in
----------------------
effect under the Plan.
CC. Subsidiary shall mean any corporation (other than the
----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
DD. 10% Stockholder shall mean the owner of stock (as determined
---------------
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
A-4.
<PAGE>
RELEASE SOFTWARE CORPORATION
STOCK ISSUANCE AGREEMENT
------------------------
AGREEMENT made as of this ____ day of ___________ 199__, by and
between Release Software Corporation, a Delaware corporation, and
_____________________, Participant in the Corporation's 1998 Stock Option/Stock
Issuance Plan.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.
A. PURCHASE OF SHARES
------------------
1. Purchase. Participant hereby purchases ___________________
--------
shares of Common Stock (the "Purchased Shares") pursuant to the provisions of
the Stock Issuance Program at the purchase price of $ per share (the
"Purchase Price").
2. Payment. Concurrently with the delivery of this Agreement to the
-------
Corporation, Participant shall pay the Purchase Price for the Purchased Shares
in cash or cash equivalent and shall deliver a duly-executed blank Assignment
Separate from Certificate (in the form attached hereto as Exhibit I) with
respect to the Purchased Shares.
3. Stockholder Rights. Until such time as the Corporation exercises
------------------
the Repurchase Right or the First Refusal Right, Participant (or any successor
in interest) shall have all stockholder rights (including voting, dividend and
liquidation rights) with respect to the Purchased Shares, subject, however, to
the transfer restrictions of Articles B and C.
B. SECURITIES LAW COMPLIANCE
-------------------------
1. Restricted Securities. The Purchased Shares have not been
---------------------
registered under the 1933 Act and are being issued to Participant in reliance
upon the exemption from such registration provided by SEC Rule 701 for stock
issuances under compensatory benefit plans such as the Plan. Participant hereby
confirms that Participant has been informed that the Purchased Shares are
restricted securities under the 1933 Act and may not be resold or transferred
unless the Purchased Shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Participant hereby acknowledges that Participant is prepared to hold the
Purchased Shares for an indefinite period and that Participant is aware that SEC
Rule 144 issued under the 1933 Act which exempts certain resales of unrestricted
securities is not presently available to exempt the resale of the Purchased
Shares from the registration requirements of the 1933 Act.
2. Disposition of Purchased Shares. Participant shall make no
-------------------------------
disposition of the Purchased Shares (other than a Permitted Transfer) unless and
until there is compliance with all of the following requirements:
<PAGE>
(i) Participant shall have provided the Corporation with a
written summary of the terms and conditions of the proposed disposition.
(ii) Participant shall have complied with all requirements of
this Agreement applicable to the disposition of the Purchased Shares.
(iii) Participant shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that (a)
the proposed disposition does not require registration of the Purchased
Shares under the 1933 Act or (b) all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or any
exemption from registration available under the 1933 Act (including Rule
144) has been taken.
The Corporation shall not be required (i) to transfer on its books any
---
Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement or (ii) to treat as the owner of the Purchased
--
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
3. Restrictive Legends. The stock certificates for the Purchased
-------------------
Shares shall be endorsed with one or more of the following restrictive legends:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement
for the shares under such Act, (b) a "no action" letter of the Securities
and Exchange Commission with respect to such sale or offer or (c)
satisfactory assurances to the Corporation that registration under such Act
is not required with respect to such sale or offer."
"The shares represented by this certificate are subject to certain
repurchase rights and rights of first refusal granted to the Corporation
and accordingly may not be sold, assigned, transferred, encumbered, or in
any manner disposed of except in conformity with the terms of a written
agreement dated __________, 199___, between the Corporation and the
registered holder of the shares (or the predecessor in interest to the
shares). A copy of such agreement is maintained at the Corporation's
principal corporate offices."
C. TRANSFER RESTRICTIONS
---------------------
1. Restriction on Transfer. Except for any Permitted Transfer,
-----------------------
Participant shall not transfer, assign, encumber or otherwise dispose of any of
the Purchased Shares which are subject to the Repurchase Right. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise disposed of in contravention of
the First Refusal Right or the Market Stand-Off.
<PAGE>
2. Transferee Obligations. Each person (other than the Corporation)
----------------------
to whom the Purchased Shares are transferred by means of a Permitted Transfer
must, as a condition precedent to the validity of such transfer, acknowledge in
writing to the Corporation that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to (i) the Repurchase
Right, (ii) the First Refusal Right and (iii) the Market Stand-Off, to the same
extent such shares would be so subject if retained by Participant.
3. Market Stand-Off.
----------------
(a) In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such restriction (the "Market Stand-Off")
shall be in effect for such period of time from and after the effective date of
the final prospectus for the offering as may be requested by the Corporation or
such underwriters. In no event, however, shall such period exceed one hundred
eighty (180) days and the Market Stand-Off shall in all events terminate two (2)
years after the effective date of the Corporation's initial public offering.
(b) Owner shall be subject to the Market Stand-Off provided and
------------
only if the officers and directors of the Corporation are also subject to
- -------
similar restrictions.
(c) Any new, substituted or additional securities which are by
reason of any Recapitalization or Reorganization distributed with respect to the
Purchased Shares shall be immediately subject to the Market Stand-Off, to the
same extent the Purchased Shares are at such time covered by such provisions.
(d) In order to enforce the Market Stand-Off, the Corporation may
impose stop-transfer instructions with respect to the Purchased Shares until the
end of the applicable stand-off period.
D. REPURCHASE RIGHT
----------------
1. Grant. The Corporation is hereby granted the right (the
-----
"Repurchase Right"), exercisable at any time during the sixty (60)-day period
following the date Participant ceases for any reason to remain in Service, to
repurchase at the Purchase Price any or all of the Purchased Shares in which
Participant is not, at the time of his or her cessation of Service, vested in
accordance with the provisions of the Vesting Schedule set forth in Paragraph
D.3 or the special vesting acceleration provisions of Paragraph D.5 (such shares
to be hereinafter referred to as the "Unvested Shares").
<PAGE>
2. Exercise of the Repurchase Right. The Repurchase Right shall be
--------------------------------
exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the sixty (60)-day exercise period. The notice shall
indicate the number of Unvested Shares to be repurchased and the date on which
the repurchase is to be effected, such date to be not more than thirty (30) days
after the date of such notice. The certificates representing the Unvested Shares
to be repurchased shall be delivered to the Corporation on or before the close
of business on the date specified for the repurchase. Concurrently with the
receipt of such stock certificates, the Corporation shall pay to Owner, in cash
or cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the Purchase Price previously paid for the
Unvested Shares which are to be repurchased from Owner.
3. Termination of the Repurchase Right. The Repurchase Right shall
-----------------------------------
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph D.2. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Purchased
Shares in which Participant vests in accordance with the following Vesting
Schedule:
Participant shall vest in twenty-five percent (25%) of the
Purchased Shares, and the Repurchase Right shall concurrently lapse with
respect to those Purchased Shares, upon Participant's completion of one (1)
year of Service measured from ___________________, 199_____.
Participant shall vest in the remaining seventy-five percent (75%)
of the Purchased Shares, and the Repurchase Right shall concurrently lapse
with respect to those Purchased Shares, in a series of thirty-six (36)
successive equal monthly installments upon Participant's completion of each
additional month of Service over the thirty-six (36)-month period measured
from the date on which the first twenty-five percent (25%) of the Purchased
Shares vests hereunder.
All Purchased Shares as to which the Repurchase Right lapses shall,
however, remain subject to (i) the First Refusal Right and (ii) the Market
Stand-Off.
4. Recapitalization. Any new, substituted or additional securities
----------------
or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right and any
escrow requirements hereunder, but only to the extent the Purchased Shares are
at the time covered by such right or escrow requirements. Appropriate
adjustments to reflect such distribution shall be made to the number and/or
class of Purchased Shares subject to this Agreement and to the price per share
to be paid upon the exercise of the Repurchase Right in order to reflect the
effect of any such Recapitalization upon the Corporation's capital structure;
provided, however, that the aggregate purchase price shall remain the same.
- --------
<PAGE>
5. Corporate Transaction.
---------------------
(a) The Repurchase Right shall automatically terminate in its
entirety, and all the Purchased Shares shall vest in full, immediately prior to
the consummation of any Corporate Transaction, except to the extent the
Repurchase Right is to be assigned to the successor entity in such Corporate
Transaction.
(b) To the extent the Repurchase Right remains in effect following a
Corporate Transaction, such right shall apply to any new securities or other
property (including any cash payments) received in exchange for the Purchased
Shares in consummation of the Corporate Transaction, but only to the extent the
Purchased Shares are at the time covered by such right. Appropriate adjustments
shall be made to the price per share payable upon exercise of the Repurchase
Right to reflect the effect of the Corporate Transaction upon the Corporation's
capital structure; provided, however, that the aggregate purchase price shall
--------
remain the same. The new securities or other property (including any cash
payments) issued or distributed with respect to the Purchased Shares in
consummation of the Corporate Transaction shall be immediately deposited in
escrow with the Corporation (or the successor entity) and shall not be released
from escrow until Participant vests in such securities or other property in
accordance with the same Vesting Schedule in effect for the Purchased Shares.
(c) The Repurchase Right may also terminate on an accelerated basis,
and the Purchased Shares shall immediately vest in full, in accordance with the
terms and conditions of any special addendum attached to this Agreement.
E. RIGHT OF FIRST REFUSAL
----------------------
1. Grant. The Corporation is hereby granted the right of first
-----
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which Participant has vested in accordance
with the provisions of Article D. For purposes of this Article E, the term
"transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition of the Purchased Shares intended to be made by Owner, but shall not
include any Permitted Transfer.
2. Notice of Intended Disposition. In the event any Owner of
------------------------------
Purchased Shares in which Participant has vested desires to accept a bona fide
third-party offer for the transfer of any or all of such shares (the Purchased
Shares subject to such offer to be hereinafter referred to as the "Target
Shares"), Owner shall promptly (i) deliver to the Corporation written notice
(the "Disposition Notice") of the terms of the offer, including the purchase
price and the identity of the third-party offeror, and (ii) provide satisfactory
proof that the disposition of the Target Shares to such third-party offeror
would not be in contravention of the provisions set forth in Articles B and C.
3. Exercise of the First Refusal Right. The Corporation shall, for
-----------------------------------
a period of twenty-five (25) days following receipt of the Disposition Notice,
have the right to repurchase any or all of the Target Shares subject to the
Disposition Notice upon the same terms as those
<PAGE>
specified therein or upon such other terms (not materially different from those
specified in the Disposition Notice) to which Owner consents. Such right shall
be exercisable by delivery of written notice (the "Exercise Notice") to Owner
prior to the expiration of the twenty-five (25)-day exercise period. If such
right is exercised with respect to all the Target Shares, then the Corporation
shall effect the repurchase of such shares, including payment of the purchase
price, not more than five (5) business days after delivery of the Exercise
Notice; and at such time the certificates representing the Target Shares shall
be delivered to the Corporation.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation shall have the right to pay the purchase price in the form of cash
equal in amount to the value of such property. If Owner and the Corporation
cannot agree on such cash value within ten (10) days after the Corporation's
receipt of the Disposition Notice, the valuation shall be made by an appraiser
of recognized standing selected by Owner and the Corporation or, if they cannot
agree on an appraiser within twenty (20) days after the Corporation's receipt of
the Disposition Notice, each shall select an appraiser of recognized standing
and the two (2) appraisers shall designate a third appraiser of recognized
standing, whose appraisal shall be determinative of such value. The cost of
such appraisal shall be shared equally by Owner and the Corporation. The
closing shall then be held on the later of (i) the fifth (5th) business day
-----
following delivery of the Exercise Notice or (ii) the fifth (5th) business day
after such valuation shall have been made.
4. Non-Exercise of the First Refusal Right. In the event the
---------------------------------------
Exercise Notice is not given to Owner prior to the expiration of the twenty-five
(25)-day exercise period, Owner shall have a period of thirty (30) days
thereafter in which to sell or otherwise dispose of the Target Shares to the
third-party offeror identified in the Disposition Notice upon terms (including
the purchase price) no more favorable to such third-party offeror than those
specified in the Disposition Notice; provided, however, that any such sale or
--------
disposition must not be effected in contravention of the provisions of Articles
B and C. The third-party offeror shall acquire the Target Shares subject to the
First Refusal Right, the provisions of Article B and Paragraph C.3. In the
event Owner does not effect such sale or disposition of the Target Shares within
the specified thirty (30)-day period, the First Refusal Right shall continue to
be applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses.
5. Partial Exercise of the First Refusal Right. In the event the
-------------------------------------------
Corporation makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within five (5) business days after Owner's receipt of the Exercise
Notice, to effect the sale of the Target Shares pursuant to either of the
following alternatives:
(i) sale or other disposition of all the Target Shares to the
third-party offeror identified in the Disposition Notice, but in full compliance
with the requirements of Paragraph E.4, as if the Corporation did not exercise
the First Refusal Right; or
<PAGE>
(ii) sale to the Corporation of the portion of the Target Shares
which the Corporation has elected to purchase, such sale to be effected in
substantial conformity with the provisions of Paragraph E.3. The First Refusal
Right shall continue to be applicable to any subsequent disposition of the
remaining Target Shares until such right lapses.
Owner's failure to deliver timely notification to the Corporation
shall be deemed to be an election by Owner to sell the Target Shares pursuant to
alternative (i) above.
6. Recapitalization/Reorganization.
-------------------------------
(a) Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be immediately subject to the First Refusal Right,
but only to the extent the Purchased Shares are at the time covered by such
right.
(b) In the event of a Reorganization, the First Refusal Right
shall remain in full force and effect and shall apply to the new capital stock
or other property received in exchange for the Purchased Shares in consummation
of the Reorganization, but only to the extent the Purchased Shares are at the
time covered by such right.
7. Lapse. The First Refusal Right shall lapse upon the earliest to
----- --------
occur of (i) the first date on which shares of the Common Stock are held of
record by more than five hundred (500) persons, (ii) a determination made by the
Board that a public market exists for the outstanding shares of Common Stock or
(iii) a firm commitment underwritten public offering, pursuant to an effective
registration statement under the 1933 Act, covering the offer and sale of the
Common Stock in the aggregate amount of at least ten million dollars
($10,000,000). However, the Market Stand-Off shall continue to remain in full
force and effect following the lapse of the First Refusal Right.
F. SPECIAL TAX ELECTION
--------------------
1. Section 83(b) Election. Under Code Section 83, the excess of
----------------------
the Fair Market Value of the Purchased Shares on the date any forfeiture
restrictions applicable to such shares lapse over the Purchase Price paid for
such shares will be reportable as ordinary income on the lapse date. For this
purpose, the term "forfeiture restrictions" includes the right of the
Corporation to repurchase the Purchased Shares pursuant to the Repurchase Right.
Participant may elect under Code Section 83(b) to be taxed at the time the
Purchased Shares are acquired, rather than when and as such Purchased Shares
cease to be subject to such forfeiture restrictions. Such election must be
filed with the Internal Revenue Service within thirty (30) days after the date
this Agreement. Even if the Fair Market Value of the Purchased Shares on the
date of
<PAGE>
this Agreement equals the Purchase Price paid (and thus no tax is payable), the
election must be made to avoid adverse tax consequences in the future. THE FORM
FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT II HERETO. PARTICIPANT
UNDERSTANDS THAT FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30)-
DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE FORFEITURE
RESTRICTIONS LAPSE.
2. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT IS
---------------------
PARTICIPANT'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY
ELECTION UNDER CODE SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE CORPORATION
OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
G. GENERAL PROVISIONS
------------------
1. Assignment. The Corporation may assign the Repurchase Right
----------
and/or the First Refusal Right to any person or entity selected by the Board,
including (without limitation) one or more stockholders of the Corporation.
2. No Employment or Service Contract. Nothing in this Agreement or
---------------------------------
in the Plan shall confer upon Participant any right to continue in Service for
any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Participant) or of Participant, which rights are hereby expressly
reserved by each, to terminate Participant's Service at any time for any reason,
with or without cause.
3. Notices. Any notice required to be given under this Agreement
-------
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
4. No Waiver. The failure of the Corporation in any instance to
---------
exercise the Repurchase Right or the First Refusal Right shall not constitute a
waiver of any other repurchase rights and/or rights of first refusal that may
subsequently arise under the provisions of this Agreement or any other agreement
between the Corporation and Participant. No waiver of any breach or condition
of this Agreement shall be deemed to be a waiver of any other or subsequent
breach or condition, whether of like or different nature.
5. Cancellation of Shares. If the Corporation shall make available,
----------------------
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
<PAGE>
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
H. MISCELLANEOUS PROVISIONS
------------------------
1. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of California without resort
to that State's conflict-of-laws rules.
2. Participant Undertaking. Participant hereby agrees to take
-----------------------
whatever additional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either Participant or the
Purchased Shares pursuant to the provisions of this Agreement.
3. Agreement is Entire Contract. This Agreement constitutes the
----------------------------
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the terms of the Plan.
4. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
5. Successors and Assigns. The provisions of this Agreement shall
----------------------
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon Participant, Participant's assigns and the legal
representatives, heirs and legatees of Participant's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
RELEASE SOFTWARE CORPORATION
By: _______________________________
Title: _______________________________
Address: _______________________________
_______________________________
_______________________________
PARTICIPANT
Address: _______________________________
_______________________________
<PAGE>
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of Participant has read and hereby approves the
foregoing Stock Issuance Agreement. In consideration of the Corporation's
granting Participant the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms of such Agreement, including (without
limitation) the right of the Corporation (or its assigns) to purchase any
Purchased Shares in which Participant is not vested at the time of his or her
cessation of Service.
______________________________
PARTICIPANT'S SPOUSE
Address: ______________________________
______________________________
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ____________ hereby sell(s), assign(s) and
transfer(s) unto Release Software Corporation (the "Corporation"),
______________ (_____) shares of the Common Stock of the Corporation standing in
his or her name on the books of the Corporation represented by Certificate No.
_______________ herewith and do(es) hereby irrevocably constitute and appoint
_________________ Attorney to transfer the said stock on the books of the
Corporation with full power of substitution in the premises.
Dated: ___________
Signature __________________________
Instruction: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Participant.
<PAGE>
EXHIBIT II
SECTION 83(b) TAX ELECTION
<PAGE>
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
______________ shares of the common stock of Release Software Corporation.
(3) The property was issued on __________________, 199___.
(4) The taxable year in which the election is being made is the calendar year
1998.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's service with the issuer terminates. The issuer's
repurchase right lapses in a series of annual and monthly installments over
a four (4)-year period ending on ________________, 200___.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $_____ per share.
(7) The amount paid for such property is $__ per share.
(8) A copy of this statement was furnished to Release Software Corporation for
whom taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on _______________, 199___.
___________________________________ _________________________________________
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Issuance Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Participant must retain two (2) copies of the completed form for filing with his
or her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
<PAGE>
EXHIBIT III
1998 STOCK OPTION/STOCK ISSUANCE PLAN
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Issuance Agreement.
---------
B. Board shall mean the Corporation's Board of Directors.
-----
C. Code shall mean the Internal Revenue Code of 1986, as amended.
----
D. Common Stock shall mean the Corporation's common stock.
------------
E. Corporate Transaction shall mean either of the following stockholder-
---------------------
approved transactions:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different from the
persons holding those securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of the
Corporation.
F. Corporation shall mean Release Software Corporation, a Delaware
-----------
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of Release Software Corporation which shall by
appropriate action adopt the Plan.
G. Disposition Notice shall have the meaning assigned to such term in
------------------
Paragraph E.2.
H. Exercise Notice shall have the meaning assigned to such term in
---------------
Paragraph E.3.
I. Fair Market Value of a share of Common Stock on any relevant date,
-----------------
prior to the initial public offering of the Common Stock, shall be determined by
the Plan Administrator after taking into account such factors as it shall deem
appropriate.
J. First Refusal Right shall mean the right granted to the Corporation in
-------------------
accordance with Article E.
K. Market Stand-Off shall mean the market stand-off restriction specified
----------------
in Paragraph C.3.
<PAGE>
L. 1933 Act shall mean the Securities Act of 1933, as amended.
--------
M. Owner shall mean Participant and all subsequent holders of the
-----
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Participant.
N. Parent shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
O. Participant shall mean the person to whom shares are issued under the
-----------
Stock Issuance Program.
P. Permitted Transfer shall mean (i) a gratuitous transfer of the
------------------
Purchased Shares, provided and only if Participant obtains the Corporation's
--------------------
prior written consent to such transfer, (ii) a transfer of title to the
Purchased Shares effected pursuant to Participant's will or the laws of
intestate succession following Participant's death or (iii) a transfer to the
Corporation in pledge as security for any purchase-money indebtedness incurred
by Participant in connection with the acquisition of the Purchased Shares.
Q. Plan shall mean the Corporation's 1998 Stock Option/Stock Issuance
----
Plan attached hereto as Exhibit III.
R. Plan Administrator shall mean either the Board or a committee of the
------------------
Board acting in its capacity as administrator of the Plan.
S. Purchase Price shall have the meaning assigned to such term in
--------------
Paragraph A.1.
T. Purchased Shares shall have the meaning assigned to such term in
----------------
Paragraph A.1.
U. Recapitalization shall mean any stock split, stock dividend,
----------------
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
V. Reorganization shall mean any of the following transactions:
--------------
(i) a merger or consolidation in which the Corporation is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or substantially all
of the Corporation's assets,
<PAGE>
(iii) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities are
transferred in whole or in part to a person or persons different from the
persons holding those securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the state in which
the Corporation is incorporated or to create a holding company structure.
W. Repurchase Right shall mean the right granted to the Corporation in
----------------
accordance with Article D.
X. SEC shall mean the Securities and Exchange Commission.
---
Y. Service shall mean the Participant's performance of services for the
-------
Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors or an independent consultant.
Z. Stock Issuance Program shall mean the Stock Issuance Program under the
----------------------
Plan.
AA. Subsidiary shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
AB. Target Shares shall have the meaning assigned to such term in
-------------
Paragraph E.2.
AC. Vesting Schedule shall mean the vesting schedule specified in
----------------
Paragraph D.3 pursuant to which Participant is to vest in the Purchased Shares
in a series of installments over the Participant's period of Service.
AD. Unvested Shares shall have the meaning assigned to such term in
---------------
Paragraph D.1.
<PAGE>
RELEASENOW.COM CORPORATION
NOTICE OF GRANT OF STOCK OPTION
-------------------------------
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of ReleaseNow.com Corporation (the
"Corporation"):
Optionee: (Optionee)
--------
Grant Date: (Grant_Date)
----------
Vesting Commencement Date: (Vest_Comm_Date)
-------------------------
Exercise Price: $ (Exercise_Price) per share
--------------
Number of Option Shares: (No_of_Option_Shares) shares of Common Stock
-----------------------
Expiration Date: (Expiration_Date)
---------------
Type of Option: Incentive Stock Option
--------------
Exercise Schedule: The Option shall become exercisable with respect
-----------------
to twenty-five percent (25%) of the Option Shares upon Optionee's
completion of one (1) year of Service measured from the Vesting
Commencement Date and shall become exercisable for the balance of the
Option Shares in a series of thirty-six (36) successive equal monthly
installments upon Optionee's completion of each additional month of
Service over the thirty-six (36)-month period measured from the first
anniversary of the Vesting Commencement Date. In no event shall the
Option become exercisable for any additional Option Shares after
Optionee's cessation of Service.
Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the ReleaseNow.com Corporation 1998 Stock
Option/Stock Issuance Plan (the "Plan"). Optionee further agrees to be bound
by the terms of the Plan and the terms of the Option as set forth in the Stock
Option Agreement attached hereto as Exhibit A.
Optionee understands that any Option Shares purchased under the Option
will be subject to the terms set forth in the Stock Purchase Agreement attached
hereto as Exhibit B. Optionee hereby acknowledges receipt of a copy of the Plan
in the form attached hereto as Exhibit C.
RIGHTS OF FIRST REFUSAL. OPTIONEE HEREBY AGREES THAT ALL OPTION
-----------------------
SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN
RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS. THE
TERMS OF SUCH RIGHTS ARE SPECIFIED IN THE ATTACHED STOCK PURCHASE AGREEMENT.
<PAGE>
At Will Employment. Nothing in this Notice or in the attached Stock
------------------
Option Agreement or Plan shall confer upon Optionee any right to continue in
Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining Optionee) or of Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Service at any time for any
reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have the
-----------
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
DATED: __________________, 199__
RELEASENOW.COM CORPORATION
By: ___________________________________
Title: ________________________________
_______________________________________
(Sig_Name), OPTIONEE
Address: ______________________________
_______________________________________
Attachments:
- -----------
Exhibit A - Stock Option Agreement
Exhibit B - Stock Purchase Agreement
Exhibit C - 1998 Stock Option/Stock Issuance Plan
2.
<PAGE>
EXHIBIT A
---------
STOCK OPTION AGREEMENT
----------------------
<PAGE>
EXHIBIT B
---------
STOCK PURCHASE AGREEMENT
------------------------
<PAGE>
EXHIBIT C
---------
1998 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
<PAGE>
RELEASENOW.COM CORPORATION
STOCK OPTION AGREEMENT
----------------------
RECITALS
- --------
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or the board
of directors of any Parent or Subsidiary and consultants and other independent
advisors in the service of the Corporation (or any Parent or Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a Parent
or Subsidiary), and this Agreement is executed pursuant to, and is intended to
carry out the purposes of, the Plan in connection with the Corporation's grant
of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning assigned
to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as of the
---------------
Grant Date, an option to purchase up to the number of Option Shares specified in
the Grant Notice. The Option Shares shall be purchasable from time to time
during the option term specified in Paragraph 2 at the Exercise Price.
2. Option Term. This option shall have a term of ten (10) years measured
-----------
from the Grant Date and shall accordingly expire at the close of business on the
Expiration Date, unless sooner terminated in accordance with Paragraph 5 or 6.
3. Limited Transferability. During Optionee's lifetime, this option shall
-----------------------
be exercisable only by Optionee and shall not be assignable or transferable
other than by will or by the laws of descent and distribution following
Optionee's death.
4. Dates of Exercise. This option shall become exercisable for the Option
-----------------
Shares in one or more installments as specified in the Grant Notice. As the
option becomes exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. Cessation of Service. The option term specified in Paragraph 2 shall
--------------------
terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
<PAGE>
(a) Should Optionee cease to remain in Service for any reason (other
than death, Disability or Misconduct) while this option is outstanding, then
Optionee shall have a period of three (3) months (commencing with the date of
such cessation of Service) during which to exercise this option, but in no event
shall this option be exercisable at any time after the Expiration Date.
(b) Should Optionee die while this option is outstanding, then the
personal representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or in accordance with the
laws of inheritance shall have the right to exercise this option. Such right
shall lapse, and this option shall cease to be outstanding, upon the earlier of
-------
(i) the expiration of the twelve (12)-month period measured from the date of
Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Disability while this
option is outstanding, then Optionee shall have a period of twelve (12) months
(commencing with the date of such cessation of Service) during which to exercise
this option. In no event shall this option be exercisable at any time after the
Expiration Date.
Note: Exercise of this option on a date later than three (3) months
----
following cessation of Service due to Disability will result in loss
of favorable Incentive Option treatment, unless such Disability
------
constitutes Permanent Disability. In the event that Incentive Option
treatment is not available, this option will be taxed as a Non-
Statutory Option upon exercise.
(d) During the limited period of post-Service exercisability, this
option may not be exercised in the aggregate for more than the number of Option
Shares for which the option is, at the time of Optionee's cessation of Service,
exercisable pursuant to the Exercise Schedule specified in the Grant Notice or
the special acceleration provisions of Paragraph 6. Upon the expiration of such
limited exercise period or (if earlier) upon the Expiration Date, this option
shall terminate and cease to be outstanding for any Option Shares for which the
option has not been exercised. To the extent this option is not exercisable for
the Option Shares at the time of Optionee's cessation of Service, this option
shall immediately terminate and cease to be outstanding with respect to those
shares.
(e) Should Optionee's Service be terminated for Misconduct, then this
option shall terminate immediately and cease to remain outstanding.
6. Special Acceleration of Option.
------------------------------
(a) This option, to the extent outstanding at the time of a Corporate
Transaction but not otherwise fully exercisable, shall automatically accelerate
so that this option shall, immediately prior to the effective date of the
Corporate Transaction, become exercisable for any or all of those Option Shares
at the time subject to this option as fully-vested shares of Common Stock.
However, this option shall not become exercisable on such an accelerated basis
if and to the extent: (i) this option is assumed by the successor corporation
(or parent thereof) in
<PAGE>
the Corporate Transaction or (ii) this option is to be replaced with a cash
incentive program of the successor corporation which preserves the spread
existing on the Option Shares for which this option is not otherwise at the time
of the Corporate Transaction exercisable (the excess of the Fair Market Value of
those Option Shares over the aggregate Exercise Price payable for such shares)
and provides for subsequent payout in accordance with the same Exercise Schedule
applicable to the option as set forth in the Grant Notice.
(b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
--------
(d) The exercisability of this option may also accelerate in
accordance with the terms and conditions of any special addendum attached to
this Agreement.
(e) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. Adjustment in Option Shares. Should any change be made to the Common
---------------------------
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. Stockholder Rights. The holder of this option shall not have any
------------------
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become the holder of
record of the purchased shares.
9. Manner of Exercising Option.
---------------------------
(a) In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or any other person or persons exercising the option) must take the following
actions:
(i) Execute and deliver to the Corporation a Purchase Agreement
for the Option Shares for which the option is exercised.
<PAGE>
(ii) Pay the aggregate Exercise Price for the purchased shares
in one or more of the following forms:
(A) cash or check made payable to the Corporation; or
(B) a promissory note payable to the Corporation, but only
to the extent authorized by the Plan Administrator in accordance with
Paragraph 14.
Should the Common Stock be registered under Section 12 of the 1934
Act at the time the option is exercised, then the Exercise Price may
also be paid as follows:
(C) in shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date;
or
(D) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable instructions (a) to a
Corporation-designated brokerage firm to effect the immediate sale of
the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover the
aggregate Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes required
to be withheld by the Corporation by reason of such exercise and (b) to
the Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale.
Except to the extent the sale and remittance procedure is utilized
in connection with the option exercise, payment of the Exercise Price
must accompany the Purchase Agreement delivered to the Corporation in
connection with the option exercise.
(iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option (if other than Optionee) have
the right to exercise this option.
(iv) Execute and deliver to the Corporation such written
representations as may be requested by the Corporation in order for it to
comply with the applicable requirements of Federal and state securities
laws.
<PAGE>
(v) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the satisfaction
of all Federal, state and local income and employment tax withholding
requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. RIGHTS OF FIRST REFUSAL. ALL OPTION SHARES ACQUIRED UPON THE EXERCISE
-----------------------
OF THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE CORPORATION AND ITS
ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE
PURCHASE AGREEMENT.
11. Compliance with Laws and Regulations.
------------------------------------
(a) The exercise of this option and the issuance of the Option Shares
upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
12. Successors and Assigns. Except to the extent otherwise provided in
----------------------
Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives, heirs and legatees
of Optionee's estate.
13. Notices. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
<PAGE>
14. Financing. The Plan Administrator may, in its absolute discretion and
---------
without any obligation to do so, permit Optionee to pay the Exercise Price for
the purchased Option Shares by delivering a full-recourse, interest-bearing
promissory note secured by those Option Shares. The payment schedule in effect
for any such promissory note shall be established by the Plan Administrator in
its sole discretion.
15. Construction. This Agreement and the option evidenced hereby are made
------------
and granted pursuant to the Plan and are in all respects limited by and subject
to the terms of the Plan. All decisions of the Plan Administrator with respect
to any question or issue arising under the Plan or this Agreement shall be
conclusive and binding on all persons having an interest in this option.
16. Governing Law. The interpretation, performance and enforcement of
-------------
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
17. Stockholder Approval. If the Option Shares covered by this Agreement
--------------------
exceed, as of the Grant Date, the number of shares of Common Stock which may be
issued under the Plan as last approved by the stockholders, then this option
shall be void with respect to such excess shares, unless stockholder approval of
an amendment sufficiently increasing the number of shares of Common Stock
issuable under the Plan is obtained in accordance with the provisions of the
Plan.
18. Additional Terms Applicable to an Incentive Option. In the event this
--------------------------------------------------
option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
(a) This option shall cease to qualify for favorable tax treatment as
an Incentive Option if (and to the extent) this option is exercised for one or
more Option Shares: (i) more than three (3) months after the date Optionee
ceases to be an Employee for any reason other than death or Permanent Disability
or (ii) more than twelve (12) months after the date Optionee ceases to be an
Employee by reason of Permanent Disability.
(b) No installment under this option shall qualify for favorable tax
treatment as an Incentive Option if the aggregate Fair Market Value (determined
at the Grant Date) of the Common Stock for which such installment first becomes
exercisable hereunder would, when added to the aggregate value (determined as of
the respective date or dates of grant) of the Common Stock and any other
securities for which one or more other Incentive Options granted to Optionee
prior to the Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable during the
same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the
aggregate. Should such One Hundred Thousand Dollar ($100,000) limitation be
exceeded in any calendar year, this option shall nevertheless become exercisable
for the excess shares in such calendar year as a Non-Statutory Option.
<PAGE>
(c) Should the exercisability of this option be accelerated upon a
Corporate Transaction, then this option shall qualify for favorable tax
treatment as an Incentive Option only to the extent the aggregate Fair Market
Value (determined at the Grant Date) of the Common Stock for which this option
first becomes exercisable in the calendar year in which the Corporate
Transaction occurs does not, when added to the aggregate value (determined as of
the respective date or dates of grant) of the Common Stock or other securities
for which this option or one or more other Incentive Options granted to Optionee
prior to the Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable during the
same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the
aggregate. Should the applicable One Hundred Thousand Dollar ($100,000)
limitation be exceeded in the calendar year of such Corporate Transaction, the
option may nevertheless be exercised as a Non-Statutory Option.
(d) Should Optionee hold, in addition to this option, one or more
other options to purchase Common Stock which become exercisable for the first
time in the same calendar year as this option, then the foregoing limitations on
the exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Option Agreement.
---------
B. Board shall mean the Corporation's Board of Directors.
-----
C. Code shall mean the Internal Revenue Code of 1986, as amended.
----
D. Common Stock shall mean the Corporation's common stock.
------------
E. Corporate Transaction shall mean either of the following stockholder-
----------------------
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
F. Corporation shall mean ReleaseNow.com Corporation, a Delaware
-----------
corporation.
G. Disability shall mean the inability of Optionee to engage in any
----------
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute Permanent Disability in
the event that such Disability is expected to result in death or has lasted or
can be expected to last for a continuous period of twelve (12) months or more.
H. Employee shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
I. Exercise Date shall mean the date on which the option shall have been
-------------
exercised in accordance with Paragraph 9 of the Agreement.
J. Exercise Price shall mean the exercise price payable per Option Share
--------------
as specified in the Grant Notice.
<PAGE>
K. Exercise Schedule shall mean the exercise schedule specified in the
-----------------
Grant Notice pursuant to which the option is to become exercisable for the
Option Shares in a series of installments over the Optionee's period of Service.
L. Expiration Date shall mean the date on which the option expires as
---------------
specified in the Grant Notice.
M. Fair Market Value per share of Common Stock on any relevant date shall
-----------------
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
(iii) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on the Nasdaq National Market, then the Fair
Market Value shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem appropriate.
N. Grant Date shall mean the date of grant of the option as specified in
----------
the Grant Notice.
O. Grant Notice shall mean the Notice of Grant of Stock Option
------------
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
P. Incentive Option shall mean an option which satisfies the requirements
----------------
of Code Section 422.
Q. Misconduct shall mean the commission of any act of fraud, embezzlement
----------
or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely affecting
the business or affairs of the Corporation
<PAGE>
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of Optionee or any other individual in the Service of the
Corporation (or any Parent or Subsidiary).
R. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
--------
S. Non-Statutory Option shall mean an option not intended to satisfy the
-------------
requirements of Code Section 422.
T. Option Shares shall mean the number of shares of Common Stock subject
-------------
to the option.
U. Optionee shall mean the person to whom the option is granted as
--------
specified in the Grant Notice.
V. Parent shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
W. Plan shall mean the Corporation's 1998 Stock Option/Stock Issuance
Plan.
X. Plan Administrator shall mean either the Board or a committee of the
------------------
Board acting in its capacity as administrator of the Plan.
Y. Purchase Agreement shall mean the stock purchase agreement in
------------------
substantially the form of Exhibit B to the Grant Notice.
Z. Service shall mean the Optionee's performance of services for the
-------
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-
employee member of the board of directors or an independent consultant.
AA. Stock Exchange shall mean the American Stock Exchange or the New York
--------------
Stock Exchange.
BB. Subsidiary shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
<PAGE>
RELEASENOW.COM CORPORATION
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT made this ________ day of _________ 1999, by and between
ReleaseNow.com Corporation, a Delaware corporation, and, (Optionee) under the
Corporation's 1998 Stock Option/Stock Issuance Plan.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix
A. EXERCISE OF OPTION
------------------
1. Exercise. Optionee hereby purchases ____________ shares of
--------
Common Stock (the "Purchased Shares") pursuant to that certain option (the
"Option") granted Optionee on (Grant Date) (the "Grant Date") to purchase up to
(No_of_Option_Shares) shares of Common Stock (the "Option Shares") under the
Plan at the exercise price of $(Exercise_Price) per share (the "Exercise
Price").
2. Payment. Concurrently with the delivery of this Agreement to
-------
the Corporation, Optionee shall pay the Exercise Price for the Purchased Shares
in accordance with the provisions of the Option Agreement and shall deliver
whatever additional documents may be required by the Option Agreement as a
condition for exercise.
3. Stockholder Rights. Until such time as the Corporation
------------------
exercises the First Refusal Right, Optionee (or any successor in interest) shall
have all the rights of a stockholder (including voting, dividend and liquidation
rights) with respect to the Purchased Shares, subject, however, to the transfer
restrictions of Articles B and C.
B. SECURITIES LAW COMPLIANCE
-------------------------
1. Restricted Securities. The Purchased Shares have not been
---------------------
registered under the 1933 Act and are being issued to Optionee in reliance upon
the exemption from such registration provided by SEC Rule 701 for stock
issuances under compensatory benefit plans such as the Plan. Optionee hereby
confirms that Optionee has been informed that the Purchased Shares are
restricted securities under the 1933 Act and may not be resold or transferred
unless the Purchased Shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Optionee hereby acknowledges that Optionee is prepared to hold the Purchased
Shares for an indefinite period and that Optionee is aware that SEC Rule 144
issued under the 1933 Act which exempts certain resales of unrestricted
securities is not presently available to exempt the resale of the Purchased
Shares from the registration requirements of the 1933 Act.
2. Restrictions on Disposition of Purchased Shares. Optionee
-----------------------------------------------
shall make no disposition of the Purchased Shares (other than a Permitted
Transfer) unless and until there is compliance with all of the following
requirements:
<PAGE>
(i) Optionee shall have provided the Corporation with a
written summary of the terms and conditions of the proposed disposition.
(ii) Optionee shall have complied with all requirements of
this Agreement applicable to the disposition of the Purchased Shares.
(iii) Optionee shall have provided the Corporation with
written assurances, in form and substance satisfactory to the Corporation,
that (a) the proposed disposition does not require registration of the
Purchased Shares under the 1933 Act or (b) all appropriate action necessary
for compliance with the registration requirements of the 1933 Act or any
exemption from registration available under the 1933 Act (including Rule
144) has been taken.
The Corporation shall not be required (i) to transfer on its books any
---
Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement or (ii) to treat as the owner of the Purchased
--
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
3. Restrictive Legends. The stock certificates for the Purchased
-------------------
Shares shall be endorsed with one or more of the following restrictive legends:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement
for the shares under such Act, (b) a "no action" letter of the Securities
and Exchange Commission with respect to such sale or offer or (c)
satisfactory assurances to the Corporation that registration under such Act
is not required with respect to such sale or offer."
"The shares represented by this certificate are subject to
certain rights of first refusal granted to the Corporation and accordingly
may not be sold, assigned, transferred, encumbered, or in any manner
disposed of except in conformity with the terms of a written agreement
dated April 1, 1999 between the Corporation and the registered holder of
the shares (or the predecessor in interest to the shares). A copy of such
agreement is maintained at the Corporation's principal corporate offices."
C. TRANSFER RESTRICTIONS
---------------------
1. Restriction on Transfer. Except for any Permitted Transfer,
-----------------------
Optionee shall not transfer, assign, encumber or otherwise dispose of any of the
Purchased Shares in contravention of the First Refusal Right or the Market
Stand-Off.
<PAGE>
2. Transferee Obligations. Each person (other than the
----------------------
Corporation) to whom the Purchased Shares are transferred by means of a
Permitted Transfer must, as a condition precedent to the validity of such
transfer, acknowledge in writing to the Corporation that such person is bound by
the provisions of this Agreement and that the transferred shares are subject to
(i) the First Refusal Right and (ii) the Market Stand-Off, to the same extent
such shares would be so subject if retained by Optionee.
3. Market Stand-Off.
----------------
(a) In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such restriction (the "Market Stand-Off")
shall be in effect for such period of time from and after the effective date of
the final prospectus for the offering as may be requested by the Corporation or
such underwriters. In no event, however, shall such period exceed one hundred
eighty (180) days and the Market Stand-Off shall in all events terminate two (2)
years after the effective date of the Corporation's initial public offering.
(b) Owner shall be subject to the Market Stand-Off provided
--------
and only if the officers and directors of the Corporation are also subject to
- -----------
similar restrictions.
(c) Any new, substituted or additional securities which are by
reason of any Recapitalization or Reorganization distributed with respect to the
Purchased Shares shall be immediately subject to the Market Stand-Off, to the
same extent the Purchased Shares are at such time covered by such provisions.
(d) In order to enforce the Market Stand-Off, the Corporation
may impose stop-transfer instructions with respect to the Purchased Shares until
the end of the applicable stand-off period.
D. RIGHT OF FIRST REFUSAL
----------------------
1. Grant. The Corporation is hereby granted the right of first
-----
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares. For purposes of this Article D, the term
"transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition of the Purchased Shares intended to be made by Owner, but shall not
include any Permitted Transfer.
<PAGE>
2. Notice of Intended Disposition. In the event any Owner of
------------------------------
Purchased Shares desires to accept a bona fide third-party offer for the
transfer of any or all of such shares (the Purchased Shares subject to such
offer to be hereinafter referred to as the "Target Shares"), Owner shall
promptly (i) deliver to the Corporation written notice (the "Disposition
Notice") of the terms of the offer, including the purchase price and the
identity of the third-party offeror, and (ii) provide satisfactory proof that
the disposition of the Target Shares to such third-party offeror would not be in
contravention of the provisions set forth in Articles B and C.
3. Exercise of the First Refusal Right. The Corporation shall,
-----------------------------------
for a period of twenty-five (25) days following receipt of the Disposition
Notice, have the right to repurchase any or all of the Target Shares subject to
the Disposition Notice upon the same terms as those specified therein or upon
such other terms (not materially different from those specified in the
Disposition Notice) to which Owner consents. Such right shall be exercisable by
delivery of written notice (the "Exercise Notice") to Owner prior to the
expiration of the twenty-five (25)-day exercise period. If such right is
exercised with respect to all the Target Shares, then the Corporation shall
effect the repurchase of such shares, including payment of the purchase price,
not more than five (5) business days after delivery of the Exercise Notice; and
at such time the certificates representing the Target Shares shall be delivered
to the Corporation.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation shall have the right to pay the purchase price in the form of cash
equal in amount to the value of such property. If Owner and the Corporation
cannot agree on such cash value within ten (10) days after the Corporation's
receipt of the Disposition Notice, the valuation shall be made by an appraiser
of recognized standing selected by Owner and the Corporation or, if they cannot
agree on an appraiser within twenty (20) days after the Corporation's receipt of
the Disposition Notice, each shall select an appraiser of recognized standing
and the two (2) appraisers shall designate a third appraiser of recognized
standing, whose appraisal shall be determinative of such value. The cost of
such appraisal shall be shared equally by Owner and the Corporation. The
closing shall then be held on the later of (i) the fifth (5th) business day
-----
following delivery of the Exercise Notice or (ii) the fifth (5th) business day
after such valuation shall have been made.
4. Non-Exercise of the First Refusal Right. In the event the
---------------------------------------
Exercise Notice is not given to Owner prior to the expiration of the twenty-five
(25)-day exercise period, Owner shall have a period of thirty (30) days
thereafter in which to sell or otherwise dispose of the Target Shares to the
third-party offeror identified in the Disposition Notice upon terms (including
the purchase price) no more favorable to such third-party offeror than those
specified in the Disposition Notice; provided, however, that any such sale or
--------
disposition must not be effected in contravention of the provisions of Articles
B and C. The third-party offeror shall acquire the Target Shares subject to the
First Refusal Right, the provisions of Article B and the provisions of Paragraph
C.3. In the event Owner does not effect such sale or disposition of the Target
Shares within the specified thirty (30)-day period, the First Refusal Right
shall continue to be applicable to any subsequent disposition of the Target
Shares by Owner until such right lapses.
<PAGE>
5. Partial Exercise of the First Refusal Right. In the event
-------------------------------------------
the Corporation makes a timely exercise of the First Refusal Right with respect
to a portion, but not all, of the Target Shares specified in the Disposition
Notice, Owner shall have the option, exercisable by written notice to the
Corporation delivered within five (5) business days after Owner's receipt of the
Exercise Notice, to effect the sale of the Target Shares pursuant to either of
the following alternatives:
(i) sale or other disposition of all the Target Shares to
the third-party offeror identified in the Disposition Notice, but in full
compliance with the requirements of Paragraph D.4, as if the Corporation
did not exercise the First Refusal Right; or
(ii) sale to the Corporation of the portion of the Target
Shares which the Corporation has elected to purchase, such sale to be
effected in substantial conformity with the provisions of Paragraph D.3.
The First Refusal Right shall continue to be applicable to any subsequent
disposition of the remaining Target Shares until such right lapses.
Owner's failure to deliver timely notification to the Corporation
shall be deemed to be an election by Owner to sell the Target Shares pursuant to
alternative (i) above.
6. Recapitalization/Reorganization.
-------------------------------
(a) Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be immediately subject to the First Refusal Right,
but only to the extent the Purchased Shares are at the time covered by such
right.
(b) In the event of a Reorganization, the First Refusal Right
shall remain in full force and effect and shall apply to the new capital stock
or other property received in exchange for the Purchased Shares in consummation
of the Reorganization, but only to the extent the Purchased Shares are at the
time covered by such right.
7. Lapse. The First Refusal Right shall lapse upon the earliest
----- --------
to occur of (i) the first date on which shares of the Common Stock are held of
record by more than five hundred (500) persons, (ii) a determination made by the
Board that a public market exists for the outstanding shares of Common Stock or
(iii) a firm commitment underwritten public offering, pursuant to an effective
registration statement under the 1933 Act, covering the offer and sale of the
Common Stock in the aggregate amount of at least ten million dollars
($10,000,000). However, the Market Stand-Off shall continue to remain in full
force and effect following the lapse of the First Refusal Right.
<PAGE>
E. GENERAL PROVISIONS
------------------
1. Assignment. The Corporation may assign the First Refusal
----------
Right to any person or entity selected by the Board, including (without
limitation) one or more stockholders of the Corporation.
2. No Employment or Service Contract. Nothing in this Agreement
---------------------------------
or in the Plan shall confer upon Optionee any right to continue in Service for
any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Optionee) or of Optionee, which rights are hereby expressly reserved
by each, to terminate Optionee's Service at any time for any reason, with or
without cause.
3. Notices. Any notice required to be given under this
-------
Agreement shall be in writing and shall be deemed effective upon personal
delivery or upon deposit in the U.S. mail, registered or certified, postage
prepaid and properly addressed to the party entitled to such notice at the
address indicated below such party's signature line on this Agreement or at such
other address as such party may designate by ten (10) days advance written
notice under this paragraph to all other parties to this Agreement.
4. No Waiver. The failure of the Corporation in any instance
---------
to exercise the First Refusal Right shall not constitute a waiver of any other
repurchase rights and/or rights of first refusal that may subsequently arise
under the provisions of this Agreement or any other agreement between the
Corporation and Optionee. No waiver of any breach or condition of this
Agreement shall be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.
5. Cancellation of Shares. If the Corporation shall make
----------------------
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Purchased Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time,
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such shares shall be
deemed purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
F. MISCELLANEOUS PROVISIONS
------------------------
1. Optionee Undertaking. Optionee hereby agrees to take
--------------------
whatever additional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either Optionee or the
Purchased Shares pursuant to the provisions of this Agreement.
<PAGE>
2. Agreement is Entire Contract. This Agreement constitutes the
----------------------------
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the terms of the Plan.
3. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of California without resort
to that State's conflict-of-laws rules.
4. Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5. Successors and Assigns. The provisions of this Agreement
----------------------
shall inure to the benefit of, and be binding upon, the Corporation and its
successors and assigns and upon Optionee, Optionee's permitted assigns and the
legal representatives, heirs and legatees of Optionee's estate, whether or not
any such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
RELEASENOW.COM CORPORATION
By: _____________________________
Title: _____________________________
Address:_____________________________
_____________________________
_____________________________
(Sig Name), OPTIONEE
Address:_____________________________
_____________________________
<PAGE>
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting Optionee the right to acquire the Purchased Shares in accordance with
the terms of such Agreement, the undersigned hereby agrees to be irrevocably
bound by all the terms of such Agreement, including (without limitation) the
first refusal rights granted to the Corporation (or its assigns) with respect to
the Purchased Shares.
______________________________
OPTIONEE'S SPOUSE
Address:______________________________
______________________________
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Purchase Agreement.
---------
B. Board shall mean the Corporation's Board of Directors.
-----
C. Code shall mean the Internal Revenue Code of 1986, as amended.
----
D. Common Stock shall mean the Corporation's common stock.
------------
E. Corporate Transaction shall mean either of the following stockholder-
---------------------
approved transactions:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. Corporation shall mean ReleaseNow.com Corporation, a Delaware
-----------
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of ReleaseNow.com Corporation which shall by appropriate
action adopt the Plan.
G. Disposition Notice shall have the meaning assigned to such term in
------------------
Paragraph D.2.
H. Exercise Notice shall have the meaning assigned to such term in
---------------
Paragraph D.3.
I. Exercise Price shall have the meaning assigned to such term in
--------------
Paragraph A.1.
J. Fair Market Value of a share of Common Stock on any relevant date,
-----------------
prior to the initial public offering of the Common Stock, shall be determined by
the Plan Administrator after taking into account such factors as it shall deem
appropriate.
K. First Refusal Right shall mean the right granted to the Corporation in
-------------------
accordance with Article D.
L. Grant Date shall have the meaning assigned to such term in Paragraph
----------
A.1.
<PAGE>
M. Grant Notice shall mean the Notice of Grant of Stock Option pursuant
------------
to which Optionee has been informed of the basic terms of the Option.
N. Incentive Option shall mean an option which satisfies the requirements
----------------
of Code Section 422.
O. Market Stand-Off shall mean the market stand-off restriction specified
----------------
in Paragraph C.3.
P. 1933 Act shall mean the Securities Act of 1933, as amended.
--------
Q. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
--------
R. Non-Statutory Option shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.
S. Option shall have the meaning assigned to such term in Paragraph A.1.
------
T. Option Agreement shall mean all agreements and other documents
----------------
evidencing the Option.
U. Optionee shall mean the person to whom the Option is granted under the
--------
Plan.
V. Owner shall mean Optionee and all subsequent holders of the Purchased
-----
Shares who derive their chain of ownership through a Permitted Transfer from
Optionee.
W. Parent shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
X. Permitted Transfer shall mean (i) a gratuitous transfer of the
------------------
Purchased Shares, provided and only if Optionee obtains the Corporation's prior
written consent to such transfer, (ii) a transfer of title to the Purchased
Shares effected pursuant to Optionee's will or the laws of intestate succession
following Optionee's death or (iii) a transfer to the Corporation in pledge as
security for any purchase-money indebtedness incurred by Optionee in connection
with the acquisition of the Purchased Shares.
Y. Plan shall mean the Corporation's 1998 Stock Option/Stock Issuance
----
Plan.
Z. Plan Administrator shall mean either the Board or a committee of the
------------------
Board acting in its capacity as administrator of the Plan.
AA. Purchased Shares shall have the meaning assigned to such term in
----------------
Paragraph A.1.
<PAGE>
AB. Recapitalization shall mean any stock split, stock dividend,
----------------
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
AC. Reorganization shall mean any of the following transactions:
--------------
(i) a merger or consolidation in which the Corporation is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or substantially
all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities are
transferred in whole or in part to a person or persons different from the
persons holding those securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the state in
which the Corporation is incorporated or to create a holding company
structure.
AD. SEC shall mean the Securities and Exchange Commission.
---
AE. Service shall mean the Optionee's performance of services for the
-------
Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors or an independent consultant.
AF. Subsidiary shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
AG. Target Shares shall have the meaning assigned to such term in
-------------
Paragraph D.2.
<PAGE>
EXHIBIT 10.4
RELEASENOW.COM CORPORATION
2000 STOCK INCENTIVE PLAN
-------------------------
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSE OF THE PLAN
This 2000 Stock Incentive Plan is intended to promote the interests of
ReleaseNow.Com Corporation, a Delaware corporation, by providing eligible
persons in the Corporation's service with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in such service.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into five separate equity incentives
programs:
the Discretionary Option Grant Program under which eligible persons may, at the
discretion of the Plan Administrator, be granted options to purchase shares of
Common Stock,
- the Salary Investment Option Grant Program under which
eligible employees may elect to have a portion of their base salary invested
each year in special option grants,
- the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary),
- the Automatic Option Grant Program under which eligible non-
employee Board members shall automatically receive option grants at designated
intervals over their period of continued Board service, and
- the Director Fee Option Grant Program under which non-
employee Board members may elect to have all or any portion of their annual
retainer fee otherwise payable in cash applied to a special stock option grant.
B. The provisions of Articles One and Seven shall apply to all
equity programs under the Plan and shall govern the interests of all persons
under the Plan.
<PAGE>
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. Administration of the Discretionary Option Grant
and Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board's discretion, be vested in the
Primary Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. However, any
discretionary option grants or stock issuances for members of the Primary
Committee must be authorized by a disinterested majority of the Board.
B. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions
of any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of those programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any stock option or stock issuance thereunder.
D. The Primary Committee shall have the sole and exclusive authority
to determine which Section 16 Insiders and other highly compensated Employees
shall be eligible for participation in the Salary Investment Option Grant
Program for one or more calendar years. However, all option grants under the
Salary Investment Option Grant Program shall be made in accordance with the
express terms of that program, and the Primary Committee shall not exercise any
discretionary functions with respect to the option grants made under that
program.
E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
F. Administration of the Automatic Option Grant and Director Fee
Option Grant Programs shall be self-executing in accordance with the terms of
those programs, and no Plan Administrator shall exercise any discretionary
functions with respect to any option grants or stock issuances made under those
programs.
2.
<PAGE>
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or
Subsidiary).
B. Only Employees who are Section 16 Insiders or other highly
compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.
C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive such grants, the time or times
when those grants are to be made, the number of shares to be covered by each
such grant, the status of the granted option as either an Incentive Option or a
Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive such issuances, the time or times when the issuances are
to be made, the number of shares to be issued to each Participant, the vesting
schedule (if any) applicable to the issued shares and the consideration for such
shares.
D. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
E. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals who
first become non-employee Board members on or after the Underwriting Date,
whether through appointment by the Board or election by the Corporation's
stockholders, and (ii) those individuals who continue to serve as non-employee
Board members at one or more Annual Stockholders Meetings held after the
Underwriting Date. A non-employee Board member who has previously been in the
employ of the Corporation (or any Parent or Subsidiary) shall not be eligible to
receive an option grant under the Automatic Option Grant Program at the time he
or she first becomes a non-employee Board member, but shall be eligible to
receive periodic option grants under the Automatic Option Grant Program while he
or she continues to serve as a non-employee Board member.
F. All non-employee Board members shall be eligible to participate
in the Director Fee Option Grant Program.
3.
<PAGE>
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The number of shares of Common Stock initially
reserved for issuance over the term of the Plan shall not exceed 7,500,000
shares. Such reserve shall consist of (i) the number of shares estimated to
remain available for issuance, as of the Plan Effective Date, under the
Predecessor Plans as last approved by the Corporation's stockholders, including
the shares subject to outstanding options under that Predecessor Plan, (ii) plus
an additional increase of approximately shares to be approved by
the Corporation's stockholders prior to the Underwriting Date.
B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of January each
calendar year during the term of the Plan, beginning with calendar year 2001, by
an amount equal to four percent (4%) of the total number of shares of Common
Stock outstanding on the last trading day in December of the immediately
preceding calendar year, but in no event shall any such annual increase exceed
3,000,000 shares.
C. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 1,000,000 shares of Common Stock in the aggregate per calendar year.
D. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plan) shall be
available for subsequent issuance under the Plan to the extent (i) those options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-regrant provisions of Article
Two. Unvested shares issued under the Plan and subsequently cancelled or
repurchased by the Corporation at the original issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan. However,
should the exercise price of an option under the Plan be paid with shares of
Common Stock or should shares of Common Stock otherwise issuable under the Plan
be withheld by the Corporation in satisfaction of the withholding taxes incurred
in connection with the exercise of an option or the vesting of a stock issuance
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised or which vest under the stock issuance, and not by the net
number of shares of Common Stock issued to the holder of such option or stock
issuance. Shares of Common Stock underlying one or more stock appreciation
rights exercised under Section IV of Article Two, Section III of Article Three,
Section II of Article Five or Section III of Article Six of the Plan shall not
be available for subsequent issuance under the Plan.
4.
<PAGE>
E. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made by the Plan Administrator to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum number and/or class of
securities for which any one person may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances under the Plan
per calendar year, (iii) the number and/or class of securities for which grants
are subsequently to be made under the Automatic Option Grant Program to new and
continuing non-employee Board members, (iv) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option under the Plan, (v) the number and/or class of securities and price per
share in effect under each outstanding option incorporated into this Plan from
the Predecessor Plan and (vi) the maximum number and/or class of securities by
which the share reserve is to increase automatically each calendar year pursuant
to the provisions of Section V.B of this Article One. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
5.
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
--------
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
--------------
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Seven and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value
on the Exercise Date, or
(iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant
to which the Optionee shall concurrently provide irrevocable
instructions to (a) a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise
price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to
be withheld by the Corporation by reason of such exercise and (b)
the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the
sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Exercise and Term of Options. Each option shall be exercisable
----------------------------
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no option shall have a term in excess of ten
(10) years measured from the option grant date.
6.
<PAGE>
C. Effect of Termination of Service.
--------------------------------
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan Administrator
and set forth in the documents evidencing the option, but no such option
shall be exercisable after the expiration of the option term.
(ii) Any option held by the Optionee at the time of death and
exercisable in whole or in part at that time may be subsequently exercised
by the personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's will
or the laws of inheritance or by the Optionee's designated beneficiary or
beneficiaries of that option.
(iii) Should the Optionee's Service be terminated for Misconduct
or should the Optionee otherwise engage in Misconduct while holding one or
more outstanding options under this Article Two, then all those options
shall terminate immediately and cease to be outstanding.
(iv) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares
for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease
to be outstanding to the extent the option is not otherwise at that time
exercisable for vested shares.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service from the limited
exercise period otherwise in effect for that option to such greater period
of time as the Plan Administrator shall deem appropriate, but in no event
beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of vested
shares of Common Stock for which such option is exercisable at the time of
the Optionee's cessation of Service but also with respect to one or more
additional
7.
<PAGE>
installments in which the Optionee would have vested had the
Optionee continued in Service.
D. Stockholder Rights. The holder of an option shall have no
------------------
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the
-----------------
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, any or all of those unvested shares. The terms upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Plan Administrator and set forth in the document evidencing
such repurchase right.
F. Limited Transferability of Options. During the lifetime of the
----------------------------------
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or the laws of inheritance
following the Optionee's death. However, a Non-Statutory Option may be assigned
in whole or in part during the Optionee's lifetime to one or more members of the
Optionee's family or to a trust established exclusively for one or more such
family members or to Optionee's former spouse, to the extent such assignment is
in connection with the Optionee's estate plan or pursuant to a domestic
relations order. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate. Notwithstanding the foregoing, the Optionee may also
designate one or more persons as the beneficiary or beneficiaries of his or her
outstanding options under this Article Two, and those options shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding those
options. Such beneficiary or beneficiaries shall take the transferred options
subject to all the terms and conditions of the applicable agreement evidencing
each such transferred option, including (without limitation) the limited time
period during which the option may be exercised following the Optionee's death.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Seven shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall not be subject to the terms of this Section II.
---
A. Eligibility. Incentive Options may only be granted to Employees.
-----------
B. Dollar Limitation. The aggregate Fair Market Value of the shares
-----------------
of Common Stock (determined as of the respective date or dates of grant) for
which one or more
8.
<PAGE>
options granted to any Employee under the Plan (or any other option plan of the
Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee
holds two (2) or more such options which become exercisable for the first time
in the same calendar year, the foregoing limitation on the exercisability of
such options as Incentive Options shall be applied on the basis of the order in
which such options are granted.
C. 10% Stockholder. If any Employee to whom an Incentive Option is
---------------
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
exercisable for all the shares of Common Stock at the time subject to such
option and may be exercised for any or all of those shares as fully vested
shares of Common Stock. However, an outstanding option shall not become
exercisable on such an accelerated basis if and to the extent: (i) such option
is, in connection with the Corporate Transaction, to be assumed by the successor
corporation (or parent thereof) or (ii) such option is to be replaced with a
cash incentive program of the successor corporation which preserves the spread
existing at the time of the Corporate Transaction on any shares for which the
option is not otherwise at that time exercisable and provides for subsequent
payout in accordance with the same exercise/vesting schedule applicable to those
option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
B. All outstanding repurchase rights shall automatically terminate,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
- --------
the same, (ii) the maximum
9.
<PAGE>
number and/or class of securities available for issuance over the remaining term
of the Plan and (iii) the maximum number and/or class of securities for which
any one person may be granted stock options, separately exercisable stock
appreciation rights and direct stock issuances under the Plan per calendar year
and (iv) the maximum number and/or class of securities by which the share
reserve is to increase automatically each calendar year. To the extent the
actual holders of the Corporation's outstanding Common Stock receive cash
consideration for their Common Stock in consummation of the Corporate
Transaction, the successor corporation may, in connection with the assumption of
the outstanding options under this Plan, substitute one or more shares of its
own common stock with a fair market value equivalent to the cash consideration
paid per share of Common Stock in such Corporate Transaction.
E. The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall, immediately prior to the effective date of
such Corporate Transaction, become exercisable for all the shares of Common
Stock at the time subject to those options and may be exercised for any or all
of those shares as fully vested shares of Common Stock, whether or not those
options are to be assumed in the Corporate Transaction. In addition, the Plan
Administrator shall have the discretionary authority to structure one or more of
the Corporation's repurchase rights under the Discretionary Option Grant Program
so that those rights shall not be assignable in connection with such Corporate
Transaction and shall accordingly terminate upon the consummation of such
Corporate Transaction, and the shares subject to those terminated rights shall
thereupon vest in full.
F. The Plan Administrator shall have full power and authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall become exercisable for all the shares of
Common Stock at the time subject to those options in the event the Optionee's
Service is subsequently terminated by reason of an Involuntary Termination
within a designated period (not to exceed eighteen (18) months) following the
effective date of any Corporate Transaction in which those options are assumed
and do not otherwise accelerate. In addition, the Plan Administrator may
structure one or more of the Corporation's repurchase rights so that those
rights shall immediately terminate with respect to any shares held by the
Optionee at the time of his or her Involuntary Termination, and the shares
subject to those terminated repurchase rights shall accordingly vest in full at
that time.
G. The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall, immediately prior to the effective date of
a Change in Control, become exercisable for all the shares of Common Stock at
the time subject to those options and may be exercised for any or all of those
shares as fully vested shares of Common Stock. In addition, the Plan
Administrator shall have the discretionary authority to structure one or more of
the Corporation's repurchase rights under the Discretionary Option Grant Program
so that those rights shall terminate automatically upon the consummation of such
Change in Control, and the shares subject to those terminated rights shall
thereupon vest in full. Alternatively, the Plan Administrator may condition the
automatic acceleration of one or more outstanding options under the
Discretionary Option Grant Program and the termination of one or more of the
10.
<PAGE>
Corporation's outstanding repurchase rights under such program upon the
subsequent termination of the Optionee's Service by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of such Change in Control.
H. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Nonstatutory Option under the Federal tax laws.
I. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may
establish, to elect between the exercise of the underlying option
for shares of Common Stock and the surrender of that option in
exchange for a distribution from the Corporation in an amount
equal to the excess of (a) the Fair Market Value (on the option
surrender date) of the number of shares in which the Optionee is
at the time vested under the surrendered option (or surrendered
portion thereof) over (b) the aggregate exercise price payable
for such shares.
(ii) No such option surrender shall be effective
unless it is approved by the Plan Administrator, either at the
time of the actual option surrender or at any earlier time. If
the surrender is so approved, then the distribution to which the
Optionee shall be entitled may be made in shares of Common Stock
valued at Fair Market Value on the option surrender date, in
cash,
11.
<PAGE>
or partly in shares and partly in cash, as the Plan Administrator
shall in its sole discretion deem appropriate.
(iii) If the surrender of an option is not approved by
the Plan Administrator, then the Optionee shall retain whatever
rights the Optionee had under the surrendered option (or
surrendered portion thereof) on the option surrender date and may
exercise such rights at any time prior to the later of (a) five
-----
(5) business days after the receipt of the rejection notice or
(b) the last day on which the option is otherwise exercisable in
accordance with the terms of the documents evidencing such
option, but in no event may such rights be exercised more than
ten (10) years after the option grant date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be granted
limited stock appreciation rights with respect to their
outstanding options.
(ii) Upon the occurrence of a Hostile Take-Over, each
individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right
(exercisable for a thirty (30)-day period following such Hostile
Take-Over) to surrender each such option to the Corporation. In
return for the surrendered option, the Optionee shall receive a
cash distribution from the Corporation in an amount equal to the
excess of (A) the Take-Over Price of the shares of Common Stock
at the time subject to such option (whether or not the Optionee
is otherwise vested in those shares) over (B) the aggregate
exercise price payable for those shares. Such cash distribution
shall be paid within five (5) days following the option surrender
date.
(iii) At the time such limited stock appreciation right
is granted, the Plan Administrator shall pre-approve any
subsequent exercise of that right in accordance with the terms of
this Paragraph C. Accordingly, no further approval of the Plan
Administrator or the Board shall be required at the time of the
actual option surrender and cash distribution.
12.
<PAGE>
ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
--------------------------------------
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary Investment
Option Grant Program is to be in effect and to select the Section 16 Insiders
and other highly compensated Employees eligible to participate in the Salary
Investment Option Grant Program for such calendar year or years. Each selected
individual who elects to participate in the Salary Investment Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than
Fifty Thousand Dollars ($50,000.00). Each individual who files such a timely
authorization shall automatically be granted an option under the Salary
Investment Grant Program on the first trading day in January of the calendar
year for which the salary reduction is to be in effect.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; provided, however,
--------
that each such document shall comply with the terms specified below.
A. Exercise Price.
--------------
1. The exercise price per share shall be thirty-three and one-
third percent (33-1/3%) of the Fair Market Value per share of Common Stock on
the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Number of Option Shares. The number of shares of Common Stock
-----------------------
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A / (B x 66-2/3%), where
X is the number of option shares,
13.
<PAGE>
A is the dollar amount of the reduction in the
Optionee's base salary for the calendar year to be in effect
pursuant to this program, and
B is the Fair Market Value per share of Common Stock on
the option grant date.
C. Exercise and Term of Options. The option shall become
----------------------------
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Service in the calendar
year for which the salary reduction is in effect. Each option shall have a
maximum term of ten (10) years measured from the option grant date.
D. Effect of Termination of Service. Should the Optionee cease
--------------------------------
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the earlier of (i) the expiration of the ten (10)-year option
-------
term or (ii) the expiration of the three (3)-year period measured from the date
of such cessation of Service. Should the Optionee die while holding one or more
options under this Article Three, then each such option may be exercised, for
any or all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Service (less any shares subsequently purchased by
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or the laws of inheritance or by the designated beneficiary
or beneficiaries of the option. Such right of exercise shall lapse, and the
option shall terminate, upon the earlier of (i) the expiration of the ten (10)-
-------
year option term or (ii) the three (3)-year period measured from the date of the
Optionee's cessation of Service. However, the option shall, immediately upon
the Optionee's cessation of Service for any reason, terminate and cease to
remain outstanding with respect to any and all shares of Common Stock for which
the option is not otherwise at that time exercisable.
III. CORPORATE TRANSACTION/ CHANGE IN CONTROL/ HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become exercisable for all the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. Each such outstanding option shall
terminate immediately following the Corporate Transaction, except to the extent
assumed by the successor corporation (or parent thereof) in such Corporate
Transaction. Any option so assumed and shall remain exercisable for the fully-
vested shares until the earlier of (i) the expiration of the ten (10)-year
-------
option term or (ii) the expiration of the three (3)-year period measured from
the date of the Optionee's cessation of Service.
B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall, immediately prior to the
14.
<PAGE>
effective date of the Change in Control become exercisable for all the shares of
Common Stock at the time subject to such option and may be exercised for any or
all of those shares as fully-vested shares of Common Stock. The option shall
remain so exercisable until the earliest to occur of (i) the expiration of the
--------
ten (10)-year option term, (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation of Service, (iii) the
termination of the option in connection with a Corporate Transaction or (iv) the
surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
outstanding option granted him or her under the Salary Investment Option Grant
Program. The Optionee shall in return be entitled to a cash distribution from
the Corporation in an amount equal to the excess of (i) the Take-Over Price of
the shares of Common Stock at the time subject to the surrendered option
(whether or not the option is otherwise at the time exercisable for those
shares) over (ii) the aggregate exercise price payable for such shares. Such
cash distribution shall be paid within five (5) days following the surrender of
the option to the Corporation. The Primary Committee shall, at the time the
option with such limited stock appreciation right is granted under the Salary
Investment Option Grant Program, pre-approve any subsequent exercise of that
right in accordance with the terms of this Paragraph C. Accordingly, no further
approval of the Primary Committee or the Board shall be required at the time of
the actual option surrender and cash distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
--------
payable for such securities shall remain the same.
To the extent the actual holders of the Corporation's outstanding
Common Stock receive cash consideration for their Common Stock in consummation
of the Corporate Transaction, the successor corporation may, in connection with
the assumption of the outstanding options under this Plan, substitute one or
more shares of its own common stock with a fair market value equivalent to the
cash consideration paid per share of Common Stock in such Corporate Transaction.
E. The grant of options under the Salary Investment Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
15.
<PAGE>
IV. REMAINING TERMS
The remaining terms of each option granted under the Salary Investment
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
16.
<PAGE>
ARTICLE FOUR
STOCK ISSUANCE PROGRAM
----------------------
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below. Shares of Common Stock may also be
issued under the Stock Issuance Program pursuant to share right awards which
entitle the recipients to receive those shares upon the attainment of designated
performance goals.
A. Purchase Price.
--------------
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article Seven,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any Parent or
Subsidiary).
B. Vesting Provisions.
------------------
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program shall be
determined by the Plan Administrator and incorporated into the Stock Issuance
Agreement. Shares of Common Stock may also be issued under the Stock Issuance
Program pursuant to share right awards which entitle the recipients to receive
those shares upon the attainment of designated performance goals.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
17.
<PAGE>
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock which
would otherwise occur upon the cessation of the Participant's Service or the
non-attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.
6. Outstanding share right awards under the Stock Issuance
Program shall automatically terminate, and no shares of Common Stock shall
actually be issued in satisfaction of those awards, if the performance goals
established for such awards are not attained. The Plan Administrator, however,
shall have the discretionary authority to issue shares of Common Stock under one
or more outstanding share right awards as to which the designated performance
goals have not been attained.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights under the
Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Corporate Transaction, except to the extent (i) those
repurchase rights are to be assigned to the successor corporation (or parent
thereof) in connection with such Corporate Transaction or (ii) such accelerated
vesting is precluded by other limitations imposed in the Stock Issuance
Agreement.
18.
<PAGE>
B. The Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the Stock
Issuance Program so that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those repurchase rights are assigned to the
successor corporation (or parent thereof).
C. The Plan Administrator shall also have the discretionary
authority to structure one or more of the Corporation's repurchase rights under
the Stock Issuance Program so that those rights shall automatically terminate in
whole or in part, and the shares of Common Stock subject to those terminated
rights shall immediately vest, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
19.
<PAGE>
ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
I. OPTION TERMS
A. Grant Dates. Option grants shall be made on the dates specified
-----------
below:
1. Each individual who is first elected or appointed as a non-
employee Board member at any time on or after the Underwriting Date shall
automatically be granted, on the date of such initial election or appointment, a
Non-Statutory Option to purchase 15,000 shares of Common Stock, provided that
individual has not previously been in the employ of the Corporation or any
Parent or Subsidiary.
2. On the date of each Annual Stockholders Meeting held after
the Underwriting Date, each individual who is to continue to serve as an
Eligible Director, whether or not that individual is standing for re-election to
the Board at that particular Annual Meeting, shall automatically be granted a
Non-Statutory Option to purchase 5,000 shares of Common Stock, provided such
individual has served as a non-employee Board member for at least six (6)
months. There shall be no limit on the number of such 5,000 share option grants
any one Eligible Director may receive over his or her period of Board service,
and non-employee Board members who have previously been in the employ of the
Corporation (or any Parent or Subsidiary) or who have otherwise received one or
more stock option grants from the Corporation prior to the Underwriting Date
shall be eligible to receive one or more such annual option grants over their
period of continued Board service.
B. Exercise Price.
--------------
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. Option Term. Each option shall have a term of ten (10) years
-----------
measured from the option grant date.
D. Exercise and Vesting of Options. Each option shall be
-------------------------------
immediately exercisable for any or all of the option shares. However, any
unvested shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's cessation
of Board service prior to vesting in those shares. The shares subject to each
initial 15,000-share grant shall vest, and the Corporation's repurchase right
shall lapse, in a series of three (3) successive equal semi-annual installments
upon the Optionee's
20.
<PAGE>
completion of each twelve (12)-month period of service as a Board member over
the thirty six (36)-month period measured from the option grant date. The shares
subject to each annual 5,000 share option grant shall vest, and the
Corporation's repurchase right shall lapse in one (1) annual installment upon
the Optionee's completion of twelve (12)-month of service as a Board member over
the twelve (12)-month period measured from the option grant date.
E. Limited Transferability of Options. Each option under this
----------------------------------
Article Five may be assigned in whole or in part during the Optionee's lifetime
to one or more members of the Optionee's family or to a trust established
exclusively for one or more such family members or to Optionee's former spouse,
to the extent such assignment is in connection with the Optionee's estate plan
or pursuant to a domestic relations order. The assigned portion may only be
exercised by the person or persons who acquire a proprietary interest in the
option pursuant to the assignment. The terms applicable to the assigned portion
shall be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate. The Optionee may also designate
one or more persons as the beneficiary or beneficiaries of his or her
outstanding options under this Article Five, and those options shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding those
options. Such beneficiary or beneficiaries shall take the transferred options
subject to all the terms and conditions of the applicable agreement evidencing
each such transferred option, including (without limitation) the limited time
period during which the option may be exercised following the Optionee's death.
F. Termination of Board Service. The following provisions shall
----------------------------
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's
death, the personal representative of the Optionee's estate or
the person or persons to whom the option is transferred pursuant
to the Optionee's will or the laws of inheritance or the
designated beneficiary or beneficiaries of such option) shall
have a twelve (12)-month period following the date of such
cessation of Board service in which to exercise each such option.
(ii) During the twelve (12)-month exercise period, the
option may not be exercised in the aggregate for more than the
number of vested shares of Common Stock for which the option is
exercisable at the time of the Optionee's cessation of Board
service.
(iii) Should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all
shares at the time subject to the option shall immediately vest
so that such option may, during the twelve (12)-month exercise
period following such cessation of Board service, be exercised
for all or any portion of those shares as fully-vested shares of
Common Stock.
(iv) In no event shall the option remain exercisable
after the expiration of the option term. Upon the expiration of
the twelve (12)-month exercise period or (if earlier) upon the
expiration of the option term, the option
21.
<PAGE>
shall terminate and cease to be outstanding for any vested shares
for which the option has not been exercised. However, the option
shall, immediately upon the Optionee's cessation of Board service
for any reason other than death or Permanent Disability,
terminate and cease to be outstanding to the extent the option is
not otherwise at that time exercisable for vested shares.
II. CORPORATE TRANSACTION/ CHANGE IN CONTROL/ HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Corporate Transaction, become exercisable for
all shares of Common Stock and may be exercised for any or all of those vested
shares. Immediately following the consummation of the Corporate Transaction,
each automatic option grant shall terminate and cease to be outstanding, except
to the extent assumed by the successor corporation (or parent thereof).
B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Change in Control, become exercisable for all
shares of Common Stock and may be exercised for any or all of those vested
shares. Each such option shall remain exercisable for such fully-vested option
shares until the expiration or sooner termination of the option term or the
surrender of the option in connection with a Hostile Take-Over.
C. All outstanding repurchase rights shall automatically terminate,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction or Change in
Control.
D. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each of
his or her outstanding automatic option grants. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation. No approval or
consent of the Board or any Plan Administrator shall be required at the time of
the actual option surrender and cash distribution.
E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
--------
payable for such securities shall remain the same.
22.
<PAGE>
To the extent the actual holders of the Corporation's outstanding
Common Stock receive cash consideration for their Common Stock in consummation
of the Corporate Transaction, the successor corporation may, in connection with
the assumption of the outstanding options under this Plan, substitute one or
more shares of its own common stock with a fair market value equivalent to the
cash consideration paid per share of Common Stock in such Corporate Transaction.
F. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
23.
<PAGE>
ARTICLE SIX
DIRECTOR FEE OPTION GRANT PROGRAM
---------------------------------
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years for which the Director Fee Option Grant
Program is to be in effect. For each such calendar year the program is in
effect, each non-employee Board member may irrevocably elect to apply all or any
portion of the annual retainer fee otherwise payable in cash for his or her
service on the Board for that year to the acquisition of a special option grant
under this Director Fee Option Grant Program. Such election must be filed with
the Corporation's Chief Financial Officer prior to the first day of the calendar
year for which the annual retainer fee which is the subject of that election is
otherwise payable. Each non-employee Board member who files such a timely
election shall automatically be granted an option under this Director Fee Option
Grant Program on the first trading day in January in the calendar year for which
the annual retainer fee which is the subject of that election would otherwise be
payable in cash.
II. OPTION TERMS
Each option shall be a Non-Statutory Option governed by the terms and
conditions specified below.
A. Exercise Price.
--------------
1. The exercise price per share shall be thirty-three and one-
third percent (33-1/3%) of the Fair Market Value per share of Common Stock on
the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Number of Option Shares. The number of shares of Common Stock
-----------------------
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A / (B x 66-2/3%), where
X is the number of option shares,
A is the portion of the annual retainer fee subject to the non-
employee Board member's election, and
24.
<PAGE>
B is the Fair Market Value per share of Common Stock on the
option grant date.
C. Exercise and Term of Options. The option shall become
----------------------------
exercisable in a series of twelve (12) equal monthly installments upon the
Optionee's completion of each month of Board service over the twelve (12)-month
period measured from the grant date. Each option shall have a maximum term of
ten (10) years measured from the option grant date.
D. Limited Transferability of Options. Each option under this
----------------------------------
Article Six may be assigned in whole or in part during the Optionee's lifetime
to one or more members of the Optionee's family or to a trust established
exclusively for one or more such family members or to Optionee's former spouse,
to the extent such assignment is in connection with the Optionee's estate plan
or pursuant to a domestic relations order. The assigned portion may only be
exercised by the person or persons who acquire a proprietary interest in the
option pursuant to the assignment. The terms applicable to the assigned portion
shall be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate. The Optionee may also designate
one or more persons as the beneficiary or beneficiaries of his or her
outstanding options under this Article Six, and those options shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding those
options. Such beneficiary or beneficiaries shall take the transferred options
subject to all the terms and conditions of the applicable agreement evidencing
each such transferred option, including (without limitation) the limited time
period during which the option may be exercised following the Optionee's death.
E. Termination of Board Service. Should the Optionee cease Board
----------------------------
service for any reason (other than death or Permanent Disability) while holding
one or more options under this Director Fee Option Grant Program, then each such
option shall remain exercisable, for any or all of the shares for which the
option is exercisable at the time of such cessation of Board service, until the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the
- -------
expiration of the three (3)-year period measured from the date of such cessation
of Board service. However, each option held by the Optionee under this Director
Fee Option Grant Program at the time of his or her cessation of Board service
shall immediately terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at that
time exercisable.
F. Death or Permanent Disability. Should the Optionee's service as
-----------------------------
a Board member cease by reason of death or Permanent Disability, then each
option held by such Optionee under this Director Fee Option Grant Program shall
immediately become exercisable for all the shares of Common Stock at the time
subject to that option, and the option may be exercised for any or all of those
shares as fully-vested shares until the earlier of (i) the expiration of the ten
-------
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of such cessation of Board service. In the event of the
Optionee's death while holding such option, the option may be exercised by the
personal representative of the Optionee's estate
25.
<PAGE>
or by the person or persons to whom the option is transferred pursuant to the
Optionee's will or the laws of inheritance or by the designated beneficiary or
beneficiaries of such option.
Should the Optionee die after cessation of Board service but
while holding one or more options under this Director Fee Option Grant Program,
then each such option may be exercised, for any or all of the shares for which
the option is exercisable at the time of the Optionee's cessation of Board
service (less any shares subsequently purchased by Optionee prior to death), by
the personal representative of the Optionee's estate or by the person or persons
to whom the option is transferred pursuant to the Optionee's will or the laws of
inheritance or by the designated beneficiary or beneficiaries of such option.
Such right of exercise shall lapse, and the option shall terminate, upon the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the three
- -------
(3)-year period measured from the date of the Optionee's cessation of Board
service.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction while the Optionee
remains a Board member, each outstanding option held by such Optionee under this
Director Fee Option Grant Program shall automatically accelerate so that each
such option shall, immediately prior to the effective date of the Corporate
Transaction, become exercisable for all the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. Each such outstanding option shall
terminate immediately following the Corporate Transaction, except to the extent
assumed by the successor corporation (or parent thereof) in such Corporate
Transaction. Any option so assumed and shall remain exercisable for the fully-
vested shares until the earlier of (i) the expiration of the ten (10)-year
-------
option term or (ii) the expiration of the three (3)-year period measured from
the date of the Optionee's cessation of Board service.
B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Director Fee
Option Grant Program shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Change in Control become
exercisable for all the shares of Common Stock at the time subject to such
option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. The option shall remain so exercisable until the
earliest to occur of (i) the expiration of the ten (10)-year option term, (ii)
- --------
the expiration of the three (3)-year period measured from the date of the
Optionee's cessation of Board service, (iii) the termination of the option in
connection with a Corporate Transaction or (iv) the surrender of the option in
connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
outstanding option granted him or her under the Director Fee Option Grant
Program. The Optionee shall in return be entitled to a cash distribution from
the Corporation in an amount equal to the excess of (i) the Take-Over Price of
the shares of Common Stock at the time subject to each surrendered option
(whether or not the option is otherwise at the time exercisable for those
shares) over (ii) the
26.
<PAGE>
aggregate exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the surrender of the option to the
Corporation. No approval or consent of the Board or any Plan Administrator shall
be required at the time of the actual option surrender and cash distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same. To the extent the actual
holders of the Corporation's outstanding Common Stock receive cash consideration
for their Common Stock in consummation of the Corporate Transaction, the
successor corporation may, in connection with the assumption of the outstanding
options under this Plan, substitute one or more shares of its own common stock
with a fair market value equivalent to the cash consideration paid per share of
Common Stock in such Corporate Transaction.
E. The grant of options under the Director Fee Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
IV. REMAINING TERMS
The remaining terms of each option granted under this Director Fee
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
27.
<PAGE>
ARTICLE SEVEN
MISCELLANEOUS
-------------
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares (less the par value of
such shares) plus (ii) any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or the issuance or vesting of such shares under the
Plan shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant or Director Fee Option Grant Program) with the right to use shares
of Common Stock in satisfaction of all or part of the Withholding Taxes to which
such holders may become subject in connection with the exercise of their options
or the vesting of their shares. Such right may be provided to any such holder
in either or both of the following formats:
Stock Withholding: The election to have the Corporation withhold,
-----------------
from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Withholding
Taxes (not to exceed one hundred percent (100%) designated by the holder.
Stock Delivery: The election to deliver to the Corporation, at the
--------------
time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Withholding
Taxes) with an aggregate Fair Market Value equal to the percentage of the
Withholding Taxes (not to exceed one hundred percent (100%) designated by the
holder.
28.
<PAGE>
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately on the Plan Effective
Date. However, the Salary Investment Option Grant Program and the Director Fee
Option Grant Program shall not be implemented until such time as the Primary
Committee may deem appropriate. Options may be granted under the Discretionary
Option Grant at any time on or after the Plan Effective Date, and the initial
option grants under the Automatic Option Grant Program shall also be made on the
Plan Effective Date to any non-employee Board members eligible for such grants
at that time. However, no options granted under the Plan may be exercised, and
no shares shall be issued under the Plan, until the Plan is approved by the
Corporation's stockholders. If such stockholder approval is not obtained within
twelve (12) months after the Plan Effective Date, then all options previously
granted under this Plan shall terminate and cease to be outstanding, and no
further options shall be granted and no shares shall be issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants or direct stock issuances shall be made under the
Predecessor Plan after the Plan Effective Date. All options outstanding under
the Predecessor Plan on the Plan Effective Date shall be incorporated into the
Plan at that time and shall be treated as outstanding options under the Plan.
However, each outstanding option so incorporated shall continue to be governed
solely by the terms of the documents evidencing such option, and no provision of
the Plan shall be deemed to affect or otherwise modify the rights or obligations
of the holders of such incorporated options with respect to their acquisition of
shares of Common Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.
D. The Plan shall terminate upon the earliest to occur of (i)
--------
, 2010, (ii) the date on which all shares available for issuance
under the Plan shall have been issued as fully-vested shares or (iii) the
termination of all outstanding options in connection with a Corporate
Transaction. Should the Plan terminate on , 2010, then all option
grants and unvested stock issuances outstanding at that time shall continue to
have force and effect in accordance with the provisions of the documents
evidencing such grants or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect the rights and obligations with respect
to stock options or unvested stock issuances at the time outstanding under the
Plan unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.
29.
<PAGE>
B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant and Salary Investment Option Grant Programs and
shares of Common Stock may be issued under the Stock Issuance Program that are
in each instance in excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued under those programs
shall be held in escrow until there is obtained stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such stockholder approval is not obtained
within twelve (12) months after the date the first such excess issuances are
made, then (i) any unexercised options granted on the basis of such excess
shares shall terminate and cease to be outstanding and (ii) the Corporation
shall promptly refund to the Optionees and the Participants the exercise or
purchase price paid for any excess shares issued under the Plan and held in
escrow, together with interest (at the applicable Short Term Federal Rate) for
the period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any granted option or (ii) under the Stock Issuance Program shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
30.
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. Automatic Option Grant Program shall mean the automatic option
------------------------------
grant program in effect under Article Five of the Plan.
B. Board shall mean the Corporation's Board of Directors.
-----
C. Change in Control shall mean a change in ownership or control of
-----------------
the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any
person or related group of persons (other than the Corporation or
a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation), of beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the
Corporation's stockholders, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously
since the beginning of such period or (B) have been elected or
nominated for election as Board members during such period by at
least a majority of the Board members described in clause (A) who
were still in office at the time the Board approved such election
or nomination.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
----
E. Common Stock shall mean the Corporation's common stock.
------------
F. Corporate Transaction shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons
holding those securities immediately prior to such transaction,
or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
<PAGE>
G. Corporation shall mean ReleaseNow.Com Corporation, a Delaware
-----------
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of ReleaseNow.Com Corporation which shall by appropriate
action adopt the Plan.
H. Director Fee Option Grant Program shall mean the special stock
---------------------------------
option grant in effect for non-employee Board members under Article Six of the
Plan.
I. Discretionary Option Grant Program shall mean the discretionary
----------------------------------
option grant program in effect under Article Two of the Plan.
J. Eligible Director shall mean a non-employee Board member eligible
-----------------
to participate in the Automatic Option Grant Program or the Director Fee Option
Grant Program in accordance with the eligibility provisions of Articles One,
Five and Six.
K. Employee shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
L. Exercise Date shall mean the date on which the Corporation shall
-------------
have received written notice of the option exercise.
M. Fair Market Value per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in
question, as such price is reported by the National Association
of Securities Dealers on the Nasdaq National Market. If there is
no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question
on the Stock Exchange determined by the Plan Administrator to be
the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common
Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which
such quotation exists.
(iii) For purposes of any option grants made on the
Underwriting Date, the Fair Market Value shall be deemed to be
equal to the price per share at which the Common Stock is to be
sold in the initial public offering pursuant to the Underwriting
Agreement.
<PAGE>
N. Hostile Take-Over shall mean the acquisition, directly or
-----------------
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
O. Incentive Option shall mean an option which satisfies the
----------------
requirements of Code Section 422.
P. Involuntary Termination shall mean the termination of the Service
-----------------------
of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct,
or
(ii) such individual's voluntary resignation following
(A) a change in his or her position with the Corporation which
materially reduces his or her duties and responsibilities or the
level of management to which he or she reports, (B) a reduction
in his or her level of compensation (including base salary,
fringe benefits and percentage target bonus under any corporate-
performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of such individual's
place of employment by more than fifty (50) miles, provided and
only if such change, reduction or relocation is effected by the
Corporation without the individual's consent.
Q. Misconduct shall mean the commission of any act of fraud,
----------
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
R. 1934 Act shall mean the Securities Exchange Act of 1934, as
--------
amended.
S. Non-Statutory Option shall mean an option not intended to satisfy
--------------------
the requirements of Code Section 422.
T. Optionee shall mean any person to whom an option is granted under
--------
the Discretionary Option Grant, Salary Investment Option Grant, Automatic Option
Grant or Director Fee Option Grant Program.
<PAGE>
U. Parent shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. Participant shall mean any person who is issued shares of Common
-----------
Stock under the Stock Issuance Program.
W. Permanent Disability or Permanently Disabled shall mean the
--------------------------------------------
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
and Director Fee Option Grant Programs, Permanent Disability or Permanently
Disabled shall mean the inability of the non-employee Board member to perform
his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.
X. Plan shall mean the Corporation's 2000 Stock Incentive Plan, as
----
set forth in this document.
Y. Plan Administrator shall mean the particular entity, whether the
------------------
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
Z. Plan Effective Date shall mean the date the Plan shall become
-------------------
effective and shall be coincident with the Underwriting Date.
AA. Predecessor Plans shall mean the Corporation's 1996 Stock Plan
-----------------
and 1998 Stock Option/Issuance Plan in effect immediately prior to the Plan
Effective Date hereunder.
BB. Primary Committee shall mean the committee of two (2) or more
-----------------
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders and to administer the Salary Investment Option Grant Program solely
with respect to the selection of the eligible individuals who may participate in
such program.
CC. Salary Investment Option Grant Program shall mean the salary
--------------------------------------
investment option grant program in effect under Article Three of the Plan.
<PAGE>
DD. Secondary Committee shall mean a committee of one or more Board
-------------------
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
EE. Section 16 Insider shall mean an officer or director of the
------------------
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
FF. Service shall mean the performance of services for the
-------
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant or stock issuance.
GG. Stock Exchange shall mean either the American Stock Exchange or
--------------
the New York Stock Exchange.
HH. Stock Issuance Agreement shall mean the agreement entered into by
------------------------
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
II. Stock Issuance Program shall mean the stock issuance program in
----------------------
effect under Article Four of the Plan.
JJ. Subsidiary shall mean any corporation (other than the
----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
KK. Take-Over Price shall mean the greater of (i) the Fair Market
--------------- -------
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
LL. 10% Stockholder shall mean the owner of stock (as determined
---------------
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
MM. Underwriting Agreement shall mean the agreement between the
----------------------
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
NN. Underwriting Date shall mean the date on which the Underwriting
-----------------
Agreement is executed and priced in connection with an initial public offering
of the Common Stock.
<PAGE>
OO. Withholding Taxes shall mean the Federal, state and local income
-----------------
and employment withholding taxes to which the holder of Non-Statutory Options or
unvested shares of Common Stock may become subject in connection with the
exercise of those options or the vesting of those shares.
<PAGE>
RELEASENOW.COM CORPORATION
NOTICE OF GRANT OF STOCK OPTION
-------------------------------
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of ReleaseNow.com Corporation (the
"Corporation"):
Optionee:____________________________________________________________
--------
Grant Date:__________________________________________________________
----------
Vesting Commencement Date:___________________________________________
-------------------------
Exercise Price: $ __________________________________________ per share
--------------
Number of Option Shares:_______________________________________ shares
-----------------------
Expiration Date:_____________________________________________________
---------------
Type of Option: __________ Incentive Stock Option
--------------
__________ Non-Statutory Stock Option
Exercise Schedule: The Option shall become exercisable for twenty-
-----------------
five percent (25%) of the Option Shares upon Optionee's completion of
one (1) year of Service measured from the Vesting Commencement Date
and shall become exercisable for the balance of the Option Shares in a
series of thirty-six (36) successive equal monthly installments upon
Optionee's completion of each additional month of Service over the
thirty-six (36) month period measured from the first anniversary of
the Vesting Commencement Date. In no event shall the Option become
exercisable for any additional Option Shares after Optionee's
cessation of Service.
Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the ReleaseNow.com Corporation 2000 Stock
Incentive Plan (the "Plan"). Optionee further agrees to be bound by the terms
of the Plan and the terms of the Option as set forth in the Stock Option
Agreement attached hereto as Exhibit A. Optionee hereby acknowledges the
---------
receipt of a copy of the official prospectus for the Plan in the form attached
hereto as Exhibit B. A copy of the Plan is available upon request made to the
---------
Corporate Secretary at the Corporation's principal offices.
<PAGE>
Employment at Will. Nothing in this Notice or in the attached Stock
------------------
Option Agreement or in the Plan shall confer upon Optionee any right to continue
in Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining Optionee) or of Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Service at any time for any
reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have the
-----------
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
DATED:___________________________
RELEASENOW.COM CORPORATION
By:___________________________________________
Title:________________________________________
______________________________________________
OPTIONEE
Address:______________________________________
______________________________________________
ATTACHMENTS
- -----------
Exhibit A - Stock Option Agreement
Exhibit B - Plan Summary and Prospectus
<PAGE>
EXHIBIT A
---------
STOCK OPTION AGREEMENT
----------------------
<PAGE>
EXHIBIT B
---------
PLAN SUMMARY AND PROSPECTUS
---------------------------
<PAGE>
RELEASENOW.COM CORPORATION
STOCK OPTION AGREEMENT
----------------------
RECITALS
- --------
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board (or the board
of directors of any Parent or Subsidiary) and consultants and other independent
advisors who provide services to the Corporation (or any Parent or Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as
---------------
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. Option Term. This option shall have a maximum term of ten (10)
-----------
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. Limited Transferability.
-----------------------
(a) This option shall be neither transferable nor
assignable by Optionee other than by will or the laws of inheritance following
Optionee's death and may be exercised, during Optionee's lifetime, only by
Optionee. However, Optionee may designate one or more persons as the beneficiary
or beneficiaries of this option, and this option shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee's death while holding this option. Such beneficiary or
beneficiaries shall take the transferred option subject to all the terms and
conditions of this Agreement, including (without limitation) the limited time
period during which this option may, pursuant to Paragraph 5, be exercised
following Optionee's death.
(b) If this option is designated a Non-Statutory Option in
the Grant Notice, then this option may be assigned in whole or in part during
Optionee's lifetime to one or more members of Optionee's family or to a trust
established for the exclusive benefit of one or more such family members or to
Optionee's former spouse, to the extent such
<PAGE>
assignment is in connection with the Optionee's estate plan or pursuant to a
domestic relations order. The assigned portion shall be exercisable only by the
person or persons who acquire a proprietary interest in the option pursuant to
such assignment. The terms applicable to the assigned portion shall be the same
as those in effect for this option immediately prior to such assignment.
4. Dates of Exercise. This option shall become exercisable for the
-----------------
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. Cessation of Service. The option term specified in Paragraph 2
--------------------
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(a) Should Optionee cease to remain in Service for any reason
(other than death, Permanent Disability or Misconduct) while holding this
option, then Optionee shall have a period of three (3) months (commencing with
the date of such cessation of Service) during which to exercise this option, but
in no event shall this option be exercisable at any time after the Expiration
Date.
(b) Should Optionee die while holding this option, then the
personal representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or the laws of inheritance
shall have the right to exercise this option. However, if Optionee has
designated one or more beneficiaries of this option, then those persons shall
have the exclusive right to exercise this option following Optionee's death. Any
such right to exercise this option shall lapse, and this option shall cease to
be outstanding, upon the earlier of (i) the expiration of the twelve (12)-month
-------
period measured from the date of Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Permanent
Disability while holding this option, then Optionee shall have a period of
twelve (12) months (commencing with the date of such cessation of Service)
during which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service exercisability,
this option may not be exercised in the aggregate for more than the number of
Option Shares for which the option is exercisable at the time of Optionee's
cessation of Service. Upon the expiration of such limited exercise period or (if
earlier) upon the Expiration Date, this option shall terminate and cease to be
outstanding for any exercisable Option Shares for which the option has not been
exercised. However, this option shall, immediately upon Optionee's cessation of
Service for any reason, terminate and cease to be outstanding with respect to
any Option Shares for which this option is not otherwise at that time
exercisable.
<PAGE>
(e) Should Optionee's Service be terminated for Misconduct or
should Optionee otherwise engage in any Misconduct while this option is
outstanding, then this option shall terminate immediately and cease to remain
outstanding.
6. Special Acceleration of Option.
------------------------------
(a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
such Corporate Transaction, become exercisable for all of the Option Shares at
the time subject to this option and may be exercised for any or all of those
Option Shares as fully vested shares of Common Stock. No such acceleration of
this option shall occur, however, if and to the extent: (i) this option is, in
connection with the Corporate Transaction, to be assumed by the successor
corporation (or parent thereof) or (ii) this option is to be replaced with a
cash incentive program of the successor corporation which preserves the spread
existing at the time of the Corporate Transaction on any Option Shares for which
this option is not otherwise at that time exercisable (the excess of the Fair
Market Value of those Option Shares over the aggregate Exercise Price payable
for such shares) and provides for subsequent payout in accordance with the same
option exercise/vesting schedule for those Option Shares set forth in the Grant
Notice.
(b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same. To the
--------
extent the actual holders of the Corporation's outstanding Common Stock receive
cash consideration for their Common Stock in consummation of the Corporate
Transaction, the successor corporation may, in connection with the assumption of
this option, substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock
in such Corporate Transaction.
(d) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. Adjustment in Option Shares. Should any change be made to the
---------------------------
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class
<PAGE>
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the total number and/or class of securities subject to this
option and (ii) the Exercise Price in order to reflect such change and thereby
preclude a dilution or enlargement of benefits hereunder.
8. Stockholder Rights. The holder of this option shall not have any
------------------
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. Manner of Exercising Option.
---------------------------
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(A) cash or check made payable to the Corporation;
(B) a promissory note payable to the Corporation, but
only to the extent authorized by the Plan Administrator in accordance
with Paragraph 13;
(C) shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or
(D) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable instructions (i) to
a Corporation-designated brokerage firm to effect the immediate sale
of the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover
the aggregate Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise
and (ii) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete
the sale.
<PAGE>
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise delivered to the
Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee)
have the right to exercise this option.
(iv) Make appropriate arrangements with the Corporation
(or Parent or Subsidiary employing or retaining Optionee) for the
satisfaction of all Federal, state and local income and employment tax
withholding requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. Compliance with Laws and Regulations.
------------------------------------
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
11. Successors and Assigns. Except to the extent otherwise provided
----------------------
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns, the legal representatives, heirs and legatees
of Optionee's estate and any beneficiaries of this option designated by
Optionee.
12. Notices. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
<PAGE>
13. Financing. The Plan Administrator may, in its absolute
---------
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the terms
of repayment) shall be established by the Plan Administrator in its sole
discretion.
14. Construction. This Agreement and the option evidenced hereby are
------------
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
15. Governing Law. The interpretation, performance and enforcement
-------------
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
16. Excess Shares. If the Option Shares covered by this Agreement
-------------
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall be
void with respect to those excess shares, unless stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.
17. Additional Terms Applicable to an Incentive Option. In the event
--------------------------------------------------
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
(a) This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is exercised
for one or more Option Shares: (A) more than three (3) months after the date
Optionee ceases to be an Employee for any reason other than death or Permanent
Disability or (B) more than twelve (12) months after the date Optionee ceases to
be an Employee by reason of Permanent Disability.
(b) No installment under this option shall qualify for favorable
tax treatment as an Incentive Option if (and to the extent) the aggregate Fair
Market Value (determined at the Grant Date) of the Common Stock for which such
installment first becomes exercisable hereunder would, when added to the
aggregate value (determined as of the respective date or dates of grant) of the
Common Stock or other securities for which this option or any other Incentive
Options granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Corporation or any Parent or Subsidiary) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate. Should such One Hundred Thousand Dollar
($100,000) limitation be exceeded in any calendar year, this option shall
nevertheless become exercisable for the excess shares in such calendar year as a
Non-Statutory Option.
<PAGE>
(c) Should the exercisability of this option be accelerated upon
a Corporate Transaction, then this option shall qualify for favorable tax
treatment as an Incentive Option only to the extent the aggregate Fair Market
Value (determined at the Grant Date) of the Common Stock for which this option
first becomes exercisable in the calendar year in which the Corporate
Transaction occurs does not, when added to the aggregate value (determined as of
the respective date or dates of grant) of the Common Stock or other securities
for which this option or one or more other Incentive Options granted to Optionee
prior to the Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable during the
same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the
aggregate. Should the applicable One Hundred Thousand Dollar ($100,000)
limitation be exceeded in the calendar year of such Corporate Transaction, the
option may nevertheless be exercised for the excess shares in such calendar year
as a Non-Statutory Option.
(d) Should Optionee hold, in addition to this option, one or
more other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify ReleaseNow.com Corporation (the "Corporation") that I
elect to purchase ______________ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $____________ per share (the
"Exercise Price") pursuant to that certain option (the "Option") granted to me
under the Corporation's 2000 Stock Incentive Plan on ______________________,
_______.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.
_____________________, ________
Date
________________________________
Optionee
Address:________________________
________________________________
Print name in exact manner it is
to appear on the stock certificate: ________________________________
Address to which certificate is to
be sent, if different from address
above: ________________________________
________________________________
Social Security Number: ________________________________
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Option Agreement.
---------
B. Board shall mean the Corporation's Board of Directors.
-----
C. Common Stock shall mean shares of the Corporation's common stock.
------------
D. Code shall mean the Internal Revenue Code of 1986, as amended.
----
E. Corporation Transaction shall mean either of the following
-----------------------
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. Corporation shall mean ReleaseNow.com Corporation, a Delaware
-----------
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of ReleaseNow.com Corporation which shall by appropriate
action adopt the Plan.
G. Employee shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. Exercise Date shall mean the date on which the option shall have been
-------------
exercised in accordance with Paragraph 9 of the Agreement.
I. Exercise Price shall mean the exercise price per Option Share as
--------------
specified in the Grant Notice.
J. Expiration Date shall mean the date on which the option expires as
---------------
specified in the Grant Notice.
K. Fair Market Value per share of Common Stock on any relevant date shall
-----------------
be determined in accordance with the following provisions:
<PAGE>
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Common Stock on the date in question, as
the price is reported by the National Association of Securities Dealers on
the Nasdaq National Market. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists, or
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
L. Grant Date shall mean the date of grant of the option as specified in
----------
the Grant Notice.
M. Grant Notice shall mean the Notice of Grant of Stock Option
------------
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
N. Incentive Option shall mean an option which satisfies the requirements
----------------
of Code Section 422.
O. Misconduct shall mean the commission of any act of fraud, embezzlement
----------
or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely affecting
the business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive
of all the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of Optionee or any other
individual in the Service of the Corporation (or any Parent or Subsidiary).
P. Non-Statutory Option shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.
Q. Notice of Exercise shall mean the notice of exercise in the form
------------------
attached hereto as Exhibit I.
R. Option Shares shall mean the number of shares of Common Stock subject
-------------
to the option as specified in the Grant Notice.
<PAGE>
S. Optionee shall mean the person to whom the option is granted as
--------
specified in the Grant Notice.
T. Parent shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. Permanent Disability shall mean the inability of Optionee to engage in
--------------------
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.
V. Plan shall mean the Corporation's 2000 Stock Incentive Plan.
----
W. Plan Administrator shall mean either the Board or a committee of the
------------------
Board acting in its capacity as administrator of the Plan.
X. Service shall mean the Optionee's performance of services for the
-------
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor.
Y. Stock Exchange shall mean the American Stock Exchange or the New York
--------------
Stock Exchange.
Z. Subsidiary shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
<PAGE>
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Option Agreement (the "Option Agreement") by
and between ReleaseNow.com Corporation (the "Corporation") and
__________________________ ("Optionee") evidencing the stock option (the
"Option") granted this day to Optionee under the terms of the Corporation's 2000
Stock Incentive Plan, and such provisions are effective immediately. All
capitalized terms in this Addendum, to the extent not otherwise defined herein,
shall have the meanings assigned to them in the Option Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION/CHANGE IN CONTROL
1. To the extent the Option is, in connection with a Corporate
Transaction, to be assumed in accordance with Paragraph 6 of the Option
Agreement, the Option shall not accelerate upon the occurrence of that Corporate
Transaction, and the Option shall accordingly continue, over Optionee's period
of Service after the Corporate Transaction, to become exercisable for the Option
Shares in one or more installments in accordance with the provisions of the
Option Agreement. However, immediately upon an Involuntary Termination of
Optionee's Service within eighteen (18) months following such Corporate
Transaction, the assumed Option, to the extent outstanding at the time but not
otherwise fully exercisable, shall automatically accelerate so that the Option
shall become immediately exercisable for all the Option Shares at the time
subject to the Option and may be exercised for any or all of those Option Shares
as fully vested shares.
2. The Option shall not accelerate upon the occurrence of a Change
in Control, and the Option shall, over Optionee's period of Service following
such Change in Control, continue to become exercisable for the Option Shares in
one or more installments in accordance with the provisions of the Option
Agreement. However, immediately upon an Involuntary Termination of Optionee's
Service within eighteen (18) months following the Change in Control, the Option,
to the extent outstanding at the time but not otherwise fully exercisable, shall
automatically accelerate so that the Option shall become immediately exercisable
for all the Option Shares at the time subject to the Option and may be exercised
for any or all of those Option Shares as fully vested shares.
3. The Option as accelerated pursuant to this Addendum shall remain
so exercisable until the earlier of (i) the Expiration Date or (ii) the
-------
expiration of the one (1)-year period measured from the date of the Optionee's
Involuntary Termination.
<PAGE>
4. For purposes of this Addendum the following definitions shall be
in effect:
(i) An Involuntary Termination shall mean the
termination of Optionee's Service by reason of:
(A) Optionee's involuntary dismissal or discharge
by the Corporation for reasons other than Misconduct, or
(B) Optionee's voluntary resignation following (A)
a change in Optionee's position with the Corporation (or Parent or
Subsidiary employing Optionee) which materially reduces Optionee's
duties and responsibilities or the level of management to which
Optionee reports, (B) a reduction in Optionee's level of
compensation (including base salary, fringe benefits and target
bonus under any corporate performance based bonus or incentive
programs) by more than fifteen percent (15%) or (C) a relocation of
Optionee's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is
effected by the Corporation without Optionee's consent.
(ii) A Change in Control shall be deemed to occur in the
event of a change in ownership or control of the Corporation
effected through either of the following transactions:
(A) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or
is under common control with, the Corporation) of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders, or
(B) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (i) have been Board members continuously
since the beginning of such period or (ii) have been elected or
nominated for election as Board members during such period by at
least a majority of the Board members described in clause (i) who
were still in office at the time the Board approved such election
or nomination.
5. The provisions of Paragraph 1 of this Addendum shall govern the
period for which the Option is to remain exercisable following the Involuntary
Termination of Optionee's Service within eighteen (18) months after the
Corporate Transaction or Change in Control and shall supersede any provisions to
the contrary in Paragraph 5 of the Option Agreement.
<PAGE>
IN WITNESS WHEREOF, ReleaseNow.com Corporation has caused this
Addendum to be executed by its duly-authorized officer as of the Effective Date
specified below.
RELEASENOW.COM CORPORATION
By:________________________________
Title:_____________________________
EFFECTIVE DATE: ___________________________
<PAGE>
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Option Agreement (the "Option Agreement") by
and between ReleaseNow.com Corporation (the "Corporation") and
_____________________________ ("Optionee") evidencing the stock option (the
"Option") granted this day to Optionee under the terms of the Corporation's 2000
Stock Incentive Plan, and such provisions are effective immediately. All
capitalized terms in this Addendum, to the extent not otherwise defined herein,
shall have the meanings assigned to them in the Option Agreement.
LIMITED STOCK APPRECIATION RIGHT
1. Optionee is hereby granted a limited stock appreciation right
exercisable upon the following terms and conditions:
(a) Optionee shall have the unconditional right,
exercisable at any time during the thirty (30)-day period
immediately following a Hostile Take-Over, to surrender the Option
to the Corporation. In return for the surrendered Option, Optionee
shall receive a cash distribution from the Corporation in an amount
equal to the excess of (A) the Take-Over Price of the shares of
Common Stock which are the time subject to the surrendered option
(whether or not the Option is otherwise at the time exercisable for
those shares) over (B) the aggregate Exercise Price payable for
such shares.
(b) To exercise this limited stock appreciation right,
Optionee must, during the applicable thirty (30)-day exercise
period, provide the Corporation with written notice of the option
surrender in which there is specified the number of Option Shares
as to which the Option is being surrendered. Such notice must be
accompanied by the return of Optionee's copy of the Option
Agreement, together with any written amendments to such Agreement.
The cash distribution shall be paid to Optionee within five (5)
business days following such delivery date. The exercise of the
limited stock appreciation right in accordance with the terms of
this Addendum is hereby pre-approved by the Plan Administrator in
advance of such exercise, and no further approval of the Plan
Administrator or the Board shall be required at the time of the
actual option surrender and cash distribution. Upon receipt of such
cash distribution, the Option shall be cancelled with respect to
the Option Shares for which the Option has been surrendered, and
Optionee shall cease to have any further right to acquire those
Option Shares under the Option Agreement. The Option shall,
however, remain outstanding for the balance of the Option Shares
(if any) in accordance with the terms of the Option Agreement, and
the Corporation shall issue a replacement stock option agreement
(substantially in the same form of the surrendered Option
Agreement) for those remaining Option Shares.
<PAGE>
(c) In no event may this limited stock appreciation
right be exercised when there is not a positive spread between the
Fair Market Value of the Option Shares subject to the surrendered
option and the aggregate Exercise Price payable for such shares.
This limited stock appreciation right shall in all events terminate
upon the expiration or sooner termination of the option term and
may not be assigned or transferred by Optionee, except to the
extent the Option is transferred in accordance with the provisions
of the Option Agreement.
2. For purposes of this Addendum, the following definitions shall be
in effect:
(a) A Hostile Take-Over shall be deemed to occur upon
the acquisition, directly or indirectly, by any person or related
group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the Securities Exchange Act of
1934, as amended) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept.
(b) The Take-Over Price per share shall be deemed to be
equal to the greater of (A) the Fair Market Value per Option Share
-------
on the option surrender date or (B) the highest reported price per
share of Common Stock paid by the tender offeror in effecting the
Hostile Take-Over. However, if the surrendered Option is designated
as an Incentive Option in the Grant Notice, then the Take-Over
Price shall not exceed the clause (A) price per share.
IN WITNESS WHEREOF, ReleaseNow.com Corporation has caused this
Addendum to be executed by its duly-authorized officer.
RELEASENOW.COM CORPORATION
By:___________________________________
Title:________________________________
EFFECTIVE DATE:______________________________________
<PAGE>
RELEASENOWRELEASENOW.COM CORPORATION
SALARY INVESTMENT OPTION GRANT ELECTION
---------------------------------------
I hereby elect to apply the following portion of the base salary
otherwise payable to me in cash for calendar year 200___ to the acquisition of a
special option grant under the Salary Investment Option Grant Program in effect
under the Company's 2000 Stock Incentive Plan (the "Plan").
$___________ (I understand that the portion of my salary so
applied must not be less than $10,000 nor more than $50,000.
I hereby acknowledge and agree that this election shall be irrevocable
and that the option to be granted pursuant to such election shall be subject to
the following terms:
1. The option will be granted on January ____, 200___.
2. The exercise price per share will be equal to one-third of the
fair market value per share of the Company's common stock (the closing selling
price per share on the Nasdaq National Market) on the option grant date.
3. The number of shares of common stock subject to the option will
be determined by dividing (i) the portion of my base salary for calendar year
200____ which I have elected to apply to the acquisition of the option by (ii)
two-thirds of the fair market value per share of common stock on the option
grant date.
4. The option will become exercisable in twelve (12) successive
equal monthly installments upon my completion of each calendar month of service
with the Company during calendar year 200___, with the first such installment to
become exercisable upon my continuation in the Company's service through January
31, 200___.
5. The remaining terms of the option will be as set forth in the
Salary Reduction Option Grant Program in effect under the Plan.
Signature:_________________________
Dated:_____________________________
<PAGE>
RELEASENOW.COM CORPORATION
NOTICE OF GRANT OF STOCK OPTION
-------------------------------
UNDER SALARY INVESTMENT OPTION GRANT PROGRAM
--------------------------------------------
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of ReleaseNow.com Corporation (the
"Corporation"):
Optionee:_____________________________________________________________
--------
Grant Date:___________________________________________________________
----------
Exercise Price:$____________________________________________ per share
--------------
Number of Option Shares:________________________________________shares
-----------------------
Expiration Date:______________________________________________________
---------------
Type of Option: Non-Statutory Stock Option
--------------
Exercise Schedule: The Option shall become exercisable for the Option
-----------------
Shares in a series of twelve (12) successive equal monthly
installments upon the Optionee's completion of each calendar month of
Service during calendar year 200____, with the first such installment
to become exercisable upon Optionee's continuation in Service through
January 31, 200___. In no event shall the Option become exercisable
for any additional Option Shares after Optionee's cessation of
Service.
Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the Salary Investment Option Grant Program
under the ReleaseNow.com Corporation 2000 Stock Incentive Plan (the "Plan").
Optionee further agrees to be bound by the terms of the Plan and the terms of
the Option as set forth in the Salary Investment Stock Option Agreement attached
hereto as Exhibit A. Optionee hereby acknowledges the receipt of a copy of the
---------
official prospectus for the Plan in the form attached hereto as Exhibit B. A
--------
copy of the Plan is available upon request made to the Corporate Secretary at
the Corporation's principal offices.
At Will Employment. Nothing in this Notice or in the attached Stock
------------------
Option Agreement or in the Plan shall confer upon Optionee any right to continue
in Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining Optionee) or of Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Service at any time for any
reason, with or without cause.
<PAGE>
Definitions. All capitalized terms in this Notice shall have the
-----------
meaning assigned to them in this Notice or in the attached Salary Investment
Stock Option Agreement.
DATED:________________________, 200___
RELEASENOW.COM CORPORATION
By:_________________________________
Title:______________________________
____________________________________
OPTIONEE
Address:____________________________
____________________________________
ATTACHMENTS
- -----------
Exhibit A - Salary Investment Stock Option Agreement
Exhibit B - Plan Summary and Prospectus
<PAGE>
EXHIBIT A
---------
SALARY INVESTMENT STOCK OPTION AGREEMENT
----------------------------------------
<PAGE>
EXHIBIT B
---------
2000 STOCK INCENTIVE PLAN
-------------------------
<PAGE>
RELEASENOW.COM CORPORATION
SALARY INVESTMENT STOCK OPTION AGREEMENT
----------------------------------------
RECITALS
- --------
A. The Corporation has implemented a special Salary Investment Option
Grant Program under the Plan pursuant to which selected employees may, by prior
irrevocable election, apply a portion of their base salary each year to the
acquisition of a special stock option grant.
B. Optionee has made the requisite election to apply a portion of his or
her base salary to the acquisition of the special option, and this Agreement is
executed pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the Corporation's grant of such special option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as
---------------
of the Grant Date, a Non-Statutory Stock Option to purchase up to the number of
Option Shares specified in the Grant Notice. The Option Shares shall be
purchasable from time to time during the option term specified in Paragraph 2 at
the Exercise Price.
2. Option Term. This option shall have a term of ten (10) years
-----------
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5, 6 or 8.
3. Limited Transferability.
-----------------------
(a) This option may, in connection with the Optionee's estate
plan, be assigned in whole or in part during Optionee's lifetime to one or more
members of the Optionee's immediate family or to a trust established for the
exclusive benefit of one or more such family members. The assigned portion shall
be exercisable only by the person or persons who acquire a proprietary interest
in the option pursuant to such assignment. The terms applicable to the assigned
portion shall be the same as those in effect for this option immediately prior
to such assignment.
(b) Should the Optionee die while holding this option, then this
option shall be transferred in accordance with Optionee's will or the laws of
inheritance. However, Optionee may designate one or more persons as the
beneficiary or beneficiaries of this option, and this option shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding this
option. Such beneficiary or beneficiaries shall take the transferred option
subject to all the terms and conditions of this Agreement, including (without
limitation) the limited time period during which this option may, pursuant to
Paragraph 5, be exercised following Optionee's death.
<PAGE>
4. Dates of Exercise. This option shall become exercisable for the
-----------------
Option Shares in a series of successive equal monthly installments as specified
in the Grant Notice. As the option becomes exercisable for one or more of those
installments, the installments shall accumulate, and the option shall remain
exercisable for the accumulated installments until the Expiration Date or sooner
termination of the option term under Paragraph 5, 6 or 8.
5. Cessation of Service. The option term specified in Paragraph 2
--------------------
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(i) Should Optionee cease to remain in Service for any
reason other than Misconduct while this option is outstanding, then period
during which this option may be exercised shall be reduced to a three (3)-
year period measured from the date of such cessation of Service, but in no
event shall this option be exercisable at any time after the Expiration
Date.
(ii) Should Optionee die while holding this option, then
the personal representative of Optionee's estate or the person or persons
to whom the option is transferred pursuant to Optionee's will or the laws
of inheritance shall have the right to exercise this option. However, if
Optionee has designated one or more beneficiaries of this option, then
those persons shall have the exclusive right to exercise this option
following Optionee's death. Any such right to exercise this option shall
lapse, and this option shall cease to be outstanding, upon the earlier of
-------
(i) the expiration of the three (3)-year period measured from the date of
Optionee's cessation of Service or (ii) the Expiration Date.
(iii) During the applicable post-Service exercise period,
this option may not be exercised in the aggregate for more than the number
of Option Shares for which the option is exercisable at the time of
Optionee's cessation of Service. Upon the expiration of such limited
exercise period or (if earlier) upon the Expiration Date, this option shall
terminate and cease to be outstanding for any exercisable Option Shares for
which the option has not been exercised. However, this option shall
immediately, upon Optionee's cessation of Service for any reason, terminate
and cease to be outstanding with respect to any and all Option Shares for
which the option is not otherwise at that time exercisable.
(iv) Should Optionee's Service be terminated for Misconduct
or should Optionee otherwise engage in Misconduct while this option is
outstanding, then this option shall terminate immediately and cease to
remain outstanding.
6. Corporate Transaction.
---------------------
(a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable for all the Option
Shares, shall automatically accelerate so that this option shall, immediately
prior to the effective date of such Corporate Transaction, become exercisable
for all the Option Shares at the time subject to this option and
<PAGE>
may be exercised for any or all of those Option Shares as fully-vested shares of
Common Stock. Immediately following such Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).
(b) To the extent assumed by the successor corporation (or
parent thereof) in connection with such Corporate Transaction, this option shall
be appropriately adjusted, immediately after such Corporate Transaction, to
apply to the number and class of securities which would have been issuable to
Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction, and appropriate
adjustments shall also be made to the Exercise Price, provided the aggregate
--------
Exercise Price shall remain the same. This option, as so assumed, shall remain
fully exercisable for all the Option Shares subject to such option until the
earliest to occur of (i) the expiration of the three (3)-year period measured
- --------
from the date of Optionee's cessation of Service, (ii) the specified Expiration
Date, or (iii) the sooner termination of this option under Paragraph 5.
(c) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. Change in Control.
-----------------
(a) This option, to the extent outstanding at the time of a
Change of Control but not otherwise fully exercisable for all the Option Shares,
shall automatically accelerate so that this option shall, immediately prior to
the effective date of such Change in Control, become exercisable for all the
Option Shares at the time subject to this option and may be exercised for any or
all of those Option Shares as fully-vested shares of Common Stock.
(b) The option shall remain exercisable for such fully-vested
Option Shares until the earliest to occur of (i) the expiration of the three
--------
(3)-year period measured from the date of Optionee's cessation of Service, (ii)
the specified Expiration Date, (iii) the termination of the option in connection
with a Corporate Transaction, (iv) the cash-out of the option pursuant to the
provisions of Paragraph 8 or (v) the termination of this option under Paragraph
5.
8. Hostile Take-Over. Optionee is hereby granted a limited stock
-----------------
appreciation right exercisable upon the following terms and conditions:
(a) Optionee shall have the unconditional right, exercisable at
any time during the thirty (30)-day period immediately following a Hostile Take-
Over, to surrender this option to the Corporation. In return for the surrendered
option, Optionee shall receive a cash distribution from the Corporation in an
amount equal to the excess of (A) the Take-Over Price of the shares of Common
Stock which are at the time subject to the surrendered option (whether or not
the option is otherwise at that time exercisable for those Option Shares) over
(B) the aggregate Exercise Price payable for such shares.
<PAGE>
(b) To exercise this limited stock appreciation right, Optionee
must, during the applicable thirty (30)-day exercise period, provide the
Corporation with written notice of the option surrender in which there is
specified the number of Option Shares as to which the option is being
surrendered. Such notice must be accompanied by the return of Optionee's copy of
this Agreement, together with any written amendments to such Agreement. The cash
distribution shall be paid to Optionee within five (5) business days following
such delivery date. The exercise of the limited stock appreciation right in
accordance with the terms of this Paragraph 8 is hereby pre-approved by the Plan
Administrator in advance of such exercise, and no further approval of the Plan
Administrator or the Board shall be required at the time of the actual option
surrender and cash distribution. Upon receipt of such cash distribution, this
option shall be cancelled with respect to the Option Shares for which the option
has been surrendered, and Optionee shall cease to have any further right to
acquire those Option Shares under this Agreement. The option shall, however,
remain outstanding for the balance of the Option Shares (if any) in accordance
with the terms of this Agreement, and the Corporation shall issue a replacement
stock option agreement (substantially in the same form as this Agreement) for
those remaining Option Shares.
(c) In no event may this limited stock appreciation right be
exercised when there is not a positive spread between the Fair Market Value of
the Option Shares subject to the surrendered option and the aggregate Exercise
Price payable for such shares. This limited stock appreciation right shall in
all events terminate upon the expiration or sooner termination of the option
term and may not be assigned or transferred by Optionee, except to the extent
the option is transferred in accordance with the provisions of this Agreement.
9. Stockholder Rights. The holder of this option shall not have any
------------------
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
10. Adjustment in Option Shares. Should any change be made to the
---------------------------
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the number and/or
class of securities subject to this option and (ii) the Exercise Price in order
to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
11. Manner of Exercising Option.
---------------------------
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a Notice of
Exercise for the number of Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
<PAGE>
(A) cash or check made payable to the Corporation;
(B) shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value
on the Exercise Date; or
(C) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons
exercising the option) shall concurrently provide irrevocable
instructions (I) to a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate Exercise
Price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to
be withheld by the Corporation by reason of such exercise and
(II) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to
complete the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee)
have the right to exercise this option.
(iv) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the satisfaction
of all Federal, state and local income and employment tax withholding
requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares.
(c) In no event may this option be exercised for any fractional
shares.
12. Compliance with Laws and Regulations.
------------------------------------
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
<PAGE>
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
13. Successors and Assigns. Except to the extent otherwise provided
----------------------
in Paragraph 3, the provisions of this Agreement shall inure to the benefit of,
and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns, the legal representatives, heirs and legatees of
Optionee's estate and any beneficiaries of this option designated by Optionee.
14. Notices. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
15. Construction. This Agreement and the option evidenced hereby are
------------
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
16. Governing Law. The interpretation, performance and enforcement
-------------
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
17. Excess Shares. If the Option Shares covered by this Agreement
-------------
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall be
void with respect to such excess shares, unless stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Salary Investment Stock Option Agreement.
---------
B. Board shall mean the Corporation's Board of Directors.
-----
C. Change in Control shall mean a change in ownership or control of the
-----------------
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the Securities Exchange Act of 1934, as amended) of securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation's stockholders, or
(ii) a change in the composition of the Board over a period of thirty-
six (36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (i) have been Board
members continuously since the beginning of such period or (ii) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (i) who were
still in office at the time the Board approved such election or nomination.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
----
E. Common Stock shall mean the Corporation's common stock.
------------
F. Corporate Transaction shall mean either of the following stockholder-
---------------------
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
<PAGE>
G. Corporation shall mean ReleaseNow.com Corporation, a Delaware
-----------
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of ReleaseNow.com Corporation which shall by appropriate
action adopt the Plan.
H. Employee shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
I. Exercise Date shall mean the date on which the option shall have been
-------------
exercised in accordance with Paragraph 9 of the Agreement.
J. Exercise Price shall mean the exercise price per share as specified in
--------------
the Grant Notice.
K. Expiration Date shall mean the date on which the option expires as
---------------
specified in the Grant Notice.
L. Fair Market Value per share of Common Stock on any relevant date shall
-----------------
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be closing selling price
per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price quoted for the Common
Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation
exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price quoted
for the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which
such quotation exists.
M. Grant Date shall mean the date of grant of the option as specified in
----------
the Grant Notice.
N. Grant Notice shall mean the Notice of Grant of Stock Option under the
------------
Salary Investment Grant Program accompanying the Agreement, pursuant to which
Optionee has been informed of the basic terms of the option evidenced hereby.
<PAGE>
O. Hostile Take-Over shall mean the acquisition, directly or indirectly,
-----------------
by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders which the Board
does not recommend such stockholders to accept.
P. Misconduct shall mean the commission of any act of fraud, embezzlement
----------
or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely affecting
the business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive of
all the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of Optionee or any other
individual in the Service of the Corporation (or any Parent or Subsidiary).
Q. Non-Statutory Stock Option shall mean an option not intended to
--------------------------
satisfy the requirements of Code Section 422.
R. Notice of Exercise shall mean the written notice of the option
------------------
exercise on the form provided by the Corporation for such purpose.
S. Option Shares shall mean the number of shares of Common Stock subject
-------------
to the option as specified in the Grant Notice.
T. Optionee shall mean the person to whom the option is granted as
--------
specified in the Grant Notice.
U. Parent shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. Plan shall mean the Corporation's 2000 Stock Incentive Plan.
----
W. Plan Administrator shall mean either the Board or a committee of Board
------------------
members, to the extent the committee is at the time responsible for the
administration of the Plan.
X. Service shall mean the Optionee's performance of services for the
-------
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-
employee member of the board of directors or an independent consultant.
<PAGE>
Y. Stock Exchange shall mean the American Stock Exchange or the New York
--------------
Stock Exchange.
Z. Subsidiary shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
AA. Take-Over Price per share shall mean the greater of (A) the Fair
--------------- -------
Market Value per Option Share on the option surrender date under Paragraph 8 or
(B) the highest reported price per share of Common Stock paid by the tender
offeror in effecting the Hostile Take-Over.
<PAGE>
RELEASENOW.COM CORPORATION
STOCK ISSUANCE AGREEMENT
------------------------
AGREEMENT made this _____ day of ___________________________,
__________, by and between ReleaseNow.com Corporation, a Delaware corporation,
and _____________________________________________________, a Participant in the
Corporation's 2000 Stock Incentive Plan.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.
A. PURCHASE OF SHARES
------------------
1. Purchase. Participant hereby purchases _____________ shares of
--------
Common Stock (the "Purchased Shares") pursuant to the provisions of the Stock
Issuance Program at the purchase price of $______ per share (the "Purchase
Price").
2. Payment. Concurrently with the delivery of this Agreement to the
-------
Corporation, Participant shall pay the Purchase Price for the Purchased Shares
in cash or check payable to the Corporation and shall deliver a duly-executed
blank Assignment Separate from Certificate (in the form attached hereto as
Exhibit I) with respect to the Purchased Shares.
3. Stockholder Rights. Until such time as the Corporation exercises
------------------
the Repurchase Right, Participant (or any successor in interest) shall have all
the rights of a stockholder (including voting, dividend and liquidation rights)
with respect to the Purchased Shares, subject, however, to the transfer
restrictions of this Agreement.
4. Escrow. The Corporation shall have the right to hold the
------
Purchased Shares in escrow until those shares have vested in accordance with the
Vesting Schedule.
5. Compliance with Law. Under no circumstances shall shares of
-------------------
Common Stock or other assets be issued or delivered to Participant pursuant to
the provisions of this Agreement unless, in the opinion of counsel for the
Corporation or its successors, there shall have been compliance with all
applicable requirements of Federal and state securities laws, all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is at the time listed for trading and all
other requirements of law or of any regulatory bodies having jurisdiction over
such issuance and delivery.
B. TRANSFER RESTRICTIONS
---------------------
1. Restriction on Transfer. Except for any Permitted Transfer,
-----------------------
Participant shall not transfer, assign, encumber or otherwise dispose of any of
the Purchased Shares which are subject to the Repurchase Right.
<PAGE>
2. Restrictive Legend. The stock certificate for the Purchased
------------------
Shares shall be endorsed with the following restrictive legend:
"The shares represented by this certificate are unvested and subject
to certain repurchase rights granted to the Corporation and accordingly may not
be sold, assigned, transferred, encumbered, or in any manner disposed of except
in conformity with the terms of a written agreement dated ____________, ______
between the Corporation and the registered holder of the shares (or the
predecessor in interest to the shares). A copy of such agreement is maintained
at the Corporation's principal corporate offices."
3. Transferee Obligations. Each person (other than the Corporation)
----------------------
to whom the Purchased Shares are transferred by means of a Permitted Transfer
must, as a condition precedent to the validity of such transfer, acknowledge in
writing to the Corporation that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to the Repurchase Right to
the same extent such shares would be so subject if retained by Participant.
C. REPURCHASE RIGHT
----------------
1. Grant. The Corporation is hereby granted the right (the
-----
"Repurchase Right"), exercisable at any time during the ninety (90)-day period
following the date Participant ceases for any reason to remain in Service, to
repurchase at the Purchase Price any or all of the Purchased Shares in which
Participant is not, at the time of his or her cessation of Service, vested in
accordance with the Vesting Schedule set forth in Paragraph C.3 of this
Agreement or the special vesting acceleration provisions of Paragraph C.5 of
this Agreement (such shares to be hereinafter referred to as the "Unvested
Shares").
2. Exercise of the Repurchase Right. The Repurchase Right shall be
--------------------------------
exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the ninety (90)-day exercise period. The notice
shall indicate the number of Unvested Shares to be repurchased and the date on
which the repurchase is to be effected, such date to be not more than thirty
(30) days after the date of such notice. The certificates representing the
Unvested Shares to be repurchased shall be delivered to the Corporation on the
closing date specified for the repurchase. Concurrently with the receipt of
such stock certificates, the Corporation shall pay to Owner, in cash or cash
equivalent (including the cancellation of any purchase-money indebtedness), an
amount equal to the Purchase Price previously paid for the Unvested Shares to be
repurchased from Owner.
3. Termination of the Repurchase Right. The Repurchase Right shall
-----------------------------------
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph C.2. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Purchased
Shares in which Participant vests in accordance with the following Vesting
Schedule:
(i) Upon Participant's completion of one (1) year of
Service measured from ______________, _______, Participant shall acquire a
vested interest in, and the Repurchase Right shall lapse with respect to,
twenty-five percent (25%) of the Purchased Shares.
<PAGE>
(ii) Participant shall acquire a vested interest in, and
the Repurchase Right shall lapse with respect to, the remaining Purchased
Shares in a series of thirty six (36) successive equal monthly installments
upon Participant's completion of each additional month of Service over the
thirty-six (36)-month period measured from the initial vesting date under
subparagraph (i) above.
4. Recapitalization. Any new, substituted or additional securities
----------------
or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right and any
escrow requirements hereunder, but only to the extent the Purchased Shares are
at the time covered by such right or escrow requirements. Appropriate
adjustments to reflect such distribution shall be made to the number and/or
class of securities subject to this Agreement and to the price per share to be
paid upon the exercise of the Repurchase Right in order to reflect the effect of
any such Recapitalization upon the Corporation's capital structure; provided,
--------
however, that the aggregate purchase price shall remain the same.
5. Corporate Transaction.
---------------------
(a) Immediately prior to the consummation of any Corporate
Transaction, the Repurchase Right shall automatically lapse in its entirety and
the Purchased Shares shall vest in full, except to the extent the Repurchase
Right is to be assigned to the successor corporation (or parent thereof) in
connection with the Corporate Transaction.
(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to the new capital
stock or other property (including any cash payments) received in exchange for
the Purchased Shares in consummation of the Corporate Transaction, but only to
the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Corporation's capital structure; provided, however, that
--------
the aggregate purchase price shall remain the same. The new securities or other
property (including cash payments) issued or distributed with respect to the
Purchased Shares in consummation of the Corporate Transaction shall immediately
be deposited in escrow with the Corporation (or the successor entity) and shall
not be released from escrow until Participant vests in such securities or other
property in accordance with the same Vesting Schedule in effect for the
Purchased Shares.
D. SPECIAL TAX ELECTION
--------------------
1. Section 83(b) Election. Under Code Section 83, the excess of the
----------------------
fair market value of the Purchased Shares on the date any forfeiture
restrictions applicable to such shares lapse over the Purchase Price paid for
such shares will be reportable as ordinary income on the lapse date. For this
purpose, the term "forfeiture restrictions" includes the right of the
Corporation to repurchase the Purchased Shares pursuant to the Repurchase Right.
Participant may elect under Code Section 83(b) to be taxed at the time the
Purchased Shares are acquired, rather than when and as such Purchased Shares
cease to be subject to such forfeiture restrictions. Such election must be
filed with the Internal Revenue Service within thirty (30) days after the date
of this Agreement. Even if the fair market value of the Purchased Shares on the
date of this Agreement equals the Purchase Price paid
<PAGE>
(and thus no tax is payable), the election must be made to avoid adverse tax
consequences in the future. THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS
EXHIBIT II HERETO. PARTICIPANT UNDERSTANDS THAT FAILURE TO MAKE THIS FILING
WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF
ORDINARY INCOME AS THE FORFEITURE RESTRICTIONS LAPSE.
2. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT IS
---------------------
PARTICIPANT'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY
ELECTION UNDER CODE SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE CORPORATION
OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
E. GENERAL PROVISIONS
------------------
1. Assignment. The Corporation may assign the Repurchase Right to
----------
any person or entity selected by the Board, including (without limitation) one
or more stockholders of the Corporation.
2. At Will Employment. Nothing in this Agreement or in the Plan
------------------
shall confer upon Participant any right to continue in Service for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Corporation (or any Parent or Subsidiary employing or retaining
Participant) or of Participant, which rights are hereby expressly reserved by
each, to terminate Participant's Service at any time for any reason, with or
without cause.
3. Notices. Any notice required to be given under this Agreement
-------
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
4. No Waiver. The failure of the Corporation in any instance to
---------
exercise the Repurchase Right shall not constitute a waiver of any other
repurchase rights that may subsequently arise under the provisions of this
Agreement or any other agreement between the Corporation and Participant. No
waiver of any breach or condition of this Agreement shall be deemed to be a
waiver of any other or subsequent breach or condition, whether of like or
different nature.
5. Cancellation of Shares. If the Corporation shall make available,
----------------------
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
<PAGE>
6. Participant Undertaking. Participant hereby agrees to take
-----------------------
whatever additional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either Participant or the
Purchased Shares pursuant to the provisions of this Agreement.
7. Agreement is Entire Contract. This Agreement constitutes the
----------------------------
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the terms of the Plan.
8. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of California without resort
to that State's conflict-of-laws rules.
9. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
10. Successors and Assigns. The provisions of this Agreement shall
----------------------
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon Participant, Participant's assigns and the legal
representatives, heirs and legatees of Participant's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
RELEASENOW.COM CORPORATION
By:______________________________________
Title:___________________________________
Address:_________________________________
_________________________________________
PARTICIPANT
_________________________________________
Signature
Address:_________________________________
_________________________________________
<PAGE>
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of the Participant has read and hereby approves
the foregoing Stock Issuance Agreement. In consideration of the Corporation's
granting the Participant the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms of such Agreement, including (without
limitation) the right of the Corporation (or its assigns) to purchase any
Purchased Shares in which the Participant is not vested at the time of his or
her termination of Service.
________________________________________
PARTICIPANT'S SPOUSE
Address:________________________________
________________________________________
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ______________________ hereby sell(s), assign(s)
and transfer(s) unto ReleaseNow.com Corporation (the "Corporation"),
_______________________________________ (___________) shares of the Common Stock
of the Corporation standing in his or her name on the books of the Corporation
represented by Certificate No. ___________________ herewith and do(es) hereby
irrevocably constitute and appoint ______________________________ Attorney to
transfer the said stock on the books of the Corporation with full power of
substitution in the premises.
Dated: _________________, _____.
Signature___________________________________
Instruction: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Participant.
<PAGE>
EXHIBIT II
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
____________ shares of the common stock of ReleaseNow.com Corporation.
(3) The property was issued on _________________, _________.
(4) The taxable year in which the election is being made is the calendar year
_________.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's service with the issuer terminates. The issuer's
repurchase right will lapse in a series of annual and monthly installments
over a forty-eight (48)-month period ending on ________________________.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $_____________per share.
(7) The amount paid for such property is $____________ per share.
(8) A copy of this statement was furnished to ReleaseNow.com Corporation for
whom taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on ________________________, _______.
________________________________ _________________________
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with
which taxpayer files his or her Federal income tax returns and must be made
within thirty (30) days after the execution date of the Stock Issuance
Agreement. This filing should be made by registered or certified mail, return
receipt requested. Participant must retain two (2) copies of the completed form
for filing with his or her Federal and state tax returns for the current tax
year and an additional copy for his or her records.
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Issuance Agreement.
---------
B. Board shall mean the Corporation's Board of Directors.
-----
C. Common Stock shall mean shares of the Corporation's common stock.
------------
D. Code shall mean the Internal Revenue Code of 1986, as amended.
----
E. Corporate Transaction shall mean either of the following
---------------------
stockholder-approved transactions:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. Corporation shall mean ReleaseNow.com Corporation, a Delaware
-----------
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of ReleaseNow.com Corporation
G. Owner shall mean Participant and all subsequent holders of the
-----
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Participant.
H. Parent shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
I. Participant shall mean the person to whom the Purchased Shares
-----------
are issued under the Stock Issuance Program.
J. Permitted Transfer shall mean (i) a gratuitous transfer of the
------------------
Purchased Shares, provided and only if Participant obtains the Corporation's
--------------------
prior written consent to such transfer, (ii) a transfer of title to the
Purchased Shares effected pursuant to Participant's will or the laws of
inheritance following Participant's death or (iii) a transfer to the Corporation
in pledge as security for any purchase-money indebtedness incurred by
Participant in connection with the acquisition of the Purchased Shares.
<PAGE>
K. Plan shall mean the Corporation's 2000 Stock Incentive Plan.
----
L. Plan Administrator shall mean either the Board or a committee of
------------------
the Board acting in its administrative capacity under the Plan.
M. Purchase Price shall have the meaning assigned to such term in
--------------
Paragraph A.1.
N. Purchased Shares shall have the meaning assigned to such term in
----------------
Paragraph A.1.
O. Recapitalization shall mean any stock split, stock dividend,
----------------
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
P. Repurchase Right shall mean the right granted to the Corporation
----------------
in accordance with Article C.
Q. Service shall mean the Participant's performance of services for
-------
the Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors or an independent consultant.
R. Stock Issuance Program shall mean the Stock Issuance Program
----------------------
under the Plan.
S. Subsidiary shall mean any corporation (other than the
----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
T. Vesting Schedule shall mean the vesting schedule specified in
----------------
Paragraph C.3, pursuant to which the Purchased Shares are to vest in a series of
installments over Participant's period of Service.
U. Unvested Shares shall have the meaning assigned to such term in
---------------
Paragraph C.1.
<PAGE>
ADDENDUM
TO
STOCK ISSUANCE AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Issuance Agreement (the "Issuance Agreement")
by and between ReleaseNow.com Corporation (the "Corporation") and
_________________________ ("Participant") evidencing the stock issuance made
this day to Participant under the terms of the Corporation's 2000 Stock
Incentive Plan, and such provisions are effective immediately. All capitalized
terms in this Addendum, to the extent not otherwise defined herein, shall have
the meanings assigned to such terms in the Issuance Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION/CHANGE IN CONTROL
1. To the extent the Repurchase Right is assigned to the successor
corporation (or parent thereof) in connection with a Corporate Transaction, no
accelerated vesting of the Purchased Shares shall occur upon such Corporate
Transaction, and the Repurchase Right shall continue to remain in full force and
effect in accordance with the provisions of the Issuance Agreement. The
Participant shall, over Participant's period of Service following the Corporate
Transaction, continue to vest in the Purchased Shares in one or more
installments in accordance with the provisions of the Issuance Agreement.
2. No accelerated vesting of the Purchased Shares shall occur upon a
Change in Control, and the Repurchase Right shall continue to remain in full
force and effect in accordance with the provisions of the Issuance Agreement and
shall be assigned to any successor entity in the Change in Control transaction.
The Participant shall, over Participant's period of Service following the Change
in Control, continue to vest in the Purchased Shares in one or more installments
in accordance with the provisions of the Issuance Agreement.
3. Immediately upon an Involuntary Termination of Participant's
Service within eighteen (18) months following the Corporate Transaction or
Change in Control, the Repurchase Right shall terminate automatically, and all
the Purchased Shares shall vest in full at that time. In addition, the
outstanding balance of any escrow account maintained on Participant's behalf
pursuant to Paragraph C.5 of the Issuance Agreement shall immediately vest at
the time of such Involuntary Termination and shall be paid to the Participant
promptly thereafter.
4. For purposes of this Addendum, the following definitions shall be
in effect:
An Involuntary Termination shall mean the termination of Participant's
Service by reason of:
(i) Participant's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
<PAGE>
(ii) Participant's voluntary resignation following (A) a change
in Participant's position with the Corporation (or Parent or Subsidiary
employing Participant) which materially reduces Participant's duties and
responsibilities or the level of management to which Participant reports,
(B) a reduction in Participant's level of compensation (including base
salary, fringe benefits and target bonus under any corporate performance
based bonus or incentive programs) by more than fifteen percent (15%) or
(C) a relocation of Participant's place of employment by more than fifty
(50) miles, provided and only if such change, reduction or relocation is
effected by the Corporation without Participant's consent.
A Change in Control shall be deemed to occur in the event of a change
in ownership or control of the Corporation effected through either of the
following transactions:
(i) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's stockholders,
or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time the Board approved such election or
nomination.
Misconduct shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Participant, any unauthorized use or disclosure by the
Participant of confidential information or trade secrets of the Corporation (or
any Parent or Subsidiary), or any other intentional misconduct by the
Participant adversely affecting the business or affairs of the Corporation (or
any Parent or Subsidiary) in a material manner. The foregoing definition shall
not be deemed to be inclusive of all the acts or omissions which the Corporation
(or any Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of the Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).
<PAGE>
IN WITNESS WHEREOF, ReleaseNow.com Corporation has caused this
Addendum to be executed by its duly-authorized officer, effective as of the
Effective Date specified below.
RELEASENOW.COM CORPORATION
By:______________________________________
Title:___________________________________
EFFECTIVE DATE:_________________________________
<PAGE>
INITIAL GRANT
RELEASENOW.COM CORPORATION
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
----------------------------------------
AUTOMATIC STOCK OPTION
----------------------
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of ReleaseNow.com Corporation (the
"Corporation"):
Optionee: ____________________________________________________________
--------
Grant Date: __________________________________________________________
----------
Exercise Price: $___________________________________________ per share
--------------
Number of Option Shares: 20,000 shares of Common Stock
-----------------------
Expiration Date: _____________________________________________________
---------------
Type of Option: Non-Statutory Stock Option
--------------
Date Exercisable: Immediately Exercisable
----------------
Vesting Schedule: The Option Shares shall initially be unvested and
----------------
subject to repurchase by the Corporation at the Exercise Price paid
per share. Optionee shall acquire a vested interest in, and the
Corporation's repurchase right shall accordingly lapse with respect
to, the Option Shares in a series of four (4) successive equal semi-
annual installments upon Optionee's completion of twelve (12)-month
period of service as a member of the Corporation's Board of Directors
(the "Board") over the forty-eight (48)-month period measured from the
Grant Date. In no event shall any additional Option Shares vest after
Optionee's cessation of Board service.
Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the automatic option grant program under the
ReleaseNow.com Corporation 2000 Stock Incentive Plan (the "Plan"). Optionee
further agrees to be bound by the terms of the Plan and the terms of the Option
as set forth in the Automatic Stock Option Agreement attached hereto as Exhibit
-------
A. Optionee hereby acknowledges receipt of a copy of the official prospectus
- -
for the Plan in the form attached hereto as Exhibit B. A copy of the Plan is
---------
available upon request made to the Corporate Secretary at the Corporation's
principal offices.
<PAGE>
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTION
----------------
SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO A REPURCHASE
RIGHT EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS. THE TERMS OF SUCH RIGHT
SHALL BE SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION
EXERCISE.
No Impairment of Rights. Nothing in this Notice or the attached
-----------------------
Automatic Stock Option Agreement or in the Plan shall interfere with or
otherwise restrict in any way the rights of the Corporation and the
Corporation's stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
Definitions. All capitalized terms in this Notice shall have the
-----------
meaning assigned to them in this Notice or in the attached Automatic Stock
Option Agreement.
DATED: _________________, _______
RELEASENOW.COM CORPORATION
By:______________________________________
Title: __________________________________
_________________________________________
OPTIONEE
Address: ________________________________
_________________________________________
ATTACHMENTS
- -----------
Exhibit A - Automatic Stock Option Agreement
Exhibit B - Plan Summary and Prospectus
<PAGE>
EXHIBIT A
---------
AUTOMATIC STOCK OPTION AGREEMENT
--------------------------------
<PAGE>
EXHIBIT B
---------
PLAN SUMMARY AND PROSPECTUS
---------------------------
<PAGE>
ANNUAL GRANT
RELEASENOW.COM CORPORATION
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
----------------------------------------
AUTOMATIC STOCK OPTION
----------------------
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of ReleaseNow.com Corporation (the
"Corporation"):
Optionee: ____________________________________________________________
--------
Grant Date: __________________________________________________________
----------
Exercise Price: $___________________________________________ per share
--------------
Number of Option Shares: 5,000 shares of Common Stock
-----------------------
Expiration Date: _____________________________________________________
---------------
Type of Option: Non-Statutory Stock Option
--------------
Date Exercisable: Immediately Exercisable
----------------
Vesting Schedule: The Option Shares are fully vested as of the Grant
----------------
Date.
Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the automatic option grant program under the
ReleaseNow.com Corporation 2000 Stock Incentive Plan (the "Plan"). Optionee
further agrees to be bound by the terms of the Plan and the terms of the Option
as set forth in the Automatic Stock Option Agreement attached hereto as Exhibit
-------
A. Optionee hereby acknowledges receipt of a copy of the official prospectus
- -
for the Plan in the form attached hereto as Exhibit B. A copy of the Plan is
---------
available upon request made to the Corporate Secretary at the Corporation's
principal offices.
No Impairment of Rights. Nothing in this Notice or the attached
-----------------------
Automatic Stock Option Agreement or in the Plan shall interfere with or
otherwise restrict in any way the rights of the Corporation and the
Corporation's stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
<PAGE>
Definitions. All capitalized terms in this Notice shall have the
-----------
meaning assigned to them in this Notice or in the attached Automatic Stock
Option Agreement.
DATED: _________________, _______
RELEASENOW.COM CORPORATION
By: ____________________________________
Title: _________________________________
________________________________________
OPTIONEE
Address: _______________________________
________________________________________
ATTACHMENTS
- -----------
Exhibit A - Automatic Stock Option Agreement
Exhibit B - Plan Summary and Prospectus
<PAGE>
EXHIBIT A
---------
AUTOMATIC STOCK OPTION AGREEMENT
--------------------------------
<PAGE>
EXHIBIT B
---------
PLAN SUMMARY AND PROSPECTUS
---------------------------
<PAGE>
RELEASENOW.COM CORPORATION
AUTOMATIC STOCK OPTION AGREEMENT
--------------------------------
RECITALS
- --------
A. The Corporation has implemented an automatic option grant program
under the Plan pursuant to which eligible non-employee members of the Board will
automatically receive special option grants at periodic intervals over their
period of Board service in order to provide such individuals with a meaningful
incentive to continue to serve as members of the Board.
B. Optionee is an eligible non-employee Board member, and this
Agreement is executed pursuant to, and is intended to carry out the purposes of,
the Plan in connection with the automatic grant of an option to purchase shares
of Common Stock under the Plan.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as
---------------
of the Grant Date, a Non-Statutory Option to purchase up to the number of Option
Shares specified in the Grant Notice. The Option Shares shall be purchasable
from time to time during the option term specified in Paragraph 2 at the
Exercise Price.
2. Option Term. This option shall have a term of ten (10) years
-----------
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5, 6 or 7.
3. Limited Transferability.
-----------------------
(a) This option may be assigned in whole or in part during
Optionee's lifetime to one or more members of Optionee's family or to a trust
established for the exclusive benefit of one or more such family members or to
Optionee's former spouse, to the extent such assignment is in connection with
the Optionee's estate plan or pursuant to a domestic relations order. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment.
(b) Should the Optionee die while holding this option, then this
option shall be transferred in accordance with Optionee's will or the laws of
inheritance. However, Optionee may designate one or more persons as the
beneficiary or beneficiaries of this option, and this option shall, in
accordance with such designation, automatically be transferred to such
<PAGE>
beneficiary or beneficiaries upon the Optionee's death while holding this
option. Such beneficiary or beneficiaries shall take the transferred option
subject to all the terms and conditions of this Agreement, including (without
limitation) the limited time period during which this option may, pursuant to
Paragraph 5, be exercised following Optionee's death.
4. Exercisability/Vesting.
----------------------
(a) This option shall be immediately exercisable for any or all
of the Option Shares, whether or not the Option Shares are at the time vested in
accordance with the Vesting Schedule, and shall remain so exercisable until the
Expiration Date or sooner termination of the option term under Paragraph 5, 6 or
7.
(b) Optionee shall, in accordance with the Vesting Schedule set
forth in the Grant Notice, vest in the Option Shares in one or more installments
over his or her period of Board service. Vesting in the Option Shares may be
accelerated pursuant to the provisions of Paragraph 5, 6 or 7. In no event,
however, shall any additional Option Shares vest following Optionee's cessation
of service as a Board member.
5. Cessation of Board Service. Should Optionee's service as a
--------------------------
Board member cease while this option remains outstanding, then the option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
outstanding) prior to the Expiration Date in accordance with the following
provisions:
(a) Should Optionee cease to serve as a Board member for any
reason (other than death or Permanent Disability) while this option is
outstanding, then the period during which this option may be exercised shall be
reduced to a twelve (12)-month period measured from the date of such cessation
of Board service, but in no event shall this option be exercisable at any time
after the Expiration Date. During such limited period of exercisability, this
option may not be exercised in the aggregate for more than the number of Option
Shares (if any) in which Optionee is vested on the date of his or her cessation
of Board service. Upon the earlier of (i) the expiration of such twelve
-------
(12)-month period or (ii) the specified Expiration Date, the option shall
terminate and cease to be exercisable with respect to any vested Option Shares
for which the option has not been exercised.
(b) Should Optionee die during the twelve (12)-month period
following his or her cessation of Board service and hold this option at the time
of his or her death, then the personal representative of Optionee's estate or
the person or persons to whom the option is transferred pursuant to Optionee's
will or the laws of inheritance or the designated beneficiary or beneficiaries
of this option (as the case may be) shall have the right to exercise this option
for any or all of the Option Shares in which Optionee is vested at the time of
Optionee's cessation of Board service (less any Option Shares purchased by
Optionee after such cessation of Board service but prior to death). Any such
right to exercise this option shall terminate, and this option shall accordingly
cease to be exercisable for such vested Option Shares, upon the earlier of (i)
-------
the expiration of the twelve (12)-month period measured from the date of
Optionee's cessation of Board service or (ii) the specified Expiration Date.
<PAGE>
(c) Should Optionee cease service as a Board member by reason of
death or Permanent Disability, then any Option Shares at the time subject to
this option but not otherwise vested shall vest in full so that this option may
be exercised for any or all of the Option Shares as fully vested shares of
Common Stock at any time prior to the earlier of (i) the expiration of the
-------
twelve (12)-month period measured from the date of Optionee's cessation of Board
service or (ii) the specified Expiration Date, whereupon this option shall
terminate and cease to be outstanding.
(d) Upon Optionee's cessation of Board service for any reason
other than death or Permanent Disability, this option shall immediately
terminate and cease to be outstanding with respect to any and all Option Shares
in which Optionee is not otherwise at that time vested in accordance with the
normal Vesting Schedule or the special vesting acceleration provisions of
Paragraphs 6 and 7 below.
6. Corporate Transaction.
---------------------
(a) In the event of a Corporate Transaction, any Option Shares
at the time subject to this option but not otherwise vested shall automatically
vest so that this option shall, immediately prior to the specified effective
date for the Corporate Transaction, become exercisable for all of the Option
Shares as fully-vested shares of Common Stock and may be exercised for any or
all of those vested shares. Immediately following the consummation of the
Corporate Transaction, this option shall terminate and cease to be outstanding,
except to the extent assumed by the successor corporation or its parent company.
(b) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same. To the
--------
extent the actual holders of the Corporation's outstanding Common Stock receive
cash consideration for their Common Stock in consummation of the Corporate
Transaction, the successor corporation may, in connection with the assumption of
this option, substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock
in such Corporate Transaction.
7. Change in Control/Hostile Take-Over.
-----------------------------------
(a) Any Option Shares subject to this option at the time of a
Change in Control but not otherwise vested shall automatically vest so that this
option shall, immediately prior to the effective date of such Change in Control,
become exercisable for all of the Option Shares as fully-vested shares of Common
Stock and may be exercised for any or all of those vested shares. This option
shall remain exercisable for such fully-vested Option Shares until the earliest
--------
to occur of (i) the specified Expiration Date, (ii) the sooner termination of
this option in accordance with Paragraph 5 or 6 or (iii) the surrender of this
option under Paragraph 7(b).
<PAGE>
(b) Optionee shall have an unconditional right, exercisable at
any time during the thirty (30)-day period immediately following the
consummation of a Hostile Take-Over to surrender this option to the Corporation
in exchange for a cash distribution from the Corporation in an amount equal to
the excess of (i) the Take-Over Price of the Option Shares at the time subject
to the surrendered option (whether or not those Option Shares are otherwise at
the time vested) over (ii) the aggregate Exercise Price payable for such shares.
This Paragraph 7(b) limited stock appreciation right shall in all events
terminate upon the expiration or sooner termination of the option term and may
not be assigned or transferred by Optionee, except to the extent the option is
transferred in accordance with the provisions of this Agreement.
(c) To exercise the Paragraph 7(b) limited stock appreciation
right, Optionee must, during the applicable thirty (30)-day exercise period,
provide the Corporation with written notice of the option surrender in which
there is specified the number of Option Shares as to which the option is being
surrendered. Such notice must be accompanied by the return of Optionee's copy of
this Agreement, together with any written amendments to such Agreement. The cash
distribution shall be paid to Optionee within five (5) business days following
such delivery date. The exercise of such limited stock appreciation right in
accordance with the terms of this Paragraph 7 has been pre-approved pursuant to
the express provisions of the Automatic Option Grant Program, and neither the
approval of the Plan Administrator nor the consent of the Board shall be
required at the time of the actual option surrender and cash distribution. Upon
receipt of the cash distribution, this option shall be cancelled with respect to
the shares subject to the surrendered option (or the surrendered portion), and
Optionee shall cease to have any further right to acquire those Option Shares
under this Agreement. The option shall, however, remain outstanding for the
balance of the Option Shares (if any) in accordance with the terms and
provisions of this Agreement, and the Corporation shall accordingly issue a
replacement stock option agreement (substantially in the same form as this
Agreement) for those remaining Option Shares.
8. Adjustment in Option Shares. Should any change be made to the
---------------------------
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
9. Stockholder Rights. The holder of this option shall not have any
------------------
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
10. Manner of Exercising Option.
---------------------------
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
<PAGE>
(i) To the extent the option is exercised for vested
Option Shares, execute and deliver to the Corporation a Notice of Exercise
for the Option Shares for which the option is exercised. To the extent this
option is exercised for unvested Option Shares, execute and deliver to the
Corporation a Purchase Agreement for those unvested Option Shares.
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(A) cash or check made payable to the Corporation,
(B) shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(C) to the extent the option is exercised for vested
Option Shares, through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable instructions (I) to
a Corporation-designated brokerage firm to effect the immediate sale
of the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover
the aggregate Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise
and (II) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete
the sale.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee)
have the right to exercise this option.
(b) Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the Exercise Price
must accompany the Notice of Exercise (or the Purchase Agreement) delivered to
the Corporation in connection with the option exercise.
(c) As soon after the Exercise Date as practical, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto. To the extent any such Option
Shares are unvested, the certificates for those Option Shares shall be endorsed
with an appropriate legend evidencing the Corporation's repurchase rights and
may be held in escrow with the Corporation until such shares vest.
<PAGE>
(d) In no event may this option be exercised for any fractional
shares.
11. No Impairment of Rights. This Agreement shall not in any way
-----------------------
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. In addition, this Agreement shall not in any way be
construed or interpreted so as to affect adversely or otherwise impair the right
of the Corporation or the stockholders to remove Optionee from the Board at any
time in accordance with the provisions of applicable law.
12. Compliance with Laws and Regulations.
------------------------------------
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
13. Successors and Assigns. Except to the extent otherwise provided
----------------------
in Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns, the legal representatives, heirs and legatees of
Optionee's estate and any beneficiaries of this option designated by Optionee.
14. Notices. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
15. Construction. This Agreement and the option evidenced hereby are
------------
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan.
16. Governing Law. The interpretation, performance and enforcement
-------------
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify ReleaseNow.com Corporation (the "Corporation") that I
elect to purchase _____________ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $________________ per share
(the "Exercise Price") pursuant to that certain option (the "Option") granted to
me under the Corporation's 2000 Stock Incentive Plan on _________________,
________.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price for any Purchased Shares in which I am vested at the time of exercise of
the Option.
_________________________, ________
Date
_______________________________________
Optionee
_______________________________________
Address: ______________________________
_______________________________________
Print name in exact manner
it is to appear on the
stock certificate: _______________________________________
Address to which certificate
is to be sent, if different
from address above: _______________________________________
_______________________________________
Social Security Number: _______________________________________
_______________________________________
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Automatic Stock Option Agreement.
---------
B. Board shall mean the Corporation's Board of Directors.
-----
C. Change in Control shall mean a change in ownership or control of
-----------------
the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time the Board approved such election or
nomination.
D. Common Stock shall mean shares of the Corporation's common stock.
------------
E. Code shall mean the Internal Revenue Code of 1986, as amended.
----
F. Corporate Transaction shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
<PAGE>
G. Corporation shall mean ReleaseNow.com Corporation, a Delaware
-----------
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of ReleaseNow.com Corporation which shall by appropriate
action adopt the Plan.
H. Exercise Date shall mean the date on which the option shall have
-------------
been exercised in accordance with Paragraph 10 of the Agreement.
I. Exercise Price shall mean the exercise price per share as
--------------
specified in the Grant Notice.
J. Expiration Date shall mean the date on which the option expires
---------------
as specified in the Grant Notice.
K. Fair Market Value per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange which
serves as the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange.
If there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price on
the last preceding date for which such quotation exists.
L. Grant Date shall mean the date of grant of the option as
----------
specified in the Grant Notice.
M. Grant Notice shall mean the Notice of Grant of Automatic Stock
------------
Option accompanying the Agreement, pursuant to which Optionee has been informed
of the basic terms of the option evidenced hereby.
N. Hostile Takeover shall mean the acquisition, directly or
----------------
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
<PAGE>
O. 1934 Act shall mean the Securities Exchange Act of 1934, as
--------
amended.
P. Non-Statutory Option shall mean an option not intended to satisfy
--------------------
the requirements of Code Section 422.
Q. Notice of Exercise shall mean the notice of exercise in the form
------------------
of Exhibit I.
R. Option Shares shall mean the number of shares of Common Stock
-------------
subject to the option.
S. Optionee shall mean the person to whom the option is granted as
--------
specified in the Grant Notice.
T. Permanent Disability shall mean the inability of Optionee to
--------------------
perform his or her usual duties as a member of the Board by reason of any
medically determinable physical or mental impairment which is expected to result
in death or has lasted or can be expected to last for a continuous period of
twelve (12) months or more.
U. Plan shall mean the Corporation's 2000 Stock Incentive Plan.
----
V. Purchase Agreement shall mean the stock purchase agreement (in
------------------
form and substance satisfactory to the Corporation) which grants the Corporation
the right to repurchase, at the Exercise Price, any and all unvested Option
Shares held by Optionee at the time of Optionee's cessation of Board service and
which precludes the sale, transfer or other disposition of any purchased Option
Shares while those shares are unvested and subject to such repurchase right.
W. Stock Exchange shall mean the American Stock Exchange or the New
--------------
York Stock Exchange.
X. Take-Over Price shall mean the greater of (i) the Fair Market
--------------- -------
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting the
Hostile Take-Over.
Y. Vesting Schedule shall mean the vesting schedule specified in the
----------------
Grant Notice, pursuant to which the Option Shares will vest in one or more
installments over the Optionee's period of Board service, subject to
acceleration in accordance with the provisions of the Agreement.
<PAGE>
RELEASENOW.COM CORPORATION
DIRECTOR FEE ELECTION
---------------------
Pursuant to the Director Fee Option Grant Program in effect under the
Corporation's 2000 Stock Incentive Plan (the "Plan"), I hereby elect to apply a
portion of my annual retainer fee for calendar year 200___ to the acquisition of
a special option grant to purchase shares of the Corporation's common stock (the
"Common Stock"). The percentage of my retainer fee to be so applied is as
follows:
________% of the annual retainer fee.
I hereby acknowledge and agree that this election shall be irrevocable
and that the option to be granted pursuant to such election will be subject to
the following terms:
1. The option will be granted on January _____, 200___.
2. The exercise price per share will be equal to one-third of the
fair market value per share of Common Stock (closing selling price per share on
the Nasdaq National Market) on the option grant date.
3. The number of shares of Common Stock subject to the option will
be determined by dividing (i) the portion of the retainer fee I have elected to
apply to the acquisition of the option by (ii) two-thirds of the fair market
value per share of Common Stock on the option grant date.
4. The option will become exercisable in twelve (12) successive
equal monthly installments upon my completion of each calendar month of service
on the Board during calendar year 200__, with the first such installment to
become exercisable upon my continuation in Board service through January 31,
200___.
5. The remaining terms of the option will be as set forth in the
Director Fee Option Grant Program in effect under the Plan.
Signature:_________________________________
Dated:_____________________________________
<PAGE>
RELEASENOW.COM CORPORATION
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
----------------------------------------
Stock OPTION UNDER DIRECTOR FEE OPTION GRANT PROGRAM
----------------------------------------------------
Notice is hereby given of the following option grant (the "Option") to
purchase shares of Common Stock of ReleaseNow.com Corporation (the
"Corporation"):
Optionee: ____________________________________________________________
--------
Grant Date: __________________________________________________________
----------
Exercise Price: $___________________________________________ per share
--------------
Number of Option Shares: ______________________________________ shares
-----------------------
Expiration Date: _____________________________________________________
---------------
Type of Option: Non-Statutory Option
--------------
Exercise Schedule: The Option shall become exercisable for the Option
-----------------
Shares in a series of twelve (12) successive equal monthly
installments upon Optionee's completion of each calendar month of
service as a member of the Corporation's Board of Directors (the
"Board") during calendar year 200___, with the first such installment
to become exercisable upon Optionee's continuation in Board service
through January 31, 200___. In no event shall the Option become
exercisable for any additional Option Shares after Optionee's
cessation of Board service.
Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the Director Fee Option Grant Program under
the ReleaseNow.com Corporation 2000 Stock Incentive Plan (the "Plan"). Optionee
further agrees to be bound by the terms of the Plan and the terms of the Option
as set forth in the Director Fee Stock Option Agreement attached hereto as
Exhibit A.
Optionee hereby acknowledge receipt of a copy of the official
prospectus for the Plan in the form attached hereto as Exhibit B. A copy of the
Plan is available upon request made to the Corporate Secretary at the
Corporation's principal offices.
<PAGE>
No Impairment of Rights. Nothing in this Notice or in the Plan or in
-----------------------
the attached Director Fee Stock Option Agreement shall interfere with or
otherwise restrict in any way the rights of the Corporation or the Corporation's
stockholders to remove Optionee form the Board at any time in accordance with
the provisions of applicable law.
Definitions. All capitalized terms in this Notice shall have the
-----------
meaning assigned to them in this Notice or in the attached Director Fee Stock
Option Agreement.
Dated:______________________, ______
RELEASENOW.COM CORPORATION
By:_____________________________________
Title:__________________________________
________________________________________
OPTIONEE
Address:________________________________
________________________________________
ATTACHMENTS
- -----------
Exhibit A - Director Fee Stock Option Agreement
Exhibit B - Plan Summary and Prospectus
<PAGE>
EXHIBIT A
---------
DIRECTOR FEE STOCK OPTION AGREEMENT
-----------------------------------
<PAGE>
EXHIBIT B
---------
PLAN SUMMARY AND PROSPECTUS
---------------------------
<PAGE>
RELEASENOW.COM CORPORATION
DIRECTOR FEE STOCK OPTION AGREEMENT
-----------------------------------
RECITALS
- --------
A The Corporation has implemented a special director fee stock option
grant program under the Plan pursuant to which non-employee members of the Board
may, by prior irrevocable election, apply all or any portion of the annual
retainer fee otherwise payable to them in cash to the acquisition of a special
stock option grant.
B. Optionee is a non-employee Board member who made the requisite
election to apply a portion of his or her retainer fee to the acquisition of the
special option, and this Agreement is executed pursuant to, and is intended to
carry out the purposes of, the Plan in connection with the grant of such special
option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee,
---------------
as of the Grant Date, a Non-Statutory Stock Option to purchase up to the number
of Option Shares specified in the Grant Notice. The Option Shares shall be
purchasable from time to time during the option term specified in Paragraph 2 at
the Exercise Price.
2. Option Term. This option shall have a term of ten (10) years
-----------
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5, 6 or 8.
3. Limited Transferability
-----------------------
(a) This option may, in connection with the Optionee's estate
plan, be assigned in whole or in part during Optionee's lifetime to one or more
members of the Optionee's immediate family or to a trust established for the
exclusive benefit of one or more such family members. The assigned portion shall
be exercisable only by the person or persons who acquire a proprietary interest
in the option pursuant to such assignment. The terms applicable to the assigned
portion shall be the same as those in effect for this option immediately prior
to such assignment.
(b) Should the Optionee die while holding this option, then this
option shall be transferred in accordance with Optionee's will or the laws of
inheritance. However, Optionee may designate one or more persons as the
beneficiary or beneficiaries of this option, and this option shall, in
accordance with such designation, automatically be transferred
<PAGE>
to such beneficiary or beneficiaries upon the Optionee's death while holding
this option. Such beneficiary or beneficiaries shall take the transferred option
subject to all the terms and conditions of this Agreement, including (without
limitation) the limited time period during which this option may, pursuant to
Paragraph 5, be exercised following Optionee's death.
4. Exercisability/Vesting. This option shall become exercisable for
----------------------
the Option Shares in a series of successive equal monthly installments as
specified in the Grant Notice. As the option becomes exercisable for those
installments, the installments shall accumulate, and the option shall remain
exercisable for the accumulated installments until the Expiration Date or sooner
termination of the option term under Paragraph 5, 6 or 8.
5. Cessation of Board Service. Should Optionee's service as a Board
--------------------------
member cease while this option remains outstanding, then the option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
outstanding) prior to the Expiration Date in accordance with the following
provisions:
(i) Should Optionee cease to serve as a Board member for
any reason (other than death or Permanent Disability) while holding this
option, then the period during which this option may be exercised shall be
reduced to a three (3)-year period measured from the date of such cessation
of Board service, but in no event shall this option be exercisable at any
time after the Expiration Date. During such limited exercise period, this
option may not be exercised in the aggregate for more than the number of
Option Shares (if any) for which the option is exercisable on the date of
Optionee's cessation of Board service. Upon the earlier of (A) the
-------
expiration of such three (3)-year period or (B) the specified Expiration
Date, the option shall terminate and cease to be exercisable with respect
to any exercisable Option Shares for which the option has not been
exercised.
(ii) Should Optionee cease service as a Board member by
reason of death or Permanent Disability, then this option shall
automatically accelerate and become immediately exercisable for all the
Option Shares at the time subject to this option so that Optionee (or the
personal representative of Optionee's estate or the person or persons to
whom the option is transferred upon Optionee's death or the designated
beneficiary or beneficiaries of this option, as the case may be) shall have
the right to exercise this option for any or all of those Option Shares as
fully-vested shares of Common Stock. Any such right to exercise this option
shall lapse upon the earlier of (A) the expiration of the three (3)-year
-------
period measured from the date of Optionee's cessation of Board service or
(B) the specified Expiration Date.
(iii) Upon Optionee's cessation of Board service for any
reason other than death or Permanent Disability, this option shall
immediately terminate and cease to be outstanding with respect to any and
all Option Shares for which the option is not otherwise at that time
exercisable.
<PAGE>
6. Corporate Transaction.
---------------------
(a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable for all the Option
Shares, shall automatically accelerate so that this option shall, immediately
prior to the effective date of such Corporate Transaction, become exercisable
for all the Option Shares at the time subject to this option and may be
exercised for any or all of those Option Shares as fully-vested shares of Common
Stock. Immediately following such Corporate Transaction, this option shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).
(b) To the extent assumed by the successor corporation (or
parent thereof) in connection with such Corporate Transaction, this option shall
be appropriately adjusted, immediately after such Corporate Transaction, to
apply to the number and class of securities which would have been issuable to
Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction, and appropriate
adjustments shall also be made to the Exercise Price, provided the aggregate
--------
Exercise Price shall remain the same. This option, as so assumed, shall remain
fully exercisable for all the Option Shares subject to such option until the
earlier of (i) the expiration of the three (3)-year period measured from the
- -------
date of Optionee's cessation of Board service or (ii) the specified Expiration
Date.
(c) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. Change in Control.
-----------------
(a) This option, to the extent outstanding at the time of a
Change of Control but not otherwise fully exercisable for all the Option Shares,
shall automatically accelerate so that this option shall, immediately prior to
the effective date of such Change in Control, become exercisable for all the
Option Shares at the time subject to this option and may be exercised for any or
all of those Option Shares as fully-vested shares of Common Stock.
(b) The option shall remain exercisable for such fully-vested
Option Shares until the earliest to occur of (i) the expiration of the three
--------
(3)-year period measured from the date of Optionee's cessation of Board service,
(ii) the specified Expiration Date, (iii) the termination of the option in
connection with a Corporate Transaction or (iv) the cash-out of the option
pursuant to the provisions of Paragraph 8.
8. Hostile Take-Over Optionee is hereby granted a limited stock
-----------------
appreciation right exercisable upon the following terms and conditions:
<PAGE>
(a) Optionee shall have the unconditional right, exercisable at
any time during the thirty (30)-day period immediately following a Hostile Take-
Over, to surrender this option to the Corporation. In return for the surrendered
option, Optionee shall receive a cash distribution from the Corporation in an
amount equal to the excess of (A) the Take-Over Price of the shares of Common
Stock which are at the time subject to the surrendered option (whether or not
the option is otherwise at that time exercisable for those Option Shares) over
(B) the aggregate Exercise Price payable for such shares.
(b) To exercise this limited stock appreciation right, Optionee
must, during the applicable thirty (30)-day exercise period, provide the
Corporation with written notice of the option surrender in which there is
specified the number of Option Shares as to which the option is being
surrendered. Such notice must be accompanied by the return of Optionee's copy of
this Agreement, together with any written amendments to such Agreement. The cash
distribution shall be paid to Optionee within five (5) business days following
such delivery date. The exercise of the limited stock appreciation right in
accordance with the terms of this Paragraph 8 has been pre-approved pursuant to
the express provisions of the Plan, and no further approval of the Plan
Administrator or the Board shall be required at the time of the actual option
surrender and cash distribution. Upon receipt of such cash distribution, this
option shall be cancelled with respect to the Option Shares for which the option
has been surrendered, and Optionee shall cease to have any further right to
acquire those Option Shares under this Agreement. The option shall, however,
remain outstanding for the balance of the Option Shares (if any) in accordance
with the terms of this Agreement, and the Corporation shall issue a replacement
stock option agreement (substantially in the same form as this Agreement) for
those remaining Option Shares.
(c) In no event may this limited stock appreciation right be
exercised when there is not a positive spread between the Fair Market Value of
the Option Shares subject to the surrendered option and the aggregate Exercise
Price payable for such shares. This limited stock appreciation right shall in
all events terminate upon the expiration or sooner termination of the option
term and may not be assigned or transferred by Optionee, except to the extent
the option is transferred in accordance with the provisions of this Agreement.
9. Stockholder Rights. The holder of this option shall not have
------------------
any stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
10. Adjustment in Option Shares. Should any change be made to the
---------------------------
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the number and/or
class of securities subject to this option and (ii) the Exercise Price in order
to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
<PAGE>
11. Manner of Exercising Option.
---------------------------
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(A) cash or check made payable to the Corporation,
(B) shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(C) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable instructions (I) to
a Corporation-designated brokerage firm to effect the immediate sale
of the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover
the aggregate Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income taxes required to be
withheld by the Corporation by reason of such exercise and (II) to the
Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee)
have the right to exercise this option.
(b) As soon after the Exercise Date as practical, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
<PAGE>
12. Compliance with Laws and Regulations.
------------------------------------
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
13. Successors and Assigns. Except to the extent otherwise provided
----------------------
in Paragraph 3, the provisions of this Agreement shall inure to the benefit of,
and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns, the legal representatives, heirs and legatees of
Optionee's estate and any beneficiaries of this option designated by Optionee.
14. Notices. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
15. Construction. This Agreement and the option evidenced hereby are
------------
made and granted pursuant to the director fee option grant program in effect
under the Plan and are in all respects limited by and subject to the terms of
that program.
16. Governing Law. The interpretation, performance and enforcement
-------------
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Director Fee Stock Option Agreement.
---------
B. Board shall mean the Corporation's Board of Directors.
-----
C. Change in Control shall mean a change in ownership or control of the
-----------------
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time the Board approved such election or
nomination.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
----
E. Common Stock shall mean the Corporation's common stock.
------------
F. Corporate Transaction shall mean either of the following stockholder-
---------------------
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
<PAGE>
G. Corporation shall mean ReleaseNow.com Corporation, a Delaware
-----------
corporation, any successor corporation to all or substantially all of the assets
or voting stock of ReleaseNow.com Corporation which shall by appropriate action
adopt the Plan.
H. Exercise Date shall mean the date on which the option shall have been
-------------
exercised in accordance with Paragraph 10 of the Agreement.
I. Exercise Price shall mean the exercise price per share as specified in
--------------
the Grant Notice.
J. Expiration Date shall mean the date on which the option expires as
---------------
specified in the Grant Notice.
K. Fair Market Value per share of Common Stock on any relevant date shall
-----------------
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no selling price quoted for the Common Stock
on the date in question, then the Fair Market Value shall be closing
selling price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange serving
as the primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange. If there is
no selling price quoted for the Common Stock on the date in question, then
the Fair Market Value shall be the average of the high and low selling
price on the last preceding date for which such quotation exists.
L. Grant Date shall mean the date of grant of the option as specified in
----------
the Grant Notice.
M. Grant Notice shall mean the Notice of Grant of Non-Employee Director
------------
Stock Option Under Director Fee Option Grant Program accompanying the Agreement,
pursuant to which Optionee has been informed of the basic terms of the option
evidenced hereby.
N. Hostile Take-Over shall mean the acquisition, directly or indirectly,
-----------------
by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders which the Board
does not recommend such stockholders to accept.
<PAGE>
O. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
--------
P. Non-Statutory Stock Option shall mean an option not intended to
--------------------------
satisfy the requirements of Code Section 422.
Q. Notice of Exercise shall mean the written notice of the option
------------------
exercise on the form provided by the Corporation for such purpose.
R. Option Shares shall mean the number of shares of Common Stock subject
-------------
to the option as specified in the Grant Notice.
S. Optionee shall mean the person to whom the option is granted as
--------
specified in the Grant Notice.
T. Permanent Disability shall mean the inability of Optionee to perform
--------------------
his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.
U. Plan shall mean the Corporation's 2000 Stock Incentive Plan.
----
V. Stock Exchange shall mean the American Stock Exchange or the New York
--------------
Stock Exchange.
W. Take-Over Price per share shall mean the greater of (A) the Fair
--------------- -------
Market Value per Option Share on the option surrender date under Paragraph 8 or
(B) the highest reported price per share of Common Stock paid by the tender
offeror in effecting the Hostile Take-Over.
<PAGE>
EXHIBIT 10.5
RELEASENOW.COM CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the interests
of ReleaseNow.Com Corporation, a Delaware corporation, by providing eligible
employees with the opportunity to acquire a proprietary interest in the
Corporation through participation in a payroll deduction based employee stock
purchase plan designed to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of Common
Stock purchased on the open market. The number of shares of Common Stock
initially reserved for issuance over the term of the Plan shall be limited to
Nine Hundred Thousand (900,000) shares.
B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of January each
calendar year during the term of the Plan, beginning with calendar year 2000, by
an amount equal to one percent (1%) of the total number of shares
of Common Stock outstanding on the last trading day in December of the
immediately preceding calendar year, but in no event shall any such annual
increase exceed 600,000 shares.
C. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and class of securities issuable under
the Plan, (ii) the maximum number and class of securities purchasable per
Participant on any one Purchase Date, (iii) the maximum number and class of
securities purchasable in total by all Participants on any one Purchase Date,
(iv) the maximum number and/or class of securities by which the share reserve is
to increase automatically each calendar year pursuant to the provisions of
Section III.B of this Article One and (v) the number and class
<PAGE>
of securities and the price per share in effect under each outstanding purchase
right in order to prevent the dilution or enlargement of benefits thereunder.
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive offering periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.
B. Each offering period shall be of such duration (not to exceed
twenty-four (24) months) as determined by the Plan Administrator prior to the
start date of such offering period. However, the initial offering period shall
commence at the Effective Time and terminate on the last business day in January
2002. The next offering period shall commence on the first business day in
February 2002, and subsequent offering periods shall commence as designated by
the Plan Administrator.
C. Each offering period shall be comprised of a series of one or
more successive Purchase Intervals. Purchase Intervals shall run from the first
business day in February to the last business day in July each year and from the
first business day in August each year to the last business day in January in
the following year. However, the first Purchase Interval in effect under the
initial offering period shall commence at the Effective Time and terminate on
the last business day in July 2000.
D. Should the Fair Market Value per share of Common Stock on any
Purchase Date within an offering period be less than the Fair Market Value per
share of Common Stock on the start date of that offering period, then that
offering period shall automatically terminate immediately after the purchase of
shares of Common Stock on such Purchase Date, and a new offering period shall
commence on the next business day following such Purchase Date. The new
offering period shall have a duration of twenty (24) months, unless a shorter
duration is established by the Plan Administrator within five (5) business days
following the start date of that offering period.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start date of
any offering period under the Plan may enter that offering period on such start
date or on any subsequent Semi-Annual Entry Date within that offering period,
provided he or she remains an Eligible Employee.
B. Each individual who first becomes an Eligible Employee after the
start date of an offering period may enter that offering period on any
subsequent Semi-Annual Entry Date within that offering period on which he or she
is an Eligible Employee.
2.
<PAGE>
C. The date an individual enters an offering period shall be
designated his or her Entry Date for purposes of that offering period.
D. To participate in the Plan for a particular offering period, the
Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization) and file such forms with the Plan Administrator (or its
designate) on or before his or her scheduled Entry Date.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for purposes
of acquiring shares of Common Stock during an offering period may be any
multiple of one percent (1%) of the Cash Earnings paid to the Participant during
each Purchase Interval within that offering period, up to a maximum of fifteen
percent (15%). The deduction rate so authorized shall continue in effect
throughout the offering period, except to the extent such rate is changed in
accordance with the following guidelines:
(i) The Participant may, at any time during the offering period,
reduce his or her rate of payroll deduction to become effective as soon as
possible after filing the appropriate form with the Plan Administrator. The
Participant may not, however, effect more than one (1) such reduction per
Purchase Interval.
(ii) The Participant may, prior to the commencement of any new
Purchase Interval within the offering period, increase the rate of his or
her payroll deduction by filing the appropriate form with the Plan
Administrator. The new rate (which may not exceed the fifteen percent (15%)
maximum) shall become effective on the start date of the first Purchase
Interval following the filing of such form.
B. Payroll deductions shall begin on the first pay day
administratively feasible following the Participant's Entry Date into the
offering period and shall (unless sooner terminated by the Participant) continue
through the pay day ending with or immediately prior to the last day of that
offering period. The amounts so collected shall be credited to the
Participant's book account under the Plan, but no interest shall be paid on the
balance from time to time outstanding in such account. The amounts collected
from the Participant shall not be required to be held in any segregated account
or trust fund and may be commingled with the general assets of the Corporation
and used for general corporate purposes.
C. Payroll deductions shall automatically cease upon the termination
of the Participant's purchase right in accordance with the provisions of the
Plan.
D. The Participant's acquisition of Common Stock under the Plan on
any Purchase Date shall neither limit nor require the Participant's acquisition
of Common Stock on any subsequent Purchase Date, whether within the same or a
different offering period.
3.
<PAGE>
VII. PURCHASE RIGHTS
A. Grant of Purchase Rights. A Participant shall be granted a
------------------------
separate purchase right for each offering period in which he or she
participates. The purchase right shall be granted on the Participant's Entry
Date into the offering period and shall provide the Participant with the right
to purchase shares of Common Stock, in a series of successive installments over
the remainder of such offering period, upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.
Under no circumstances shall purchase rights be granted under the Plan
to any Eligible Employee if such individual would, immediately after the grant,
own (within the meaning of Code Section 424(d)) or hold outstanding options or
other rights to purchase, stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Corporation
or any Corporate Affiliate.
B. Exercise of the Purchase Right. Each purchase right shall be
------------------------------
automatically exercised in installments on each successive Purchase Date within
the offering period, and shares of Common Stock shall accordingly be purchased
on behalf of each Participant on each such Purchase Date. The purchase shall be
effected by applying the Participant's payroll deductions for the Purchase
Interval ending on such Purchase Date to the purchase of whole shares of Common
Stock at the purchase price in effect for the Participant for that Purchase
Date.
C. Purchase Price. The purchase price per share at which Common
--------------
Stock will be purchased on the Participant's behalf on each Purchase Date within
the offering period shall be equal to eighty-five percent (85%) of the lower of
(i) the Fair Market Value per share of Common Stock on the Participant's Entry
Date into that offering period or (ii) the Fair Market Value per share of Common
Stock on that Purchase Date.
D. Number of Purchasable Shares. The number of shares of Common
----------------------------
Stock purchasable by a Participant on each Purchase Date during the offering
period shall be the number of whole shares obtained by dividing the amount
collected from the Participant through payroll deductions during the Purchase
Interval ending with that Purchase Date by the purchase price in effect for the
Participant for that Purchase Date. However, the maximum number of shares of
Common Stock purchasable per Participant on any one Purchase Date shall not
exceed 1,000 shares, subject to periodic adjustments in the event of certain
changes in the Corporation's capitalization. In addition, the maximum number of
shares of Common Stock purchasable in total by all Participants on any one
Purchase Date shall not exceed 225,000 shares, subject to periodic adjustments
in the event of certain changes in the Corporation's capitalization. However,
the Plan Administrator shall have the discretionary authority, exercisable prior
to the start of any offering period under the Plan, to increase or decrease the
limitations to be in effect for the number of shares purchasable per Participant
and in total by all Participants on each Purchase Date during that offering
period.
4.
<PAGE>
E. Excess Payroll Deductions. Any payroll deductions not applied to
-------------------------
the purchase of shares of Common Stock on any Purchase Date because they are not
sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable per Participant or in
total by all Participants on the Purchase Date shall be promptly refunded.
F. Termination of Purchase Right. The following provisions shall
-----------------------------
govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the next scheduled
Purchase Date in the offering period, terminate his or her outstanding
purchase right by filing the appropriate form with the Plan Administrator
(or its designate), and no further payroll deductions shall be collected
from the Participant with respect to the terminated purchase right. Any
payroll deductions collected during the Purchase Interval in which such
termination occurs shall, at the Participant's election, be immediately
refunded or held for the purchase of shares on the next Purchase Date. If
no such election is made at the time such purchase right is terminated,
then the payroll deductions collected with respect to the terminated right
shall be refunded as soon as possible.
(ii) The termination of such purchase right shall be
irrevocable, and the Participant may not subsequently rejoin the offering
period for which the terminated purchase right was granted. In order to
resume participation in any subsequent offering period, such individual
must re-enroll in the Plan (by making a timely filing of the prescribed
enrollment forms) on or before his or her scheduled Entry Date into that
offering period.
(iii) Should the Participant cease to remain an Eligible Employee
for any reason (including death, disability or change in status) while his
or her purchase right remains outstanding, then that purchase right shall
immediately terminate, and all of the Participant's payroll deductions for
the Purchase Interval in which the purchase right so terminates shall be
immediately refunded. However, should the Participant cease to remain in
active service by reason of an approved unpaid leave of absence, then the
Participant shall have the right, exercisable up until the last business
day of the Purchase Interval in which such leave commences, to (a) withdraw
all the payroll deductions collected to date on his or her behalf for that
Purchase Interval or (b) have such funds held for the purchase of shares on
his or her behalf on the next scheduled Purchase Date. In no event,
however, shall any further payroll deductions be collected on the
Participant's behalf during such leave. Upon the Participant's return to
active service (x) within ninety (90) days following the commencement of
such leave or (y) prior to the expiration of any longer period for which
such Participant's right to reemployment with the Corporation is guaranteed
by statute or contract, his or her payroll deductions under the Plan shall
automatically resume at the rate in
5.
<PAGE>
effect at the time the leave began, unless the Participant withdraws from
the Plan prior to his or her return. An individual who returns to active
employment following a leave of absence which exceeds in duration the
applicable (x) or (y) time period will be treated as a new Employee for
purposes of subsequent participation in the Plan and must accordingly re-
enroll in the Plan (by making a timely filing of the prescribed enrollment
forms) on or before his or her scheduled Entry Date into the offering
period.
G. Change in Control. Each outstanding purchase right shall
-----------------
automatically be exercised, immediately prior to the effective date of any
Change in Control, by applying the payroll deductions of each Participant for
the Purchase Interval in which such Change in Control occurs to the purchase of
whole shares of Common Stock at a purchase price per share equal to eighty-five
percent (85%) of the lower of (i) the Fair Market Value per share of Common
Stock on the Participant's Entry Date into the offering period in which such
Change in Control occurs or (ii) the Fair Market Value per share of Common Stock
immediately prior to the effective date of such Change in Control. However, the
applicable limitation on the number of shares of Common Stock purchasable per
Participant shall continue to apply to any such purchase, but not the limitation
applicable to the maximum number of shares of Common Stock purchasable in total
by all Participants on any one Purchase Date.
The Corporation shall use its best efforts to provide at least ten
(10)-days prior written notice of the occurrence of any Change in Control, and
Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Change in Control.
H. Proration of Purchase Rights. Should the total number of shares
----------------------------
of Common Stock to be purchased pursuant to outstanding purchase rights on any
particular date exceed the number of shares then available for issuance under
the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. Assignability. The purchase right shall be exercisable only by
-------------
the Participant and shall not be assignable or transferable by the Participant.
J. Stockholder Rights. A Participant shall have no stockholder
------------------
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.
VIII.ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other purchase right granted under this Plan and (ii)
similar rights accrued under other employee stock purchase plans
6.
<PAGE>
(within the meaning of Code Section 423)) of the Corporation or any Corporate
Affiliate, would otherwise permit such Participant to purchase more than Twenty-
Five Thousand Dollars ($25,000.00) worth of stock of the Corporation or any
Corporate Affiliate (determined on the basis of the Fair Market Value per share
on the date or dates such rights are granted) for each calendar year such rights
are at any time outstanding.
B. For purposes of applying such accrual limitations to the purchase
rights granted under the Plan, the following provisions shall be in effect:
(i) The right to acquire Common Stock under each outstanding
purchase right shall accrue in a series of installments on each successive
Purchase Date during the offering period on which such right remains
outstanding.
(ii) No right to acquire Common Stock under any outstanding
purchase right shall accrue to the extent the Participant has already
accrued in the same calendar year the right to acquire Common Stock under
one or more other purchase rights at a rate equal to Twenty-Five Thousand
Dollars ($25,000.00) worth of Common Stock (determined on the basis of the
Fair Market Value per share on the date or dates of grant) for each
calendar year such rights were at any time outstanding.
C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular Purchase Interval, then the payroll
deductions which the Participant made during that Purchase Interval with respect
to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions of this
Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on , 2000 and shall
become effective at the Effective Time, provided no purchase rights granted
under the Plan shall be exercised, and no shares of Common Stock shall be issued
hereunder, until (i) the Plan shall have been approved by the stockholders of
the Corporation and (ii) the Corporation shall have complied with all applicable
requirements of the 1933 Act (including the registration of the shares of Common
Stock issuable under the Plan on a Form S-8 registration statement filed with
the Securities and Exchange Commission), all applicable listing requirements of
any stock exchange (or the Nasdaq National Market, if applicable) on which the
Common Stock is listed for trading and all other applicable requirements
established by law or regulation. In the event such stockholder approval is not
obtained, or such compliance is not effected, within twelve (12) months after
the date on which the Plan is adopted by the Board, the Plan shall terminate and
have no further force or effect, and all sums collected from Participants during
the initial offering period hereunder shall be refunded.
7.
<PAGE>
B. Unless sooner terminated by the Board, the Plan shall terminate
upon the earliest of (i) the last business day in January 2010, (ii) the date on
which all shares available for issuance under the Plan shall have been sold
pursuant to purchase rights exercised under the Plan or (iii) the date on which
all purchase rights are exercised in connection with a Change in Control. No
further purchase rights shall be granted or exercised, and no further payroll
deductions shall be collected, under the Plan following such termination.
X. AMENDMENT OF THE PLAN
A. The Board may alter, amend, suspend or terminate the Plan at any
time to become effective immediately following the close of any Purchase
Interval. However, the Plan may be amended or terminated immediately upon Board
action, if and to the extent necessary to assure that the Corporation will not
recognize, for financial reporting purposes, any compensation expense in
connection with the shares of Common Stock offered for purchase under the Plan,
should the financial accounting rules applicable to the Plan at the Effective
Time be subsequently revised so as to require the Corporation to recognize
compensation expense in the absence of such amendment or termination.
B. In no event may the Board effect any of the following amendments
or revisions to the Plan without the approval of the Corporation's stockholders:
(i) increase the number of shares of Common Stock issuable under the Plan,
except for permissible adjustments in the event of certain changes in the
Corporation's capitalization, (ii) alter the purchase price formula so as to
reduce the purchase price payable for the shares of Common Stock purchasable
under the Plan or (iii) modify the eligibility requirements for participation in
the Plan.
XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of the Plan
shall be paid by the Corporation; however, each Plan Participant shall bear all
costs and expenses incurred by such individual in the sale or other disposition
of any shares purchased under the Plan.
B. Nothing in the Plan shall confer upon the Participant any right
to continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.
C. The provisions of the Plan shall be governed by the laws of the
State of California without resort to that State's conflict-of-laws rules.
8.
<PAGE>
Schedule A
Corporations Participating in
Employee Stock Purchase Plan
As of the Effective Time
------------------------
ReleaseNow.Com Corporation
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. Board shall mean the Corporation's Board of Directors.
-----
B. Cash Earnings shall mean the (i) regular base salary paid to a
-------------
Participant by one or more Participating Companies during such individual's
period of participation in one or more offering periods under the Plan plus (ii)
all overtime payments, bonuses, commissions, profit-sharing distributions and
other incentive-type payments received during such period. Such Cash Earnings
shall be calculated before deduction of (A) any income or employment tax
withholdings or (B) any contributions made by the Participant to any Code
Section 401(k) salary deferral plan or Code Section 125 cafeteria benefit
program now or hereafter established by the Corporation or any Corporate
Affiliate. However, Cash Earnings shall not include any contributions made on
the Participant's behalf by the Corporation or any Corporate Affiliate to any
employee benefit or welfare plan now or hereafter established (other than Code
Section 401(k) or Code Section 125 contributions deducted from such Cash
Earnings).
C. Change in Control shall mean a change in ownership of the
-----------------
Corporation pursuant to any of the following transactions:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete liquidation
or dissolution of the Corporation, or
(iii) the acquisition, directly or indirectly, by a person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by or is under common
control with the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
----
E. Common Stock shall mean the Corporation's common stock.
------------
<PAGE>
F. Corporate Affiliate shall mean any parent or subsidiary
-------------------
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.
G. Corporation shall mean ReleaseNow.Com Corporation, a Delaware
-----------
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of ReleaseNow.Com Corporation which shall by appropriate
action adopt the Plan.
H. Effective Time shall mean the time at which the Underwriting
--------------
Agreement is executed and the Common Stock priced for the initial public
offering of such Common Stock. Any Corporate Affiliate which becomes a
Participating Corporation after such Effective Time shall designate a subsequent
Effective Time with respect to its employee-Participants.
I. Eligible Employee shall mean any person who is employed by a
-----------------
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section 3401
(a).
J. Entry Date shall mean the date an Eligible Employee first
----------
commences participation in the offering period in effect under the Plan. The
earliest Entry Date under the Plan shall be the Effective Time.
K. Fair Market Value per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
(iii) purposes of the initial offering period which begins at the
Effective Time, the Fair Market Value shall be deemed to be equal to the
price per share at which the Common Stock is sold in the initial public
offering pursuant to the Underwriting Agreement.
<PAGE>
L. 1933 Act shall mean the Securities Act of 1933, as amended.
--------
M. Participant shall mean any Eligible Employee of a Participating
-----------
Corporation who is actively participating in the Plan.
N. Participating Corporation shall mean the Corporation and such
-------------------------
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan are listed in attached Schedule A.
O. Plan shall mean the Corporation's 2000 Employee Stock Purchase
----
Plan, as set forth in this document.
P. Plan Administrator shall mean the committee of two (2) or more
------------------
Board members appointed by the Board to administer the Plan.
Q. Purchase Date shall mean the last business day of each Purchase
-------------
Interval. The initial Purchase Date shall be July 31, 2000.
R. Purchase Interval shall mean each successive six (6)-month period
-----------------
within the offering period at the end of which there shall be purchased shares
of Common Stock on behalf of each Participant.
S. Semi-Annual Entry Date shall mean the first business day in
----------------------
February and August each year on which an Eligible Employee may first enter an
offering period.
T. Stock Exchange shall mean either the American Stock Exchange or
--------------
the New York Stock Exchange.
U. Underwriting Agreement shall mean the agreement between the
----------------------
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
<PAGE>
RELEASENOW.COM CORPORATION
EMPLOYEE STOCK PURCHASE PLAN ("ESPP")
ENROLLMENT/CHANGE FORM
<TABLE>
<CAPTION>
- ------------------
SECTION 1: Action Complete Sections:
- ------------------ -------------------------------- ----------------------------------------------------
<S> <C> <C>
ACTION [_] New Enrollment 2, 3, 7 and sign attached Stock Purchase Agreement
---
[_] Change Payroll Deduction 2, 4, 7
[_] Terminate Payroll Deductions 2, 5, 7
[_] Leave of Absence 2, 6, 7
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
- ------------------
SECTION 2: Name
- ------------------ -----------------------------------------------------------------------------------------------------
Last First MI Dept.
PERSONNEL
DATA Home Address
------------------------------------------------------------------------
Street
-----------------------------------------------------------------------
City State Zip Code
Social Security # [_][_][_] - [_][_] - [_][_][_][_]
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
- ------------------
SECTION 3: Effective with the Purchase Payroll Deduction Amount: __________ % of cash earnings*
Interval Beginning:
- ------------------
NEW [_] February 1, ______ * Must be a multiple of 1% up to a maximum of
ENROLLMENT [_] August 1, ______ ____% of cash earnings
[_] Initial Offering Period
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
- ------------------
SECTION 4: Effective with the I authorize the following new level of payroll deduction:
Pay Period Beginning:____________________________ ______________% of cash earnings*
- ------------------ Month, Day and Year * Must be a multiple of 1% up to a maximum of ____%
CHANGE of cash earnings
PAYROLL
DEDUCTIONS
NOTE: You may reduce your rate of payroll deductions once per 6-month purchase interval to become
---- effective as soon as possible following the filing of this change form. You may also increase your
rate of payroll deductions to become effective as of the start date of the next 6-month purchase
interval (first business day of February or August).
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
- ------------------
SECTION 5: Effective with the Your election to terminate your payroll deductions for
Pay Period Beginning:________________________________ the balance of the offering period cannot be
- ------------------ Month, Day and Year changed, and you may not rejoin the offering period
TERMINATE at a later date. You will not be able to resume
PAYROLL participation in the ESPP until the start of a new
DEDUCTIONS two-year offering period.
In connection with my voluntary termination of payroll deductions, I elect the following action regarding my
ESPP payroll deductions to date in the current six (6)-month purchase interval:
[_] Purchase shares of ReleaseNow.com Corporation at end of the interval
OR
[_] Refund ESPP payroll deductions collected
NOTE: If your employment terminates for any reason or your eligibility status changes (<20 hrs/week or <5
---- months/year), you will immediately cease to participate in the ESPP, and your ESPP payroll deductions
collected in that purchase interval will automatically be refunded to you.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
- ------------------
SECTION 6: In connection with my unpaid leave of absence, I elect the following action with respect to my ESPP payroll
deductions to date in the current purchase interval:
- ------------------
LEAVE OF
ABSENCE [_] Purchase shares of ReleaseNow.com Corporation at end of the interval
OR
[_] Refund ESPP payroll deductions collected
NOTE: If you take an unpaid leave of absence, your payroll deductions will immediately cease. Upon your return
to active service within 90 days after the start of your leave, your payroll deductions will automatically
resume at the rate in effect for you when you went on leave.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------
SECTION 7:
- ------------------
AUTHORIZATION I hereby authorize the specific action or actions indicated above.
- -------------------------------------- ---------------------------------
Date Signature of Employee
<PAGE>
RELEASENOW.COM CORPORATION
STOCK PURCHASE AGREEMENT
------------------------
I hereby elect to participate in the 2000 Employee Stock Purchase Plan
(the "ESPP") for the offering period specified below, and I hereby subscribe to
purchase shares of Common Stock of ReleaseNow.com Corporation (the
"Corporation") in accordance with the provisions of this Agreement and the ESPP.
I hereby authorize payroll deductions from each of my paychecks following my
entry into the ESPP in the 1% multiple of my cash earnings (not to exceed a
maximum of _____%) specified in my attached Enrollment Form.
The offering period is divided into a series of consecutive purchase
intervals. With the exception of the initial purchase interval, which will begin
at the time of the initial public offering of the Common Stock and end on July
31, 2000, those purchase intervals will each be of six months duration and will
run from the first business day of February to the last business day of July
each year and from the first business day of August each year to the last
business day of January in the following year. My participation will
automatically remain in effect from one purchase interval to the next in
accordance with my payroll deduction authorization, unless I withdraw from the
ESPP or change the rate of my payroll deduction or unless my employment status
changes. I may reduce the rate of my payroll deductions on one occasion per
purchase interval, and I may increase my rate of payroll deductions to become
effective at the beginning of any subsequent purchase interval.
My payroll deductions will be accumulated for the purchase of shares
of Common Stock on the last business day of each purchase interval within the
offering period. The purchase price per share will be equal to 85% of the lower
-----
of (i) the fair market value per share of Common Stock on my Entry Date into the
offering period or (ii) the fair market value per share on the purchase date. I
will also be subject to ESPP restrictions (i) limiting the maximum number of
shares that I may purchase per purchase interval, (ii) limiting the maximum
number of shares that may be purchased in total by all participants per purchase
interval and (iii) prohibiting me from purchasing more than $25,000 worth of
Common Stock for each calendar year my purchase right remains outstanding.
I may withdraw from the ESPP at any time prior to the last business
day of the purchase interval and elect either to have the Corporation refund all
my payroll deductions for that interval or to have such payroll deductions
applied to the purchase of Common Stock at the end of such interval. However, I
may not rejoin that particular offering period at a later date and must wait
until the start of a new offering to resume participation in the ESPP. Upon the
termination of my employment for any reason, including death or disability, or
my loss of eligible employee status, my participation in the ESPP will
immediately cease, and all my payroll deductions for the purchase interval in
which my employment terminates or my loss of eligibility occurs will immediately
be refunded.
If I take an unpaid leave of absence, my payroll deductions will
immediately cease, and any payroll deductions for the purchase interval in which
my leave begins will, at my election, either be refunded or applied to the
purchase of shares of Common Stock at the end of that purchase interval. If my
re-employment is guaranteed by law or contract, or if I return to active service
within ninety (90) days, then upon my return my payroll deductions will
automatically resume at the rate in effect when my leave began.
The Corporation will issue a stock certificate for the shares
purchased on my behalf after the end of each purchase interval. The certificate
will be issued in street name and will be deposited directly in my Corporation-
designated brokerage account. I will notify the Corporation of any disposition
of shares purchased under the ESPP, and I will satisfy all applicable income and
employment tax withholding requirements at the time of such disposition.
The Corporation has the right, exercisable in its sole discretion, to
amend or terminate all outstanding purchase rights under the ESPP at any time,
with such amendment or termination to become effective immediately following the
end of any purchase interval. However, such purchase rights may be amended or
terminated with an immediate effective date to the extent necessary to avoid the
Corporation's recognition of compensation expense for financial reporting
purposes, should the accounting principles applicable to the ESPP change. Upon
any such termination, I will cease to have any further rights to purchase shares
of common stock under this Agreement.
I have read this Agreement and hereby agree to be bound by the terms
of both this Agreement and the ESPP. The effectiveness of this Agreement is
dependent upon my eligibility to participate in the ESPP.
Date:________________________
Signature of Employee_______________________
Printed Name:_______________________________
Offering Period: Initial Offering Period ending January 31, 2002
Entry Date: _____________________
<PAGE>
EXHIBIT 10.6
------------
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE --
MODIFIED NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
[AIR LOGO]
1. Basic Provisions ("Basic Provisions").
1.1 Parties: This Lease ("Lease"), dated for reference purposes only,
August 10, 1998, is made by and between W.F. Batton Company, Inc., a California
corporation ("Lessor") and Release Software, Inc., a California corporation
("Lessee") (collectively the "Parties," or individually a "Party").
1.2(a) Premises: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of 990 Commercial Street, located in the
City of San Carlos, County of San Mateo, State of California, with zip code
94070, as outlined on Exhibit A attached hereto ("Premises"). The "Building" is
that certain building containing the Premises and generally described as
(describe briefly the nature of the Building): Approximately 15,363 rentable
square feet in a larger single story building.
In addition to Lessee's rights to use and occupy the Premises as hereinafter
specified, Lessee shall have non-exclusive rights to the Common Areas (as
defined in Paragraph 2.7 below) as hereinafter specified, but shall not have any
rights to the roof, exterior walls or utility raceways of the Building or to any
other buildings in the Industrial Center. The Premises, the Building, the
Common Areas, the land upon which they are located, along with all other
buildings and improvements thereon, are herein collectively referred to as the
"Industrial Center." (Also see Paragraph 2.)
1.2(b) Parking: 39 unreserved vehicle parking spaces ("Unreserved
Parking Spaces"); and 0 reserved vehicle parking spaces ("Reserved Parking
Spaces"). (Also see Paragraph 2.6).
1.3 Term: 6 years and 0 months ("Original Term") commencing October 16,
1998 ("Commencement Date") and ending October 15, 2004 ("Expiration Date").
(Also see Paragraph 3.)
1.4 Early Possession: ______________ ("Early Possession Date"). (Also see
Paragraphs 3.2 and 3.3.)
1.5 Base Rent: $30,726 per month ("Base Rent"), payable on the first day
of each month commencing October 1, 1998 (Also see Paragraph 4).
<PAGE>
[X] If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum Par. 50 attached hereto.
1.6(a) Base Rent Paid Upon Execution: $30,726 as Base Rent for the
period October 16, 1998 - November 15, 1998.
1.6(b) Lessee's Share of Common Area Operating Expenses: Thirty-Four
percent (34%) ("Lessee's Share") as determined by [X] prorata square footage of
the Premises as compared to the total square footage of the Building or [ ]
other criteria as described in Addendum _____.
1.7 Security Deposit: $203,764.17 ("Security Deposit"). (Also see
Paragraph 5) and Addendum par. 52.
1.8 Permitted Use: Office, research and development, storage and
distribution of software. ("Permitted Use"). (Also see Paragraph 6.)
1.9 Insuring Party. Lessor is the "Insuring Party." (Also see Paragraph
8.)
1.10(a) Real Estate Brokers. The following real estate broker(s)
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
[ ] ________________ represents Lessor exclusively ("Lessor's
Broker");
[ ] ________________ represents Lessee exclusively ("Lessee's
Broker");
[ X ] Cornish & Carey Commercial represents both Lessor and
Lessee ("Dual Agency"). (Also see Paragraph 15.)
1.10(b) Payment to Brokers. Upon the execution of this lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or in such separate shares
as they may mutually designate in writing, a fee as set forth in a separate
written agreement between Lessor and said Broker(s) (or in the event there is no
separate written agreement between Lessor and said Broker(s), the sum of $_____)
for brokerage services rendered by said Broker(s) in connection with this
transaction.
1.11 Guarantor. The obligations of the Lessee under this Lease are to be
guaranteed by N/A ("Guarantor"), (Also see Paragraph 37.)
1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 49 through 57, and Exhibits A through "B", all of which
constitute a part of this Lease.
<PAGE>
2. Premises, Parking and Common Areas.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental and/or Common Area Operating
Expenses, is an approximation which Lessor and Lessee agree is reasonable and
the rental and Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is
not subject to revision whether or not the actual square footage is more or
less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that [1] the
existing plumbing, electrical systems, fire sprinkler system, lighting, air
conditioning and heating systems and loading doors, if any, in the Premises,
other than those constructed by Lessee, shall be in good operating condition on
the Commencement Date. If a non-compliance with said warranty exists as of the
Commencement Date, Lessor shall, except as otherwise provided in this Lease,
promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, rectify same at
Lessor's expense. If Lessee does not give Lessor written notice of a non-
compliance with this warranty within ninety (90) days after the Commencement
Date, correction of that non-compliance shall be the obligation of Lessee at
Lessee's sole cost and expense.
2.3 Compliance with Covenants, Restrictions and Building Code. Lessor
warrants that any improvements (other than those constructed by Lessee or at
Lessee's direction) on or in the Premises which have been constructed or
installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances in effect on the commence Date.
Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation or violations of
applicable building codes, regulations, or ordinances exist with regard to the
Premises as of the Commencement Date. Said warranties shall not apply to any
Alterations or Utility Installations (defined in Paragraph 7.3 (a)) made or to
be made by Lessee. If the Premises do not comply with said warranties, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee given within six (6) months following the
Commencement Date and setting forth with specificity the nature and extent of
such non-compliance, take such action, at Lessor's expense, as may be reasonable
or appropriate to rectify the non-compliance. Lessor makes no warranty that the
Permitted Use in Paragraph 1.8 is permitted for the Premises under Applicable
Laws (as defined in Paragraph 2.4).
2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that it has
been advised by the Broker(s) to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with Disabilities Act and applicable zoning,
municipal, county, state and federal laws, ordinances and regulations and any
covenants or restrictions of record (collectively, "Applicable Laws") and the
present and future suitability of the Premises for Lessee's intended use; (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumes all
responsibility therefore as the same relate to Lessee's occupancy of the
Premises and/or the terms of this Lease; and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties with
respect to said matters other than as set forth in this Lease.
<PAGE>
2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in
this Paragraph 2 shall be of no force or effect if immediately prior to the date
set forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In
such event, Lessee shall, at Lessee's sole cost and expense, correct any non-
compliance of the Premises with said warranties.
2.6 Vehicle Parking. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said number.
Said parking spaces shall be used for parking by vehicles no larger than full-
sized passenger automobiles or pick-up trucks, herein called "Permitted Size
Vehicles." Vehicles other than Permitted Size Vehicles shall be parked and
loaded or unloaded as directed by Lessor in the Rules and Regulations (as
defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that belong to or
are controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right upon 24 hours
prior notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease, provide
the parking facilities required by Applicable Law.
2.7 Common Areas -- Definition. The term "Common Areas" is defined as
all areas and facilities outside the Premises and within the exterior boundary
line of the Industrial Center and interior utility raceways within the Premises
that are provided and designated by the Lessor from time to time for the general
non-exclusive use of Lessor, Lessee and other lessees of the Industrial Center
and their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas.
2.8 Common Areas -- Lessee's Rights. Lessor hereby grants to Lessee, for
the benefit of Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Lessor under the terms hereof or under the terms of any rules and regulations
or restrictions governing the use of the Industrial Center. Under no
circumstances shall the right herein granted to use the Common Areas be deemed
to include the right to store Expenses shall be abated for the period of such
early occupancy. All other terms of this Lease, however, (including, but not
limited to the obligations to carry the insurance required by Paragraph 8) shall
be in effect during such period. Any such early possession shall not affect nor
advance the Expiration Date of the Original Term.
<PAGE>
any property, temporarily or permanently, in the Common Areas. Any such storage
shall be permitted only by the prior written consent of Lessor or Lessor's
designated agent, which consent may be revoked at any time. In the event that
any unauthorized storage shall occur then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove the property and charge the cost to Lessee, which cost shall be payable
[2].
2.9 Common Areas -- Rules and Regulations. Lessor or such other person(s)
as Lessor may appoint shall have the exclusive control and management of the
Common Areas and shall have the right, from time to time, to establish, modify,
amend and enforce reasonable Rules and Regulations with respect thereto in
accordance with Paragraph 40. Lessee agrees to abide by and conform to all such
Rules and Regulations, and to cause its employees, suppliers, shippers,
customers, contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees of the Industrial Center. [3]
2.10 Common Areas -- Changes. Lessor shall have the right, in Lessor's
sole discretion, from time to time:
(a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;
(b) With 48 hours notice to close temporarily any of the Common
Areas for maintenance purposes so long as reasonable access to the Premises
remains available;
(c) To designate other land outside the boundaries of the Industrial
Center to be a part of the Common Areas;
(d) To add additional buildings and improvements to the Common
Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and
(f) To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas and Industrial Center as Lessor may,
in the exercise of sound business judgment, deem to be appropriate.
[4]
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after the
Early Possession Date but prior to the Commencement Date, the obligation to pay
Base Rent and Lessee's Share of Operating Expenses shall be abated for the
period of such early occupancy. All other terms of this Lease, however,
(including, but not limited to the obligations to carry the insurance required
by Paragraph 8) shall be in effect during such period. Any such early possession
shall not affect nor advance the Expiration Date of the original Term.
<PAGE>
3.3 Delay in Possession. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Early Possession Date, if one is
specified in Paragraph 1.4, or if no Early Possession Date is specified, by the
Commencement Date, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease, or the obligations of
Lessee hereunder, or extend the term hereof, but in such case, Lessee shall not,
except as otherwise provided herein, be obligated to pay rent or perform any
other obligation of Lessee under the terms of this Lease until Lessor delivers
possession of the Premises to Lessee [4A] if possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice in writing to Lessor within thirty (30) days after
the end of said sixty (60) day period, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder [4B]; provided
further, however, that if such written notice of Lessee is not received by
Lessor within said thirty (30) day period, Lessee's right to cancel this Lease
hereunder shall terminate and be of no further force or effect. Except as may be
otherwise provided, and regardless of when the Original Term actually commences,
if possession is not tendered to Lessee when required by this Lease and Lessee
does not terminate this Lease, as aforesaid, the period free of the obligation
to pay Base Rent, if any, that Lessee would otherwise have enjoyed shall run
from the date of delivery of possession and continue for a period equal to the
period during which the Lessee would have otherwise enjoyed under the terms
hereof, but minus any days of delay caused by the acts, changes or omissions of
Lessee.
4. Rent.
4.1 Base Rent. Lessee shall pay Base Rent and other rent or charges, as
the same may be adjusted from time to time, to Lessor in lawful money of the
United States, without offset or deduction, on or before the day on which it is
due under the terms of this Lease. Base Rent and all other rent and charges for
any period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to Lessor at its address stated herein
or to such other persons or at such other addresses as Lessor may from time to
time designate in writing to Lessee.
4.2 Common Area Operating Expenses. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined,
during each calendar year of the term of this Lease, in accordance with the
following provisions:
(a) "Common Area Operating Expenses" are defined, for purposes of
this Lease, as all costs incurred by Lessor relating to the ownership and
operation of the Industrial Center, including, but not limited to, the
following:
<PAGE>
(i) The operation, repair and maintenance, in neat, clean,
good order and condition, of the following:
(aa) The Common Areas, including parking areas, loading
and unloading areas, trash areas, roadways,
sidewalks, walkways, parkways, driveways,
landscaped areas, striping, bumpers, irrigation
systems, Common Area lighting facilities [4C].
(bb) Exterior signs and any tenant directories.
(cc) Fire detection and sprinkler systems.
(ii) The cost of water, gas, electricity and telephone to
service the Common Areas.
(iii) Trash disposal, property management and security services
and the costs of any environmental inspections.
(v) Real Property Taxes (as defined in Paragraph 10.2) to be
paid by Lessor for the Building and the Common Areas
under Paragraph 10 hereof.
(vi) The cost of the premiums for the insurance policies
maintained by Lessor under Paragraph 8 hereof.
(viii) Any other services to be provided by Lessor that are
stated elsewhere in this Lease to be a Common Area
Operating Expense.
[5]
(b) Any Common Area Operating Expenses and Real Property Taxes that
are specifically attributable to the Building or to any other building in the
Industrial Center or to the operation, repair and maintenance thereof, shall be
allocated entirely to the Building or to such other building. However, any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Industrial Center.
(c) The inclusion of the improvements, facilities and services set
forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon
Lessor to either have said improvements or facilities or to provide those
services unless the Industrial Center already has the same, Lessor already
provides the services, or Lessor has agreed elsewhere in this lease to provide
the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall be
payable by Lessee [5A] ten (10) days after a reasonably detailed statement of
actual expenses is presented to Lessee by Lessor. At Lessor's option, however,
an amount may be estimated by Lessor from
<PAGE>
time to time of Lessee's Share of annual Common Area Operating Expenses and the
same shall be payable monthly as Lessor shall designate, during each 12-month
period of the Lease term, on the same day as the Base Rent is due hereunder.
Lessor shall deliver to Lessee within sixty (60) days after the expiration of
each calendar year a reasonably detailed statement showing Lessee's Share of the
actual Common Area Operating Expenses incurred during the preceding year. If
Lessee's payments under this Paragraph 4.2(d) during said preceding year exceed
Lessee's Share as indicated on said statement, Lessor shall be credited the
amount of such overpayment against Lessee's Share of Common Area Operating
Expenses next becoming due. If Lessee's payments under this Paragraph 4.2(d)
during said preceding year were less than Lessee's Shares as indicated on said
statement, Lessee shall pay to Lessor the amount of the deficiency within ten
(10) days after delivery by Lessor to Lessee of said statement. [6]
5. Security Deposit.
Lessee shall deposit with Lessor upon Lessee's execution hereof the Security
Deposit set forth in Paragraph 1.7 as security for Lessee's faithful performance
of Lessee's obligations under this Lease. If Lessee fails to pay Base Rent or
other rent or charges due hereunder, or otherwise Defaults under this Lease (as
defined in Paragraph 13.1), Lessor may use, apply or retain all or any portion
of said Security Deposit for the payment of any amount due Lessor or to
reimburse or compensate Lessor for any liability, cost, expense, loss or damage
(including attorneys' fees) which lessor may suffer or incur by reason thereof.
If Lessor uses or applies all or any portion of said Security Deposit, Lessee
shall within ten (10) days after written request therefore deposit monies with
Lessor sufficient to restore said Security Deposit to the full amount required
by this Lease. Lessor shall not be required to keep all or any part of the
Security Deposit separate from its general accounts. Lessor shall, at the
expiration or earlier termination of the term hereof and after Lessee has
vacated the Premises, return to Lessee (or, at Lessor's option, to the last
assignee, if any, of Lessee's interest herein),within ten (10) days that portion
of the Security Deposit not used or applied by Lessor. Unless otherwise
expressly agreed in writing by Lessor, no part of the Security Deposit shall be
considered to be held in trust, to bear interest or other increment for its use,
or to be prepayment for any monies to be paid by Lessee under this Lease.
6. Use.
6.1 Permitted Use.
(a) Lessee shall use and occupy the Premises only for the Permitted
Use set forth in Paragraph 1.8, or any other legal use which is reasonably
comparable thereto, and for no other purpose. Lessee shall not use or permit
the use of the Premises in a manner that is unlawful, creates waste or is a
nuisance, or that disturbs owners and/or occupants of, or causes damage to the
Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay its
consent to any written request by Lessee, Lessee's assignees or subtenants, and
by prospective assignees and subtenants of Lessee, its assignees and subtenants,
for a modification of said Permitted Use, so long as the same will not impair
the structural integrity of the improvements on the Premises or in the Building
or the mechanical or electrical systems therein, does not conflict with uses by
other lessees, is not significantly more burdensome to the Premises or the
Building and the improvements thereon, and is otherwise permissible pursuant to
this Paragraph 6. If Lessor elects
<PAGE>
to withhold such consent, Lessor shall within five (5) business days after such
request give a written notification of same, which notice shall include an
explanation of Lessor's reasonable objections to the change in use.
6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous Substance"
as used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Premises, is
either: (ii) regulated or monitored by any governmental authority; or (iii) a
basis for potential liability of Lessor to any governmental agency or third
party under any applicable statute or common law theory. Hazardous Substance
shall include, but not be limited to, hydrocarbons, petroleum, gasoline, crude
oil or any products or by-products thereof. Lessee shall not engage in any
activity in or about the Premises which constitutes a Reportable Use (as
hereinafter defined) of Hazardous Substances without the express prior written
consent of Lessor and compliance in a timely manner (at Lessee's sole cost and
expense) with all Applicable Requirements (as defined in Paragraph 6.3).
"Reportable Use" shall mean (i) the installation or use of any above or below
ground storage tank, (ii) the generation, possession, storage, use,
transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report, notice, registration or business plan
is required to be filed with, any governmental authority, and (iii) the presence
in, on or about the Premises of a Hazardous Substance with respect to which any
Applicable Laws require that a notice be given to persons entering or occupying
the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may, without Lessor's prior consent, but upon notice to Lessor and in compliance
with all Applicable Requirements, use any ordinary and customary materials
reasonably required to be used by Lessee in the normal course of the Permitted
Use, so long as such use is not a Reportable Use and does not expose the
Premises or neighboring properties to any meaningful risk of contamination or
damage or expose Lessor to any liability therefor. In addition, Lessor may (but
without any obligation to do so) condition its consent to any Reportable Use of
any Hazardous Substance by Lessee upon Lessee's giving Lessor such additional
assurances as Lessor, in its reasonable discretion, deems necessary to protect
itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefor, including but not limited to
the installation (and, at Lessor's option, removal on or before the Lease
expiration or earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements).
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises or the building [7], other than as previously consented to by
Lessor, lessee shall immediately give lessor written notice thereof, together
with a copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action, or proceeding given to, or received from,
any governmental authority or private party concerning the presence, spill,
release, discharge of, or exposure to, such Hazardous Substance including but
not limited to all such documents as may be involved in any Reportable Use
involving the Premises. Lessee shall not cause or permit any Hazardous
Substance to be spilled or released in, on, under or about the Premises
(including, without limitation, through the plumbing of sanitary sewer system).
<PAGE>
(c) Indemnification. Lessee shall indemnify, protect, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and reasonable
attorneys' and consultants' fees arising out of or involving any Hazardous
Substance brought onto the Premises by or for Lessee. Lessee's obligations under
this Paragraph 6.2(c) shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or
suffered by Lessee, and the cost of investigation (including reasonable
consultants' and attorneys' fees and testing), removal, remediation, restoration
and/or abatement thereof, or of any contamination therein involved, and shall
survive the expiration or earlier termination of this Lease. No termination,
cancellation or release agreement entered into by Lessor and Lessee shall
release Lessee from its obligations under this Lease with respect to Hazardous
Substances, unless specifically so agreed by Lessor in writing at the time of
such agreement.
6.3 Lessee's Compliance with Requirements. Lessee shall, at Lessee's sole
cost and expense, fully, diligently and in a timely manner, comply with all
"Applicable Requirements," which term is used in this Lease to mean all laws,
rules, regulations, ordinances and directives relating to the Premises
pertaining to the use, generation, manufacture, production, installation,
maintenance, removal, transportation, storage, spill, or release of any
Hazardous Substance) by Lessee now in effect or which may hereafter come into
effect. Lessee shall, within five (5) days after receipt of Lessor's written
request, provide Lessor with copies of all documents and information, including
but not limited to permits, registrations, manifests, applications, reports and
certificates, evidencing Lessee's compliance with any Applicable Requirements
specified by Lessor, and shall promptly upon receipt, notify Lessor in writing
(with copies of any documents involved) of any threatened or actual claim,
notice, citation, warning, complaint or report pertaining to or involving
failure by Lessee or the Premises to comply with any Applicable Requirements.
[8]
6.4 Inspection; Compliance with Law. Lessor, Lessor's agents, employees,
contractors and designated representatives, and the holders of any mortgages,
deeds of trust or ground leases on the Premises ("Lenders") shall have the right
to enter the Premises at any time in the case of an emergency, and otherwise at
reasonable times upon 24 hours prior notice for the purpose of inspecting the
condition of the Premises and for verifying compliance by Lessee with this Lease
and all Applicable Requirements (as defined in Paragraph 6.3), and Lessor shall
be entitled to employ experts and/or consultants in connection therewith to
advise Lessor with respect to Lessee's activities, including but not limited to
Lessee's installation, operation, use, monitoring, maintenance, or removal of
any Hazardous Substance on or from the Premises. The costs and expenses of any
such inspections shall be paid by the party requesting same, unless a Default or
Breach of this Lease by Lessee or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Lessee, is found to exist
or to be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In such case, Lessee shall upon request reimburse Lessor or
Lessor's Lender, as the case may be, for the costs and expenses of such
inspections. [9]
[10]
<PAGE>
7. Maintenance, Repairs, Utility Installations, Trade Fixtures and
Alterations.
7.1 Lessee's Obligations.
(a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessee shall, at
Lessee's sole cost and expense and at all times, keep the Premises and every
part thereof in good order, condition and repair (whether or not such portion of
the Premises requiring repair, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises), including without limiting the generality
of the foregoing, all equipment or facilities specifically serving the Premises,
such as plumbing, heating, air conditioning, ventilating, electrical, lighting
facilities, boilers, fired or unfired pressure vessels, fire hose connections
if within the Premises, fixtures, interior walls, interior surfaces of exterior
walls, ceilings, floors, windows, doors, plate glass, and skylights, but
excluding any items which are the responsibility of Lessor pursuant to Paragraph
7.2 below. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices. Lessee's obligations
shall include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order, condition
and state of repair. [11]
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain a contract, with copies to Lessor, in customary form and substance for
and with a contractor specializing and experienced in the inspection,
maintenance and service of the heating, air conditioning and ventilating system
for the Premises. However, Lessor reserves the right, upon notice to Lessee, to
procure and maintain the contract for the heating, air conditioning and
ventilating systems, and if Lessor so elects, Lessee shall reimburse Lessor,
upon demand, for the cost thereof.
(c) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days' prior
written notice to Lessee (except in the case of an emergency, in which case no
notice shall be required), perform such obligations on Lessee's behalf, and put
the Premises in good order, condition and repair, in accordance with Paragraph
13.2 below.
7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9
(Damage or Destruction) and 14 (Condemnation), Lessor shall keep in good order
and condition and repair and replace the foundations, exterior walls, structural
condition of interior bearing walls and exterior roof [11A], fire sprinkler
and/or standpipe and hose (if located in the Common Areas) or other automatic
fire extinguishing system including fire alarm and/or smoke detection systems
and equipment, fire hydrants, parking lots, walkways, parkways, driveways,
landscaping, fences, signs and utility systems serving the Common Areas and all
parts thereof, as well as providing the services for which there is a Common
Area Operating Expense pursuant to Paragraph 4.2. Lessor shall not be obligated
to paint the exterior or interior surfaces of exterior walls nor shall Lessor be
obligated to maintain, repair or replace windows, doors or plate glass of the
Premises. Lessee
<PAGE>
expressly waives the benefit of any statute now or hereafter in effect which
would otherwise afford Lessee the right to make repairs at Lessor's expense or
to terminate this Lease because of Lessor's failure to keep the Building,
Industrial Center or Common Areas in good order, condition and repair.
7.3 Utility Installations, Trade Fixtures, Alterations.
(a) Definitions; Consent Required. The term "Utility Installations"
is used in this Lease to refer to all air lines, power panels, electrical
distribution, security, fire protection systems, communications systems,
lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "Trade Fixtures"
shall mean Lessee's machinery and equipment which can be removed without doing
material damage to the Premises. The term "Alterations" shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms of this Lease, other than Utility Installations or Trade
Fixtures. "Lessee-Owned Alterations and/or Utility Installations" are defined
as Alterations and/or Utility Installations made by Lessee that are not yet
owned by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause
to be made any Alterations or Utility Installations in, on, under or about the
Premises without Lessor's prior written consent [12]. Lessee may, however, make
non-structural Utility Installations to the interior of the Premises (excluding
the roof) without Lessor's consent but upon notice to Lessor, so long as they
are not visible from the outside of the Premises, do not involve puncturing,
relocating or removing the roof or any existing walls, or changing or
interfering with the fire sprinkler or fire detection systems and [13] does not
exceed $2,500.00.
(b) Consent. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent,
shall be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon;
and (iii) the compliance by Lessee with all conditions of said permits in a
prompt and expeditious manner. Any Alterations or Utility Installations by
Lessee during the term of this Lease shall be done in a good and workmanlike
manner, with good and sufficient materials, and be in compliance with all
Applicable Requirements. Lessee shall promptly upon completion thereof furnish
Lessor with as-built plans and specifications therefor. Lessor may, (but
without obligation to do so) condition its consent to any requested Alteration
or Utility Installation that costs $2,500.00 or more upon Lessee's providing
Lessor with a lien and completion bond in an amount equal to one and one-half
times the estimated cost of such Alteration or Utility Installation.
(c) Lien Protection. Lessee shall pay when due all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on, or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall, at
<PAGE>
its sole expense, defend and protect itself, Lessor and the Premises against the
same and shall pay and satisfy any such adverse judgment that may be rendered
thereon before the enforcement thereof against the Lessor or the Premises. If
Lessor shall require, Lessee shall furnish to Lessor a surety bond satisfactory
to Lessor in an amount equal to one and one-half times the amount of such
contested lien claim or demand, indemnifying Lessor against liability for the
same, as required by law for the holding of the Premises free from the effect of
such lien or claim. In addition, Lessor may require Lessee to pay Lessor's
attorneys' fees and costs in participating in such action if Lessor shall decide
it is to its best interest to do so.
7.4 Ownership, Removal, Surrender, and Restoration.
(a) Ownership. Subject to Lessor's right to require their removal and
to cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the Premises by
Lessee shall be the property of and owned by Lessee, but considered a part of
the Premises. Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee-Owned
Alterations and Utility Installations. Unless otherwise instructed per
Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and Utility
Installations shall, at the expiration or earlier termination of this Lease,
become the property of Lessor and remain upon the Premises and be surrendered
with the Premises by Lessee.
(b) Removal. Unless otherwise agreed in writing, Lessor may [13A]
require that any or all Lessee-Owned Alterations or Utility Installations be
removed by the expiration or earlier termination of this Lease, notwithstanding
that their installation may have been consented to by Lessor. Lessor may
require the removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor. [14]
(c) Surrender/Restoration. Lessee shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date, clean and
free of debris and in good operating order, condition and state of repair,
ordinary wear and tear [14A] excepted. Ordinary wear and tear shall not include
any damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease.
Except as otherwise agreed or specified herein, the Premises, as surrendered,
shall include the Alterations and Utility Installations. The obligations of
Lessee shall include the repair of any damage occasioned by removal of Lessee's
Trade Fixtures, furnishings, equipment, and Lessee-Owned Alterations and Utility
Installations, as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
ground water contaminated by lessee, all as may then be required by Applicable
Requirements and/or good practice. Lessee's Trade Fixtures shall remain the
property of Lessee and shall be removed by Lessee subject to its obligation to
repair. [15]
8. Insurance; Indemnity.
8.1 Payment of Premiums. The cost of the premiums for the insurance
policies maintained by Lessor under this Paragraph 8 shall be a Common Area
Operating Expense pursuant to Paragraph 4.2 hereof. Premiums for policy periods
commencing prior to, or
<PAGE>
extending beyond, the term of this Lease shall be pro-rated to coincide with the
corresponding Commencement Date or Expiration Date.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee, Lessor and any Lender(s) whose names have been provided to
Lessee in writing (as additional insureds) against claims for bodily injury,
personal injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $2,000,000 per occurrence with
an "Additional Insured-Managers or Lessors of Premises" endorsement and contain
the "Amendment of the Pollution Exclusion" endorsement for damage caused by
heat, smoke or fumes from a hostile fire. The policy shall not contain any
intra-insured exclusions as between insured persons or organizations, but shall
include coverage for liability assumed under this Lease as an "Insured contract"
for the performance of Lessee's indemnity obligations under this Lease. The
limits of said insurance required by this Lease or as carried by Lessee shall
not, however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be carried by Lessee shall be primary to and not
contributory with any similar insurance carried by Lessor, whose insurance shall
be considered excess insurance only.
(b) Carried by Lessor. Lessor shall also maintain liability insurance
described in Paragraph 8.2(a) above, in addition to and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.
8.3 Property Insurance-Building, Improvements and Rental Value.
(a) Building and Improvements. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor, with
loss payable to Lessor and to any Lender(s), insuring against loss or damage to
the Premises. Such insurance shall be for full replacement cost, as the same
shall exist from time to time, or the amount required by any Lender(s), but in
no event more than the commercially reasonable and available insurable value
thereof if, by reason of the unique nature or age of the improvements involved,
such latter amount is less than full replacement costs. Lessee-Owned
Alterations and Utility Installations, Trade Fixtures and Lessee's personal
property shall be insured by Lessee pursuant to Paragraph 8.4. If the coverage
is available and commercially appropriate, Lessor's policy or policies shall
insure against all risks of direct physical loss or damage (except the perils of
flood and/or earthquake unless required by a Lender), including coverage for any
additional costs resulting from debris removal and reasonable amounts of
coverage for the enforcement of any ordinance or law regulating the
reconstruction or replacement of any undamaged sections of the Building required
to be demolished or removed by reason of the enforcement of any building,
zoning, safety or land use laws as the result of a covered loss, but not
including plate glass insurance. Said policy or policies shall also contain an
agreed valuation provision in lieu of any co-insurance clause, waiver of
subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S.
<PAGE>
Department of Labor Consumer Price Index for All Urban Consumers for the city
nearest to where the Premises are located.
(b) Rental Value. Lessor shall also obtain and keep in force during
the term of this Lease a policy or policies in the name of Lessor, with loss
payable to lessor and any Lender(s), insuring the loss of the full rental and
other charges payable by all lessees of the Building to Lessor for one year
(including all Real Property Taxes, insurance costs, all common Area Operating
Expenses and any scheduled rental increases). Said insurance may provide that
in the event the lease is terminated by reason of an insured loss; the period of
indemnity for such coverage shall be extended beyond the date of the completion
of repairs or replacement of the Premises, to provide for one full year's loss
of rental revenues from the date of any such loss. Said insurance shall contain
an agreed valuation provision in lieu of any co-insurance clause, and the amount
of coverage shall be adjusted annually to reflect the projected rental income,
Real Property Taxes, insurance premium costs and other expenses, if any,
otherwise payable, for the next 12-month period. Common Area Operating Expenses
shall include any deductible amount in the event of such loss.
(c) Adjacent Premises. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas or
other buildings in the Industrial Center if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
(d) Lessee's Improvements. Since Lessor is the Insuring Party, Lessor
shall not be required to insure Lessee-Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.
8.4 Lessee's Property Insurance. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option,
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Trade Fixtures and Lessee-Owned Alterations and
Utility Installations in, on or about the Premises similar in coverage to that
carried by Lessor as the Insuring Party under Paragraph 8.3(a). Such insurance
shall be full replacement cost coverage. The proceeds from any such insurance
shall be used by Lessee for the replacement of personal property and the
restoration of Trade Fixtures and Lessee-Owned Alterations and Utility
Installations. Upon request from Lessor, Lessee shall provide Lessor with
certificates of insurance that such insurance is in force.
8.5 Insurance Policies. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, or such other rating as may be required by a Lender, as set
forth in the most current issue of "Best's Insurance Guide." Lessee shall not do
or permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Lessee shall cause to be delivered to Lessor,
within seven (7) days after the Early Possession Date or the Commencement Date,
certified copies of, or certificates evidencing the existence and amounts of,
the insurance required under Paragraphs 8.2(a) and 8.4. No such policy shall be
cancelable or subject to modification except after thirty (30) days' prior
written notice to Lessor. Lessee shall at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand.
<PAGE>
8.6 Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages (whether in contract or in tort) against
the other, for loss or damage to their property arising out of or incident to
the perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.
8.7 Indemnity. Except for Lessor's [16] negligence or willful misconduct
and/or breach of express warranties, Lessee shall indemnify, protect, defend and
hold harmless the Premises, Lessor and its agents, Lessor's master or ground
lessor, partners and Lenders, from and against any and all claims, loss of rents
and/or damages, costs, liens, judgments, penalties, loss of permits, attorneys'
and consultants' fees, expenses and/or liabilities arising out of, involving, or
in connection with, the occupancy of the Premises by Lessee, the conduct of
Lessee's business, any act, omission or neglect of Lessee, its agents,
contractors, employees or invitees, and out of any Default or Breach by Lessee
in the performance in a timely manner or of any obligation on Lessee's part to
be performed under this Lease. The foregoing shall include, but not be limited
to, the defense or pursuit of any claim or any action or proceeding involved
therein, and whether or not (in the case of claims made against Lessor)
litigated and/or reduced to judgment. In case any action or proceeding be
brought against Lessor by reason of any of the foregoing matters, Lessee upon
notice from Lessor shall defend the same at Lessee's expense by counsel
reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such
defense. Lessor need not have first paid any such claim in order to be so
indemnified. [17]
8.8 Exemption of Lessor from Liability. [18] Lessor shall not be liable
for injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee's employees, contractors, invitees, customers, or any
other person in or about the Premises, whether such damage or injury is caused
by or results from fire, steam, electricity, gas, water or rain, or from the
breakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not. Lessor
shall not be liable for any damages arising from any act or neglect or any other
lessee of Lessor nor from the failure by Lessor to enforce the provisions of any
other lease in the Industrial Center.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%) of
the then Replacement Cost (as defined
<PAGE>
in Paragraph 9.1(d), of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such damage or
destruction.
(b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is fifty percent (50%) or more of the
then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such damage or
destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures of any lessees of the
Building) of the Building shall, at the option of Lessor, be deemed to be
Premises Total Destruction.
(c) "Insured Loss" shall mean damage or destruction to the Premises,
other than Lessee-Owned Alterations and Utility Installations and Trade Fixtures
which was caused by an event required to be covered by the insurance described
in Paragraph 8.3(a) irrespective of any deductible amounts or coverage limits
involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 Premises Partial Damage -- Insured Loss. If Premises Partial
Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's expense,
repair such damage [19] (but not Lessee's Trade Fixtures or Lessee-Owned
Alterations and Utility Installations) as soon as reasonably possible and this
Lease shall continue in full force and effect. In the event, however, that
there is a shortage of insurance proceeds and such shortage is due to the fact
that, by reason of the unique nature of the improvements in the Premises, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request therefor. If Lessor receives said funds or adequate assurance thereof
within said ten (10) day period, Lessor shall complete them as soon as
reasonably possible and this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within said period, Lessor may
nevertheless elect by written notice to Lessee within ten (10) days thereafter
to make such restoration and repair as is commercially reasonable with Lessor
paying any shortage in proceeds, in which case this Lease shall remain in full
force and effect. If Lessor does not receive such funds or assurance within
such ten (10) day period, and if Lessor does not so elect to restore and repair,
then this Lease shall terminate as of the date of the occurrence of the
<PAGE>
damage or destruction. Unless otherwise agreed, Lessee shall in no event have
any right to reimbursement from Lessor for any funds contributed by Lessee to
repair any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2,
notwithstanding that there may be some insurance coverage, but the net proceeds
of any such insurance shall be made available for the repairs if made by either
Party.
9.3 Partial Damage -- Uninsured Loss. If Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect), Lessor may at Lessor's
option, either (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such damage of Lessor's desire to
terminate this Lease as of the date of the casualty. In the event Lessor elects
to give such notice of Lessor's intention to terminate this Lease, Lessee shall
have the right within ten (10) days after the receipt of such notice to give
written notice to Lessor of Lessee's commitment to pay for the repair of such
damage totally at Lessee's expense and without reimbursement from Lessor. Lessee
shall provide Lessor with the required funds or satisfactory assurance thereof
within thirty (30) days following such commitment from Lessee. In such event
this Lease shall continue in full force and effect, and Lessor shall proceed to
make such repairs as soon as reasonably possible [20] after the required funds
are available. If Lessee does not give such notice and provide the funds or
assurance thereof within the times specified above, this Lease shall terminate
as of the date of the casualty.
9.4 Total Destruction. Notwithstanding any other provision hereof, if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate as of the date of the
casualty following the date of such Premises Total Destruction, whether or not
the damage or destruction is an Insured Loss or was caused by a negligent or
willful act of Lessee. In the event, however, that the damage or destruction was
caused by Lessee, Lessor shall have the right to recover Lessor's damages from
Lessee except as released and waived in Paragraph 9.7.
9.5 Damage Near End of Term. If at any time during the last six (6)
months of the term of this Lease there is a damage for which the cost to repair
exceeds on month's Base Rent, whether or not an Insured Loss, Lessor or Lessee
may terminate this Lease effective as of the date of occurrence of such damage
by giving written notice to the other of its election to do so within thirty
(30) days after the date of occurrence of such damage. Provided, however, if
Lessee at that time has an exercisable option to extend this Lease or to
purchase the Premises, then the Lessee may preserve this Lease by (a) exercising
such option, and (b) providing Lessor with any shortage in insurance proceeds
(or adequate assurance thereof) needed to make the repairs on or before the
earlier of (i) the date which is ten (10) days after Lessee's receipt of
Lessor's written notice purporting to terminate this Lease, or (ii) the day
prior to the date upon which such option expires. If Lessee duly exercises such
option during such period and provides Lessor with funds (or adequate assurance
thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's
expense repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds
<PAGE>
or assurance during such period, then this Lease shall terminate as of the date
set forth in the first sentence of Paragraph 9.5.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base Rent,
Common Area Operating Expenses and other charges, if any, payable by Lessee
hereunder for the period during which such damage or condition, its repair,
remediation or restoration continues, shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired, but not in excess of
proceeds from insurance required to be carried under Paragraph 8.3(b). Except
for abatement of Base Rent, Common Area Operating Expenses and other charges, if
any, as aforesaid, all other obligations of Lessee hereunder shall be performed
by Lessee, and Lessee shall have no claim against Lessor for any damage suffered
by reason of any such damage, destruction, repair, remediation or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue. Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease as of the date of the casualty. If Lessee gives such
notice to Lessor and such Lenders and such repair or restoration is not
commenced within thirty (30) days after receipt of such notice, this Lease shall
terminate as of the date specified in said notice. If Lessor or a Lender
commences the repair or restoration of the Premises within thirty (30) days
after the receipt of such notice, this Lease shall continue in full force and
effect. "Commence" as used in Paragraph 9.6 shall mean either the unconditional
authorization of the preparation of the required plans, or the beginning of the
actual work on the Premises, whichever occurs first.
9.7 Hazardous Substance Conditions. If a Hazardous Substance
Condition occurs [20A] Lessor may, if the estimated cost to investigate and
remediate such condition exceeds twelve (12) times the then monthly Base Rent,
give written notice to Lessee within thirty (30) days after receipt by Lessor of
knowledge of the occurrence of such Hazardous Substance Condition of Lessor's
desire to terminate this Lease as of the date sixty (60) days following the date
of such notice. In the event Lessor elects to give such notice of Lessor's
intention to terminate this Lease, Lessee shall have the right within ten (10)
days after the receipt of such notice to give written notice to Lessor of
Lessee's commitment to pay for the excess costs of (a) investigation and
remediation of such Hazardous Substance Condition to the extent required by
Applicable Requirements, over (b) an amount equal to twelve (12) times the then
monthly Base Rent. Lessee shall provide Lessor with the funds required of Lessee
or satisfactory assurance thereof within thirty (30) days following said
commitment by Lessee. In such event this Lease shall continue in full force and
effect, and Lessor shall proceed to make such investigation and remediation as
soon as reasonably possible after the required funds are available. If Lessee
does not give such notice and provide the required funds or assurance thereof
within the time period specified above, this lease shall terminate as of the
date specified in Lessor's notice of termination. [20B]
<PAGE>
9.8 Termination -- Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment
made by Lessee to Lessor and so much of Lessee's Security Deposit as has not
been, or is not then required to be, used by Lessor under the terms of this
Lease.
9.9 Waiver of Statutes. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent it is inconsistent
herewith.
[21]
10. Real Property Taxes.
10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Industrial Center, and except as
otherwise provided in Paragraph 10.3, any such amounts shall be included in the
calculation of Common Area Operating Expenses in accordance with the provisions
of Paragraph 4.2.
10.2 Real Property Tax Definition. As used herein, the term "Real
Property Taxes" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Industrial Center by any
authority having the direct or indirect power to tax, including any city, state
or federal government, or any school, agricultural, sanitary, fire, street,
drainage, or other improvement district thereof, levied against any legal or
equitable interest of Lessor in the Industrial Center or any portion thereof,
Lessor's right to rent or other income therefrom, and/or Lessor's business of
leasing the Premises. The term "Real Property Taxes" shall also include any tax,
fee, levy, assessment or charge, or any increase therein, imposed by reason of
events occurring, or changes in Applicable Law taking effect, during the term of
this Lease, including but not limited to a change in the ownership of the
Industrial Center or in the improvements thereon, the execution of this Lease,
or any modification, amendment or transfer thereof, and whether or not
contemplated by the Parties. In calculating Real Property Taxes for any calendar
year, the Real Property Taxes for any real estate tax year shall be included in
the calculation of Real Property Taxes for such calendar year based upon the
number of days which such calendar year and tax year have in common.
[22]
10.3 Additional Improvements. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirety of any increase in Real Property Taxes if assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.
<PAGE>
10.4 Joint Assessment. If the Building is not separately assessed,
Real Property Taxes allocated to the Building shall be an equitable proportion
of the Real Property Taxes for all of the land and improvements included within
the tax parcel assessed, such proportion to be determined by Lessor from the
respective valuations assigned in the assessor's work sheets or such other
information as may be reasonably available. Lessor's reasonable determination
thereof, in good faith, shall be conclusive.
10.5 Lessee's Property Taxes. Lessee shall pay prior to delinquency
all taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center.
When possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's said property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. Utilities. Lessee shall pay directly for all utilities and services
supplied to the Premises, including but not limited to electricity, telephone,
security, gas and cleaning of the Premises, together with any taxes thereon. If
any such utilities or services are not separately metered to the Premises or
separately billed to the Premises, Lessee shall pay to Lessor a reasonable
proportion to be determined by Lessor or all such charges jointly metered or
billed with other premises in the Building, in the manner and within the time
periods set forth in Paragraph 4.2(d).
12. Assignment and Subletting.
12.1 Lessor's Consent Required. (See Addendum, Paragraph 57.)
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sublet all or any part of Lessee's interest in the Lease or in the Premises
without Lessor's prior written consent. [23]
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of fifty
percent (50%) or more of the voting control of Lessee shall constitute a change
in control for this purpose. [23A]
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than fifty percent (50%) of such Net
Worth of Lessee as it was represented to Lessor at the time of full execution
and delivery of this Lease or at the time of the most recent assignment to which
Lessor has consented, or as it exists immediately prior to said transaction or
transactions constituting such reduction, at whichever time said Net Worth of
Lessee was or is greater, shall be considered an assignment of this Lease by
Lessee to which Lessor may reasonably withhold its consent. "Net Worth of
Lessee" for purposes of this
<PAGE>
Lease shall be the net worth of Lessee (excluding any Guarantors) established
under generally accepted accounting principles consistently applied.
(d) An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option, be a
Default curable after notice per Paragraph 13.1, or a non-curable Breach without
the necessity of any notice and grace period. If Lessor elects to treat such
unconsented to assignment or subletting as a non-curable Breach, Lessor shall
have the right to terminate this Lease.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder [24] nor (iii) after the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent for performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the assignee or
sublessee. Lessor may consent to subsequent sublettings and assignments of the
sublease or any amendments or modifications thereto without notifying Lessee or
anyone else liable under this Lease or the sublease and without obtaining their
consent, and such action shall not relieve such persons from liability under
this Lease or the sublease.
(d) In the event of any Default or Breach of Lessee's obligation
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
anyone else responsible for the performance of the Lessee's obligations under
this Lease, including any sublease, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor.
(e) Each request for consent to an assignment or subletting shall
be in writing, accompanied by information relevant to Lessor's determination as
to the financial and operational responsibility and appropriateness of the
proposed assignee or sublessee, including but not limited to the intended use
and/or required modification of the Premises, if any. [24A] Lessee agrees to
provide Lessor with such other or additional information and/or documentation as
may be reasonably requested by Lessor.
<PAGE>
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed,
for the benefit of Lessor, to have assumed and agreed to confirm and comply with
each and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:.
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of the
foregoing provision or any other assignment of such sublease to Lessor, nor by
reason of the collection of the rents from a sublessee, be deemed liable to the
sublessee for any failure of Lessee to perform and comply with any of Lessee's
obligations to such sublessee under such Sublease. Lessee hereby irrevocably
authorizes and directs any such sublessee, upon receipt of a written notice from
Lessor stating that a Breach exists in the performance of Lessee's obligations
under this Lease, to pay Lessor the rents and other charges due and to become
due under the sublease. Sublessee shall rely upon any such statement and
request from Lessor and shall pay such rents and other charges to Lessor without
any obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee, or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by
said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior default
or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor
under a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further
assign or sublet all or any part of the Premises without Lessor's prior written
consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach
by Lessee to the sublessee, who shall have the right to cure the Default of
Lessee within the grace period, if
<PAGE>
any, specified in such notice. The sublessee shall have a right of reimbursement
and offset from and against Lessee for any such Defaults cured by the sublessee.
[25]
13. Default; Breach; Remedies.
13.1 Default; Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said default. A "Default" by Lessee is
defined as a failure by Lessee to observe, comply with or perform with any of
the terms, covenants and conditions or rules applicable to Lessee under this
Lease. A "Breach" by Lessee is defined as the occurrence of any one or more of
the following Defaults, and, where a grace period for cure after notice is
specified herein, the failure by Lessee to cure such Default prior to the
expiration of the applicable grace period, and shall entitle Lessor to pursue
the remedies set forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises and failure to pay rent.
(b) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent, Lessee's Share of Common
Area Operating Expenses, or any other monetary payment required to be made by
Lessee hereunder as and when due, the failure by Lessee to provide Lessor with
reasonable evidence of insurance or surety bond required under this Lease, or
the failure of Lessee to fulfill any obligation under this Lease which endangers
or threatens life or property, where such failure continues for a period of
three (3) days following written notice thereof by or on behalf of Lessor to
Lessee.
(c) Except as expressly otherwise provided in this Lease, the
failure by Lessee to provide Lessor with reasonable written evidence (in duly
executed original form, if applicable) of (i) compliance with Applicable
Requirements relating to Hazardous Substances per Paragraph 6.3 [25A], (ii) the
inspection, maintenance and service contracts required under Paragraph 7.1(b),
(iii) the rescission of an unauthorized assignment or subletting per Paragraph
12.1, (iv) a Tenancy Statement per Paragraphs 16 or 37, (v) the subordination or
non-subordination of this Lease per Paragraph 30, (vi) the guaranty of the
performance of Lessee's obligations under this Lease if required under
Paragraphs 1.11 and 37, (vii) the execution of any document requested under
Paragraph 42 (assessments), or (viii) any other documentation or information
which Lessor may reasonable require of Lessee under the terms of this lease,
where any such failure continues for a period of ten (10)business days following
receipt of written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that
are to be observed, complied with or performed by Lessee, other than those
described in Subparagraphs 13.1(a), (b) or (c), above, where such Default
continues for a period of thirty (30) days after receipt of written
<PAGE>
notice thereof by or on behalf of Lessor to Lessee; provided, however, that if
the nature of Lessee's Default is such that more than thirty (30) days are
reasonably required for its cure, then it shall not be deemed to be a Breach of
this Lease by Lessee if Lessee commences such cure within said thirty (30) day
period and thereafter diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within sixty (60) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within sixty (60) days; provided, however, in the
event that any provision of this Subparagraph 13.1(e) is contrary to any
applicable law, such provision shall be of no force or effect, and shall not
affect the validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement of Lessee
or of any Guarantor, given to Lessor by Lessee or any Guarantor, was knowingly
and materially false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurances of security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the Guarantors that existed at the time of execution of this Lease.
13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its own
option, may require all future payments to be made under this Lease by Lessee to
be made only by cashier's check. In the event of a Breach of this Lease by
Lessee (as defined in Paragraph 13.1), with or without further notice or demand,
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In
such event Lessor shall be
<PAGE>
entitled to recover from Lessee: (i) the worth at the time of the award of the
unpaid rent which had been earned at the time of termination; (ii) the worth at
the time of award of the amount by which the unpaid rent which would have been
earned after termination until the time of award exceeds the amount of such
rental loss that the Lessee proves could have been reasonably avoided; (iii) the
worth at the time of award of the amount by which the unpaid rent for the
balance of the term after the time of award exceeds the amount of such rental
loss that the Lessee proves could be reasonably avoided; and (iv) any other
amount necessary to compensate Lessor for all the detriment proximately caused
by the Lessee's failure to perform its obligations under this Lease or which in
the ordinary course of things would be likely to result therefrom, including but
not limited to the cost of recovering possession of the Premises, expenses of
reletting, including necessary renovation and alteration of the Premises,
reasonable attorneys' fees, and that portion of any leasing commission paid by
Lessor in connection with this Lease applicable to the unexpired term of this
Lease. The worth at the time of award of the amount referred to in provision
(iii) of the immediately preceding sentence shall be computed by discounting
such amount at the discount rate of the Federal Reserve Bank of San Francisco or
the Federal Reserve Bank District in which the Premises are located at the time
of award plus one percent (1%). Efforts by Lessor to mitigate damages caused by
Lessee's Default or Breach of this Lease shall not waive Lessor's right to
recover damages under this Paragraph 13.2. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor shall have
the right to recover in such proceeding the unpaid rent and damages as are
recoverable therein, or Lessor may reserve the right to recover all or any part
thereof in a separate suit for such rent and/or damages. If a notice and grace
period required under Subparagraph 13.1(b), (c) or (d) was not previously given,
a notice to pay rent or quit, or to perform or quit, as the case may be, given
to Lessee under any statute authorizing the forfeiture of leases for unlawful
detainer shall also constitute the applicable notice for grace period purposes
required by Subparagraph 13.1(b), (c) or (d). In such case, the applicable grace
period under the unlawful detainer statute shall run concurrently after the one
such statutory notice and the failure of Lessee to cure the Default within the
greater of the two (2) such grace periods shall constitute both an unlawful
detainer and a Breach of this Lease entitling Lessor to the remedies provided
for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect
(in California under California Civil Code Section 1951.4) after Lessee's Breach
and recover the rent as it becomes due, provided Lessee has the right to sublet
or assign, subject only to reasonable limitations. Lessor and Lessee agree that
the limitations on assignment and subletting in this Lease are reasonable. Acts
of maintenance or preservation, efforts to relet the Premises, or the
appointment of a receiver to protect the Lessor's interest under this Lease,
shall not constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not release Lessee
from liability under any indemnity provisions of this Lease as to matters
occuring or accruing during the term hereof or by reason of Lessee's
occupancy of the Premises.
13.3 Late Charges. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or deed of trust covering the
Premises.
<PAGE>
Accordingly, if any installment of rent or other sum due from Lessee shall not
be received by Lessor or Lessor's designee within ten (10) days after [26] such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by any Lender(s) whose name and address shall have been furnished to
Lessee in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for its performance, then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
<PAGE>
14. Condemnation.
If the Premises or any portion thereof are taken under the power of eminent
domain or sold under the threat of the exercise of said power (all of which are
herein called "condemnation"), this Lease shall terminate as to the part so
taken as of the date the condemning authority takes title or possession,
whichever first occurs. If more than ten percent (10%) of the floor area of the
Premises, or more than twenty-five percent (25%) of the portion of the Common
Areas designated for Lessee's parking, is taken by condemnation, Lessee may, at
Lessee's option, to be exercised in writing within ten (10) days after Lessor
shall have given Lessee written notice of such taking (or in the absence of such
notice, within ten (10) days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in the same
proportion as the rentable floor area of the Premises taken bears to the total
rentable floor area of the Premises. No reduction Base Rent shall occur if the
condemnation does not apply to any portion of the Premises. Any award for the
taking of all or any part of the Premises under the power of eminent domain or
any payment made under threat of the exercise of such power shall be the
property of Lessor, whether such award shall be made as compensation for
diminution of value of the leasehold or for the taking of the fee, or as
severance damages; provided, however, that Lessee shall be entitled to any
compensation, separately awarded to Lessee for Lessee's relocation expenses
and/or loss of Lessee's Trade Fixtures and loss of goodwill in the event that
this Lease is not terminated by reason of such condemnation, Lessor shall to the
extent of its net severance damages received, over and above Lessee's Share of
the legal and other expenses incurred by Lessor in the condemnation matter,
repair any damage to the Premises caused by such condemnation authority.
15. Broker's Fees.
15.1 Procuring Cause. The Broker(s) named in Paragraph 1.10 is/are
the procuring cause of this Lease.
15.4 Representation and Warranties. Lessee and Lessor each represent
and warrant to the other that it has had no dealings with any person, firm,
broker or finder other than as named in Paragraph 1.10(a) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder's fee in
connection with said transaction. Lessee and Lessor do each hereby agree to
idemnify, protect, defend and hold the other harmless from and against liability
for compensation or charges which may be claimed by any such unnamed broker,
finder or other similar party by reason of any dealings or actions of the
Indemnifying Party, including any costs, expenses, and/or attorneys' fees
reasonably incurred with respect thereto.
16. Tenancy and Financial Statements.
16.1 Tenancy Statement. Each Party (as "Responding Party") shall
within ten (10) business days after written notice from the other Party (the
"Requesting Party") execute, acknowledge and deliver to the Requesting Party a
statement in writing a form similar to the then most current "Tenancy Statement"
form published by the American Industrial Real Estate
<PAGE>
Association, plus such additional information, confirmation and/or statements as
may be reasonably requested by the Requesting Party.
16.2 Financial Statement. If Lessor desires to finance, refinance,
or sell the Premises or the Building, or any part thereof, Lessee and all
Guarantors shall deliver to any potential lender or purchaser designated by
Lessor such financial statements of Lessee and such Guarantors as may be
reasonably required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past three (3) years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth and may be
requested no more than twice per calendar year.
17. Lessor's Liability. The term "Lessor" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises. In the event
of a transfer of Lessor's title or interest in the Premises or in this Lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15.3, upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor. Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove defined.
18. Severability. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. Interest on Past-Due Obligations. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within ten (10) days
following the date on which it was due, shall bear interest from the date due at
the prime rate charged by the largest state chartered bank in the state in which
the Premises are located plus two percent (2%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the potential late charge provided
for in Paragraph 13.4.
20. Time of Essence. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. Rent Defined. All monetary obligation of Lessee to Lessor under the terms
of this Lease are deemed to be rent.
22. No Prior or other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
23. Notices.
23.1 Notice Requirements. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or by
messenger or courier service) or may be sent by regular, certified or registered
mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile
transmission during normal business hours, and shall be deemed sufficiently
given if served in a manner specified in this Paragraph 23. The address noted
<PAGE>
adjacent to a Party's signature on this Lease shall be that Party's address for
delivery or mailing of notice purposes. Either party may be written notice to
the other specify a different address for notice purposes, except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for the purpose of mailing or delivering notices to Lessee. A
copy of all notices required or permitted to be given to Lessor hereunder shall
be concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
23.2 Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail, the notice shall be deemed given forty-eight (48) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the United States Postal Service or courier. If any
notice is transmitted by facsimile transmission or similar means, the same shall
be deemed served or delivered upon telephone or facsimile confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If notice is received on a Saturday or Sunday or a legal
holiday, it shall be deemed received on the next business day.
24. Waivers. No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or any other term, covenant or condition hereof. Lessor's consent to
or approval of, any such act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. Regardless of Lessor's
knowledge of a Default or Breach at the time of accepting rent, the acceptance
of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of
any provision hereof. Any payment given Lessor by Lessee may be accepted by
Lessor on account of moneys or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
26 than the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to one hundred fifty
percent (150%) of the Base Rent applicable during the month immediately
preceding such expiration of earlier termination. Nothing contained herein shall
be construed as a consent by Lessor to any holding over by Lessee.
<PAGE>
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. Binding Effect; Choice of Law. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
30.2 Attornment. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such new owner shall not:
(i) be liable for any act of omission of any prior lessor or with respect to
events occurring prior to acquisition of ownership, (ii) be subject to any
offsets or defenses which Lessee might have against any prior lessor, or (iii)
be bound by prepayment of more than one month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered into
by lessor after the execution of this lease, Lessee's subordination of this
Lease shall be subject to receiving assurance (a "non-disturbance agreement")
from the Lender that Lessee's possession and this Lease, including any options
to extend the term hereof, will not be disturbed so long as Lessee is not in
Breach hereof and attorns to the record owner of the Premises.
30.4 Self-Executing. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
<PAGE>
31. Attorneys' Fees. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered n a separate suit, whether or not such action or proceeding is
pursued to decision or judgment. The term "Prevailing Party" shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred. Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal actin is subsequently commenced in
connection with such Default or resulting Breach. Broker(s) shall be intended
third party beneficiaries of this paragraph 31.
32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents
shall have the right to enter the Premise at any time, in the case of an
emergency, and otherwise at reasonable times upon reasonable prior notice for
the purpose of showing the same to prospective purchasers, lenders, or lessees,
and making such alterations, repairs, improvements or additions to the Premises
or to the Building, as Lessor may reasonably deem necessary. Lessor may at any
time place on or about the Premises or Building any ordinary "For Sale" signs
and Lessor may at any time during the last one hundred eighty (180) days of the
term hereof place on or about the Premises any ordinary "For Lease" signs. All
such activities of Lessor shall be without abatement of rent or liability to
Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonable ness in determining whether to grant such consent.
34. Signs. Lessee shall not place any sign upon the exterior of the Premises or
the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign on
the Premises by or for Lessee shall be subject to the provisions of Paragraph 7
(Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use
of the roof of the Building, and the right to install advertising signs on the
Building, including the roof, which do not unreasonably interfere with the
conduct of Lessee's business; Lessor shall be entitled to all revenues from such
advertising signs.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any
<PAGE>
sublease or lesser estate in the Premises; provided, however, Lessor shall in
the event of any such surrender, termination or cancellation, have the option to
continue any one or all of any existing subtenancies. Lessor's failure with in
ten (10) days following any such event to make a written election to the
contrary by written notice to the holder of any such lesser interest, shall
constitute Lessor's election to have such event constitute the termination of
such interest.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs sad expenses (including but not
limited to architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, relating to consents to
an assignment a subletting, proposed alterations or the presence or use of a
Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefor.
38. Quiet Possession. Upon payment by Lessee of the rent for the Premises and
the performance of all of the covenants, conditions and provisions on Lessee's
part to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises or for the entire term hereof subject to all of the
provisions of this Lease.
39. Options.
39.1 Definition. As used in this Lease, the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 Options Personal to Original Lessee. [27] Each Option granted to
Lessee in this Lease is personal to the original Lessee named in Paragraph 1.1
hereof, and cannot be voluntarily or involuntarily assigned or exercised by any
person or entity other than said original Lessee while the original Lessee is in
full and actual possession of the Premises and without the intention of
thereafter assigning or subletting. The Options, if any, herein granted to
Lessee are not assignable, either as a part of an assignment of this Lease or
separately or apart therefrom, and no Option may be separated from this Lease in
any manner, by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later option cannot be exercised unless
the prior Options to extend or renew this Lease have been validly exercised.
39.4 Effect of Default on Options.
<PAGE>
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary during the time Lessee is
in Breach of this Lease, or in the event that Lessor has given to Lessee three
(3) or more notices of separate Defaults under Paragraph 13.1 during the twelve
(12) month period immediately preceding the exercise of the Option and, the
Defaults not are cured.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the original
term of this Lease, Lessor gives to Lessee three (3) or more notices of separate
Defaults under Paragraph 13.1 during any twelve month period, and the Defaults
are not cured, or if Lessee commits a Breach of this Lease.
40. Rules and Regulations. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, was well as for the convenience of other occupants
or tenants of the Building and the Industrial Center an their invitees.
41. Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. Reservations. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee or diminish its parking; Lessee
agrees to sign any documents reasonably requested by Lessor to effectuate any
such easement rights, dedication, map or restrictions.
43. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
44. Authority. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or
<PAGE>
she is duly authorized to execute and deliver this Lease on its behalf. If
Lessee is a corporation ,trust or partnership, Lessee shall, within thirty (30)
days after request by Lessor, deliver to Lessor evidence satisfactory to Lessor
of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. Offer. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding unit executed
and delivered by all Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. Multiple Parties. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LESE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR
ATTORNEY'S REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED
TO EVALUATE THE CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF
ASBESTOS, UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO
REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL
REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKERS OR THEIR
CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH
IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN
COUNSEL AS TO THE LEGAL AN D TAX CONSEQUENCES OF THIS LEASE. IF THE
SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM
THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
<PAGE>
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
<TABLE>
<CAPTION>
<S> <C>
Executed at: Palo Alto, Calif. Executed at: /s/ Marielena Tidwell
----------------------------------- ----------------------------------------
On: August 20, 1998 On: August 20, 1998
--------------------------------------------- --------------------------------------------
Menlo Park, CA 94025
By LESSOR: W.F. BATTON & CO., INC. By LESSEE: RELEASE SOFTWARE, INC.
A California corporation A California corporation
--------------------------------- --------------------------------------
By: /s/ Marie A. Batton By: /s/ Marielena Tidwell
--------------------------------- --------------------------------------
Name Printed: Marie A. Batton Name Printed: Marielena Tidwell
-------------------------------- --------------------------------------
Title: Vice President Title: VP, HR & Admin
--------------------------------- --------------------------------------
Address: _________________________________ Address: ______________________________________
_________________________________ ______________________________________
_________________________________ ______________________________________
_________________________________ _____________________________________
Telephone: ( )___________________________ Telephone: ( )___________________________
Facsimile: ( )___________________________ Facsimile: ( )___________________________
BROKER: BROKER:
Executed at: ______________________________________ Executed at: ________________________________________
On: _______________________________________________ On:__________________________________________________
By: _______________________________________________ By: _________________________________________________
Name Printed: _____________________________________ Name Printed: _______________________________________
Title: _____________________________________ Title: _______________________________________
Address: Address:
__________________________________ _____________________________________
Telephone: ( ) _________________________ Telephone: ( )____________________________
Facsimile: ( ) Facsimile: ( )____________________________
</TABLE>
<PAGE>
[CORNISH & CAREY COMMERCIAL LETTERHEAD]
FIRST LEASE ADDENDUM
ADDENDUM A TO THE LEASE DATED AUGUST 10, 1998 BY AND BETWEEN W.F. BATTON & CO.,
INC., A CALIFORNIA CORPORATION, LESSOR, AND RELEASE SOFTWARE, INC., A CALIFORNIA
CORPORATION, LESSEE, FOR THOSE PREMISES LOCATED AT 990 COMMERCIAL STREET, SAN
CARLOS, CALIFORNIA.
Lessee and Lessor further agree as follows:
In the event of any inconsistency between the provisions of the
printed portion of the Lease and this Addendum, this Addendum shall govern.
49. Occupancy and Commencement Date:
Lessee shall occupy space upon substantial completion of Lessee
Improvements estimated to be October 16, 1998 subject to the City of San Carlos
building and planning departments and the timely receipt of a building permit.
Lessee shall be permitted one (1) week of early access for the purpose of data
and phone cabling and furniture set up provided it is coordinated with the
contractor and does not interfere with the final construction of the Premises.
Rent shall commence October 16, 1998, or upon substantial completion of Lessee
Improvements, whichever occurs later. "Substantial completion" shall mean that
(i) Lessor has completed the Lessee Improvements in accordance with the final
plans and specifications approved by Lessor and Lessee; (ii) there remains no
incomplete or defective item of Lessee Improvements that would adversely affect
Lessee's intended use of the Premises; (iii) Lessor has delivered legal
possession of the Premises and the Lessee Improvements to Lessee; and (iv)
Lessor has obtained all approvals and permits from the appropriate governmental
authorities required for the legal occupancy of the Premises and the Lessee
Improvements.
50. Base Rent Schedule.
Lessee shall pay Base Rent to Lessor, as follows:
Months Rent/SF/Mo./NNN Monthly Rent
01-12 $2.00 $30,726.00
13-24 $2.08 $31,955.04
25-36 $2.16 $33,233.24
37-48 $2.25 $34,562.57
49-60 $2.34 $35,945.07
61-72 $2.43 $37,382.88
51. Lease Improvements:
Lessor, at Lessor's sole expense, shall build out the Premises
pursuant to the improvement plan approved by Lessor and Lessee attached hereto
as Exhibit "B" and made a part hereof. Carpet and other finishes shall be of
standard commercial grade quality. Lessor
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shall construct the Lessee Improvements in accordance with the plans and
specifications approved by Lessee and in accordance with all Applicable
Requirements (including without limitation, the Americans with Disabilities Act
of 1990), in a good and workmanlike manner, free of defects and using new
materials and equipment of good quality. Within thirty (30) days after the
Commencement Date, Lessee shall have the right to submit a written "punch list"
to Lessor, setting forth any defective item of construction, and Lessor shall
promptly cause such items to be corrected.
Notwithstanding anything to the contrary contained in this Lease,
Lessee's acceptance of the Premises or submission of a "punch list" shall not be
deemed a waiver of Lessee's right to have defects in the Lessee Improvements or
the Premises repaired at no cost to Lessee, provided that Lessee gives written
notice to Lessor of such defects within ninety (90) days after the Commencement
Date, pursuant to Paragraph 2.2 of this Lease, and Lessor shall repair such
defect as soon as practicable. After the expiration of said period of ninety
(90) days, Lessor shall, upon written request by Lessee, assign to Lessee all
warranties with respect to the Premises, including warranties which would reduce
Lessee's maintenance obligations under this Lease, and shall cooperate with
Lessee in Lessee's enforcement of such warranties.
52. Security Deposit:
Upon lease execution, Lessee shall deliver to Lessor a security
deposit in the amount of $203,764.17, of which $101,882.09 shall be in the form
of cash and the balance of $101,882.09 shall be in the form of a bank letter of
credit acceptable to Lessor and Lessee, to be held by Lessor, which Lessee shall
renew from time to time. Provided that no default by Lessee under this Lease
then remains uncured, Lessor shall release the letter of credit to Lessee upon
the effective date of the initial underwritten public offering of securities by
Lessee or the expiration of the Lease Term, whichever occurs first. The letter
of credit shall name Lessor as the beneficiary thereunder, and provide that
draws thereunder will be honored upon receipt by the issuer of a written
statement signed by Lessor stating that Lessor is entitled to draw down on the
letter of credit. If Lessee is in default under the Lease beyond any applicable
notice and cure period, Lessor shall be entitled to draw under the letter of
credit only an amount equal to the amount of any monetary default as defined
below (or, only if partial draws are not permitted, the entire amount of the
letter of credit). As used herein, "monetary default" means any delinquent
installment of Base Rent, Additional Rent, or any other sum payable by Lessee
under this Lease, (as and when Lessee fails to pay the same beyond any
applicable notice and cure period contained in this Lease), plus any damages to
which Lessor is entitled under the Lease. Lessor agrees that the letter of
credit may also provide for partial draws by Lessor. To the extent not applied
by Lessor, pursuant to the provisions of the Lease, any amount drawn under the
letter of credit shall be held or applied by Lessor as a security deposit,
subject to the terms of Paragraph 5 of this Lease.
53. Expansion:
Lessee understands that Lessor does not control the adjacent space in
the Building. However, if the adjacent space in the Building becomes available
to Lessor for lease during the term of this Lease while Lessee is in possession
of the Premises and no default by Lessee hereunder remains uncured, Lessor will
give written notice to Lessee of the availability of
2
<PAGE>
the adjacent space for lease and Lessor's asking rent and general lease terms,
before Lessor places the adjacent space on the market for lease. The "adjacent
space in the Building" means the space currently subleased to Acteron. Lessee
shall have ten (10) days after receipt of written notice from Lessor specifying
the rent and the other economic terms requested for the adjacent space in which
to notify Lessor in writing of its agreement to lease such space. The expiration
date of the new lease for the adjacent space shall be coterminous with the
expiration date of this Lease. For example, if the space becomes available
during the original term of this Lease, Lessor agrees to lease the adjacent
space to Lessee for the unexpired term of this Lease and to give Lessee a five
(5) year extension option on the new space. The new space will be offered to
Lessee on substantially the same terms as this Lease, except for any terms
relating to Base Rent and Lessor shall not be required to make any Lessee
improvements. The parties agree to promptly enter into an amendment to this
Lease for the adjacent space following Lessee's notice to Lessor of its
agreement to lease such space. If Lessee fails to timely exercise such right of
first offer or if Lessee fails to execute and deliver to Lessor said amendment
to this Lease within ten (10) days after delivery thereof by Lessor to Lessee,
Lessee shall nave no right to lease such adjacent space. Lessee's rights under
this Paragraph 53 shall be subject to the existing extension rights of Acteron
Corporation and Quantic, existing tenants.*
54. Option to Extend:
Lessor hereby grants to Lessee one (1) option to extend the Lease term
for a period of five (5) years. The option to extend is subject to the
provisions of Paragraph 39 of the printed portion of this Lease.
Lessee may exercise the option to extend by giving written notice of
exercise to Lessor at least six (6) months, but not more than twelve (12)
months, prior to the expiration of the Original Term.
The option extension period, if exercised, shall be upon the same
terms and conditions as the Original Term, except that there shall be no
additional option to extend and the Base Rent during the option period shall be
equal to one hundred percent (100%) of the then fair market Base Rent of the
Premises as determined by agreement between Lessor and Lessee. Between the six
(6) months period, which is not more than twelve (12) months nor less than six
(6) months prior to the Commencement Date of the extended term, Lessor shall,
upon request by Lessee, negotiate in good faith with Lessee concerning the
market lease rate for the extended Term. If the parties cannot agree within one
hundred fifty (150) days prior to the commencement of the extended term, then
the market lease rate (and periodic increases) shall be determined by
appraiser(s) selected and governed by the Rules of the American Arbitration
Association. All other terms and conditions contained in this Lease (excluding
any further option to extend) shall remain in full force and effect and shall
apply during the extended term. The cost of the appraisal shall be shared
equally by Lessor and Lessee. In no event shall the
_________________________
* If Lessee exercises the expansion option, Lessor shall not unreasonably
withhold or delay its consent to any tenant improvements or alterations proposed
to be made to the expansion space by Lessee at Lessee's expense, provided that
such tenant improvements or alterations are substantially comparable to the
tenant improvements in the existing Premises.
3
<PAGE>
initial monthly Base Rent for the option period be less than the Base Rent
payable by Lessee for the last full calendar month of the initial lease term.
Failure by Lessee to exercise the option to extend in a timely manner
shall cause the option to lapse, time being of the essence.
55. Dual Representation:
Lessor and Lessee acknowledge that Cornish & Carey Commercial
represents both Lessor and Lessee, and Lessor and Lessee consent thereto.
56. Parking:
A plan indicating the location of parking for the Premises is
attached as Exhibit C. Lessor shall restripe the parking lot serving the
Premises within 30 days after the Commencement Date. If approved by the City of
San Carlos the parking lot shall be restriped for compact cars. If the number of
parking spaces is increased as a result thereof, Lessee's number of parking
spaces shall increase in an amount determined by multiplying Lessee's Share
(34%) by the total number of parking spaces appurtenant to the Industrial Center
after the restriping.
57. Assignment/Sublease:
Lessee shall not assign this Lease, or any interest herein,
voluntarily or involuntarily, and shall not sublet the Premises or any part
thereof, without the prior written consent of Lessor in each instance, which
consent shall not be unreasonably withheld, subject to the following terms and
conditions:
(a) Upon receipt by Lessor of a request from Lessee to consent to a
Sublease of all or any portion of the Premises, together with information
concerning the proposed Sublessee and the proposed rent and terms of the
Sublease, Lessor shall have the right, at Lessor's option, to terminate this
Lease by giving written notice of termination to Lessee, in which event the
parties shall be relieved as of the effective date of termination from all
further obligations accruing thereafter; provided, however, that Lessee shall
have the right to negate Lessor's termination of this Lease by giving Lessor
written notice of such negation ("Lessee's Negation Notice") with three (3)
business days after Lessee received Lessor's notice electing to terminate in
lieu of consenting to an assignment or subleasing. Upon such negation, this
Lease shall continue in full force and effect and Lessee's request to sublease
or assign shall be considered withdrawn. If Lessor exercises its right of
termination, Lessor shall have the right to enter into a new direct Lease with
such proposed Sublessee, or with any other Lessee procured by Lessor, upon such
terms and conditions as Lessor shall approve, and Lessee shall have no right or
interest in the new Lease or the income therefrom.
(b) If Lessor consents to any assignment or Sublease by Lessee,
Lessor may require as a condition of such consent that Lessee pay to Lessor, as
and when received by Lessee, fifty percent (50%) of the amount of any excess of
the consideration to be received by Lessee in connection with such assignment or
Sublease over and above the rental amount fixed
4
<PAGE>
by this Lease and payable by Lessee to Lessor, (excluding sums received for
Lessee's personal property and trade fixtures).
(c) Lessee shall reimburse Lessor for Lessor's reasonable attorney's
fees incurred in reviewing and negotiating the terms of the Sublease and
Lessor's consent thereto.
(d) The assignment or Sublease shall specify that further assignment
or subsubletting of all or any portion of the Premises by the initial sublessee
or assignee from Release Software, Inc. is expressly prohibited.
(e) The option to extend referred to in Paragraph 54 of this Addendum
is personal to Lessee and Permitted Transferees and is not transferable and is
not exercisable by an assignee or sublessee.
Lessee hereby stipulates that the foregoing terms and conditions are
reasonable.
Lessor: W.F. BATTON & CO., INC.
A CALIFORNIA CORPORATION
By: /s/ Marie A. Batton Date: Aug. 20, 1998
----------------------------------- -------------------------
Marie A. Batton, Vice President
Lessee: RELEASE SOFTWARE, INC.
A CALIFORNIA CORPORATION
By: /s/ Marielena Tidwell Date: 8/18/99
----------------------------------- -------------------------
Marielena Tidwell, VP Resources &
Administration
<PAGE>
ADDENDUM B TO STANDARD INDUSTRIAL/COMMERCIAL
MULTI-TENANT LEASE - MODIFIED NET, BETWEEN
W. F. BATTON COMPANY, INC., AS LESSOR, AND
RELEASE SOFTWARE, INC., AS LESSEE, FOR PREMISES
LOCATED AT 990 COMMERCIAL STREET, SAN CARLOS, CALIFORNIA
Lessor and Lessee further agree that the following language shall be
inserted in the Lease where the corresponding numbers are set forth in the
Lease:
1. that the roof is in good condition and repair and
2. within twenty (20) days after receipt of written demand by Lessor.
3. Notwithstanding anything to the contrary contained in this Lease,
Lessee shall not be required to comply with any rule or regulation unless the
same applies non-discriminatorily to all occupants of the Industrial Center, and
does not unreasonably interfere with Lessee's use of the Premises or Lessee's
parking rights.
4. Lessor's exercise of the foregoing rights shall not materially
increase Lessee's obligations nor materially diminish Lessee's rights under this
Lease, or interfere with Lessee's parking rights.
4A. as required by Paragraph 51 of Addendum A and as depicted on the
architectural drawing (Sheet A-2) prepared by LRS Associates, dated 8/10/98,
attached as Exhibit B.
4B. and Lessor shall promptly refund all funds previously tendered by
Lessee.
4C. fences, roof membrane and the non-structural portions of the roof
5. Notwithstanding anything to the contrary contained in this Lease, in
no event shall Lessee have any obligation to perform, to pay directly, or to
reimburse Lessor for, all or any portion of the following repairs, maintenance,
improvements, replacements, premiums, claims, losses, fees, commissions,
charges, disbursements, attorneys' fees, experts' fees, costs and expenses
(collectively, "Costs"): (i) Costs occasioned by the act, omission or violation
of Applicable Requirements, ground leases, security instruments, or private
restrictions by Lessor, any other occupant of the Building, or their respective
agents, employees or contractors, or Costs to correct any construction defect in
the Tenant Improvements constructed for Lessee; (ii) Costs occasioned by fire,
acts of God or other casualties, or by the exercise of the power of eminent
domain, including the cost to restore the Industrial Center unless caused by
Tenant or its agents, in which event the entire costs shall be paid by Lessee;
(iii) Costs which would properly be capitalized under generally accepted
accounting principles and which relate to repairs, alterations, improvements,
replacements, equipment and tools except to the extent that Lessee's share of
such Costs is amortized over the useful life of the capital improvement in
question in accordance with generally accepted accounting principles; (iv) Costs
which Lessee pays directly to a third person or for which Lessor has a right of
reimbursement from others; (v) Costs (A) arising from the disproportionate use
of any utility or service supplied by Lessor to any other occupant of the
Building; or (B) associated with utilities and services of a type not provided
to
<PAGE>
Lessee; (vi) Costs incurred in connection with negotiations or disputes with
other occupant(s) of the Building, and Costs arising from the violation by
Lessor or any occupant of the Building (other than Lessee) of the terms and
conditions of any lease or other agreement; (vii) depreciation, amortization or
other expense reserves; or (viii) Costs related to Hazardous Substances, except
to the extent the Cost is caused by the storage, release, use or disposal of the
Hazardous Substance in question by Lessee in violation of Applicable
Requirements, in which case Tenant shall be directly responsible for any costs
associated therewith in accordance with the provisions of Paragraph 6.2; (ix)
leasing commissions and other expenses incurred in connection with leasing space
in the Building or the Industrial Center; (x) points, fees and other charges for
Landlord's financing or refinancing of the Building or the Industrial Center,
and penalties or charges for failure to perform Landlord's obligations under any
loans or indebtedness secured by the Building or the Industrial Center; (xi)
advertising and promotional costs; (xii) costs of repairs directly resulting
from the negligence or willful misconduct of Landlord, its agents or employees;
(xiii) the cost of any new construction (as opposed to replacement of the
Industrial Center improvements due to breakage or normal wear and tear); (xiv)
repairs or rebuilding necessitated by condemnation; (xv) costs associated with
the operation of the business of the corporation or entity which constitutes
Landlord, or the operation of any parent, subsidiary or affiliate of Landlord,
as the same are distinguished from the costs of operation of the Industrial
Center; (xvi) any fee for Landlord's general administrative and overhead
expenses; (xvii) rent for any project management office; (xviii) a property
management fee in excess of two percent (2%) of Base Rent, which management fee
shall include all salaries and compensation of any kind payable to employees of
Lessor; or (xix) any other cost, expense, fee or charge which in accordance with
generally accepted property management practices would not be considered an
expense of managing, operating, maintaining and repairing the Industrial Center.
5A. by the later of the date the next monthly installment of Base Rent is
due or
6. If the statement is delivered to Lessee after the expiration or
earlier termination of this Lease and Lessee has made payments exceeding
Lessee's Share for the last year of the Term, Lessor shall refund the
overpayment to Lessee within twenty (20) days after the date of the statement.
In addition, within sixty (60) days after receipt by Lessee of Lessor's
statement of Operating Expenses for any prior calendar year during the Term,
Lessee or its authorized representative shall have the right at Lessee's expense
to inspect the books of Lessor during the business hours of Lessor at Lessor's
office in the Building, or, such other location as Lessor reasonably may
specify, for the purpose of verifying the information contained in the
statement. Unless Lessee asserts specific errors within sixty (60) days after
receipt of the statement, the statement shall be deemed correct as between
Lessor and Lessee, except as to individual components subsequently determined to
be in error by a future audit.
7. which is caused by Lessee or its employees, agents or invitees
8. Notwithstanding anything to the contrary contained in this Lease, if
repairs or alterations are required to comply with Applicable Requirements
generally applicable to the condition of the Premises for use as office/research
and development, and not required or caused by Lessee's particular use or
activities or by any Alterations or Utility Installations (as defined below)
made by Lessee, such repairs or alterations shall be made by Lessor and the cost
thereof
2
<PAGE>
shall be amortized over the useful life of the item as determined in accordance
with generally accepted accounting principles, and Lessee shall pay Lessee's
Share of such cost on a monthly basis as such amortized cost falls due during
the remainder of the Term.
9. to the extent such costs and expenses are caused by Lessee, its
agents, employees or contractors.
10. Lessor represents and warrants that (a) the only environment report it
has provided the Lessee respecting the Industrial Center is that certain report
prepared by Aqua Science Engineers Inc. dated March 24, 1997, (b) a copy of such
report has been provided to Lessee, and (c) Lessor has received no written
notice that there are any other Hazardous Substances on or about the Industrial
Complex except as disclosed in such report. Lessor's representations and
warranties under this Paragraph shall survive termination of this Lease.
11. Notwithstanding anything to the contrary contained in this Lease,
Lessee's repair and maintenance obligations hereunder shall not require Lessee
to construct or pay for repairs in the Premises which are properly capitalized
under generally accepted accounting principles except to the extent that
Lessee's Share of such costs are amortized over the useful life of the item
determined in accordance with generally accepted accounting principles. In
addition, Lessee shall not be obligated to bear any costs in connection with the
presence of Hazardous Substances unless the same were stored, used or disposed
of by Lessee, its agents, employees or contractors on or in the Premises, or in
connection with the correction of any condition existing on the Premises as of
the Commencement Date.
11A. Subject to reimbursement pursuant to Paragraph 4.2, Lessor shall keep
in good condition and repair the
12. ,which shall not be unreasonably withheld or delayed with respect to
Alterations proposed to be made by Lessee to the Option Space (as defined
below). Otherwise, Lessor may withhold its consent to Lessee's request to
construct Alterations in the Premises in its sole and absolute discretion.
13. for any particular work of improvement the cost thereof
13A. at the time Tenant requests consent for any Alteration or Utility
Installation
14. Landlord agrees that the tenant improvements to be constructed
pursuant to Paragraph 51 shall not be required to be removed at the expiration
or earlier termination of this Lease.
14A. acts of God, casualties, and condemnation
15. the damage caused by the removal thereof.
16. and its agents' , employees' and contractors'
17. Notwithstanding anything to the contrary contained in this Lease,
Lessor shall not be released from all damages, liabilities, judgments, actions,
claims, attorneys' fees, consultants'
<PAGE>
fees, payments, costs and expenses arising from the negligence or willful
misconduct of Lessor or its agents, employees, contractors or invitees; Lessor's
violation of Applicable Requirements, or a breach of Lessor's obligations or
representations under this Lease.
18. Except to the extent caused by the negligence or willful misconduct of
Lessor, its agents, employees or contractors,
19. to substantially the same condition immediately prior to the damage or
destruction,
20. and restore the Premises to substantially the same condition
immediately prior to the damage or destruction
20A. and Lessor is ordered by any governmental entity to remediate the same
or if Lessor voluntarily enters into a written agreement with any governmental
entity to remediate the same,
20B. but in no event less than 180 days after the date the notice is
delivered to Lessee.
21. 9.10 Notwithstanding anything to the contrary contained in this
Lease, Lessee shall have the option to terminate this Lease in the event any of
the following occurs, which option may be exercised by delivery to Lessor of a
written notice of election to terminate within thirty (30) days after Lessee
receives from Lessor the estimate of the time needed to complete such
restoration: (i) the Premises, with reasonable diligence, cannot be fully
repaired by Lessor within two hundred seventy (270) days after the damage or
destruction taking into consideration any then-existing force majeure
circumstances; or (ii) Lessor commences the repairs but fails to complete them
within two hundred seventy (270) days after the date of the damage or
destruction and such failure is not attributable to force majeure.
22. Notwithstanding anything to the contrary contained in this Lease,
Lessee shall not be required to pay any portion of any tax or assessment expense
(i) levied on Lessor's rental income, unless such tax or assessment expense is
imposed in lieu of real property taxes; (ii) in excess of the amount which would
be payable if such tax or assessment expense were paid in installments over the
longest possible term; (iii) imposed on land and improvements other than the
Industrial Center; or (iv) attributable to Lessor's net income, inheritance,
gift, transfer, franchise, estate or state taxes.
23. ,which shall not be unreasonably withheld or delayed (subject to
Paragraph 57 in Addendum A).
23A. provided that a sale of Lessee's capital stock through any public
exchange shall not be deemed an assignment, subletting or other transfer of this
Lease or the Premises requiring Lessor's consent.
24. unless otherwise agreed in writing by Lessor,
24A. Within ten (10) business days after Lessee has submitted the required
information, a copy of the proposed sublease or assignment, and a proposed
Lessor consent form, Lessee shall
<PAGE>
notify in writing of whether it will approve or disapprove of the proposed
sublessee or assignee. If Lessor should disapprove such proposed sublessee or
assignee, it shall specify its reasonable reasons for such disapproval in the
disapproval notice. If Lessor fails to approve or disapprove of such proposed
sublessee or assignee with such ten (10) day period, the proposed sublease or
assignment shall be deemed approved.
25. 12.4 Notwithstanding anything to the contrary contained in this
Lease, Lessee, may (provided Lessee is not then in default hereunder beyond any
applicable cure period), sublet the Premises or assign this Lease without
Lessor's prior written consent to: (i) a subsidiary, division or corporation
controlling, controlled by or under common control with Lessee and such entity
has a net worth equal or greater to Lessee's net worth on the Commencement Date;
(ii) a successor corporation related to Lessee by merger, consolidation, non-
bankruptcy reorganization or government action; or (iii) a purchaser of
substantially all of Lessee's assets located at the Premises (collectively,
"Permitted Transferees"); provided that the assignee or sublessee expressly
assumes the obligations of Lessee under this Lease for the benefit of Lessor and
delivers a copy thereof to Lessor. For purposes of this Lease, a sale of
Lessee's capital stock through any public exchange shall not be deemed an
assignment, subletting or other transfer of this Lease or the Premises requiring
Lessor's consent.
25A. which compliance shall not require that Lessee perform any
environmental survey or prepare any environmental report if Lessee has not
caused a release, spill or disposal of Hazardous Substances on or about the
Premises;
26. after receipt of written notice from Lessor that such sum is due,
27. Except with respect to a Permitted Transferee,
Lessor: W. F BATTON & CO., INC.
A CALIFORNIA CORPORATION
By: /s/Marie A Batton Date: August 20, 1998
Marie A. Batton, Vice President
Lessee: RELEASE SOFTWARE, INC.,
A CALIFORNIA CORPORATION
By: /s/Marielena Tidwell Date: 8/18/98
Marielena Tidwell, VP Resources & Administration
<PAGE>
August 20, 1998
Lessor (W.F. Batton Company, Inc., a California Corporation) and Lessee (Release
Software, Inc., a California Corporation) acknowledge that Lessee intends to
park vehicles in front of the new glass storefront on the right side of the
building located at 990 Commercial Street, San Carlos, CA.
Lessee: RELEASE SOFTWARE, INC., a
California Corporation
By: /s/ Marielena Tidwell Date: 8/21/98
Lessor: W.F. BATTON COMPANY, INC., a
California Corporation
By: /s/ Pamela Foley Date: 8/21/98
<PAGE>
Description of Improvements
to be performed by W.F. Batton Co., Inc.
For Release Software, Inc.
at 990 Commercial Street, San Carlos, CA
A. Demo and construction of new walls per attached Exhibit "A."
B. All areas to be carpeted (carpet and base have been selected by Tenant.
Base is Burke Thunder 727p; carpet is Philadelphia Vocation China Rose
#83482) except for the following two rooms: the lunch room shall have VCT
floor covering, and the server room shall have static dissipative flooring.
(Any cost increase between standard VCT floor covering and static
dissipative floor covering shall be paid in cash by Tenant upon invoice.)
C. Drop ceiling with 2' x 4' florescent lights throughout reception area,
conference rooms, kitchen area, copy room, server room and the "additional
space" (2,321 square feet).
D. Open bullpen area shall have an exposed ceiling with 400 watt metal halide
low/bay light fixtures, existing insulation will be covered with a black
cap sheet at the roof line. HVAC will be a spiral pipe system with dropped
defusers per Title 24 Code. The server room area shall have a 5 ton cooling
unit only which will be provided and paid for by Tenant, in cash upon
invoice.
E. Standard electrical drops throughout all enclosed areas with specified
amperage and locations for the server room and the copy room. Extra
electrical outlet costs for the server room requested by tenant at the
11:00 AM meeting August 17, 1998 shall be paid for in cash by Tenant upon
invoice.) Power will be provided in the open bull pen area for the tenant-
furnished power poles.
F. Install laminated counter top and shelving (not cabinets) in copy room and
upper and lower cabinets in kitchen area.
This document is only a description of the tenant improvement work, formal
construction drawings will be agreed to and signed by all parties.
<PAGE>
SERVICE AGREEMENT: Equipment List: Quantic Industries, Building 1
<TABLE>
<CAPTION>
System & Equipment Description Rating Remaining Quantity of ASI Visits
Type, Maintenance, Serial # Size Life Units per year
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AC4 TRANE, PACKAGE UNIT 5 TONS 9 YEARS 1 4
MODEL: SFCA-503-LA
SERIAL: 77B-14952
- --------------------------------------------------------------------------------------------------------
AC5 CARRIER, PACKAGE UNIT 7 TONS 5 YEARS 1 4
MODEL: 50R0008600EA
SERIAL: N/A
- --------------------------------------------------------------------------------------------------------
AC6 CARRIER, PACKAGE UNIT 4 TONS 5 YEARS 1 4
MODEL: 48LD005
SERIAL: 3482G53615
- --------------------------------------------------------------------------------------------------------
AC7 CARRIER, PACKAGE UNIT 3.5 TONS 5 YEARS 1 4
MODEL: 50YQ04260
SERIAL: 0216752
- --------------------------------------------------------------------------------------------------------
AC8 CARRIER, PACKAGE UNIT 5 TONS 5 YEARS 1 4
MODEL: 48LD006
SERIAL: 0782G38330
- --------------------------------------------------------------------------------------------------------
AC9 CARRIER, PACKAGE UNIT 5 TONS 5 YEARS 1 4
MODEL: 50QD006600VA
SERIAL: 2282G48875
- --------------------------------------------------------------------------------------------------------
</TABLE>
SERVICE AGREEMENT: AQ - Air Quality & Filter Service: Building 1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Filter Type Filter Quantity Changes Total
Description Size Per Change Per Year Quantity
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AC-4 PLEATED, HI-E 16X20X2 4 4 16
- --------------------------------------------------------------------------------------------------------
AC-5 PLEATED, HI-E 16X25X2 1 4 4
20X25X2 1 4 4
- --------------------------------------------------------------------------------------------------------
AC-6 PLEATED, HI-E 20X25X1 1 4 4
16X25X1 1 4 4
- --------------------------------------------------------------------------------------------------------
AC-7 PLEATED, HI-E 14X25X1 1 4 4
- --------------------------------------------------------------------------------------------------------
AC-8 PLEATED, HI-E 16X25X1 1 4 4
20X25X1 1 4 4
- --------------------------------------------------------------------------------------------------------
AC-9 PLEATED, HI-E 24X24X2 2 4 8
BAG FILTER REMOVE
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.8
================================================================================
LOAN AGREEMENT
Dated as of June 26, 1996
between
RELEASE SOFTWARE CORPORATION
as Borrower,
and
VENTURE LENDING & LEASING, INC.,
as Lender
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - DEFINITIONS ..................................................................... 1
ARTICLE 2 - THE COMMITMENT AND LOANS ........................................................ 4
2.1 The Commitment ............................................................ 4
2.2 Limitation on Loans ....................................................... 4
2.3 Notes Evidencing Loans; Repayment ......................................... 6
2.4 Procedures for Borrowing .................................................. 5
2.5 Interest................................................................... 5
2.6 Interest Rate Calculation ................................................. 5
2.7 Default Interest .......................................................... 5
2.8 Lender's Records .......................................................... 6
2.9 Security .................................................................. 6
2.10 Issuance of Warrant to Lender ............................................. 6
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES .................................................. 6
3.1 Due Organization .......................................................... 6
3.2 Authorization, Validity and Enforceability ................................ 6
3.3 Compliance with Applicable Laws ........................................... 7
3.4 Copyrights, Patents, Trademarks and Licenses .............................. 7
3.5 No Conflict ............................................................... 7
3.6 No Litigation, Claims or Proceedings ...................................... 7
3.7 Correctness of Financial Statements ....................................... 7
3.8 No Subsidiaries ........................................................... 7
3.9 Environmental Matters ..................................................... 7
3.10 No Event of Default ....................................................... 7
3.11 Full Disclosure ........................................................... 8
ARTICLE 4 - CONDITIONS PRECEDENT ............................................................ 8
4.1 Conditions to First Loan .................................................. 8
4.2 Conditions to All Loans ................................................... 9
ARTICLE 5 - AFFIRMATIVE COVENANTS ........................................................... 9
5.1 Notice to Lender .......................................................... 9
5.2 Financial Statements ...................................................... 10
5.3 Managerial Assistance from Lender ......................................... 10
5.4 Existence ................................................................. 11
5.5 Accounting Records ........................................................ 11
5.6 Compliance With Laws ...................................................... 11
5.7 Taxes and Other Liabilities ............................................... 11
5.8 Financial Covenants ....................................................... 11
5.9 Use of Proceeds ........................................................... 11
ARTICLE 6 - NEGATIVE COVENANTS .............................................................. 11
6.1 Dividends ................................................................. 12
6.2 Changes/Mergers ........................................................... 12
6.3 Sales of Assets ........................................................... 12
ARTICLE 7 - EVENTS OF DEFAULT ............................................................... 12
7.1 Events of Default ......................................................... 12
ARTICLE 8 - GENERAL PROVISIONS .............................................................. 13
8.1 Notices ................................................................... 13
8.2 Binding Effect ............................................................ 13
8.3 No Waiver ................................................................. 14
8.4 Rights Cumulative ......................................................... 14
8.5 Unenforceable Provisions .................................................. 14
8.6 Accounting Terms .......................................................... 14
8.7 Indemnification; Exculpation .............................................. 14
8.8 Reimbursement ............................................................. 14
8.9 Execution in Counterparts ................................................. 15
8.10 Entire Agreement .......................................................... 15
8.11 Governing Law and Jurisdiction ............................................ 15
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
Page
----
8.12 Waiver of Jury Trial ...................................... 15
LIST OF EXHIBITS
----------------
Exhibit "A" Form of Note
Exhibit "B" Form of Borrowing Request
Exhibit "C" Security Agreement (Equipment)
Exhibit "D" Form of Warrant
ii
<PAGE>
LOAN AGREEMENT
This LOAN AGREEMENT is entered into as of June 26, 1996, between
RELEASE SOFTWARE CORPORATION, a Delaware corporation ("Borrower"), and VENTURE
LENDING & LEASING, INC., a Maryland corporation ("VLLI" or "Lender").
WHEREAS, Lender has agreed to make available to Borrower a loan
facility upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
The definitions appearing in this Agreement or any supplement or
addendum to this Agreement, shall be applicable to both the singular and plural
forms of the defined terms:
"Additional Interest" means, with respect to each Loan, an amount of
interest payable thereon, in addition to Basic Interest, payable on the Maturity
Date of such Loan in an amount equal to twelve percent (12%) of the original
principal amount of such Loan.
"Affiliate" means any Person which directly or indirectly controls, is
controlled by, or is under common control with, Borrower. "Control," "controlled
by" and "under common control with" means direct or indirect possession of the
power to direct or cause the direction of management or policies (whether
through ownership of voting securities, by contract or otherwise); provided that
control shall be conclusively presumed when any Person or affiliated group
directly or indirectly owns five percent or more of the securities having
ordinary voting power for the election of directors of a corporation.
"Agreement" means this Loan Agreement as it may be amended or
supplemented from time to time.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. (S)101, et seq.), as amended.
-- ---
"Basic Interest" means the fixed rate of interest payable on the
outstanding balance of each Loan at the applicable Designated Rate.
"Borrowing Date" means the Business Day on which the proceeds of a
Loan are disbursed by Lender.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in New York City or San Francisco are authorized
or required by law to close.
"Closing Date" means the date of this Agreement.
"Collateral" has the meaning ascribed thereto in the Security
Agreement.
3
<PAGE>
"Commitment" means the obligation of Lender to make Loans to Borrower
in an aggregate, original principal amount not exceeding One Million Dollars
($1,000,000,00} as stated in Commitment Letter dated May 29, 1996
"Default" means an event which with the giving of notice, passage of
time, or both would constitute an Event of Default.
"Default Rate" is defined in Section 2.7.
------------
"Designated Rate" means a fixed rate of interest of eight percent
(8.00%).
"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authorities, in each case
relating to environmental, health, or safety matters.
"Equipment" means all of Debtor's specific equipment identified and
described on Schedule 1 attached to the Security Agreement and incorporated
----------
herein by reference (as such Schedule may be amended or supplemented from time
to time) all replacements, parts, accessions and additions thereto, and all
proceeds thereof arising from the sale, lease, rental or other use or
disposition thereof, including all rights to payment with respect to insurance
or condemnation, returned premiums, or any cause or action relating to any of
the foregoing. Financed equipment to be new and used software, R&D, test
equipment, computer and general purpose office equipment. Advances on used
equipment will be at 100% of purchase price and 50% of this facility may be used
for software or tenant improvements as stated in Commitment Letter dated May 29,
1996.
"Event of Default" means any event described in Article 7.
"GAAP" means generally accepted accounting principles and practices
consistent with those principles and practices promulgated or adopted by the
Financial Accounting Standards Board and the Board of the American Institute of
Certified Public Accountants, their respective predecessors and successors. Each
accounting term used but not otherwise expressly defined herein shall have the
meaning given it by GAAP.
"Indebtedness" of any Person means at any date, without duplication
and without regard to whether matured or unmatured, absolute or contingent: (i)
all obligations of such Person for borrowed money; (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments;
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business; (iv) all obligations of such Person as lessee under capital
leases; (v) all obligations of such Person to reimburse or prepay any bank or
other Person in respect of amounts paid under a letter of credit, banker's
acceptance, or similar instrument, whether drawn or undrawn; (vi) all
obligations of such Person to purchase securities which arise out of or in
connection with the sale of the same or substantially similar securities; (vii)
all obligations of such Person in connection with
4
<PAGE>
any agreement to purchase, redeem, exchange, convert or otherwise acquire for
value any capital stock of such Person or any warrants, rights or options to
acquire such capital stock, now or hereafter outstanding, except to the extent
that such obligations remain performable solely at the option of such Person;
(viii) all obligations to repurchase assets previously sold (including any
obligation to repurchase any accounts or chattel paper under any factoring,
receivables purchase, or similar arrangement); {ix) obligations of such Person
under interest rate swap, cap, collar or similar hedging arrangements; and (x)
all obligations of others of any type described in clause (i) through clause
---------- ------
(ix) above guaranteed by such Person.
- ----
"Insolvency Proceeding" means (a) any case, action or proceeding
before any court or other governmental authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors, or other, similar
arrangement in respect of its creditors generally or any substantial portion of
its creditors, undertaken under U.S. Federal, state or foreign law, including
the Bankruptcy Code.
"Lien" means any voluntary or involuntary security interest, mortgage,
pledge, claim, charge, encumbrance, title retention agreement, or third party
interest, covering all or any part of the property of Borrower or any other
Person.
"Loan" means an extension of credit by Lender under Section 2 of this
--------
Agreement.
"Loan Documents" means, individually and collectively, this Agreement,
each Note, the Security Agreement and any other security or pledge agreement
(s), and all other contracts, instruments, addenda and documents executed in
connection with this Agreement or the extensions of credit which are the subject
of this Agreement.
"Material Adverse Effect" or "Material Adverse Change" means (a) a
material adverse change in, or a material adverse effect upon, the operations,
business, properties, or condition (financial or otherwise) of Borrower; (b) a
material impairment of the ability of Borrower to perform under any Loan
Document and to avoid any Event of Default; or (c) a material adverse effect
upon the legality, validity, binding effect or enforceability against Borrower
of any Loan Document.
"Maturity Date" means, with regard to each Note, the date on which
payment of all outstanding principal and accrued interest, including Additional
Interest, is due, whether at stated maturity or by acceleration.
"Note" means a promissory note substantially in the form of Exhibit
-------
"A" hereto, executed by Borrower evidencing each Loan.
- ---
"Obligations" means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document, owing by Borrower to
Lender, whether direct or indirect (including those acquired by assignment),
absolute or contingent, due or to become due, now existing or hereafter arising.
5
<PAGE>
"Person" means any individual or entity.
"Qualified Public Offering" means the closing of a firmly underwritten
public offering of Borrower's common stock with aggregate proceeds of not less
than $6,000,000 (prior to underwriting expenses and commissions).
"Related Person" means any Affiliate of Borrower, or any officer,
employee, director or shareholder of Borrower or any Affiliate.
"Security Agreement" means the Security Agreement substantially in the
form of Exhibit "C" hereto, executed by Borrower.
-----------
"Termination Date" means the earlier of: (a) the date Lender may
terminate making loans or extending the credit pursuant to the rights of Lender
under Article 7, or (b) June 30, 1997.
"UCC" means the Uniform Commercial Code as enacted in the applicable
jurisdiction, in effect on the Closing Date and as amended from time to time.
ARTICLE 2 - THE COMMITMENT AND LOANS
2.1 The Commitment. Subject to the terms and conditions of this Agreement,
Lender agrees to make term loans to Borrower from time to time from the Closing
Date and to, but not including, the Termination Date in an aggregate principal
amount not exceeding the Commitment for purposes of financing Borrower's
acquisition of Equipment. The Commitment is not a revolving credit commitment,
and Borrower shall not have the right to repay and reborrow hereunder.
2.2 Limitation on Loans. Each Loan shall be in an amount not to exceed one
hundred percent (100%) of the amount paid or payable by Borrower to a non-
affiliated manufacturer, vendor or dealer for an item of Equipment as shown on
an invoice therefor (excluding any commissions and any portion of the payment
which relates to the servicing of the equipment and sales taxes payable by
Borrower upon acquisition, and delivery charges). Lender shall not be obligated
to make any Loan under its Commitment if at the time of or after giving effect
to the proposed Loan Lender would no longer qualify as: (A) a "venture capital
operating company" under U.S. Department of Labor Regulations Section 2510.3-
101(d), Title 29 of the Code of Federal Regulations, as amended; and (B) a
"business development company" under the provisions of Federal Investment
Company Act of 1940, as amended; and (C) a "regulated investment company" under
the provisions of the Internal Revenue Code of 1986, as amended. Each Loan
requested by Borrower to be made on a single Business Day shall be for a
principal amount of Fifty Thousand Dollars ($50,000.00) or greater, except to
the extent the remaining Commitment is a lesser amount.
2.3 Notes Evidencing Loans; Repayment. Each Loan shall be evidenced by a
separate Note payable to the order of Lender substantially in the form of
Exhibit "A" to this Agreement, in the total principal amount of the Loan. Each
- -----------
Note shall be payable as follows: Principal and Basic Interest shall be
6
<PAGE>
paid in thirty-six(36) equal and successive monthly payments, in advance,
beginning on the Borrowing Date and continuing on the first Business Day of each
month thereafter; provided, that if the Borrowing Date of a Loan is not the
--------
first day of a month, then (i) the 36-month amortization period shall commence
on the first day of the next month following the Borrowing Date, and (ii)
Borrower shall pay to Lender, in advance on the Borrowing Date a payment of
Basic Interest that will accrue on such Loan from the Borrowing Date through the
last day of such month. Borrower shall also prepay on the Borrowing Date the
first amortization installment payment. The Additional Interest on each Loan
shall be paid on the first Business Day of the thirty-seventh (37th) full month
after the Borrowing Date of such Loan. The payment of amortization installments
of principal of and interest on a Loan in advance results in a higher effective
rate of interest than the stated Designated Rate applicable to such Loan.
2.4 Procedures for Borrowing.
(a) Borrower shall give Lender at least five (5) Business Days' prior
to a proposed Borrowing Date written notice of any request for borrowing
hereunder (a "Borrowing Request"). Each Borrowing Request shall be in
substantially the form of Exhibit "B" hereto, shall be executed by the chief
-----------
financial officer of Borrower, and shall state how much is requested, and shall
be accompanied by copies of invoices for the Equipment to be financed and such
additional information and documentation as Lender may deem reasonably necessary
to determine whether the proposed borrowing will comply with the limitations in
Section 2.2. To the Borrower's best knowledge after due inquiry of its senior
- -----------
officers, the Borrowing Request shall also certify that all Equipment to be
financed thereby is owned by Borrower free and clear of all Liens except in
favor of Lender.
(b) No later than 1:00 p.m. Pacific Standard Time on the Borrowing
Date, if Borrower has satisfied the conditions precedent in Article 4, Lender
shall make the Loan available to Borrower in immediately available funds.
2.5 Interest. Basic Interest on the outstanding principal balance of the
each Loan shall accrue daily from the Borrowing Date until the Maturity Date at
the Designated Rate. On the Maturity Date of a Loan, Borrower shall pay the
Additional Interest thereon.
2.6 Interest Rate Calculation. Basic Interest, along with charges and fees
under this Agreement and any Loan Document, shall be calculated for actual days
elapsed on the basis of a 360-day year, which results in higher interest, charge
or fee payments than if a 365-day year were used. In no event shall Borrower be
obligated to pay Lender interest, charges or fees at a rate in excess of the
highest rate permitted by applicable law from time to time in effect.
2.7 Default Interest. Any unpaid payments of principal or interest with
respect to any Loan shall bear interest from their respective maturities,
whether scheduled or accelerated, at the Designated Rate for such Loan plus five
----
percent (5.00%) per annum, until paid in full, whether before or after judgment
(the "Default Rate"). Borrower shall pay such interest on demand.
7
<PAGE>
2.8 Lender's Records. Principal, Basic Interest, Additional Interest and
all other sums owed under any Loan Document shall be evidenced by entries in
records maintained by Lender for such purpose. Each payment on and any other
credits with respect to principal, Basic Interest, Additional Interest and all
other sums outstanding under any Loan Document shall be evidenced by entries in
such records. Absent manifest error, Lender's records shall be conclusive
evidence thereof.
2.9 Security. As security for all Obligations to Lender, Borrower shall
grant concurrently to Lender, or ensure that Lender is concurrently granted,
perfected security interests of first priority in all of the Equipment and other
Collateral pursuant to the Security Agreement, subject only to Liens disclosed
to and approved by Lender prior to the Closing Date to this Agreement.
2.10 Issuance of Warrant to Lender. As additional consideration for the
making of the Loans under this Agreement, Lender shall be entitled to receive a
Warrant to purchase a number of shares of preferred stock of Borrower with a
value equal to seven percent (7%) of the Commitment. Thirty percent (30%) of the
Warrant Shares will be exercisable at a price per share of $0.50 and seventy
percent (70%) of the Warrant shares will be exercisable at a price per share
equal to the price paid by investors in Borrower's next round of venture capital
equity financing to be closed within one year from the date of this Agreement.
The Warrant issued pursuant to this Agreement shall be in substantially the form
attached hereto as Exhibit D; shall be transferable by Lender, subject to
compliance with applicable securities laws; shall expire March 26, 2003; and
shall include piggy-back registration rights, a "net exercise" provision and
anti dilution protection that is identical to the antidilution protection
received by the other holders of Borrower's preferred stock.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that as of the Closing Date and each
Borrowing Date:
3.1 Due Organization. Borrower is a corporation duly organized and validly
existing in good standing under the laws of California, and is duly qualified to
conduct business and is in good standing in each other jurisdiction in which its
business is conducted or its properties are located.
3.2 Authorization, Validity and Enforceability. The execution, delivery
and performance of all Loan Documents executed by Borrower are within Borrower's
powers, have been duly authorized, and are not in conflict with Borrower's
articles [certificate] of incorporation or by-laws, or the terms of any charter
or other organizational document of Borrower, as amended from time to time; and
all such Loan Documents constitute valid and binding obligations of Borrower,
enforceable in accordance with their terms (except as may be limited by
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights in general, and subject to general principles of equity).
3.3 Compliance with Applicable Laws. Borrower has complied with all
licensing, permit and fictitious name requirements necessary to lawfully conduct
the business in which it is engaged, and to any sales, leases or the
8
<PAGE>
furnishing of services by Borrower, including without limitation those requiring
consumer or other disclosures, the noncompliance with which would have a
Material Adverse Effect.
3.4 Copyrights, Patents, Trademarks and Licenses.
(a) Borrower owns or is licensed or otherwise has the right to use
all of the patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and other rights that are reasonably
necessary for the operation of its business, without conflict with the rights of
any other Person.
(b) No slogan or other advertising device, product, process, method,
substance, park or other material now employed, or now contemplated to be
employed, by Borrower infringes upon any rights held by any other Person.
(c) No claim or litigation regarding any of the foregoing is pending
or threatened, which, in either case, could reasonably be expected to have a
Material Adverse Effect.
3.5 No Conflict. The execution, delivery, and performance by Borrower of
all Loan Documents are not in conflict, with any law, rule, regulation, order or
directive, or any indenture, agreement, or undertaking to which Borrower is a
party or by which Borrower may be bound or affected.
3.6 No Litigation, Claims or Proceedings. There is no litigation, tax
claim, proceeding or dispute pending, or, to the knowledge of Borrower,
threatened against or affecting Borrower or its property.
3.7 Correctness of Financial Statements. Borrower's financial statements
which have been delivered to Lender fairly and accurately reflect Borrower's
financial condition as of April 30, 1996; and, since that date there has been no
Material Adverse Change.
3.8 No Subsidiaries. Borrower is not a majority owner of or in a control
relationship with any other business entity.
3.9 Environmental Matters. Borrower has reviewed, or caused to be reviewed
on its behalf, all Environmental Laws applicable to its business operations and
materials handled therein, and as a result thereof has reasonably concluded that
Borrower is in compliance with such Environmental Laws, except to the extent a
failure to be in such compliance could not reasonably be expected to have a
Material Adverse Effect on Borrower's operations, properties or financial
condition.
3.10 No Event of Default. No Default or Event of Default has occurred and
is continuing.
3.11 Full Disclosure. None of the representations or warranties made by
Borrower in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of Borrower
in connection with the Loan Documents (including disclosure materials delivered
by or on behalf of Borrower to Lender prior to the Closing Date),
9
<PAGE>
contains any untrue statement of a material fact or omits any material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they are made, not misleading as of
the time when made or delivered.
ARTICLE 4 - CONDITIONS PRECEDENT
4.1 Conditions to First Loan. The obligation of Lender to make its first
Loan hereunder is, in addition to the conditions precedent specified in Section
-------
4.2, subject to the fulfillment of the following conditions and to the receipt
by Lender of the documents described below, duly executed and in form and
substance satisfactory to Lender and its counsel:
(a) Resolutions. A certified copy of the resolutions of the Board of
Directors of Borrower authorizing the execution, delivery and performance by
Borrower of the Loan Documents.
(b) Incumbency and Signatures. A certificate of the secretary of
Borrower certifying the names of the officer or officers of Borrower authorized
to sign the Loan Documents, together with a sample of the true signature of each
such officer.
(c) Opinion of Counsel. The opinion of Venture Law Group, counsel for
Borrower, together with any opinions, certificates and other matters on which
such opinion relies.
(d) Articles and By-Laws. Certified copies of the Articles of
Incorporation and By-Laws of Borrower, as amended through the Closing Date.
(e) The Agreement. A counterpart of this Agreement with all schedules
completed and attached thereto, and disclosing such information as is acceptable
to Lender.
(f) Security Agreement. A Security Agreement executed by Borrower,
substantially in the form of Exhibit "C", together with filing copies (or other
---
evidenced of filing satisfactory to Lender and its counsel) of such Uniform
Commercial Code financing statements, collateral assignments and termination
statements, with respect to the Collateral (as defined in such Security
Agreement) as Lender shall request.
(g) Lien Searches. Uniform Commercial Code lien, judgment, bankruptcy
and tax lien searches of Borrower from the California Secretary of State, as of
a date reasonably satisfactory to Lender and its counsel.
(h) Good Standing Certificate. A Certificate of Good Standing as of a
date acceptable to Lender with respect to Borrower from the California Secretary
of State.
(i) Warrant. A warrant issued by Borrower to Lender exercisable for
the Warrant Shares, as described in Section 2.11 hereof.
------------
10
<PAGE>
4.2 Conditions to All Loans. The obligation of Lender to make its initial
Loan and each subsequent Loan is subject to the following further conditions
precedent that:
(a) No Default. No Default or Event of Default has occurred and is
continuing or will result from the making of any such Loan, and the
representations and warranties of Borrower contained in Article 3 of this
Agreement are true and correct as of the Borrowing Date of such Loan.
(b) No Adverse Material Change. No Material Adverse Change shall have
occurred since the date of the most recent financial statements submitted to
Lender.
(c) Note. Borrower shall have delivered an executed Note evidencing
such Loan, in form and substance satisfactory to Lender.
(d) Borrowing Request. Borrower shall have delivered to Lender a
Borrowing request for such Loan.
(e) VCOC Limitation. The making of the Loan will not result in a
violation of the condition applicable to Lender described in Section 2.2.
ARTICLE 5 - AFFIRMATIVE COVENANTS
During the term of this Agreement and until its performance of ail
obligations to Lender, Borrower will:
5.1 Notice to Lender. Promptly give written notice to each Lender of:
(a) Any litigation or administrative or regulatory proceeding
affecting Borrower where the amount claimed against Borrower is Fifty Thousand
Dollars ($50,000) or more, or where the granting of the relief requested would
have a Material Adverse Effect.
(b) Any substantial dispute which may exist between Borrower or any
governmental or regulatory authority.
(c) The occurrence of any Event of Default or any event which with
the giving of notice, the passage of time, or both, would constitute an Event of
Default.
(d) Any change in the location Of any of Borrower's places of
business at least thirty (30) days in advance of such change, or of the
establishment of any new, or the discontinuance of any existing, place of
business.
(e) Any other matter which has resulted or might result in a Material
Adverse Change.
5.2 Financial Statements. Deliver to each Lender or cause to be delivered
to Lender, in form and detail satisfactory to Lender the following financial
information, which Borrower warrants shall be accurate and complete in all
material respects:
11
<PAGE>
(a) Monthly Financial Statements. As soon as available but no later
than thirty (30) days after the end of each month, Borrower's balance sheet as
of the end of such period, and Borrower's income statement for such period and
for that portion of Borrower's financial reporting year ending with such period,
prepared and attested by a responsible financial officer of Borrower as being
complete and correct and fairly presenting Borrower's financial condition and
the results of Borrower's operations. After a Qualified Public Offering, the
foregoing interim financial statements shall be delivered no later than 45 days
after each fiscal quarter and for the quarter-annual fiscal period then ended.
(b) Year-End Financial Statements. As soon as available but no later
than ninety (90) days after and as of the end of each financial reporting year,
a complete copy of Borrower's audit report, which shall include balance sheet,
income statement, statement of changes in equity and statement of cash flows for
such year, prepared and certified by an independent certified public accountant
selected by Borrower and reasonably satisfactory to Lender (the "Accountant").
The Accountant's certification shall not be qualified or limited due to a
restricted or limited examination by the Accountant of any material portion of
Borrower's records or otherwise.
(c) Compliance Certificates. Simultaneously with the delivery of each
set of financial statements referred to in paragraphs (a) and (b) above, a
certificate of the chief financial officer of Borrower stating whether any
Default or Event of Default exists on the date of such certificate, and if so,
setting forth the details thereof and the action which Borrower is taking or
proposes to take with respect thereto.
(d) Government Required Reports; Press Releases. Promptly after
sending, issuing, making available, or filing, copies of all statements released
to any news media for publication, all reports, proxy statements, and financial
statements that Borrower sends or makes available to its stockholders, and, not
later than five (5) days after actual filing or the date such filing was first
due, all registration statements and reports that Borrower files or is required
to file with the Securities and Exchange Commission.
(e) Other Information. Such other statements, lists of property and
accounts, budgets, forecasts, reports, or other information as any Lender may
reasonably from time to time request.
5.3 Managerial Assistance from Lender. Permit Lender, as a "venture
capital operating company" to participate in, and influence the conduct of
management of Borrower through the exercise of "management rights," as such
terms are defined in 29 C.F.R. (S) 2510.3-101(d), and:
(a) Permit Lender to make available to Borrower, at no cost to
Borrower, "significant managerial assistance", as defined in Section 2(a)(47) of
the Investment Company Act of 1940, as amended, either in the form of: (i)
consulting arrangements with Lender or any of its officers, directors, employees
or affiliates, (ii) Borrower's allowing Lender to provide recommendations of
prospective candidates for election to Borrower's Board of Directors, or (iii)
Lender, at Borrower's request, seeking the services of
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third-party consultants to aid Borrower with respect to its management and
operations;
(b) Permit Lender to make available consulting and advisory services
to officers of Borrower regarding Borrower's equipment acquisition and financing
plans, and such other matters affecting the business, financial condition and
prospects of Borrower as Lender shall reasonably deem relevant; and
(c) If Lender reasonably believes that financial or other
developments affecting Borrower have impaired or are likely to impair Borrower's
ability to perform its obligations under this Agreement, permit Lender
reasonable access to Borrower's management and/or Board of Directors and
opportunity to present Lender's views with respect to such developments.
5.4 Existence. Maintain and preserve Borrower's existence, present form of
business, and all rights and privileges necessary or desirable in the normal
course of its business.
5.5 Accounting Records. Maintain adequate books, accounts and records, and
prepare all financial statements in accordance with GAAP, and in compliance with
the regulations of any governmental or regulatory authority having jurisdiction
over Borrower or Borrower's business; and permit employees or agents of Lender
at such reasonable times as Lender may request, at Borrower's expense not to
exceed $1,000; provided that Borrower shall not be required to pay this expense
more than one time, to inspect Borrower's properties, and to examine, and make
copies and memoranda of Borrower's books, accounts and records.
5.6 Compliance With Laws. Comply with all laws (including Environmental
Laws), rules, regulations applicable to, and all orders and directives of any
governmental or regulatory authority having jurisdiction over, Borrower or
Borrower's business, and with all material agreements to which Borrower is a
party.
5.7 Taxes and Other Liabilities. Pay all Borrower's obligations when due;
pay all taxes and other governmental or regulatory assessments before
delinquency or before any penalty attaches thereto, except as may be contested
in good faith by the appropriate procedures and for which Borrower shall
maintain appropriate reserves; and timely file all required tax returns.
5.8 Financial Covenants. Comply with the terms of all financial covenants
contained in any addendum to this Agreement.
5.9 Use of Proceeds. Use the proceeds of Loans only as set forth in
Article 2 of this Agreement; and not directly or indirectly to purchase or carry
any margin stock, as defined from time to time by the Board of Governors of the
Federal Reserve System in Federal Regulation U.
ARTICLE 6 - NEGATIVE COVENANTS
During the term of this Agreement and until the performance of all
obligations to Lender, Borrower will not:
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6.1 Dividends. Except after a Qualified Public Offering, pay any dividends
or purchase, redeem or otherwise acquire or make any other distribution with
respect to any of Borrower's capital stock, except dividends or other
distributions solely of capital stock of Borrower.
6.2 Changes/Mergers. Liquidate or dissolve, or enter into any
consolidation, merger, partnership, joint venture or other combination except
------
for joint ventures, strategic alliances, licensing and similar arrangements
customary in Borrower's industry for businesses in the development stage of
Borrower and which do not require Borrower to assume or otherwise become liable
for the obligations of any third party not directly related to or arising out of
such arrangement or, without the prior written consent of Lender, require
Borrower to transfer ownership of assets to such joint venture or other entity;
prepay any subordinated debt, debt for borrowed money, or debt secured by any
permitted Lien, or enter into or modify any agreement as a result of which the
terms of payment of any such debt are waived or modified.
6.3 Sales of Assets. Sell, transfer, lease or otherwise dispose of any of
Borrower's assets except for fair consideration and in the ordinary course of
its business; or enter into any sale or leaseback agreement covering any of
Borrower's fixed or capital assets.
ARTICLE 7 - EVENTS OF DEFAULT
7.1 Events of Default. Upon the occurrence and during the continuation of
any Default, the obligation of Lender to make any additional Loan shall be
suspended. The occurrence of any of the following shall terminate any obligation
of Lender to make any additional Loan; and shall, at the option of Lender (1)
make all sums of Basic Interest, principal, Additional Interest and any other
amounts owing under any Loan Documents immediately due and payable without
notice of default, presentment or demand for payment, protest or notice of
nonpayment or dishonor or any other notices or demands, and (2) give Lender the
right to exercise any other right or remedy provided by contract or applicable
law:
(a) Borrower shall fail to make any payment of principal or interest
under this Agreement, or to pay any fees or other charges when due under any
Loan Document, and such failure continues for three (10) Business Days or more
after the same first becomes due; or an Event of Default as defined in any other
Loan Document shall have occurred.
(b) Any representation or warranty made, or financial statement,
certificate or other document provided, by Borrower shall prove to have been
false or misleading in any material respect when made or deemed made herein.
(c) Borrower shall fail to pay its debts generally as they become due
or shall commence any Insolvency Proceeding with respect to itself; an
involuntary Insolvency Proceeding shall be filed against Borrower, or a
custodian, receiver, trustee, assignee for the benefit of creditors, or other
similar official, shall be appointed to take possession, custody or control of
the properties of Borrower, and such involuntary Insolvency Proceeding, petition
or appointment is acquiesced to by Borrower or is not dismissed within sixty
(60) days; or the dissolution or termination of the business of Borrower.
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(d) Borrower shall be in default beyond any applicable period of
grace or cure under any other agreement involving the borrowing of money, the
purchase of property, the advance of credit or any other monetary liability of
any kind to Lender or to any Person which results in the acceleration of payment
of such obligation in an amount in excess of One Hundred Thousand Dollars
($100,000).
(e) Any governmental or regulatory authority shall take any judicial
or administrative action, or any defined benefit pension plan maintained by
Borrower shall have any unfunded liabilities, any of which, in the reasonable
judgment of Lender, might have a Material Adverse Effect.
(f) Any sale, transfer or other disposition of all or a substantial
or material part of the assets of Borrower, including without limitation to any
trust or similar entity, shall occur.
(g) Any judgment(s) singly or in the aggregate in excess of One
Hundred Thousand Dollars ($100,000) shall be entered against Borrower which
remain unsatisfied, unvacated or unstayed pending appeal for ten (10) or more
days after entry thereof.
(h) Any Person or two or more Persons acting in concert shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission) of twenty-five percent (25%) or more of the
outstanding shares of voting stock of Borrower.
(i) Borrower shall fail to perform any of its duties or obligations
under any Loan Document not specifically referenced in this Article 7.
ARTICLE 8 - GENERAL PROVISIONS
8.1 Notices. Any notice given by any party under any Loan Document shall
be in writing and personally delivered, sent by overnight courier, or United
States mail, postage prepaid, or sent by facsimile, to be promptly confirmed in
writing, or other authenticated message, charges prepaid, to the other party's
or parties' addresses shown on the signature pages hereto. Each party may change
the address or facsimile number to which notices, requests and other
communications are to be sent by giving written notice of such change to each
other party. Notice given hand delivery shall be deemed received on the date
delivered; if sent by overnight courier, on the next business day after delivery
to the courier service; if by first class mail, on the third business day after
deposit in the U.S. Mail; and if by telecopy, on the date of transmission.
8.2 Binding Effect. The Loan Documents shall be binding upon and inure to
the benefit of Borrower and Lender and their respective successors and assigns;
provided, however, that Borrower may not assign or transfer Borrower's rights or
obligations under any Loan Document without each Lender's prior written consent.
Lender reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Lender's rights and
obligations under the Loan Documents. In connection with any of the foregoing,
Lender may disclose all documents and information which
15
<PAGE>
Lender now or hereafter may have relating to the Loans, Borrower, or its
business.
8.3 No Waiver. Any waiver, consent or approval by Lender of any Event of
Default or breach of any provision, condition, or covenant of any Loan Document
must be in writing and shall be effective only to the extent set forth in
writing. No waiver of any breach or default shall be deemed a waiver of any
later breach or default of the same or any other provision of any Loan Document.
No failure or delay on the part of Lender in exercising any power, right, or
privilege under any Loan Document shall operate as a waiver thereof, and no
single or partial exercise of any such power, right, or privilege shall preclude
any further exercise thereof or the exercise of any other power, right or
privilege. Lender has the right at its sole option to continue to accept
interest and/or principal payments due under the Loan Documents after default,
and such acceptance shall not constitute a waiver of said default or an
extension of the Maturity Date unless Lender agrees otherwise in writing.
8.4 Rights Cumulative. All rights and remedies existing under the Loan
Documents are cumulative to, and not exclusive of, any other rights or remedies
available under contract or applicable law.
8.5 Unenforceable Provisions. Any provision of any Loan Document executed
by Borrower which is prohibited or unenforceable in any jurisdiction, shall be
so only as to such jurisdiction and only to the extent of such prohibition or
unenforceability, but all the remaining provisions of any such Loan Document
shall remain valid and enforceable.
8.6 Accounting Terms. Except as otherwise provided in this Agreement,
accounting terms and financial covenants and information shall be determined and
prepared in accordance with GAAP.
8.7 Indemnification; Exculpation. Borrower shall pay and protect, defend
and indemnify Lender and Lender's employees, officers, directors, shareholders,
affiliates, correspondents, agents and representatives (other than Lender,
collectively "Agents") against, and hold Lender and each such Agent harmless
from, all claims, actions, proceedings, liabilities, damages, losses, expenses
(including, without limitation, attorneys' fees and costs) and other amounts
incurred by Lender and each such Agent, arising from (i) the matters
contemplated by this Agreement or any other Loan Documents or (ii) any
contention that Borrower has failed to comply with any law, rule, regulation,
order or directive applicable to Borrower's business; provided, however, that
this indemnification shall not apply to any of the foregoing incurred solely as
the result of Lender's or any Agent's gross negligence or willful misconduct.
This indemnification shall survive the payment and satisfaction of all of
Borrower's Obligations to Lender.
8.8 Reimbursement. Borrower shall reimburse Lender for all costs and
expenses, including without limitation reasonable attorneys' fees and
disbursements expended or incurred by Lender in any arbitration, mediation,
judicial reference, legal action or otherwise in connection with (a) the
preparation, negotiation, amendment, interpretation and enforcement of the Loan
Documents, including without limitation during any workout, attempted workout,
and/or in connection with the rendering of legal advice as to Lender's rights,
remedies and obligations under the Loan Documents, (b) collecting any sum which
becomes due Lender under any Loan Document,
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<PAGE>
(c) any proceeding for declaratory relief, any counterclaim to any, proceeding,
or any appeal, or (d) the protection, preservation or enforcement of any rights
of Lender. For the purposes of this section, attorneys' fees shall include,
without limitation, fees incurred in connection with the following: (1) contempt
proceedings; (2) discovery; (3) any motion, proceeding or other activity of any
kind in connection with an Insolvency Proceeding;
(4) garnishment, levy, and debtor and third party examinations; and
(5) postjudqment motions and proceedings of any kind, including without
limitation any activity taken to collect or enforce any judgment. All of the
foregoing costs and expenses shall be payable upon demand by Lender and if not
paid within forty-five (45) days of presentation of invoices shall bear interest
at the highest applicable Default Rate.
8.9 Execution in Counterparts. This Agreement may be executed in any
number of counterparts which, when taken together, shall constitute but one
agreement.
8.10 Entire Agreement. The Loan Documents are intended by the parties as
the final expression of their agreement and therefore contain the entire
agreement between the parties and supersede all prior understandings or
agreements concerning the subject matter hereof. This Agreement may be amended
only in a writing signed by Borrower and Lender.
8.11 Governing Law and Jurisdiction.
(a) THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN, CENTRAL OR SOUTHERN
DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH OF BORROWER AND LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF
BORROWER AND LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR
ANY DOCUMENT RELATED HERETO. BORROWER AND LENDER EACH WAIVE PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY
ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.
8.12 Waiver of Jury Trial. BORROWER AND LENDER EACH WAIVES ITS RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. BORROWER AND LENDER EACH AGREES THAT ANY SUCH CLAIM OR
CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE
RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY
ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEMS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE
17
<PAGE>
OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement
as of the date set forth in the preamble.
Addresses, for Notice: RELEASE SOFTWARE CORPORATION
- ---------------------
200 Middlefield road, Suite 202
Menlo Park, CA 94025 By: /s/ Matthew Klein
--------------------------------------
Attn: Matthew Klein Name: Matthew Klein
------------------------------------
Its: President
-------------------------------------
Venture Lending & Leasing, Inc. VENTURE LENDING & LEASING, INC.
2010 North First Street, Suite 310
San Jose, CA 95131
Attn: Salvador O. Gutierrez By: /s/ Salvador O. Gutierrez
--------------------------------------
President Name: Salvador O. Gutierrez
------------------------------------
Fax No.: 408-436-8625 Its: President
-------------------------------------
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EXHIBIT A
[Note No. X-XXX]
FORM OF PROMISSORY NOTE
$_________________________ _______________, 199___
San Jose, California
The undersigned ("Borrower") promises to pay to the order of VENTURE
LENDING & LEASING, INC., a Maryland corporation ("Lender") at its office at 2010
North First Street, Suite 310, San Jose, California 95131, or at such other
place as Lender may designate in writing, in lawful money of the United States
of America, the principal sum of _____________________ Dollars ($______), with
Basic Interest thereon from the date hereof until maturity, whether scheduled or
accelerated, at a fixed rate per annum of eight percent (8.00%), and with
Additional Interest in the sum of _______________ [12% of face amount] Dollars
--------------------
($______) payable on the Maturity Date.
This Note is one of the Notes referred to in, and is entitled to all the
benefits of, a Loan Agreement dated _____________________, 199___, between
Borrower and Lender. Each capitalized term not otherwise defined herein shall
have the meaning set forth in the Loan Agreement. The Loan Agreement contains
provisions for the acceleration of the maturity of this Note upon the happening
of certain stated events.
Principal of and interest on this Note shall be payable as follows:
On the Borrowing Date, Borrower shall pay (i) Basic Interest, in advance,
on the outstanding principal balance of this Note at the Designated Rate for the
period from the Borrowing Date through [the last day of the same month] ; and
--------------------------------
(ii) a first (1st) amortization installment of principal and Basic Interest in
the amount of ______________, in advance for the month of [ first full month
------------------
after Borrowing Date ].
- --------------------
Commencing on the first day of the second full month after the Borrowing
Date, and continuing on the first day of each consecutive month thereafter,
principal and Basic Interest shall be payable, in advance, in __________________
(__) equal consecutive installments of ______________________ Dollars ($_______)
each, with a (____) installment equal to the entire unpaid principal balance and
accrued Basic Interest on _________, 199___. The Additional Interest amount
shall be payable on [one month later], 199__ .
-----------------
Any unpaid payments of principal or interest on this Note shall bear
interest from their respective maturities, whether scheduled or accelerated, at
a rate per annum equal to the Default Rate. Borrower shall pay such interest on
demand.
<PAGE>
Interest, charges and fees shall be calculated for actual days elapsed on
the basis of a 360-day year, which results in higher interest, charge or fee
payments than if a 365-day year were used. In no event shall Borrower be
obligated to pay interest, charges or fees at a rate in excess of the highest
rate permitted by applicable law from time to time in effect.
This Note shall be governed by, and construed in accordance with, the laws
of the State of California.
RELEASE SOFTWARE CORPORATION
By:____________________________
Name: _________________________
Its:___________________________
<PAGE>
EXHIBIT B
BORROWER REQUEST
____________________, 1996
Venture Lending & Leasing, Inc.
2010 North First Street, Suite 310
San Jose, CA 95131
Re: RELEASE SOFTWARE CORPORATION
Gentlemen:
Reference is made to the Loan Agreement dated as of June 26, 1996 as it has
been and may be amended from time to time, the "Loan Agreement", the capitalized
terms used herein as defined therein), between Venture Lending & Leasing, inc.
and RELEASE Software Corporation (the "Company").
The undersigned is the Chief Financial Officer of the Company, and hereby
requests a Loan under the Loan Agreement, and in that connection certifies as
follows:
1. The amount of the proposed Loan is $______________. The Business Day
of the proposed Loan is ________________________ 1996.
2. As of this date, no Default or Event of Default has occurred and is
continuing, or will result from the making of the proposed Loan, and the
representations and warranties of the Company contained in Article 3 of the Loan
Agreement are true and correct.
3. No Material Adverse Change has occurred since the date of the most
recent financial statements submitted to you by the Company.
The Company agrees to notify you promptly before the funding of the Loan
if any of the matters to which I have certified above shall not be true and
correct on the Borrowing Date.
Very Truly Yours,
________________________________
Chief Financial Officer
<PAGE>
EXHIBIT C
SECURITY AGREEMENT
(EQUIPMENT)
This Agreement is made as of June 26, 1996, by RELEASE SOFTWARE
CORPORATION, a Delaware corporation ("Debtor") in favor of VENTURE LENDING &
LEASING, INC., a Maryland corporation ("Secured Party").
ARTICLE 1 - DEFINITIONS
The following definitions shall be applicable to both the singular and
plural forms of the defined terms:
"Agreement" means this Security Agreement, as it may be amended from time
to time.
"Collateral" means all Debtor's Equipment and Fixtures now owned or
hereafter acquired, wherever located, and whether held by Debtor or any third
party, and all proceeds and products (excluding all intellectual property of
Debtor) thereof, including all insurance and condemnation proceeds ("Proceeds"),
and all Records relating or useful to, or used in connection with any of the
foregoing.
"Equipment," means all of Debtor's specific equipment identified and
described on Schedule 1 attached to this Agreement and incorporated herein by
----------
reference (as such Schedule may be amended or supplemented from time to time),
together with all improvements, replacements, accessions and additions thereto,
wherever located, and all Proceeds thereof arising from the sale, lease, rental
or other use or disposition of any such property, including all rights to
payment with respect to insurance or condemnation, returned premiums, or any
cause of action relating to any of the foregoing. Financed equipment to be new
and used software, R&D, test equipment, computer and general purpose office
equipment. Advances on used equipment will be at 100% of purchase price and 50%
of this facility may be used for software or tenant improvements as stated in
the Commitment Letter dated May 29, 1996.
"Event of Default,, means an event described in Article 6.
"Fixtures" means all items of Equipment that are so related to the real
property upon which they are located that an interest in them arises under real
property law, and all proceeds thereof arising from the sale, lease, rental or
other use or disposition thereof.
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"Indebtedness" means all debts, obligations and liabilities of Debtor to
Secured Party currently existing or now or hereafter made, incurred or created,
whether pursuant to the Loan Documents, whether voluntary or involuntary and
however arising or evidenced, whether direct or acquired by Secured Party by
assignment or succession, whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, and whether Debtor may
be liable individually or jointly, or whether recovery upon such debt may be or
become barred by any statute of limitations or otherwise unenforceable and all
renewals, extensions and modifications thereof, and all attorneys' fees and
costs incurred by Secured Party in connection with the collection and
enforcement thereof.
"Lien" means any voluntary or involuntary security interest, mortgage,
pledge, claim, charge, encumbrance, title retention agreement, or third party
interest covering all or any part of the property of Debtor or any other Person.
"Loan Agreement" means that certain Loan Agreement between Debtor and
Secured Party of even date herewith, as amended from time to time.
"Person" means any individual or entity, including without limitation
Secured Party where the context so permits and in Secured Party's sole
discretion.
"Records" means all Debtor's computer programs, software, hardware, source
codes and data processing information, all written documents, books, invoices,
ledger sheets, financial information and statements, and all other writings
concerning Debtor's business.
"Uniform Commercial Code" means the California Uniform Commercial Code, as
amended from time to time.
Terms not specifically defined in this Agreement have the meanings
prescribed in the Loan Agreement, and if not defined therein then the meanings
prescribed in the Uniform Commercial Code.
ARTICLE 2 - GRANT OF SECURITY INTEREST
To secure the timely payment of the Indebtedness and performance of all
obligations of Debtor to Secured Party, Debtor grants to Secured Party a
security interest in the Collateral.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
2
<PAGE>
Debtor represents and warrants that, at all times during the term of this
Agreement:
3.1 Governmental Actions. Debtor has obtained all consents and actions of,
and has performed all filings with, any governmental or regulatory authority
required to authorize the execution, delivery or performance of this Agreement.
Debtor has, at the time Lender makes a Loan with respect to an item of equipment
in accordance with Section 2.2 of the Loan Agreement, and at all times
thereafter while such Loan is outstanding, obtained all consents and actions of,
and has performed all filings with, any governmental or regulatory authority
required to grant and perfect Secured Party's security interest in such item of
equipment which is part of the Collateral.
3.2 Title. Except for the security interests created by this Agreement,
Debtor is and will be the unconditional legal and beneficial owner of the
Collateral. The Collateral is subject to no Liens, rights or defenses of others,
except Liens permitted under the Loan Agreement.
3.3 No Misrepresentation. No representation, warranty or statement by
Debtor contained in this Agreement, in any Loan Document or certificate or other
writing furnished by Debtor to Secured Party in connection with any Loan
Document contains any untrue statement of material fact, or omits to state a
material fact necessary to make the statements made therein not misleading in
any material respect.
3.4 Collateral Not Inventory. Debtor is not in the business of selling
goods of the kind included within the Collateral subject to this Agreement.
3.5 Chief Executive Office. Debtor's chief executive office is located at:
200 Middlefield Road, Suite 202
Menlo Park, California 94025
3.6 Records Location. Other than as set forth in Section 3.5, Records are
maintained at:
200 Middlefield Road, Suite 202
Menlo Park, California 94025
3.7 Equipment or Fixtures Location. Other than as set forth in Section
3.5, Equipment or Fixtures are located at:
200 Middlefield Road, Suite 202
3
<PAGE>
Menlo Park, California 94025
3.8 Other Places of Business. In addition to the locations set forth in
Sections 3.5 through 3.7, Debtor maintains the following place(s) of business:
3.9 Business Names. Debtor has conducted business in the following names
other than as stated in the preamble to this Agreement:
3.10 Financing Statements. Copies of all financing statements and all other
documents publicly recorded or filed naming Debtor as debtor or obligor have
been delivered to Secured Party, prior to the date of this Agreement.
ARTICLE 4 - AFFIRMATIVE COVENANTS
During the term of this Agreement and until payment of all the Indebtedness
and performance of all obligations to Secured Party, Debtor will, unless Secured
Party otherwise consents in writing:
4.1 Use of Proceeds. Use the proceeds of any credit extended by Secured
Party to Debtor only in accordance with the terms of the Loan Documents.
4.2 Delivery of Certain Items. Deliver to Secured Party promptly (a) after
an Event of Default, all Proceeds; (b) such specific acknowledgments,
assignments or other agreements as Secured Party may reasonably request relating
to the Collateral; and (c) copies of such Records and other reports in such form
and detail and at such times as Secured Party may reasonably require relating to
the Collateral.
4.3 Maintenance of Collateral; Inspection. Do all things necessary to
maintain, preserve, protect and keep all Collateral in good working order and
saleable condition, dealing with the Collateral in all ways as are considered
good practice by owners of like property, and use the Collateral lawfully and
only as permitted by Debtor's insurance policies. Debtor hereby authorizes
Secured Party's officers, employees, representatives and agents, upon reasonable
notice, at reasonable times and with reasonable frequency, to inspect the
Collateral and to discuss
4
<PAGE>
the Collateral and the Records relating thereto with Debtor's officers
4.4 Maintenance of Records; Inspection. Maintain, or cause to be
maintained, complete and accurate Records relating to the Collateral. Secured
Party, its officers, employees, agents and representatives, upon reasonable
notice, shall have the right, from time to time, to examine the Records relating
to the Collateral and to make copies or extracts therefrom.
4.5 Debtor's Duty to Give Notice. Give prompt notice to Secured Party of:
(a) any decrease in the value of any Collateral and the amount of such decrease
(other than depreciation calculated in the ordinary course of business under
applicable tax laws and regulations and in accordance with generally accepted
accounting principles); (b) any threatened or asserted dispute or claim with
respect to the Collateral; (c) any litigation or administrative or regulatory
proceeding which is reasonably likely to have a material adverse effect on
Debtor or its business; (d) any change in ownership of any property on which any
Collateral is located; and (e) the occurrence of any Event of Default or of any
other development, financial or otherwise, which is reasonably likely to
materially adversely affect the Collateral or Debtor's ability to pay the
indebtedness or perform its obligations to Secured Party.
4.6 Financing Statements and Other Actions. Execute and deliver to Secured
Party, and file or record at Debtor's expense all financing statements, notices
and other documents from time to time requested by Secured Party to maintain a
first perfected security interest in the Collateral in favor of Secured Party,
all in form and substance satisfactory to Secured Party, perform such other acts
and execute and deliver to Secured Party such additional conveyances,
assignments, agreements and instruments, as Secured Party may at any time
reasonably request in connection with the administration and enforcement of this
Agreement or Secured Party's rights, powers and remedies hereunder.
4.7 Decals, Markings. At the request of Secured Party, firmly affix a
decal, stencil or other marking to designated items of Collateral, indicating
thereon the security interest of Secured Party.
4.8 Agreement With Real Property Owner/Landlord. Obtain and maintain such
acknowledgments, consents, waivers and agreements from the owner, lienholder,
mortgagee and landlord with respect to any real property on which Collateral is
located as Secured Party may require, all in form and substance satisfactory to
Secured Party.
5
<PAGE>
ARTICLE 5 - NEGATIVE COVENANTS
During the tern of this Agreement and until payment of all the Indebtedness
and performance of all obligations to Secured Party, Debtor will not, without
Secured Party's prior written consent:
5.1 Liens. Create, incur, assume or permit to exist any Lien on any
Collateral, except Liens permitted under the Loan Agreement.
5.2 Documents of Title. Sign or authorize the signing of any financing
statement or other document naming Debtor as debtor or obligor, except those
which do not relate to the Collateral or which, with respect to the Collateral
are permitted under the Loan Agreement, or acquiesce or cooperate in the
issuance of any warehouse receipt or other document of title with respect to any
Collateral, except those negotiated to Secured Party or those naming Secured
Party as secured party.
5.3 Disposition of Collateral. Sell, transfer, lease or otherwise dispose
of any Collateral.
5.4 Change in Location, Name, Legal Structure. If and to the extent the
same would in any manner impair the creation, perfection or priority of Secured
Party's security interest in the Collateral, (a) maintain Records, its chief
executive office or residence, or a place of business at a location other than
as specified in Article 3; or (b) change its name, mailing address, the nature
of its business, or its legal structure.
ARTICLE 6 - EVENTS OF DEFAULT
6.1 Events of Default. The occurrence of any of the following shall
constitute an Event of Default:
(a) Any "Event of Default" as defined in the Loan Agreement.
(b) Secured Party shall not have a first perfected security interest
in any Collateral for ten (10) or more days after notice to Debtor;
(c) Secured Party reasonably determines, in good faith, that its
security interest in the Collateral is materially impaired for ten (10) or more
days after notice to Debtor;
(d) Secured Party reasonably determines, in good faith, that any or
all of the Collateral, including any proceeds, is in danger of dissipation,
loss, theft, damage or destruction,
6
<PAGE>
or otherwise in jeopardy such as would materially impair the value of the
Collateral (with due consideration to applicable insurance coverage);
(e) Debtor shall fail to perform any of its duties or obligations
under this Agreement not specifically referenced in this Article 6 and such
failure remains uncured for ten (10) or more days after notice to Debtor;
6.2 Acceleration and Remedies. Upon the occurrence of any Event of Default
Secured Party shall be entitled to, at Secured Party's option, without notice or
demand of any kind, (a) declare all or any part of the Indebtedness immediately
due and payable; (b) exercise any or all of the rights and remedies available to
a secured party under the Uniform Commercial Code or any other applicable law;
and (c) exercise any or all of Secured Party's rights and remedies provided for
in this Agreement and in any other Loan Document. The obligations of Debtor
under this Agreement shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any Indebtedness is rescinded or must
otherwise be returned by Secured Party upon, on account of, or in connection
with, the insolvency, bankruptcy or reorganization of Debtor, or otherwise, all
as though such payment had not been made.
6.3 Sale of Collateral. After the occurrence of an Event of Default
Secured Party may sell all or any part of the Collateral, at public or private
sales, to itself, a wholesaler, retailer or investor, for cash, upon credit or
for future delivery, and at such price or prices as Secured Party may deem
commercially reasonable. To the extent permitted by law, Debtor hereby
specifically waives all rights of redemption and any rights of stay or appraisal
which it has or may have under any applicable law in effect from time to time.
Any such public or private sales shall be held at such times and at such
place(s) as Secured Party may determine. In case of the sale of all or any part
of the Collateral on credit or for future delivery, the collateral so sold may
be retained by Secured Party until the selling price is paid by the purchaser,
but Secured Party shall not incur any liability in case of the failure of such
purchaser to pay for the Collateral and, in case of any such failure, such
Collateral may be resold. Secured Party may, instead of exercising its power of
sale, proceed to enforce its security interest in the Collateral by seeking a
judgment or decree of a court of competent jurisdiction.
6.4 Debtor's Obligation Upon Default. Upon the request of Secured Party
after the occurrence of an Event of Default Debtor will:
7
<PAGE>
(a) Assemble and make available to Secured Party the Collateral at
such place(s) as Secured Party shall designate, segregating all Collateral so
that each item is capable of identification; and
(b) Permit Secured Party, by Secured Party's officers, employees,
agents and representatives, to enter any premises where any Collateral is
located, to take possession of the Collateral and to remove the Collateral or to
conduct any public or private sale of the Collateral, all without any liability
of Secured Party for rent or other compensation for the use of Debtor's
premises.
ARTICLE 7 - SPECIAL COLLATERAL PROVISIONS
7.1 Performance of Debtor's Obligations. Without having any obligation to
do so, Secured Party may perform or pay any obligation which Debtor has agreed
to perform or pay under this Agreement, including, without limitation, the
payment or discharge of taxes or Liens levied or placed on or threatened against
the Collateral. In so performing or paying, Secured Party shall determine the
action to be taken and the amount necessary to discharge such obligations.
Debtor shall reimburse Secured Party on demand for any amounts paid by Secured
Party pursuant to this Section, which amounts shall constitute Indebtedness
secured by the Collateral and shall bear interest from the date of demand at the
rate applicable to overdue payments under the Loan Agreement.
7.2 Power of Attorney. For the purpose of protecting, preserving and
enforcing the Collateral and Secured Party's rights under this Agreement, Debtor
hereby irrevocably appoints Secured Party, with full power of substitution, as
its attorney-in-fact with full power and authority to do any act which Debtor
is obligated to do, or Secured Party has the right to do, hereunder; to exercise
such rights with respect to the Collateral as Debtor might exercise; to use such
Equipment, Fixtures or other property as Debtor might use; to enter Debtor's
premises; to give notice of Secured Party's security interest in and to collect
the Collateral and the Proceeds; and to execute and file in Debtor's name any
financing statements, amendments and continuation statements necessary or
desirable to perfect or continue the perfection of Secured Party's security
interests in the Collateral. Debtor hereby ratifies all that Secured Party shall
lawfully do or cause to be done by virtue of this appointment.
7.3 Authorization for Secured Party to Take Certain Action. The power of
attorney created in Section 7.3 is a power coupled with an interest and shall be
irrevocable. The powers conferred
8
<PAGE>
on Secured Party hereunder are solely to protect its interests in the Collateral
and shall not impose any duty upon Secured Party to exercise such powers.
Secured Party shall be accountable only for amounts that it actually receives as
a result of the exercise of such powers and in no event shall Secured Party or
any of its directors, officers, employees, agents or representatives be
responsible to Debtor for any act or failure to act, except for gross negligence
or willful misconduct. Secured Party may exercise this power of attorney without
notice to or assent of Debtor, in the name of Debtor, or in Secured Party's own
name, from time to time in Secured Party's sole discretion and at Debtor's
expense. To further carry out the terms of this Agreement, Secured Party may
upon the occurrence of an Event of Default:
(a) Execute any statements or documents to take possession of, and
endorse and collect and receive delivery or payment of, any checks, drafts,
notes, acceptances or other instruments and documents constituting the payment
of amounts due and to become due or any performance to be rendered with respect
to the Collateral;
(b) Sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts; drafts, certificates and statements under
any commercial or standby letter of credit, assignments, leases, bills of sale,
or any other documents relating to the Collateral, including without limitation
the Records;
(c) Use or operate Collateral or any other property of Debtor for the
purpose of preserving or liquidating Collateral;
(d) File any claim or take any other action or proceeding in any
court of law or equity or as otherwise deemed appropriate by Secured Party for
the purpose of collecting any and all monies due or securing any performance to
be rendered with respect to the Collateral;
(e) Commence, prosecute or defend any suits, actions or proceedings
or as otherwise deemed appropriate by Secured Party for the purpose of
protecting or collecting the Collateral. In furtherance of this right, upon the
occurrence of an Event of Default Secured Party may apply for the appointment of
a receiver or similar official to operate Debtor's business, and, to the fullest
extent permitted by law, Debtor hereby waives any right to oppose such
appointment;
(f) Prepare, adjust, execute, deliver and receive payment under
insurance claims, and collect and receive payment of and endorse any instrument
in payment of loss or returned
9
<PAGE>
premiums or any other insurance refund or return, and apply soon amounts, at
Secured Party's sole discretion, toward repayment of the Indebtedness or
replacement of the Collateral.
7.4 Application of Proceeds. Any Proceeds and other monies or property
received by Secured Party pursuant to the terms of this Agreement or any Loan
Document may be applied by Secured Party first to the payment of expenses of
collection, including without limitation to reasonable attorneys' fees, and then
to the payment of the Indebtedness in such order of application as Secured Party
may elect. Notwithstanding the rights given to Debtor pursuant to California
Civil Code sections 1479 and 2822 or equivalent provisions in the laws of the
state specified in the governing law clause of this document (and any amendments
or successors thereto), to designate how payments will be applied, Debtor hereby
waives such rights and Secured Party shall have the right in its sole discretion
to determine the order and method of the application of payments received from
Debtor or from the sale or disposition of the Collateral and to revise such
application prospectively or retroactively at its discretion.
7.5 Deficiency. If the proceeds of any sale of the Collateral are
insufficient to cover all costs and expenses of such sale and the payment in
full of all Indebtedness, plus all other sums required to be expended or
distributed by Secured Party, then Debtor shall be liable for any such
deficiency.
7.6 Secured Party Transfer. Upon the transfer of all or any part of the
Indebtedness, Secured Party may transfer all or any part of its interest in the
Collateral and shall be fully discharged thereafter from all liability and
responsibility with respect to such interest in the Collateral so transferred,
and the transferee shall be vested with all the rights and powers of Secured
Party hereunder with respect to such interest in the Collateral so transferred.
ARTICLE 8 - GENERAL PROVISIONS
8.1 Notices. Any notice given by any party under this Agreement shall be
given in the manner prescribed in the Loan Agreement.
8.2 Binding Effect. This Agreement shall be binding upon Debtor, its
permitted successors, representatives and assigns, and shall inure to the
benefit of Secured Party and its successors, representatives and assigns;
provided however that Debtor may not assign or transfer Debtor's obligations
under this Agreement without Secured Party's prior written consent. Secured
Party reserves the right to sell, assign, or transfer its rights and powers
under this Agreement in whole or in part without
10
<PAGE>
notice to Debtor. In that connection, Secured Party may disclose all documents
and information which Secured Party now or hereafter may have relating to this
Agreement, Debtor or Debtor's business.
8.3 No Waiver. Any waiver, consent or approval by Secured Party of any
Event of Default or breach of any provision, condition or covenant of this
Agreement or any Loan Document must be in writing and shall be effective only to
the extent set forth in writing. No waiver or any breach of default shall be
deemed a waiver of any later breach or default of the same or any other
provision of this Agreement or any of the Loan Documents. No failure or delay on
the part of Secured Party in exercising any power, right or privilege under this
Agreement or any Loan Document shall operate as a waiver thereof, and no single
or partial exercise of any such power, right or privilege shall preclude any
further exercise thereof, or the exercise of any further power, right or
privilege.
8.4 Rights Cumulative. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any other rights or remedies
available under contract or applicable law.
8.5 Unenforceable Provisions. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall be so only as to such
jurisdiction and only to the extent of such prohibition or unenforceability, but
all the remaining provisions of this Agreement shall remain valid and
enforceable.
8.6 Governing Law, Waiver of Notice. Except as may be otherwise provided
by the Uniform Commercial Code or in any addendum hereto, this Agreement shall
be governed by and construed in accordance with the laws of the State of
California.
To the fullest extent permitted by law, Debtor hereby waives presentment,
demand, protest, notice of dishonor and all other notices and demands as well as
any applicable statute of limitations.
8.7 Entire Agreement. This Agreement, together with the other Loan
Documents, is intended by Debtor and Secured Party as the final expression of
Debtor's obligations to Secured Party in connection with the Collateral and
supersedes all prior understandings or agreements concerning the subject matter
hereof. This Agreement may be amended only by a writing signed by Debtor and
accepted by Secured Party in writing.
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth in the preamble.
RELEASE SOFTWARE CORPORATION VENTURE LENDING & LEASING, INC.
By:_________________________ By: /s/ Salvador O. Gutierrez
-----------------------------
SALVADOR O. GUTIERREZ
Chief Financial Officer
12
<PAGE>
Schedule 1 to Security Agreement
Description of Equipment
Quantity Article Make Y. Mfg. Model Serial or Motor No.
- -------- ------- ---- ------- ----- -------------------
See attached continuation to Schedule 1
together with all improvements, replacements, accessions and additions thereto,
wherever located, and all Proceeds thereof arising from the sale, lease, rental
or other use or disposition of any such property, including all rights to
payment With respect to insurance or condemnation, returned premiums, or any
cause of action relating to any of the foregoing.
RELEASE SOFTWARE CORPORATION
By:_________________________
VENTURE LENDING & LEASING, INC.
By: /s/ Salvador O. Gutierrez
----------------------------
SALVADOR O. GUTIERREZ
President
<PAGE>
EXHIBIT A TO FINANCING STATEMENT
BETWEEN
RELEASE SOFTWARE CORPORATION.
AS DEBTOR,
AND
VENTURE LENDING & LEASING, INC.,
AS SECURED PARTY
--------------------------------
Item 6 continued:
-----------------
All of Debtor's right, title and interest in and to the Collateral, as such
term is defined below.
"Collateral" means all Debtor's Equipment and Fixtures now owned or
hereafter acquired, wherever located, and whether held by Debtor or any third
party, and all proceeds and products thereof, including all insurance and
condemnation proceeds ("Proceeds"), and all Records relating or useful to, or
used in connection with any of the foregoing.
"Equipment" means all of Debtor's specific equipment identified and
described on Schedule 1 attached to this Agreement and incorporated herein by
----------
reference (as such Schedule may be amended or supplemented from time to time),
all replacements, parts, accessions and additions thereto, and all proceeds
thereof arising from the sale, lease, rental or other use or disposition
thereof, including all rights to payment with respect to insurance or
condemnation, returned premiums, or any cause of action relating to any of the
foregoing. Financed equipment to be new and used software, R&D, test equipment,
computer and general purpose office equipment. Advances on used equipment will
be 100% of purchase price and 50% of this facility may be used for software or
tenant improvements as stated in Commitment Letter dated May 29, 1996.
"Fixtures" means all items of Equipment that are so related to the real
property upon which they are located that an interest in them arises under real
property law, and all proceeds thereof arising from the sale, lease, rental or
other use or disposition thereof.
"Records" means all Debtor's computer programs, software, hardware, source
codes and data processing information, all written documents, books, invoices,
ledger sheets, financial information and statements, and all other writings
concerning Debtor's business.
<PAGE>
RELEASE SOFTWARE CORPORATION
EQUIPMENT LIST FOR LOAN SCHEDULE NO. 53-001
<TABLE>
<CAPTION>
MANUFACTURER QTY DESCRIPTION SERIAL INVOICE INVOICE EQUIPMENT
OF NUMBER NUMBER DATE COST
VENDOR
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NCA 6 SIMMS 4X32/60 MEMORY S1651686 2/24/96 298.31
HI-TECH USA 1 INTEL ATLANTIS 256K PIPELINED M/B COMPUTER 10522 A05735 2/26/96 4,264.35
1 INTEL PENTIUM-133 CPU
1 INTEL ATLANTIS W/OK EXT. CACHE M/B COMPUTER 47419
1 INTEL PENTIUM-133 CPU
2 PENTIUM-133 COOLING FAN
2 16MB EDO DRAM
2 4*32 6ONS SIMM
2 FULL TOWER CASE & POWER SUPPLY
2 KEYTRONICS 104 KEYBOARDS FOR WINDOWS 95
2 3 BUTTON SERIAL MOUSE
2 1.44 MB 3 1/2 FLOPPY DRIVE
1 ADAPTEC AHA-294OK PCI SCSI
1 1/0GB SCSI HARD DRIVE
1 1/6GB IDE HARD DRIVE
2 MITSUMI FX400 CD ROM 4-SPEED
1 14" SVGA NIN INTERLACED
546849 2/27/96 320.46
FRY'S ELECTRONICS 2 3COM PCI 10BASE ETHERLINK CARDS
7 TWISTED PAIR PATCH CORDS
1 R J45 COUPLER COUBLE NETWORK
FRY'S ELECTRONICS 1 NECS MULTISYNE 17" MONITOR 551099 3/1/96 850.15
NCA 1 ALEXIX QPA-120 MULTIMEDIA SYSTEM INCLUDING 727465 3/15/96 3,273.22
3COM ETHERLINK II
2 2X32/60 8MB MEMORY
FRY'S ELECTRONICS 1 APPLE POWERMAC 85/120 16/2G/CD 16MB 2GHD 4XCD-ROM XB5500AP3FT 589829 3/21/96 6,230.08
1 APPLE MULTIPLE SCAN
1 16MB UPGRADE FOR POWERMAC
1 MICROSPEED KEYBOARD
1 CONNECTIX QUICKCAM WIN 95
NCA COMPONENTS FOR 2 PENTIUM 100 PS'S TO INCLUDE THE S345119 3/27/96 5,332.14
FOLLOWING
2 SANYO QUAD IDE 3551312781
</TABLE>
Page 1
<PAGE>
RELEASE SOFTWARE CORPORATION
EQUIPMENT LIST FOR LOAN SCHEDULE NO. 53-001
<TABLE>
<CAPTION>
MANUFACTURER QTY DESCRIPTION SERIAL INVOICE INVOICE EQUIPMENT
OF NUMBER NUMBER DATE COST
VENDOR
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4 SIMMS 4 32/60 EDO MEMORY 3551498592
2 INTEL ATLANTIS W/ATI VIDEO AND SOUND
2 KEYTRONICS 104 KEYBOARDS
2 MICROSOFT MOUSE
2 TEAC 1.44MB FLOPPY DRIVE
2 3COM ETHERLINK
2 NCA CASE 9 BAY
1 NEC 17" PLUS MONITOR S6207186RA
1 INTEL PENTIUM 12
1 INTEL PENTIUM 13
NCA 2 WESTERN DIGITAL 31600A 190MS ENHANCED IDE 2891411529 S345123 3/27/96 624.84
2891332557
NCA 4 4X32/70 16MB MEMORY
2 INTEL PENTIUM 100 MHZ CPU L6060871-0598 S169766 3/29/96 5,343.74
L6060871-0662
2 SANYO 254P 4X IDE CD ROM 3551497326
3551497322
2 MICROSOFT SERIAL MOUSE
2 3-COM ETHERLINK III PERALLEL
2 CPU COOLING FANS PENTIUM 90-133
2 MITSUMI 1.44MB FLOPPY DRIVE
2 QUANTUM HARD DRIVES 1226447115889
122644721444
2 ATLANTIS W/SOUND & VIDEO
1 NEC XV17" PLUS MONITOR 6203566RA
1 NEC XV 15" PLUS MONITOR 6206188EP
2 NCA CASE 9 BAY TOWER 250 POWER SUPPLY
PROGRAMMER'S PARADISE INC. 1 MS VIS SOURCESAFE V4.0 446531 4/3/96 504.80
FRY'S ELECTRONICS 1 QUICKBOOKS PRO V4.0 630767 4/9/96 204.67
NCA 1 ALEXUISIII 166-6X 3PA PRE-BUILT SYSTEM 120 4/11/96 3,110.47
1 PRINCETON ULTRA 1 T PLUS BY MAG
1 SONY QIC-WIDE QW
NCA 2 MOTION 331 2MB PCI DRAM NBX1-331-2P 224 4/13/96 290.07
</TABLE>
Page 2
<PAGE>
RELEASE SOFTWARE CORPORATION
EQUIPMENT LIST FOR LOAN SCHEDULE NO. 53-001
<TABLE>
<CAPTION>
MANUFACTURER
OF SERIAL INVOICE INVOICE EQUIPMENT
VENDOR QTY DESCRIPTION NUMBER NUMBER DATE COST
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NB9FX2-771-2P
MACSYSTEM WAREHOUSE 1 APPLEVISION 1710 BCGM2935 4/27/96 999.^
MACSYSTEM WAREHOUSE 1 POWERWAVE 604/150-8/1 MINI TOWER 4/27/96 4,122.^
1 8MB 70NS MEMORY
THE COMPUTER GUYS 1 HP NETSERVER LS2 P5 133MHZ DUAL PENTIUM 133HMZ, 64MB SG60500899 4476 5/10/96 37,606.^
RAM 1.44MMD FLOPPY DRIVE CD-ROM DRIVE AND KEYBOARD
1 HP 4GB HOT PLUGGABLE FAST SCSI2
1 2/1 GB HOT SWAY DRIVE FAST SCSI-2 HOT SWAP DRIVE
1 HP SURESTORE TAPE 6000I INTERNAL 8GB TAPE DRIVE
1 MICROSOFT WINDOWS
3 HP VECTRA VL4 PENTIUM 166MH 16MB RAM, 1.2GB HARDDRIVE US60953394
1.44 FLOPPY DRIVE, MINI TOWER, KEYBORD, WINDOWS 95 US60953363
MOUSE US60953396
3 16MB RAM MODULES 72 PINS
3 QUAD SPEED IDE CD-ROM DRIVE
3 3COM COMBO PCI ETHERNIET CARD
3 MAG SVGA COLOR MONITOR21" MA2134018257
MA2134018420
MA2134021760
1 APC SMART UPS 1000XL WITH EXTENDED BATTERY
1 APC POWER CHUTE PLUS WINDOWS
2 ACCTON ETHERHUB 16 POSTS EXTERNAL
2 3COM FAST ETHERLINK 10/100
3 1MB DRAM VIDEO UPGRADE
THE COMPUTER GUYS 1 APPLE POWER MAC 8500 120MHZ, 16MB RAM, 2GB HD, 4X B5500XP3FT 4505 5/15/96 5,648.3
CD-ROM, PCI BUS.
1 APPLE MAC 17" MULTISCAN CY5503025X5
1 APPLE EXTENDED KEYBOARD II
THE COMPUTER GUYS 1 DIGIBOARD PC/16EM ISA INTELIGHENT I/O WITH RISC CHIP, 4503 5/15/96 1,093.4
16 PORTSS, NOS AND SOFTWARE DRIVERS
FRY'S ELECTRONICS 1 APPLE PERFORMA 63-CD 100MHZ, 16MB/1.2GB HD/4X CD-ROM M442511A 715368 5/24/96 2,693.6
28.8MDM/15" COLOR DISPLAY
1 QUICKCAM
</TABLE>
Page 3
<PAGE>
RELEASE SOFTWARE CORPORATION
EQUIPMENT LIST FOR LOAN SCHEDULE NO. 53-001
<TABLE>
<CAPTION>
MANUFACTURER
OF QTY DESCRIPTION SERIAL INVOICE INVOICE EQUIPMENT
VENDOR NUMBER NUMBER DATE COST
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NCA 1 16MB SIMMS (8) INTEL ATLANTIS MB W/ATI VIDEO S181322 5/20/96 678.6?
NCA 1 IBM 1700 1.7 GB IT S181386 5/21/96 235.9?
NCA 1 PENTIUM 100 CPU C6787447-0113 S181434 5/22/96 183.1?
THE COMPUTER GUYS 3 HITACHI P5-100MHZ NOTEBOKS INCLUDING 8MB RAM. AG4740039 4552 6/3/96 13,031.75
700MB HARDDRIVE, 1.44MB FLOPPY DRIVE, 4X-CD-ROM, AG4740045
TFT SVGA LCD DISPLAY, SOUND SYSTEM
THE COMPUTER GUYS 3 INTEL ENDAVOR P5 SYSTEM SUPPORT P5/90/100/120/133 AND 20133 4551 6/30/96 15,438.62
166MHZ, 256PIP CACHE, 2S AND 1P SOUND BLASTER BUILT-IN 20134
AND EIDE 20135
3 INTEL PENTIUM 588-166MHZ
3 CPU COLLING UNIT PENTIUM
6 16MB RAM EDO 72 PINS
3 TEAC 1.44MB FLOPPY DRIVE
3 WESTERN DIGILAL 1.6GB IDE
3 DIAMOND STEALTH 64 PCI 2MB VRAM
3 KEYTORNICS KEYBOARD 1-4 KEY
3 MEDIUM TOWER CASE WITH 250W POWER SUPPLY
3 MICROSOFT SERIAL MOUSE
3 MOUSE PAD
3 NEC 4X IDE CD-ROM DRIVE INTERNAL
3 3 COM 3c590 COMBO PCI ETHERNET CARD
2 MAG MX21F SVGA COLOR MONITORS 21" MA2134021716
MA2134018418
1 MAG DX-17F 17" COLOR MONITOR MH43440854
1 INTEL PENTIUM SYSTEM 75/90/100/133/150/166MHZ WITH 20145
256K PIPELINE CACHE
1 INTEL PENTIUM 133MHZ
1 CPU COOLING UNIT PENTIUM
2 8MB EDO MEMORY
1 TEAC 1.44MB FLOPPY DRIVE
1 WESTERN DIGITAL 1.6GB IDE
1 KEYTRONIC KEYBOARD
1 MEDIUM TOWER CASE WITH 250W POWER SUPPLY
1 MICROSOFT SERIAL MOUSE
1 MOUSE PAD
</TABLE>
Page 4
<PAGE>
RELEASE SOFTWARE CORPORATION
EQUIPMENT LIST FOR LOAN SCHEDULE NO. 53-001
<TABLE>
<CAPTION>
MANUFACTURER QTY DESCRIPTION SERIAL INVOICE INVOICE EQUIPMENT
OF NUMBER NUMBER DATE COST
VENDOR
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 TOSHIBA 4X SPEED CD-ROM INTERNAL IDE INTERFACE
1 3COM COMBO POI ETHERNET CARD
1 INTEL PENTIUM SYSTEM 75/90/100/133/150/166MHZ WITH 20136
256K PIPELINE CACHE
1 INTEL PENTIUM 586-166MHZ
1 CPU COOLING UNIT PENTIUM
2 16MB EDO MEMORY
1 TEAC 1.44MB FLOPPY DRIVE
1 1.2GB IDE HARDDRIVE
1 KEYTRONIC KEYBOARD
1 MEDIUM TOWER CASE WITH 250W POWER SUPPLY
1 MICROSOFT SERIAL MOUSE
1 MOUSE PAD
1 3COM COMBO POI ETHERNET CARD
1 TRIDENT SVGA CARD PCI 32-BIT BUS. 1MB RAM
THE COMPUTER GUYS 1 HP LASER JET 5M 600 DPI, 12PPM, PRINTER USHB039653 4565 6/7/96 6,200.92
1 SCSI 2.0 GB HARD DRIVE
3 MICROSOFT BUS. MOUSE
1 MAC MX21F SVGA COLOR 21" MONITOR MA2134021715
THE COMPUTER GUYS 1 APPLE POAERMAC 8500-120MHZ POWER PC 604/120MHZ, 16MB XB60705M3FT 4566 6/10/96 4,815.58
RAM, 1GB HARD DRIVE, QUAD SPEED CD-ROM
1 APPLE EXTENDED KEYGBOARDII
1 APPLE 15" COLOR DISPLAY SG6101PQ35J
FRY'S ELECTRONICS 3 MHZ ETHER/MOCEM PCMCIA 10BASE-T ETHERN X-JACK MODEM 558070 3/4/96 1,891.94
CONNECTOR
1 CARDINAL 28.8 V.34EXTERNALFAX MODEM
1 CONNER 4GB INTERNAL HARD DRIVE
1 3COM PCI 10BASE-T TWISTED PAIR
FRY'S ELECTRONICS 1 TOSHIBA 5522 6X IDE CD 128KB BUFFER, 900KB TRANS RATE 548342 2/28/96 290.86
LOW POWER CONSUMPTION
1 3 COM ETHERLINK IIITP FOR TWISTED PAIR
FRY'S ELECTRONICS 1 ADAPTEC PCI SCSI MOSTER SOFTWARE, DOS WIN, OS/2 562893 3/7/96 1,009.55
NETWARE & SUNIX SUPPLY
1 PIONEER 4 SPEED SCSI
</TABLE>
Page 5
<PAGE>
RELEASE SOFTWARE CORPORATION
EQUIPMENT LIST FOR LOAN SCHEDULE NO. 53-001
<TABLE>
<CAPTION>
MANUFACTURER QTY DESCRIPTION SERIAL INVOICE INVOICE EQUIPMENT
OF NUMBER NUMBER DATE COST
VENDOR
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 FUJITSU 2.1 GB FAST WIDE SCSI-28.9MS READ, 512K BUFFER
NCA 1 QUANTUM HARD DRIVE S168466 3/15/96 545.03
-------
127.128.70
</TABLE>
Page 6
<PAGE>
EXHIBIT 10.9
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT (the "Master Lease") dated April 16, 1999 by and between
COMDISCO, INC. ("Lessor") and Release Software Corporation ("Lessee").
IN CONSIDERATION of the mutual agreements described below, the parties agree as
follows (all capitalized terms are defined in Section 14.18):
1. Property Leased.
Lessor leases to Lessee all of the Equipment described on each Summary Equipment
Schedule. In the event of a conflict, the terms of the applicable Schedule
prevail over this Master Lease.
2. Term.
On the Commencement Date, Lessee will be deemed to accept the Equipment, will be
bound to its rental obligations for each item of Equipment and the term of a
Summary Equipment Schedule will begin and continue through the Initial Term and
thereafter until terminated by either party upon prior written notice received
during the Notice Period. No termination may be effective prior to the
expiration of the Initial Term.
3. Rent and Payment.
Rent is due and payable in advance on the first day of each Rent Interval at the
address specified in Lessor's invoice. Interim Rent is due and payable when
invoiced. If any payment is not made when due, Lessee will pay a Late Charge on
the overdue amount. Upon Lessee's execution of each Schedule, Lessee will pay
Lessor the Advance specified on the Schedule. The Advance will be credited
towards the final Rent payment if Lessee is not then in default. No interest
will be paid on the Advance.
4. Selection; Warranty and Disclaimer of Warranties.
4.1 Selection. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor, other than as set
forth in the Schedule.
4.2 Warranty and Disclaimer of Warranties. Lessor warrants to Lessee that, so
long as Lessee is not in default, Lessor will not disturb Lessee's quiet and
peaceful possession, and unrestricted use of the Equipment. To the extent
permitted by the manufacturer, Lessor assigns to Lessee during the term of the
Summary Equipment Schedule any manufacturer's warranties for the Equipment.
LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS
FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any liability,
claim, loss, damage or expense of any kind (including strict liability in tort)
caused by the Equipment except for any loss or damage caused by the willful
misconduct or negligent acts of Lessor. In no event is Lessor responsible for
special, incidental or consequential damages.
5. Title; Relocation or Sublease; and Assignment.
5.1 Title. Lessee holds the Equipment subject and subordinate to the rights of
the Owner, Lessor, any Assignee and any Secured Party. Lessee authorizes Lessor,
as Lessee's agent, and at Lessor's expense, to prepare, execute and file in
Lessee's name precautionary Uniform Commercial Code financing statements showing
the interest of the Owner, Lessor, and any Assignee or Secured Party in the
Equipment and to insert serial numbers in Summary Equipment Schedules as
appropriate. Lessee will, at its expense, keep the Equipment free and clear from
any liens or encumbrances of any kind (except any caused by Lessor) and will
indemnify and hold the Owner, Lessor, any Assignee and Secured Party harmless
from and against any loss caused by Lessee's failure to do so, except where such
is caused by Lessor.
5.2 Relocation or Sublease. Upon prior written notice, Lessee may relocate
Equipment to any location within the continental United States provided (i) the
Equipment will not be used by an entity exempt from federal income tax, and (ii)
all additional costs (including any administrative fees, additional taxes and
insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor and
the Secured Party. Such consent to sublease will be granted if: (i) Lessee meets
the relocation requirements set out above, (ii) the sublease is expressly
subject and subordinate to the terms of the Schedule, (iii) Lessee assigns its
rights in the sublease to Lessor and the Secured Party as additional collateral
and security, (iv) Lessee's obligation to maintain and insure the Equipment is
not altered, (v) all financing statements required to continue the Secured
Party's prior perfected security interest are filed, and (vi) Lessee executes
sublease documents acceptable to Lessor.
No relocation or sublease will relieve Lessee from any of its obligations under
this Master Lease and the relevant Schedule.
5.3 Assignment by Lessor. The terms and conditions of each Schedule have been
XXX by Lessor in order to permit Lessor to sell and/or assign or transfer its
interest or grant a security interest in each Schedule and/or the Equipment to a
Secured Party or Assignee. In that event, the term Lessor will mean the Assignee
and any Secured Party. However, any assignment, sale, or other transfer by
Lessor will not relieve Lessor of its obligations to Lessee and will not
materially change Lessee's duties or materially increase the burdens or risks
imposed on Lessee. The Lessee consents to and will acknowledge such assignments
in a written notice given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's rights, but
will not be obligated to perform any of the obligations of Lessor. The Secured
Party will not disturb Lessee's quiet and peaceful possession and unrestricted
use of the Equipment so long as Lessee is not in default and the Secured Party
continues to receive all Rent payable under the Schedule; and
(b) Lessee will pay all Rent and all other amounts payable to the Secured
Party, despite any defense or claim which it has against Lessor. Lessee reserves
its right to have recourse directly against Lessor for any defense or claim;
(c) Subject to and without impairment of Lessee's leasehold rights in the
Equipment, Lessee holds the Equipment for the Secured Party to the extent of the
Secured Party's rights in that Equipment.
6. Net Lease; Taxes and Fees.
6.1 Net Lease. Each Summary Equipment Schedule constitutes a net lease. Lessee's
obligation to pay Rent and all other amounts due hereunder is absolute and
unconditional and is not subject to any abatement, reduction, set-off, defense,
counterclaim, interruption, deferment or recoupment for any reason whatsoever.
6.2 Taxes and Fees. Lessee will pay when due or reimburse Lessor for all taxes,
fees or any other charges (together with any related interest or penalties not
arising from the negligence of Lessor) accrued for or arising during the term of
each Summary Equipment Schedule against Lessor, Lessee or the Equipment by any
governmental authority (except only Federal, state, local and franchise taxes on
the capital or the net income of Lessor). Lessor will file all personal property
tax returns for the Equipment and pay all such property taxes due. Lessee will
reimburse Lessor for property taxes within thirty (30) days of receipt of an
invoice.
7. Care, Use and Maintenance; Inspection by Lessor.
7.1 Care, Use and Maintenance. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration, other
than normal wear and tear, and will not use the Equipment for any purpose other
than that for which it was designed. If commercially available and considered
common business practice for each item of Equipment, Lessee will maintain in
force a standard maintenance contract with the manufacturer of the Equipment, or
another party acceptable to Lessor, and will provide Lessor with a complete copy
of that contract. If Lessee has the Equipment maintained by a party other than
the manufacturer or self maintains, Lessee agrees to pay any costs necessary for
the manufacturer to bring the Equipment to then current release, revision and
engineering change levels, and to re-certify the Equipment as eligible for
manufacturer's maintenance at the expiration of the lease term, provided re-
certification is available and is required by Lessor. The lease term will
continue upon the same terms and conditions until recertification has been
obtained.
7.2 Inspection by Lessor. Upon reasonable advance notice, Lessee, during
reasonable business hours and subject to Lessee's security requirements, will
make the Equipment and its related log and maintenance records available to
Lessor for inspection.
8. Representations and Warranties of Lessee. Lessee hereby represents, warrants
and covenants that with respect to the Master Lease and each Schedule executed
hereunder.
(a) The Lessee is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation, is duly
qualified to do business in each jurisdiction (including the jurisdiction where
the Equipment is, or is to be, located) where its ownership or lease of property
or the conduct of its business requires such qualification, except for where
such lack of qualification would not have a material adverse effect on the
Company's business; and has full corporate power and authority to hold property
under the Master Lease and each Schedule and to enter into and perform its
obligations under the Master Lease and each Schedule.
(b) The execution and delivery by the Lessee of the Master Lease and each
Schedule and its performance thereunder have been duly authorized by all
necessary corporate action on the part of the Lessee, and the Master Lease and
each Schedule are not inconsistent with the Lessee's Articles of Incorporation
or Bylaws, do not
-1-
<PAGE>
contravene any law or governmental rule, regulation or order applicable to it,
do not and will not contravene any provision of, or constitute a default under,
any indenture, mortgage, contract or other instrument to which it is a party or
by which it is bound, and the Master Lease and each Schedule constitute legal,
valid and binding agreements of the Lessee, enforceable in accordance with their
terms, subject to the effect of applicable bankruptcy and other similar laws
affecting the fights of creditors generally and rules of law concerning
equitable remedies.
(c) There are no actions, suits, proceedings or patent claims pending or, to
the knowledge of the Lessee, threatened against or affecting the Lessee in any
court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Lessee to perform its obligations under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by the Lessee
will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
liabilities and obligations which have occurred in the ordinary course of
business, and which have not been, in any case or in the aggregate, materially
adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns, possesses, has
access to, or can become licensed on reasonable terms under all patents, patent
applications, trademarks, trade names, inventions, franchises, licenses,
permits, computer software and copyrights necessary for the operations of its
business as now conducted, with no known infringement of, or conflict with, the
rights of others.
(g) All material contracts, agreements and instruments to which the Lessee is a
party are in full force and effect in all material respects, and are valid,
binding and enforceable by the Lessee in accordance with their respective terms,
subject to the effect of applicable bankruptcy and other similar laws affecting
the rights of creditors generally, and rules of law concerning equitable
remedies.
9. Delivery and Return of Equipment.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Summary Equipment Schedule,
Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear and
tear. Lessee shall return the Equipment to Lessor at 6111 North River Road,
Rosemont, Illinois 60018 or at such other address within the continental United
States as directed by Lessor, provided, however, that Lessee's expense shall be
limited to the cost of returning the Equipment to Lessor's address as set forth
herein. During the period subsequent to receipt of a notice under Section 2,
Lessor may demonstrate the Equipment's operation in place and Lessee will supply
any of its personnel as may reasonably be required to assist in the
demonstrations.
10. Labeling.
Upon request, Lessee will mark the Equipment indicating Lessor's interest with
labels provided by Lessor. Lessee will keep all Equipment free from any other
marking or labeling which might be interpreted as a claim of ownership.
11. Indemnity.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, any Assignee and any Secured Party harmless from and
against any and all claims, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, arising out of the ownership (for strict liability
in tort only), selection, possession, leasing, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment during the
term of this Master Lease or until Lessee's obligations under the Master Lease
terminate. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on equipment
owned by it. Any amounts received by Lessor under that insurance will be
credited against Lessee's obligations under this Section.
12. Risk of Loss.
Effective upon delivery and until the Equipment is returned. Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each item
of Equipment in an amount not less than the Casualty Value. All policies for
such insurance will name the Lessor and any Secured Party as additional insured
and as loss payee, and will provide for at least thirty (30) days prior written
notice to the Lessor of cancellation or expiration, and will insure Lessor's
interests regardless of any breach or violation by Lessee of any representation,
warranty or condition contained in such policies and will be primary without
right of contribution from any insurance effected by Lessor. Upon the execution
of any Schedule, the Lessee will furnish appropriate evidence of such insurance
acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such Equipment
has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss,
Lessee will provide written notice of that loss to Lessor and Lessee will, at
Lessee's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically vest in Lessor or
(b) pay the Casualty Value and after that payment and the payment of all other
amounts due and owing with respect to that item of Equipment, Lessee's
obligation to pay further Rent for the item of Equipment will cease.
13. Default, Remedies and Mitigation.
13.1 Default. The occurrence of any one or more of the following Events of
Default constitutes a default under a Summary Equipment Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee when due if
that failure continues for five (5) business days after written notice; or
(b) Lessee's failure to perform any other term or condition of the Schedule or
the material inaccuracy of any representation or warranty made by the Lessee in
the Schedule or in any document or certificate furnished to the Lessor hereunder
if that failure or inaccuracy continues for ten (10) business days after written
notice; or
(c) An assignment by Lessee for the benefit of its creditors, the failure by
Lessee to pay its debts when due, the insolvency of Lessee, the filing by Lessee
or the filing against Lessee of any petition under any bankruptcy or insolvency
law or for the appointment of a trustee or other officer with similar powers,
the adjudication of Lessee as insolvent, the liquidation of Lessee, or the
taking of any action for the purpose of the foregoing; or
(d) The occurrence of an Event of Default under any Schedule, Summary Equipment
Schedule or other agreement between Lessee and Lessor or its Assignee or
Secured Party.
13.2 Remedies. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable Schedule
by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default Costs;
(c) with notice and demand, recover all sums due and accelerate and recover the
present value of the remaining payment stream of all Rent due under the
defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment fees
charged to Lessor by the Secured Party or, if there is no Secured Party, then
discounted at 6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's security
requirements. Lessor may enter on Lessee's premises to remove and repossess the
Equipment without being liable to Lessee for damages due to the repossession.
except those resulting from Lessor's, its assignees', agents' or
representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by law,
are cumulative and may be exercised successively or concurrently.
13.3 Mitigation. Upon return of the Equipment pursuant to the terms of Section
13.2, Lessor will use its best efforts in accordance with its normal business
procedures (and without obligation to give any priority to such Equipment) to
mitigate Lessor's damages as described below. EXCEPT AS SET FORTH IN THIS
SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE
OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY ANY OF
LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or otherwise
dispose of all or any part of the Equipment at a public or private sale for cash
or credit with the privilege of purchasing the Equipment. The proceeds from any
sale. lease or other disposition of the Equipment are defined as either.
(a) if sold or otherwise disposed of, the cash proceeds less the Fair Market
Value of the Equipment at the expiration of the Initial Term less the Default
Costs; or
-2-
<PAGE>
(b) if leased, the present value (discounted at 3 percent (3%) over the U.S.
Treasury Notes of comparable maturity to the term of the re-lease) of the
rentals for a term not to exceed the Initial Term, less the Default Costs.
Any proceeds will be applied against liquidated damages and any other sums due
to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor may
recover, the amount by which the proceeds are less than the liquidated damages
and other sums due to Lessor from Lessee.
14. Additional Provisions.
14.1 Board Attendance. One representative of Lessor will have the right to
attend Lessee's corporate Board of Directors meetings and Lessee will give
Lessor reasonable notice in advance of any special Board of Directors meeting,
which notice will provide an agenda of the subject matter to be discussed at
such board meeting. Lessee will provide Lessor with a certified copy of the
minutes of each Board of Directors meeting within thirty (30) days following the
date of such meeting held during the term of this Master Lease.
14.2 Financial Statements. As soon as practicable at the end of each month (and
in any event within thirty (30) days), Lessee will provide to Lessor the same
information which Lessee provides to its Board of Directors, but which will
include not less than a monthly income statement, balance sheet and statement of
cash flows prepared in accordance with generally accepted accounting principles,
consistently applied (the "Financial Statements"). As soon as practicable at the
end of each fiscal year, Lessee will provide to Lessor audited Financial
Statements setting forth in comparative form the corresponding figures for the
fiscal year (and in any event within ninety (90) days), and accompanied by an
audit report and opinion of the independent certified public accountants
selected by Lessee. Lessee will promptly furnish to Lessor any additional
information (including, but not limited to, tax returns, income statements,
balance sheets and names of principal creditors) as Lessor reasonably believes
necessary to evaluate Lessee's continuing ability to meet financial obligations.
After the effective date of the initial registration statement covering a public
offering of Lessee's securities, the term "Financial Statements" will be deemed
to refer to only those statements required by the Securities and Exchange
Commission.
14.3 Obligation to Lease Additional Equipment. Upon notice to Lessee, Lessor
will not be obligated to lease any Equipment which would have a Commencement
Date after said notice if: (i) Lessee is in default under this Master Lease or
any Schedule; (ii) Lessee is in default under any loan agreement, the result of
which would allow the lender or any secured party to demand immediate payment of
any material indebtedness; (iii) there is a material adverse change in Lessee's
credit standing; or (iv) Lessor determines (in reasonable good faith) that
Lessee will be unable to perform its obligations under this Master Lease or any
Schedule.
14.4 Merger and Sale Provisions. Lessee will notify Lessor of any proposed
Merger at least sixty (60) days prior to the closing date. Lessor may, in its
discretion, either (i) consent to the assignment of the Master Lease and all
relevant Schedules to the successor entity, or (ii) terminate the Lease and all
relevant Schedules. If Lessor elects to consent to the assignment, Lessee and
its successor will sign the assignment documentation provided by Lessor. If
Lessor elects to terminate the Master Lease and all relevant Schedules, then
Lessee will pay Lessor all amounts then due and owing and a termination fee
equal to the present value (discounted at 6%) of the remaining Rent for the
balance of the Initial Term(s) of all Schedules, and will return the Equipment
in accordance with Section 9. Lessor hereby consents to any Merger in which the
acquiring entity has a Moody's Bond Rating of BA3 or better or a commercially
acceptable equivalent measure of creditworthiness as reasonably determined by
Lessor.
14.5 Entire Agreement. This Master Lease and associated Schedules and Summary
Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY
ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT
IS SOUGHT TO BE ENFORCED.
14.6 No Waiver. No action taken by Lessor or Lessee will be deemed to constitute
a waiver of compliance with any representation, warranty or covenant contained
in this Master Lease or a Schedule. The waiver by Lessor or Lessee of a breach
of any provision of this Master Lease or a Schedule will not operate or be
construed as a waiver of any subsequent breach.
14.7 Binding Nature. Each Schedule is binding upon, and inures to the benefit of
Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR OBLIGATIONS.
14.8 Survival of Obligations. All agreements, obligations including, but not
limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule, Summary Equipment Schedule or in
any document delivered in connection with those agreements are for the benefit
of Lessor and any Assignee or Secured Party and survive the execution, delivery,
expiration or termination of this Master Lease.
14.9 Notices. Any notice, request or other communication to either party by the
other will be given in writing and deemed received upon the earlier of (1)
actual receipt or (2) three days after mailing if mailed postage prepaid by
regular or airmail to Lessor (to the attention of "the Comdisco Venture Group")
or Lessee, at the address set out in the Schedule, (3) one day after it is sent
by courier or (4) on the same day as sent via facsimile transmission, provided
that the original is sent by personal delivery or mail by the sending party.
14.10 Applicable Law. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL HAVE
BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE GOVERNED
AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11 Severability. If any one or more of the provisions of this Master Lease or
any Schedule is for any reason held invalid, illegal or unenforceable, the
remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid, legal and enforceable provision that is closest to
the original intention of the parties.
14.12 Counterparts. This Master Lease and any Schedule may be executed in any
number of counterparts, each of which will be deemed an original, but all such
counterparts together constitute one and the same instrument. If Lessor grants a
security interest in all or any part of a Schedule, the Equipment or sums
payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate."
14.13 Licensed Products. Lessee will obtain no title to Licensed Products which
will at all times remain the property of the owner of the Licensed Products. A
license from the owner may be required and it is Lessee's responsibility to
obtain any required license before the use of the Licensed Products. Lessee
agrees to treat the Licensed Products as confidential information of the owner,
to observe all copyright restrictions, and not to reproduce or sell the Licensed
Products.
14.14 Secretary's Certificate. Lessee will, upon execution of this Master Lease,
provide Lessor with a secretary's certificate of incumbency and authority. Upon
the execution of each Schedule with a purchase price in excess of $1,000,000,
Lessee will provide Lessor with an opinion from Lessee's counsel in a form
acceptable to Lessor regarding the representations and warranties in Section 8.
14.15 Electronic Communications. Each of the parties may communicate with the
other by electronic means under mutually agreeable terms.
14.16 Landlord/Mortgagee Waiver. Lessee agrees to provide Lessor with a
Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be in
a form satisfactory to Lessor.
14.17 Equipment Procurement Charges/Progress Payments. Lessee hereby agrees that
Lessor shall not, by virtue of its entering into this Master Lease, be required
to remit any payments to any manufacturer or other third party until Lessee
accepts the Equipment subject to this Master Lease.
14.18 Definitions.
Advance - means the amount due to Lessor by Lessee upon Lessee's execution of
- -------
each Schedule.
Assignee - means an entity to whom Lessor has sold or assigned its rights as
- --------
owner and Lessor of Equipment.
Casualty Loss - means the irreparable loss or destruction of Equipment.
- -------------
Casualty Value - means the greater of the aggregate Rent remaining to be paid
- --------------
for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
Commencement Date - is defined in each Schedule.
- -----------------
Default Costs - means reasonable attorney's fees and remarketing costs resulting
- -------------
from a Lessee default or Lessor's enforcement of its remedies.
Delivery Date - means date of delivery of Inventory Equipment to Lessee's
- -------------
address.
Equipment - means the property described on a Summary Equipment Schedule and any
- ---------
replacement for that property required or permitted by this Master Lease or a
Schedule.
Event of Default - means the events described in Subsection 13.1.
- ----------------
-3-
<PAGE>
Fair Market Value - means the aggregate amount which would be obtainable in an
- -----------------
arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
Initial Term - means the period of time beginning on the first day of the first
- ------------
full Rent Interval following the Commencement Date for all items of Equipment
and continuing for the number of Rent Intervals indicated on a Schedule.
Interim Rent - means the pro-rata portion of Rent due for the period from the
- ------------
Commencement Date through but not including the first day of the first full Rent
Interval included in the Initial Term.
Late Charge - means the lesser of five percent (5%) of the payment due or the
- -----------
maximum amount permitted by the law of the state where the Equipment is located.
Licensed Products - means any software or other licensed products attached to
- -----------------
the Equipment.
Like Equipment - means replacement Equipment which is lien free and of the same
- --------------
model, type, configuration and manufacture as Equipment.
Merger - means any consolidation or merger of the Lessee with or into any other
- ------
corporation or entity, any sale or conveyance of all or substantially all of the
assets or stock of the Lessee by or to any other person or entity in which
Lessee is not the surviving entity.
Notice Period - means not less than ninety (90) days nor more than twelve (12)
- -------------
months prior to the expiration of the lease term.
Owner - means the owner of Equipment.
- -----
Rent - means the rent Lessee will pay for each item of Equipment expressed in a
- ----
Summary Equipment Schedule either as a specific amount or an amount equal to the
amount which Lessor pays for an item of Equipment multiplied by a lease rate
factor plus all other amounts due to Lessor under this Master Lease or a
Schedule.
Rent Interval - means a full calendar month or quarter as indicated on a
- -------------
Schedule.
Schedule - means either an Equipment Schedule or a Licensed Products Schedule
- ---------
which incorporates all of the terms and conditions of this Master Lease.
Secured Party - means an entity to whom Lessor has granted a security interest
- -------------
for the purpose of securing a loan.
Summary Equipment Schedule - means a certificate provided by Lessor summarizing
- --------------------------
all of the Equipment for which Lessor has received Lessee approved vendor
invoices, purchase documents and/or evidence of delivery during a calendar
quarter which will incorporate all of the terms and conditions of the related
Schedule and this Master Lease and will constitute a separate lease for the
equipment leased thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as
of the day and year first above written.
RELEASE SOFTWARE CORPORATION COMDISCO, INC.,
as Lessee as Lessor
by: /s/ Joan P. Walsh By: /s/ Jill C. Hanses
--------------------------- --------------------------
Title: CFO Title: SENIOR VICE PRESIDENT
----------------------- -----------------------
-4-
<PAGE>
ADDENDUM
ADDENDUM TO THE
MASTER LEASE AGREEMENT DATED AS OF APRIL 16, 1999
BETWEEN RELEASE SOFTWARE CORPORATION, AS LESSEE
AND COMDISCO, INC., AS LESSOR
The undersigned hereby agree that the terms and conditions of the above-
referenced Master Lease are hereby modified and amended as follows:
1. Section 2. "Term."
---------- -------
Fourth line, after the word "Period.", insert "Except as provided in
Section 14.13 below," and on fifth line change "No" to lower case "no".
2. Section 4.2. "Warranty and Disclaimer of Warranties."
------------ ----------------------------------------
Eleventh line, insert "or Lessee" after the words "is Lessor".
3. Section 5.2 "Relocation or Sublease."
----------- -------------------------
Second paragraph, at the end of the paragraph insert "Notwithstanding the
foregoing, Lessee may, upon prior written notice to Lessor, sublease or
assign all or any part of its interest under this Master Lease or any
Schedule to an affiliate or subsidiary of Lessee, provided Lessor will
remain jointly and severally liable for the performance of such affiliate
or subsidiary of all obligations under this Master Lease.
4. Section 6.2 "Taxes and Fees."
----------- -----------------
Line 1, after "fees" insert "excluding all Lessor's administrative fees".
5. Section 12 "Risk of Loss."
---------- ---------------
In the second paragraph, second line from the bottom, after "item of
Equipment" insert "up to an including the date of the Casualty Loss".
6. Section 13.1 "Default."
------------ ----------
Paragraph (c), fourth line, after the word "powers,", insert "and any such
filing or action is not dismissed or terminated by Lessee within 30 days of
the date of such filing or action".
7. Section 13.2 "Remedies."
------------ -----------
-1-
<PAGE>
Paragraph (b), after the word "damages", insert "(other than any special,
incidental or consequential damages)" and after the word "or", insert
"reasonable".
Paragraph (d), after the word "with", insert "written".
8. Section 14.1 "Board Attendance."
------------ -------------------
Delete this section in its entirety.
9. Section 14.4 "Merger and Sale Provisions."
------------ -----------------------------
In the second line, delete "sixty (60)" and replace with "thirty (30)".
10. Section 14.7 "NO WAIVER."
------------ ------------
At the end of the paragraph, after the word "OBLIGATIONS", insert "WITHOUT
THE PRIOR WRITTEN CONSENT OF LESSOR (WHICH CONSENT SHALL NOT BE
UNREASONABLY CONDITIONED, WITHHELD OR DELAYED)."
11. Section 14.15 "Landlord/Mortgagee Waiver."
------------- ----------------------------
First sentence, after the word "agrees", insert "to use good faith efforts"
and in the third line, after the word "form", insert "reasonably".
12. Section 14.17 "Definitions."
------------- --------------
"Merger" definition, third line, after the words "which Lessee", insert
--------
"or any subsidiary of affiliate of Lessee".
Except as amended hereby, all other terms and conditions of the Master Lease
Agreement remain in full force and effect.
RELEASE SOFTWARE CORPORATION COMDISCO, INC.
as LESSEE as LESSOR
By: /s/ Joan Walsh By: /s/ Jill C. Hanses
------------------ ------------------------
Title: CFO Title: Senior Vice President
--------------- ---------------------
Date: 4/19/99 Date:_______________________
----------------
-2-
<PAGE>
EXHIBIT 10.10
[Release.com Corporation letterhead]
November 10, 1999
Dear Carolyn,
We are pleased to accept your resignation as Chief Executive Officer
of Releasenow.com Corporation (the "Company"), effective as of November 10,
1999, and to offer you a position as the Chairman of the Board of the Company,
effective as of the same date. We are even more pleased that you have decided to
continue as a full time employee in your new role. The Board of Directors of the
Company is grateful for your service to date and wishes to recognize your
significant prior achievements. The Company would not be in its present position
without your efforts. This letter agreement is to more fully set out your and
the Company's responsibilities and obligations as a result of this transition.
This letter agreement will supercede in its entirety the offer letter relating
to your position as Chief Executive Officer signed by you on September 15, 1998.
Full Time Employment. The Company will continue to pay your regular salary
--------------------
and benefits for so long as you remain a full time employee. You agree that, for
so long as you remain a full time employee, you will devote sufficient time and
attention to the business of the Company. You further agree that you will not
directly or indirectly engage or participate in any business that is competitive
in any manner with the business of the Company during your employment and
severance periods. Subject to the payment obligations set forth herein, your
employment with the Company will continue to be "at will," meaning that either
you or the Company will be entitled to terminate your employment at any time and
for any reason, with or without cause.
Forgiveness for First of Two Promissory Notes. In appreciation of your
---------------------------------------------
efforts and achievements as Chief Executive Officer, the Board of Directors of
the Company has unanimously determined to forgive that certain promissory note
by you in favor of the Company dated April 1, 1999, in aggregate principal
amount of Twenty Thousand Dollars ($20,000), including all accrued but unpaid
interest. In addition, the Company will pay all taxes, employment or otherwise,
that may become due as a result of such forgiveness, including such additional
amount as may be required to ensure that you do not incur out of pocket expense
for such forgiveness or tax payment. Further, the Company hereby releases from
pledge pursuant to the above-mentioned promissory note Eleven Thousand Four
Hundred Twenty-Eight (11,428) shares of the Company's Common Stock which, as of
April 1, 1999, were held in your name. The Company acknowledges and agrees that
you have transferred all of these pledged shares, and that those transferred
shares are released from pledge.
Extension of Repayment Terms for Second of Two Promissory Notes. The Board
---------------------------------------------------------------
has also agreed that the terms of that certain promissory note by you in favor
of the Company dated June 18, 1999 in aggregate principal amount of One Million
Three Hundred Seventy-Eight Thousand One Hundred Seventy Dollars and Ten Cents
($1,378,170.10) shall be amended such that it becomes due and payable one (1)
year after the earliest of (i) the termination of your employment with the
Company; (ii) the Company's initial public offering and (iii) a sale of all or
<PAGE>
substantially all of the Company's assets or a merger pursuant to which the
Company's current shareholders hold less than 50% of the surviving entity.
Full Acceleration of Vesting. In addition to the foregoing, the Board of
----------------------------
Directors of the Company has unanimously determined that all securities now
owned or hereafter acquired (including those previously or hereafter transferred
by you) shall be fully vested as of November 10, 1999. This includes but is not
limited to the following securities currently held by you or any recipient of
such shares upon transfer:
<TABLE>
<CAPTION>
Number of Shares Exercise
Option Grant Vesting (Type of Price Per Exercised Shares Unvested Shares as
Number Date Cmc't Date Option/Issuance) Type Share as of 11/10/99 of 11/10/99
- ------ ----- ---------- ---------------- ---- ----- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 08/12/98 07/27/98 57,142 ISO $1.75 57,142 0
2 12/17/98 09/15/98 281,920 NQ 1.75 281,920 205,567
3 08/12/98 07/27/98 363,561 NQ 1.75 363,561 289,234
TOTAL 702,623 702,623
</TABLE>
Each Stock Purchase Agreement entered into by you as of June 18, 1999 and
April 1, 1999 for the purchase of the 702,623 shares referenced above, is hereby
amended or modified to the extent necessary to effectuate the full acceleration
provided for herein, and like amendments or modifications shall be made to any
similar future agreement relating to options or unvested shares acquired by you
after the date hereof to the extent the full vesting of all such securities
provided for herein is not contemplated therein.
This letter agreement supercedes and renders null and void those certain
Addendum to Stock Purchase Agreements executed in connection with the purchase
of the 702,623 shares referenced above, pursuant to which the vesting of 50% of
the then unvested shares would be accelerated at the time of a Corporate
Transaction (as defined in the Plan).
Severance Payment. In the event that the Company's Chief Executive Officer
-----------------
requests your resignation or otherwise terminates your full-time employment, the
Company will pay you an additional six (6) months of your then-current salary in
accordance with the Company's standard payroll policy. Notwithstanding the
foregoing, such payment shall be conditioned upon your execution of an
additional Mutual General Release, in substantially the form set forth below,
relating to matters of any kind which may have occurred, arisen or are otherwise
related to events or occurrences happening from the date hereof through the date
of such payment.
Mutual General Release. In consideration of the foregoing and other good
----------------------
and valuable consideration, by signing below, you and your heirs, executors,
agents and assigns, on the one hand, and the Company and its successors and
assigns, on the other hand, waive and release and promise never to assert any
claims or causes of action, whether or not now known, against the other and his,
her or its heirs, executors, officers, directors, employees, investors,
stockholders, subsidiaries, predecessor and successor corporations, agents,
attorneys and assigns (hereafter "Releasees"), relating to any matters of any
kind, including without limitation those arising out of or connected with your
employment with the Company or the termination of that employment, claims of
wrongful discharge, emotional distress, defamation, fraud, breach of contract,
breach of the covenant of good faith and fair dealing, misrepresentation,
interference with contract or prospective economic advantage, right to purchase
or receive capital stock or options to purchase
2
<PAGE>
capital stock of the Company, any claims of discrimination or harassment based
on sex, age, race, national origin, disability or on any other basis, under
Title VII of the Civil Rights Act of 1964, as amended, the California Fair
Employment and Housing Act, the Age Discrimination in Employment Act of 1967, as
amended, the Americans with Disabilities Act, and all other laws and regulations
relating to employment, including without limitation wage and hours laws, the
Family and Medical Leave Act and the Employment Retirement Income Security Act,
as well as claims for attorneys' fees and costs.
In this regard, you and the Company expressly waive and release any and all
rights you have under Section 1542 of the Civil Code of the State of California
which reads as follows: "A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the time of executing
the release, which, if known by him, must have materially affected his
settlement with the debtor."
Other Agreements. At all times in the future, you will remain bound by the
----------------
Company's Proprietary Information and Assignment of Inventions Agreement signed
by you on July 29, 1998. Nothing in this letter agreement shall affect your
rights or the Company's obligations under that certain Indemnification Agreement
dated as of May 24, 1999 by and between you and the Company.
Non-Solicitation. You agree that, should you or the Company terminate
----------------
either your employment and/or position as Chairman of the Board, for a period of
one (1) year following the later of such terminations you will not solicit any
employee or consultant of the Company to leave the Company for any reason.
Severability and Confidentiality. If any provision of this letter agreement
--------------------------------
is found to be unenforceable it shall be modified to make it enforceable and it
shall not affect the enforceability of the remaining provisions and the
remaining provisions shall be enforced to the extent permitted by law. You agree
not to disclose to any individual, entity, or otherwise, the existence of this
letter, the contents and terms of this letter, and the consideration for this
letter, except that you may disclose such information to your attorneys,
accountants and immediate family members.
No Harm. You agree that, now or in the future, including after the
-------
termination of your employment, you will not act in any manner that might damage
the business or reputation of the Company. The officers and directors of the
Company agree that, now or in the future, including after the termination of
your employment, they will not act in any manner than might damage your business
relationships, provided that, in the event of your termination for any reason,
the Company shall not be obligated to do anything more than follow its policies
regarding answering inquiries relating to terminated employees.
No Litigation Assistance. You and the Company each agree that, as to the
------------------------
other, now or in the future, including after the termination of your employment,
neither will counsel or assist any attorneys or their clients in the
presentation or prosecution of any disputes, differences, grievances, claims,
charges or complaints by any third party against the other or any of his, her or
its heirs, executors, officers, directors, employees, representatives,
stockholders, investors, subsidiaries, predecessor and successor corporations,
agents, attorneys or assigns, unless under a
3
<PAGE>
subpoena or other court order to do so or, in the case of you, unless the
Company requests your assistance.
Non-disparagement. You agree, now or in the future, including after the
-----------------
termination of your employment, to refrain from any disparagement, criticism,
defamation, libel or slander of the Company, or tortuous interference with the
contracts and relationships of the Company, its directors, officers, employees,
agents, representatives, stockholders, investors, subsidiaries, predecessor and
successor corporations, agents, attorneys and assigns. The officers and
directors of the Company agree, now or in the future, including after the
termination of your employment, to refrain from any disparagement, criticism,
defamation, libel or slander of you, or tortious interference with your
contracts and relationships.
Choice of Law. This letter agreement shall be deemed to have been entered
-------------
into in the State of California and shall be governed by the laws thereof,
without regard to the conflict of law principles thereof. You have not relied
upon any representation or statement made by the Company or its representatives
which is not specifically set forth herein.
Amendments. This agreement may only be amended in a writing signed by you
----------
and an officer of the Company.
Arbitration. Any controversy involving the construction or application of
-----------
any terms, covenants or conditions of this letter agreement, or any claims
arising out of any alleged breach of this letter will be governed by the rules
of the American Arbitration Association and submitted to and settled by final
and binding arbitration in San Mateo County, California.
We apologize for the legalistic tone of this letter, but wanted to make
sure the benefits that the Board has determined to grant you at this time were
appropriately documented and that the rights and obligations of you and the
Company were clearly set forth. Again, we appreciate the hard work and effort
you have put into the Company over the past year and want to extend our thanks
for a job well done.
Sincerely,
/s/ Clydene Bultman
Clydene Bultman
on behalf of Releasenow.Com
Corporation
Accepted and Agreed:
/s/ Carolyn A. Rogers
-----------------------------
Carolyn A. Rogers
4
<PAGE>
RELEASENOW.COM CORPORATION
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT made this ________ day of _________ 1999, by and between
ReleaseNow.com Corporation, a Delaware corporation, and, under the
Corporation's 1998 Stock Option/Stock Issuance Plan.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.
A. EXERCISE OF OPTION
------------------
1. Exercise. Optionee hereby purchases ____________ shares of
--------
Common Stock (the "Purchased Shares") pursuant to that certain option (the
"Option") granted Optionee on (the "Grant Date") to purchase up
to shares of Common Stock (the "Option Shares") under
the Plan at the exercise price of $ per share (the "Exercise Price").
2. Payment. Concurrently with the delivery of this Agreement to the
-------
Corporation, Optionee shall pay the Exercise Price for the Purchased Shares in
accordance with the provisions of the Option Agreement and shall deliver
whatever additional documents may be required by the Option Agreement as a
condition for exercise.
3. Stockholder Rights. Until such time as the Corporation exercises
------------------
the First Refusal Right, Optionee (or any successor in interest) shall have all
the rights of a stockholder (including voting, dividend and liquidation rights)
with respect to the Purchased Shares, subject, however, to the transfer
restrictions of Articles B and C.
B. SECURITIES LAW COMPLIANCE
-------------------------
1. Restricted Securities. The Purchased Shares have not been
---------------------
registered under the 1933 Act and are being issued to Optionee in reliance upon
the exemption from such registration provided by SEC Rule 701 for stock
issuances under compensatory benefit plans such as the Plan. Optionee hereby
confirms that Optionee has been informed that the Purchased Shares are
restricted securities under the 1933 Act and may not be resold or transferred
unless the Purchased Shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Optionee hereby acknowledges that Optionee is prepared to hold the Purchased
Shares for an indefinite period and that Optionee is aware that SEC Rule 144
issued under the 1933 Act which exempts certain resales of unrestricted
securities is not presently available to exempt the resale of the Purchased
Shares from the registration requirements of the 1933 Act.
2. Restrictions on Disposition of Purchased Shares. Optionee
-----------------------------------------------
shall make no disposition of the Purchased Shares (other than a Permitted
Transfer) unless and until there is compliance with all of the following
requirements:
<PAGE>
(i) Optionee shall have provided the Corporation with a written
summary of the terms and conditions of the proposed disposition.
(ii) Optionee shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(iii) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that (a)
the proposed disposition does not require registration of the Purchased
Shares under the 1933 Act or (b) all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or any
exemption from registration available under the 1933 Act (including Rule
144) has been taken.
The Corporation shall not be required (i) to transfer on its books any
---
Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement or (ii) to treat as the owner of the Purchased
--
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
3. Restrictive Legends. The stock certificates for the Purchased
-------------------
Shares shall be endorsed with one or more of the following restrictive legends:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement for
the shares under such Act, (b) a "no action" letter of the Securities and
Exchange Commission with respect to such sale or offer or (c) satisfactory
assurances to the Corporation that registration under such Act is not required
with respect to such sale or offer."
"The shares represented by this certificate are subject to
certain rights of first refusal granted to the Corporation and accordingly may
not be sold, assigned, transferred, encumbered, or in any manner disposed of
except in conformity with the terms of a written agreement dated April 1, 1999
between the Corporation and the registered holder of the shares (or the
predecessor in interest to the shares). A copy of such agreement is maintained
at the Corporation's principal corporate offices."
C. TRANSFER RESTRICTIONS
---------------------
1. Restriction on Transfer. Except for any Permitted Transfer,
-----------------------
Optionee shall not transfer, assign, encumber or otherwise dispose of any of the
Purchased Shares in contravention of the First Refusal Right or the Market
Stand-Off.
<PAGE>
2. Transferee Obligations. Each person (other than the Corporation)
----------------------
to whom the purchased Shares are transferred by means of a Permitted Transfer
must, as a condition precedent to the validity of such transfer, acknowledge in
writing to the Corporation that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to (i) the First Refusal
Right and (ii) the Market Stand-Off, to the same extent such shares would be so
subject if retained by Optionee.
3. Market Stand-Off.
----------------
(a) In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such restriction (the "Market Stand-Off")
shall be in effect for such period of time from and after the effective date of
the final prospectus for the offering as may be requested by the Corporation or
such underwriters. In no event, however, shall such period exceed one hundred
eighty (180) days and the Market Stand-Off shall in all events terminate two (2)
years after the effective date of the Corporation's initial public offering.
(b) Owner shall be subject to the Market Stand-Off provided and
------------
only if the officers and directors of the Corporation are also subject to
- -------
similar restrictions.
(c) Any new, substituted or additional securities which are by
reason of any Recapitalization or Reorganization distributed with respect to the
Purchased Shares shall be immediately subject to the Market Stand-Off, to the
same extent the Purchased Shares are at such time covered by such provisions.
(d) In order to enforce the Market Stand-Off, the Corporation may
impose stop-transfer instructions with respect to the Purchased Shares until the
end of the applicable stand-off period.
D. RIGHT OF FIRST REFUSAL
----------------------
1. Grant. The Corporation is hereby granted the right of first
-----
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares. For purposes of this Article D, the term
"transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition of the Purchased Shares intended to be made by Owner, but shall not
include any Permitted Transfer.
<PAGE>
2. Notice of Intended Disposition. In the event any Owner of
------------------------------
Purchased Shares desires to accept a bona fide third-party offer for the
transfer of any or all of such shares (the Purchased Shares subject to such
offer to be hereinafter referred to as the "Target Shares"), Owner shall
promptly (i) deliver to the Corporation written notice (the "Disposition
Notice") of the terms of the offer, including the purchase price and the
identity of the third-party offeror, and (ii) provide satisfactory proof that
the disposition of the Target Shares to such third-party offeror would not be in
contravention of the provisions set forth in Articles B and C.
3. Exercise of the First Refusal Right. The Corporation shall,
-----------------------------------
for a period of twenty-five (25) days following receipt of the Disposition
Notice, have the right to repurchase any or all of the Target Shares subject to
the Disposition Notice upon the same terms as those specified therein or upon
such other terms (not materially different from those specified in the
Disposition Notice) to which Owner consents. Such right shall be exercisable by
delivery of written notice (the "Exercise Notice") to Owner prior to the
expiration of the twenty-five (25)-day exercise period. If such right is
exercised with respect to all the Target Shares, then the Corporation shall
effect the repurchase of such shares, including payment of the purchase price,
not more than five (5) business days after delivery of the Exercise Notice; and
at such time the certificates representing the Target Shares shall be delivered
to the Corporation.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation shall have the right to pay the purchase price in the form of cash
equal in amount to the value of such property. If Owner and the Corporation
cannot agree on such cash value within ten (10) days after the Corporation's
receipt of the Disposition Notice, the valuation shall be made by an appraiser
of recognized standing selected by Owner and the Corporation or, if they cannot
agree on an appraiser within twenty (20) days after the Corporation's receipt of
the Disposition Notice, each shall select an appraiser of recognized standing
and the two (2) appraisers shall designate a third appraiser of recognized
standing, whose appraisal shall be determinative of such value. The cost of such
appraisal shall be shared equally by Owner and the Corporation. The closing
shall then be held on the later of (i) the fifth (5th) business day following
-----
following delivery of the Exercise Notice or (ii) the fifth (5th) business day
after such valuation shall have been made.
4. Non-Exercise of the First Refusal Right. In the event the
---------------------------------------
Exercise Notice is not given to Owner prior to the expiration of the twenty-five
(25)-day exercise period, Owner shall have a period of thirty (30) days
thereafter in which to sell or otherwise dispose of the Target Shares to the
third-party offeror identified in the Disposition Notice upon terms (including
the purchase price) no more favorable to such third-party offeror than those
specified in the Disposition Notice; provided, however, that any such sale or
--------
disposition must not be effected in contravention of the provisions of Articles
B and C. The third-party offeror shall acquire the Target Shares subject to the
First Refusal Right, the provisions of Article B and the provisions of Paragraph
C.3. In the event Owner does not effect such sale or disposition of the Target
Shares within the specified thirty (30)-day period, the First Refusal Right
shall continue to be applicable to any subsequent disposition of the Target
Shares by Owner until such right lapses.
<PAGE>
5. Partial Exercise of the First Refusal Right. In the event the
-------------------------------------------
Corporation makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within five (5) business days after Owner's receipt of the Exercise
Notice, to effect the sale of the Target Shares pursuant to either of the
following alternatives:
(i) sale or other disposition of all the Target Shares to
the third-party offeror identified in the Disposition Notice, but in full
compliance with the requirements of Paragraph D.4, as if the Corporation
did not exercise the First Refusal Right; or
(ii) sale to the Corporation of the portion of the Target
Shares which the Corporation has elected to purchase, such sale to be
effected in substantial conformity with the provisions of Paragraph D.3.
The First Refusal Right shall continue to be applicable to any subsequent
disposition of the remaining Target Shares until such right lapses.
Owner's failure to deliver timely notification to the Corporation
shall be deemed to be an election by Owner to sell the Target Shares pursuant to
alternative (i) above.
6. Recapitalization/Reorganization.
-------------------------------
(a) Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be immediately subject to the First Refusal Right,
but only to the extent the Purchased Shares are at the time covered by such
right.
(b) In the event of a Reorganization, the First Refusal Right
shall remain in full force and effect and shall apply to the new capital stock
or other property received in exchange for the Purchased Shares in consummation
of the Reorganization, but only to the extent the Purchased Shares are at the
time covered by such right.
7. Lapse. The First Refusal Right shall lapse upon the earliest
----- --------
to occur of (i) the first date on which shares of the Common Stock are held of
record by more than five hundred (500) persons, (ii) a determination made by the
Board that a public market exists for the outstanding shares of Common Stock or
(iii) a firm commitment underwritten public offering, pursuant to an effective
registration statement under the 1933 Act, covering the offer and sale of the
Common Stock in the aggregate amount of at least ten million dollars
($10,000,000). However, the Market Stand-Off shall continue to remain in full
force and effect following the lapse of the First Refusal Right.
<PAGE>
E. GENERAL PROVISIONS
------------------
1. Assignment. The Corporation may assign the First Refusal Right
----------
to any person or entity selected by the Board, including (without limitation)
one or more stockholders of the Corporation.
2. No Employment or Service Contract. Nothing in this Agreement or
---------------------------------
in the Plan shall confer upon Optionee any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Optionee) or of Optionee, which rights are hereby expressly reserved
by each, to terminate Optionee's Service at any time for any reason, with or
without cause.
3. Notices. Any notice required to be given under this Agreement
-------
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
4. No Waiver. The failure of the Corporation in any instance to
---------
exercise the First Refusal Right shall not constitute a waiver of any other
repurchase rights and/or rights of first refusal that may subsequently arise
under the provisions of this Agreement or any other agreement between the
Corporation and Optionee. No waiver of any breach or condition of this Agreement
shall be deemed to be a waiver of any other or subsequent breach or condition,
whether of like or different nature.
5. Cancellation of Shares. If the Corporation shall make available,
----------------------
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
F. MISCELLANEOUS PROVISIONS
------------------------
1. Optionee Undertaking. Optionee hereby agrees to take whatever
--------------------
additional action and execute whatever additional documents the Corporation may
deem necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either Optionee or the Purchased Shares
pursuant to the provisions of this Agreement.
<PAGE>
2. Agreement is Entire Contract. This Agreement constitutes the
----------------------------
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the terms of the Plan.
3. Governing Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the laws of the State of California without resort to that
State's conflict-of-laws rules.
4. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
5. Successors and Assigns. The provisions of this Agreement shall
----------------------
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon Optionee, Optionee's permitted assigns and the legal
representatives, heirs and legatees of Optionee's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
RELEASENOW.COM CORPORATION
By: ____________________________________
Title: ____________________________________
Address: ____________________________________
____________________________________
OPTIONEE
Address: ____________________________________
____________________________________
<PAGE>
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting Optionee the right to acquire the Purchased Shares in accordance with
the terms of such Agreement, the undersigned hereby agrees to be irrevocably
bound by all the terms of such Agreement, including (without limitation) the
first refusal rights granted to the Corporation (or its assigns) with respect to
the Purchased Shares.
___________________________________
OPTIONEE'S SPOUSE
Address: ___________________________________
___________________________________
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Purchase Agreement.
---------
B. Board shall mean the Corporation's Board of Directors.
-----
C. Code shall mean the Internal Revenue Code of 1986, as amended.
----
D. Common Stock shall mean the Corporation's common stock.
------------
E. Corporate Transaction shall mean either of the following stockholder-
---------------------
approved transactions:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. Corporation shall mean ReleaseNow.com Corporation, a Delaware
-----------
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of ReleaseNow.com Corporation which shall by appropriate
action adopt the Plan.
G. Disposition Notice shall have the meaning assigned to such term in
------------------
Paragraph D.2.
H. Exercise Notice shall have the meaning assigned to such term in
---------------
Paragraph D.3.
I. Exercise Price shall have the meaning assigned to such term in
--------------
Paragraph A.1.
J. Fair Market Value of a share of Common Stock on any relevant date,
-----------------
prior to the initial public offering of the Common Stock, shall be determined by
the Plan Administrator after taking into account such factors as it shall deem
appropriate.
K. First Refusal Right shall mean the right granted to the Corporation in
-------------------
accordance with Article D.
L. Grant Date shall have the meaning assigned to such term in Paragraph
----------
A.1.
<PAGE>
M. Grant Notice shall mean the Notice of Grant of Stock Option pursuant
------------
to which Optionee has been informed of the basic terms of the Option.
N. Incentive Option shall mean an option which satisfies the requirements
----------------
of Code Section 422.
O. Market Stand-Off shall mean the market stand-off restriction specified
----------------
in Paragraph C.3.
P. 1933 Act shall mean the Securities Act of 1933, as amended.
--------
Q. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
--------
R. Non-Statutory Option shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.
S. Option shall have the meaning assigned to such term in Paragraph A.1.
------
T. Option Agreement shall mean all agreements and other documents
----------------
evidencing the Option.
U. Optionee shall mean the person to whom the Option is granted under the
--------
Plan.
V. Owner shall mean Optionee and all subsequent holders of the Purchased
-----
Shares who derive their chain of ownership through a Permitted Transfer from
Optionee.
W. Parent shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
X. Permitted Transfer shall mean (i) a gratuitous transfer of the
------------------
Purchased Shares, provided and only if Optionee obtains the Corporation's prior
written consent to such transfer, (ii) a transfer of title to the Purchased
Shares effected pursuant to Optionee's will or the laws of intestate succession
following Optionee's death or (iii) a transfer to the Corporation in pledge as
security for any purchase-money indebtedness incurred by Optionee in connection
with the acquisition of the Purchased Shares.
Y. Plan shall mean the Corporation's 1998 Stock Option/Stock Issuance
----
Plan.
Z. Plan Administrator shall mean either the Board or a committee of the
------------------
Board acting in its capacity as administrator of the Plan.
AA. Purchased Shares shall have the meaning assigned to such term in
----------------
Paragraph A.1.
<PAGE>
AB. Recapitalization shall mean any stock split, stock dividend,
----------------
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
AC. Reorganization shall mean any of the following transactions:
--------------
(i) a merger or consolidation in which the Corporation is not
the surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities are
transferred in whole or in part to a person or persons different from the
persons holding those securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the state in
which the Corporation is incorporated or to create a holding company
structure.
AD. SEC shall mean the Securities and Exchange Commission.
---
AE. Service shall mean the Optionee's performance of services for the
-------
Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors or an independent consultant.
AF. Subsidiary shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
AG. Target Shares shall have the meaning assigned to such term in
-------------
Paragraph D.2.
<PAGE>
RELEASENOW.COM CORPORATION
ADDENDUM
TO
STOCK PURCHASE AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Purchase Agreement (the "Purchase Agreement")
by and between ReleaseNow.com Corporation (the "Corporation") and _________
("Optionee") evidencing the shares of Common Stock purchased on this date by
Optionee pursuant to the option granted to him or her under the Corporation's
1998 Stock Option/Stock Issuance Plan, and such provisions shall be effective
immediately. All capitalized terms in this Addendum, to the extent not
otherwise defined herein, shall have the meanings assigned to such terms in the
Purchase Agreement.
ACCELERATION IN CONNECTION WITH
A CORPORATE TRANSACTION
1. The Repurchase Right shall automatically lapse with respect to
fifty percent (50%) of the unvested Purchased Shares at the time of a Corporate
Transaction, and such Purchased Shares shall vest on an accelerated basis and
shall, immediately prior to the consummation of a Corporate Transaction, become
fully-vested shares of Common Stock.
2. For purposes of determining which unvested Purchased Shares shall
become vested on an accelerated basis, the Purchased Shares that are next to
become vested pursuant to the Vesting Schedule shall become vested on an
accelerated basis in accordance with Paragraph 1 of this Addendum and the
remaining unvested shares shall continue to vest in accordance with the Vesting
Schedule specified in the Grant Notice.
IN WITNESS WHEREOF, ReleaseNow.com Corporation has caused this
Addendum to be executed by its duly-authorized officer as of the Effective Date
specified below.
RELEASE SOFTWARE CORPORATION
By: ______________________________________
Title: ___________________________________
EFFECTIVE DATE: ____________, 1999
<PAGE>
RELEASENOW.COM CORPORATION
1996 STOCK PLAN
EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
-------------------------------------------------------
ReleaseNow.com Corporation
990 Commercial Street
San Carlos, CA 94070
Attention: President
This Agreement ("Agreement") is made as of ___________________, by and
---------
between ReleaseNow.com Corporation, a Delaware corporation (the "Company"), and
-------
___________ ("Purchaser"). To the extent any capitalized terms used in this
---------
Agreement are not defined, they shall have the meaning ascribed to them in the
Company's 1996 Stock Plan.
1. Exercise of Option. Subject to the terms and conditions hereof,
------------------
Purchaser hereby elects to exercise his or her option to purchase __________
shares of Common Stock (the "Shares") of the Company under and pursuant to the
------
Company's 1996 Stock Plan (the "Plan") and the Stock Option Agreement dated
----
_______________ (the "Option Agreement"). The purchase price for the Shares
----------------
shall be $_____ per Share for a total purchase price of $____________. The term
"Shares" refers to the purchased Shares and all securities received in
------
replacement of the Shares or as stock dividends or splits, all securities
received in replacement of the Shares in a recapitalization, merger,
reorganization, exchange or the like, and all new, substituted or additional
securities or other properties to which Purchaser is entitled by reason of
Purchaser's ownership of the Shares.
2. Time and Place of Exercise. The purchase and sale of the Shares under
--------------------------
this Agreement shall occur at the principal office of the Company simultaneously
with the execution of this Agreement in accordance with the provisions of
Section 2(b) of the Option Agreement. On such date, the Company will deliver to
Purchaser a certificate representing the Shares to be purchased by Purchaser
(which shall be issued in Purchaser's name) against payment of the purchase
price therefor by Purchaser by (a) check made payable to the Company, (b)
cancellation of indebtedness of the Company to Purchaser, (c) delivery of shares
of the Common Stock of the Company in accordance with Section 3 of the Option
Agreement, (d) such other consideration as determined by the Administrator in
accordance with the Plan, or (e) by a combination of the foregoing.
3. Limitations on Transfer. In addition to any other limitation on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares except in compliance with the
provisions below and applicable securities laws.
<PAGE>
(a) Right of First Refusal. Before any Shares held by Purchaser or any
----------------------
transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
------
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(a) (the "Right of First Refusal").
----------------------
(i) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the
------
Holder's bona fide intention to sell or otherwise transfer such Shares;
(ii) the name of each proposed purchaser or other transferee ("Proposed
--------
Transferee"); (iii) the number of Shares to be transferred to each Proposed
----------
Transferee; and (iv) the terms and conditions of each proposed sale or
transfer. The Holder shall offer the Shares at the same price (the
"Offered Price") and upon the same terms (or terms as similar as reasonably
--------------
possible) to the Company or its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not
less than all, of the Shares proposed to be transferred to any one or more
of the Proposed Transferees, at the purchase price determined in accordance
with subsection (iii) below.
(iii) Purchase Price. The purchase price ("Purchase Price") for the
-------------- --------------
Shares purchased by the Company or its assignee(s) under this Section 3(a)
shall be the Offered Price. If the Offered Price includes consideration
other than cash, the cash equivalent value of the non-cash consideration
shall be determined by the Board of Directors of the Company in good faith.
(iv) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the
Holder to the Company (or, in the case of repurchase by an assignee, to the
assignee), or by any combination thereof within 30 days after receipt of
the Notice or in the manner and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed in
--------------------------
the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section
3(a), then the Holder may sell or otherwise transfer such Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided
that such sale or other transfer is consummated within 60 days after the
date of the Notice and provided further that any such sale or other
transfer is effected in accordance with any applicable securities laws and
the Proposed Transferee agrees in writing that the provisions of this
Section 3 shall continue to apply to the Shares in the hands of such
Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, or if the Holder
proposes to change the price or other terms to make them more favorable to
the Proposed Transferee, a new Notice shall be given to the Company, and
the Company and/or its assignees shall again be offered the Right of First
Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
<PAGE>
(vi) Exception for Certain Family Transfers. Anything to the
--------------------------------------
contrary contained in this Section 3(a) notwithstanding, the transfer of
any or all of the Shares during Purchaser's lifetime or on Purchaser's
death by will or intestacy to Purchaser's Immediate Family or a trust for
the benefit of Purchaser's Immediate Family shall be exempt from the
provisions of this Section 3(a). "Immediate Family" as used herein shall
----------------
mean spouse, lineal descendant or antecedent, father, mother, brother or
sister. In such case, the transferee or other recipient shall receive and
hold the Shares so transferred subject to the provisions of this Section,
and there shall be no further transfer of such Shares except in accordance
with the terms of this Section 3.
(b) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In
-----------------------------------------------------
the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce,
but excluding a transfer to Immediate Family as set forth in Section
3(a)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have an option to purchase all of the Shares
transferred at the greater of the purchase price paid by Purchaser pursuant
to this Agreement or the fair market value of the Shares on the date of
transfer. Upon such a transfer, the person acquiring the Shares shall
promptly notify the Secretary of the Company of such transfer. The right
to purchase such Shares shall be provided to the Company for a period of
thirty (30) days following receipt by the Company of written notice by the
person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock
------------------------------
to be transferred pursuant to Section 3(b)(i), the price per Share shall be
a price set by the Board of Directors of the Company that will reflect the
current value of the stock in terms of present earnings and future
prospects of the Company. The Company shall notify Purchaser or his or her
executor of the price so determined within thirty (30) days after receipt
by it of written notice of the transfer or proposed transfer of Shares.
However, if Purchaser does not agree with the valuation as determined by
the Board of Directors of the Company, Purchaser shall be entitled to have
the valuation determined by an independent appraiser to be mutually agreed
upon by the Company and Purchaser and whose fees shall be borne equally by
the Company and Purchaser.
(c) Assignment. The right of the Company to purchase any part of the
----------
Shares may be assigned in whole or in part to any stockholder or stockholders of
the Company or other persons or organizations; provided, however, that an
-------- -------
assignee, other than a corporation that is the parent or a 100% owned subsidiary
of the Company, must pay the Company, upon assignment of such right, cash equal
to the difference between the original purchase price and fair market value, if
the original purchase price is less than the fair market value of the Shares
subject to the assignment.
(d) Restrictions Binding on Transferees. All transferees of Shares or any
-----------------------------------
interest therein will receive and hold such Shares or interest subject to the
provisions of this Agreement. Any sale or transfer of the Company's Shares
shall be void unless the provisions of this Agreement are satisfied.
<PAGE>
(e) Termination of Rights. The right of first refusal granted the Company
---------------------
by Section 3(a) above and the option to repurchase the Shares in the event of an
involuntary transfer granted the Company by Section 3(b) above shall terminate
upon the first sale of Common Stock of the Company to the general public
pursuant to a registration statement filed with and declared effective by the
Securities and Exchange Commission under the Securities Act. Upon termination
of the right of first refusal described in Section 3(a) above, a new certificate
or certificates representing the Shares not repurchased shall be issued, on
request, without the legend referred to in Section 6(a)(ii) herein and delivered
to Purchaser.
Investment and Taxation Representations. In connection with the purchase
---------------------------------------
of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Purchaser is
purchasing these securities for investment for his or her own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the securities have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the securities must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the securities. Purchaser understands that the certificate(s)
evidencing the securities will be imprinted with a legend which prohibits the
transfer of the securities unless they are registered or such registration is
not required in the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701, each
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions. Rule 701 provides that if
the issuer qualifies under Rule 701 at the time of issuance of the securities,
such issuance will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the securities exempt under Rule
701 may be resold by Purchaser ninety (90) days thereafter, subject to the
satisfaction of certain of the conditions specified by Rule 144, including,
among other things: (1) the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and, in the case of
an affiliate, (2) the availability of certain public information about the
Company, and the amount of securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), if applicable.
Notwithstanding this paragraph (d), Purchaser acknowledges and agrees to the
restrictions set forth in paragraph (f) hereof.
<PAGE>
In the event that the Company does not qualify under Rule 701 at the
time of purchase, then the securities may be resold by Purchaser in certain
limited circumstances subject to the provisions of Rule 144, which requires,
among other things: (1) the availability of certain public information about
the Company; (2) the resale occurring not less than two years after the party
has purchased, and made full payment of (within the meaning of Rule 144), the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than three years, (3) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934) and the amount of securities being sold during any three
month period not exceeding the specified limitations stated therein, if
applicable. PURCHASER UNDERSTANDS THAT PAYMENT FOR THE SHARES WITH A PROMISSORY
NOTE IS NOT DEEMED TO BE FULL PAYMENT UNDER RULE 144 UNLESS THE NOTE IS SECURED
BY ASSETS OTHER THAN THE SHARES.
(e) Purchaser further understands that at the time he or she wishes to
sell the securities there may be no public market upon which to make such a
sale, and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the securities
under Rule 144 or 701 even if the two-year minimum holding period had been
satisfied.
(f) Purchaser further understands that in the event all of the applicable
requirements of Rule 144 or 701 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
(g) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection with the purchase or disposition of the Shares and
that Purchaser is not relying on the Company for any tax advice.
5. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR
<PAGE>
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL FOR THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer
-------------------
on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
6. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
7. Market Stand-off Agreement. (a) In connection with any underwritten
--------------------------
public offering by the Company of its equity securities pursuant to an effective
registration statement filed under the 1933 Act, including the Company's initial
public offering, Purchaser shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise dispose
or transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to, any Shares without the prior written consent of
the Company or its underwriters. Such restriction (the "Market Stand-Off")
shall be in effect for such period of time from and after the effective date of
the final prospectus for the offering as may be requested by the Company or such
underwriters. In no event, however, shall such period exceed one hundred eighty
(180) days and the Market Stand-Off shall in all events terminate two (2) years
after the effective date of the Company's initial public offering.
(b) Any new, substituted or additional securities which are by
reason of any Recapitalization or Reorganization distributed with respect to the
Shares shall be immediately subject to the Market Stand-Off, to the same extent
the Shares are at such time covered by such provisions.
<PAGE>
(c) In order to enforce the Market Stand-Off, the Company may
impose stop-transfer instructions with respect to the Shares until the end of
the applicable stand-off period.
8. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions pursuant
-------------
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted, without giving effect to principles of conflicts of
law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets forth
---------------------------------------
the entire agreement and understanding of the parties relating to the subject
matter herein and merges all prior discussions between them. No modification of
or amendment to this Agreement, nor any waiver of any rights under this
Agreement, shall be effective unless in writing signed by the parties to this
Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are held to
------------
be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement is the result of negotiations between
------------
and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be deemed sufficient when delivered personally or sent by
telegram or fax or forty-eight (48) hours after being deposited in the U.S. mail
as certified or registered mail with postage prepaid, and addressed to the party
to be notified at such party's address as set forth below or as subsequently
modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
<PAGE>
(g) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
(h) California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH
-----------------------------------
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
<PAGE>
The parties have executed this Exercise Notice and Restricted Stock
Purchase Agreement as of the date first set forth above.
COMPANY:
RELEASENOW.COM CORPORATION
By: _________________________________
Name: _______________________________
(print)
Title: ______________________________
990 Commercial Street
San Carlos, CA 94070
PURCHASER:
_____________________________________
_____________________________________
(Signature)
_____________________________________
(Print Name)
Address:
____________________________________
____________________________________
I, ______________________, spouse of ____________, have read and
hereby approve the foregoing Agreement. In consideration of the Company's
granting my spouse the right to purchase the Shares as set forth in the
Agreement, I hereby agree to be irrevocably bound by the Agreement and further
agree that any community property or other such interest shall hereby be
similarly bound by the Agreement. I hereby appoint my spouse as my attorney-in-
fact with respect to any amendment or exercise of any rights under the
Agreement.
_______________________________
Spouse of _____________________
<PAGE>
RELEASENOW.COM CORPORATION
ADDENDUM
TO
STOCK PURCHASE AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Purchase Agreement (the "Purchase Agreement")
by and between ReleaseNow.com Corporation (the "Corporation") and _________
("Optionee") evidencing the shares of Common Stock purchased on this date by
Optionee pursuant to the option granted to him or her under the Corporation's
1998 Stock Option/Stock Issuance Plan, and such provisions shall be effective
immediately. All capitalized terms in this Addendum, to the extent not
otherwise defined herein, shall have the meanings assigned to such terms in the
Purchase Agreement.
ACCELERATION IN CONNECTION WITH
A CORPORATE TRANSACTION
1. The Repurchase Right shall automatically lapse with respect to
fifty percent (50%) of the unvested Purchased Shares at the time of a Corporate
Transaction, and such Purchased Shares shall vest on an accelerated basis and
shall, immediately prior to the consummation of a Corporate Transaction, become
fully-vested shares of Common Stock.
2. For purposes of determining which unvested Purchased Shares shall
become vested on an accelerated basis, the Purchased Shares that are next to
become vested pursuant to the Vesting Schedule shall become vested on an
accelerated basis in accordance with Paragraph 1 of this Addendum and the
remaining unvested shares shall continue to vest in accordance with the Vesting
Schedule specified in the Grant Notice.
IN WITNESS WHEREOF, ReleaseNow.com Corporation has caused this
Addendum to be executed by its duly-authorized officer as of the Effective Date
specified below.
RELEASE SOFTWARE CORPORATION
By: _________________________________________
Title: ______________________________________
EFFECTIVE DATE: ____________, 1999
<PAGE>
EXHIBIT 10.11
September 29, 1998
Eric Holstege
900 Regent Drive
Los Altos, CA 94024
Dear Eric:
On behalf of Release Software Corporation (the "Company"), I am
pleased to offer you the position of Vice President and Chief Technology
Officer, reporting to Carolyn Rogers, Chief Executive Officer. The terms of
your relationship with the Company will be indicated herein. Your expected
start date with the Company is as soon as possible based upon a transition plan
with your current employer and an expectation for you to start at least half
time in the near future.
Your annual base salary will be $174,000. In addition you will
receive a one-time $100,000 signing bonus. Your salary will be paid on a semi
monthly basis (subject to normal required withholdings and deductions). You
will also be eligible for up to a $35,000 (annualized amount, shall be pro-rated
for 1998) annual performance bonus based on achieving your mutually agreed upon
MBO's with Carolyn.
You will be granted an option to purchase 80,000 shares of the
Company's Common Stock at an exercise price equal to the fair market value on
the date of grant, subject to the approval of the Board of Directors. Such
option shall be an incentive stock option to the maximum extent permitted under
applicable law and shall be immediately exercisable. Release will have the
right, but not the obligation, to repurchase all such 80,000 shares (if
exercised), or such option to purchase 80,000 shares shall terminate in their
entirety (if unexercised), if you are not employed (on a continuous basis) by
the Company on a date that is one full year after your first day of employment
with Release. Upon a merger or sale of assets of the Company as defined below,
all 80,000 shares shall fully vest. On the one year anniversary date of your
employment with Release, provided you are an employee of Release during such
period, you will be fully vested in all such 80,000 shares.
In addition, you will also be granted an option to purchase 427,770
shares of Common Stock at an exercise price equal to the fair market value of
the Company's Common Stock on the date of grant, subject to the approval of the
Board of Directors of the Company. This option shall be an incentive stock
option to the maximum extent permitted by law and shall be immediately
exercisable. This stock will vest at the rate of 1/4 of the shares one year
after commencement of employment and 1/48th of the shares each month thereafter
of completed employment for 36 months. Therefore, upon completion of your fourth
full year of employment with the Company, these stock options will be fully
vested. Upon the consummation of a merger or sale of assets involving more than
a 50% change of ownership of the outstanding voting securities of the Company,
50% of all of your then unvested shares of Common Stock (including such portion
of your outstanding stock option referenced in this paragraph) shall accelerate
and vest and the applicable repurchase right shall so lapse accordingly.
Release provides a comprehensive Cafeteria Benefits Program in which
you will be eligible to participate immediately upon your first day of
employment. Release provides you with $160 each month to use towards your
benefit elections. This program includes medical, dental, vision, disability,
life insurance and health care/dependent care reimbursement accounts. We also
have a 401(k) Plan which you will eligible to participate beginning January 1,
1998. Release also offers a Personal Time Off (PTO) Plan under which you accrue
1.66 days per month to be used for vacation, illness or any other situation
where time off is needed. You will also receive 8 paid holidays per calendar
year. Enclosed is a benefit summary providing you an overview of the Release
benefits. You will receive detailed benefit information after your employment
start date.
<PAGE>
[ReleaseNow.Com Letterhead]
As a condition of employment at Release, you are required to produce
documentation that verifies your eligibility to be employed in the United
States. This documentation generally consists of two pieces of identification
(that is, Social Security Card, a valid drivers license or birth certificate).
This documentation must be available on your first day of work. It
will also be necessary to sign the Company's standard confidentiality agreement
relating to the protection of the Company's proprietary and confidential
information and assignment of inventions. In addition, you will abide by the
Company's strict policy that prohibits any new employee from using or bringing
with him or her from any previous employer any confidential information, trade
secrets, or proprietary materials or processes of such former employer. Please
note, as with all of our employees, your employment with Release is not for a
specific term and can be terminated by either of us, with or without cause, at
any time.
Again, let me indicate how pleased we are to extend you this offer and
look forward to having you as part of our team! If you have any questions,
please do not hesitate to call me at the office (650) 463-2406 or at home (650)
572-9356. We look forward to seeing you October 1, 1998 or sooner.
Very truly yours,
/s/ Marielena Tidwell
Marielena Tidwell
Vice President of Human Resources &
Administration
Release Software Corporation
To accept this offer and confirm your start date, please sign and date this
offer letter and return in the enclosed envelope.
I am pleased to accept this offer. I will start work on _________________.
Signature: /s/ Eric Holstege Date: 10/5/98
<PAGE>
June 9, 1999
Frank Maylett
2062 E. Bear Ridge Cove
Draper, Utah 84020
Dear Frank:
On behalf of ReleaseNow.com (the "Company"), I am pleased to offer you the
position of Sales Director, reporting to Mike Vanneman, Vice President, Sales.
The terms of your relationship with the Company will be indicated herein. Your
expected start date with the Company is Monday June 16, 1999.
Your annual base salary will be $100,000. Your salary will be paid on a semi
monthly basis (subject to normal required withholdings). You will also be
eligible to participate in a commission program, which is based on your ability
to generate revenue, along with favorable gross margin. Your annualized
commission target for CY99 is $70,000, plus potential for upside. Commissions
are paid out at the close of each quarter. You and Mike will mutually agree upon
your individual revenue and gross margin goals for 1999.
You will be granted an option to purchase 50,000 shares of Common Stock at an
exercise price equal to the fair market value of the Company's Common Stock on
the date of grant, subject to the approval of the Board of Directors of the
Company. This stock will vest a the rate of 1/4 of the shares one year after
commencement of employment and 1/48th of the shares each month thereafter of
completed employment. Therefore, upon completion of your forth year of
employment, your stock options will be fully vested.
Release provides a comprehensive Cafeteria Benefits Program in which you will be
eligible to participate immediately upon your first day of employment. Release
provides you with $185 each month to use towards your benefits elections. This
program includes medical, dental, vision, disability, life insurance and health
care/dependent care reimbursement accounts. We also have a 401(K) Plan which you
will be eligible for to participate beginning July 1, 1999. Release also offers
a Personal Time Off (PTO) Plan under which you accrue 1.25 days per month to be
used for vacation, illness or any other situation where time off is needed. You
will also receive 10 paid holidays per calendar year. Enclosed is a benefits
summary which will give you an overview of the Release benefits. You will
receive detailed benefit information after your employment start date.
As a condition of employment at ReleaseNow.com, you must be able to produce
documentation that verifies your eligibility to be employed in the United
States. This documentation generally consists of two pieces of identification
(that is, Social Security Card, a valid drivers license or birth certificate).
This documentation must be available on your first day of work. It will also be
necessary to sign the Company's standard confidentiality agreement relating
to the protection of the Company's proprietary and confidential information and
assignment of inventions. In addition, you will abide by the Company's strict
policy that prohibits any new employee from using or bringing with him or her
from any previous employer any confidential information, trade secrets, or
proprietary materials or processes of such former employer. Please note, as will
all of our employees, your employment with ReleaseNow is not for a specific term
and can be terminated by either of us, with or without cause, at any time.
Again, let me indicate how pleased we are to extend you this offer and look
forward to having you as part of our team! If you have any questions, please do
not hesitate to call me at 650.508.2400. We look forward to seeing you on
Monday, June 14.
Very truly yours,
/s/ Carolyn Rogers
Carolyn Rogers
Chief Executive Officer
ReleaseNow.com
<PAGE>
To accept this offer and confirm your start date, please sign and date this
offer letter and return in the enclosed envelope.
I am pleased to accept this offer. I will start work on June 16, 1999
-------------
Signature: /s/ Frank Maylett Date: 6-13-1999
------------------------ -------------------------
<PAGE>
EXHIBIT 10.13
-------------
[ReleaseNow.com Corporation letterhead]
May 20, 1999
Michael Maulick
2767 Gaspar Court
Palo Alto, CA 94306
Dear Michael:
On behalf of ReleaseNow.com Corporation (the "Company"), I am pleased
to offer you the position of President reporting to Carolyn Rogers, Chief
Executive Officer. As President, you will be an officer of the Company.
The terms of your relationship with the Company will be indicated
herein. Your expected start date with the Company is May 21, 1999.
Your annual base salary will be $200,000. Your salary will be paid on
a semi-monthly basis (subject to normal required withholdings and deductions).
You will also be eligible for up to a $100,000 annual performance bonus based
on achieving your mutually agreed upon MBO's with Carolyn. Such bonus shall be
guaranteed for the first twelve months of continuous employment and shall be
payable on a quarterly and prorated basis.
In addition, you will also be granted an option to purchase 700,000
shares of Common Stock at an exercise price equal to the fair market value of
the Company's Common Stock on the date of grant, which is not expected to exceed
$4.00 per share, subject to the approval of the Board of Directors of the
Company. This option shall be an incentive stock option to a maximum extent
permitted by law and shall be immediately exercisable for all of the option
shares. This stock will vest at the rate of 1/4 of the shares one year after
commencement of employment and 1/48th of the shares each month thereafter of
completed employment for the subsequent 36 months. Therefore, upon completion of
your fourth full year of continuous employment with the Company, the stock
option will be fully vested. Upon the consummation of a merger or sale of assets
involving more than a 50% change of ownership of the outstanding voting
securities of the Company, 50% of all of your then unvested shares of Common
Stock shall vest and the applicable repurchase right shall so lapse accordingly.
The Company will reimburse all prudent and reasonable business
expenses and provide cellular telephone, mobile PC, and related equipment to
perform your duties.
<PAGE>
[ReleaseNow.com Corporation letterhead]
The Company provides a comprehensive Cafeteria Benefits Program in
which you will be eligible to participate immediately upon your first day of
employment. The Company provides you with $160 each month to use towards your
benefit elections. This program includes medical, dental, vision, disability,
life insurance and health care/dependent care reimbursement accounts. We also
have a 401(k) Plan which you will be eligible to participate in beginning July
1, 1999. The Company also offers a Personal Time Off (PTO) Plan under which you
accrue 1.25 days per month to be used for vacation, illness or any other
situation where time off is needed. You will also receive 10 paid holidays per
calendar year. Enclosed is a benefits summary which will give you an overview of
the Company benefits. You will receive detailed benefits information after your
employment start date.
As a condition of employment at the Company, you are required to
produce documentation that verifies your eligibility to be employed in the
United States. This documentation generally consists of two pieces of
identification (that is, Social Security Card, a valid drivers license, or birth
certificate). This documentation must be available on your first day of work.
It will also be necessary to sign the Company's standard
confidentiality agreement relating to the protection of the Company's
proprietary and confidential information and assignment of inventions. In
addition, you will abide by the Company's strict policy that prohibits any new
employee from using or bringing with him from any previous employer any
confidential information, trade secrets, or proprietary materials or processes
of such former employer. Please note, as with all of our employees, your
employment with the Company is not for a specific term and can be terminated by
either of us with or without cause, at any time, for any reason.
If your employment is terminated, you may be entitled to certain other
benefits. The following definitions and terms apply to any termination of your
employment:
A. If you are terminated without cause of a constructive termination
occurs, you will receive as a severance benefit one year of base salary,
reimbursement for continuation of benefits pursuant to COBRA for six months
after the date of termination, and immediate vesting of 35% of all of your then
unvested shares of your initial grant of stock options.
B. If your employment is terminated for cause, all of your rights to
compensation and benefits under this agreement shall immediately terminate,
except that you shall be entitled to: 1) any unpaid portion of your salary and
guaranteed bonus for periods before the date of the termination, 2) any accrued
benefits up to such date, and 3) any benefits that are required to be provided
after such date under the general provisions of the Company's benefit plans in
which you are a participant as of the date of termination. For purposes of this
subparagraph, "cause" shall exist if you are grossly negligent of your duties
under this agreement, commit an act of dishonesty or breach of trust, or act in
a manner that is intentionally inimical or injurious to the business interests
of the Company, or are convicted of a felony, or you violate any of your other
agreements with the Company.
2
<PAGE>
C. if you voluntarily resign, all of your rights to compensation and
benefits under this agreement shall immediately terminate, except that you shall
be entitled to: 1) any unpaid portion of your salary and guaranteed bonus on a
pro-rata basis for periods before the date of the termination, 2) any accrued
benefits up to such date, and 3) any benefits that are required to be provided
after such date under the general provisions of the Company's benefit plans in
which you are a participant as of the date of termination.
D. For purposes of this subparagraph, a constructive termination
means: 1) your demotion or a significant reduction in your duties or
responsibility, 2) an involuntary reduction in base salary and / or under the
Company's group benefit plan, except to the extent that all other executive
officers are similarly affected by either of those reductions, 3) an involuntary
relocation of the Company more than 100 miles from its present location
resulting in a significantly increased time of commute between your current
residence and the Company's location, except to the extent that all other
executive officers are affected by any such relocation or 4) any material
uncured breach by the Company of the material terms of this agreement.
Again, let me indicate how pleased we are to extend you this offer and
look forward to having you as part of our team! If you have any questions,
please do not hesitate to call me at the office (650) 620-1070. We look forward
to seeing you soon.
Very truly yours,
/s/ Carolyn A. Rogers
Carolyn A. Rogers
CEO
ReleaseNow.com Corporation
To accept this offer and confirm your start date, please sign and date this
offer letter and return in the enclosed envelope.
I am pleased to accept this offer. I will start work on May 21st 1999
Signature: /s/ Michael J. Maulick Date: May 21st 1999
----------------------- -------------
<PAGE>
EXHIBIT 10.14
December 7, 1998
Joan Walsh
1541 Ridgewood Road
Alamo, CA 94507
Dear Joan:
On behalf of Release Software Corporation (the "Company"), I am pleased to offer
you the position of Vice President of Finance [and Chief Financial Officer],
reporting to Carolyn Rogers, Chief Executive Officer. The terms of your
relationship with the Company will be indicated herein. Your expected start
date with the Company is Monday, January 4, 1999.
Your annual base salary will be $125,000. Your salary will be paid on a semi-
monthly basis (subject to normal required withholdings and deductions). You
will also be eligible for up to a $25,000 annual performance bonus, commencing
on January 1, 1999. This bonus will be based on achieving your MBO's, which you
and Carolyn will mutually agree upon.
In addition, you will be granted an option to purchase 225,000 shares of Common
Stock at an exercise price equal to the fair market value of the Company's
Common Stock on the date of grant, subject to the approval of the Board of
Directors of the Company. This option shall be an incentive stock option to a
maximum extent permitted by law and shall be immediately exercisable for all of
the option shares. This stock will vest at the rate of 1/4 of the shares one
year after commencement of employment and 1/48th of the shares each month
thereafter of completed employment for the subsequent 36 months. Therefore,
upon completion of your fourth full year of employment with the Company, the
stock option will be fully vested. Upon the consummation of a merger or sale of
assets involving more than a 50% change of ownership of the outstanding voting
securities of the Company, 50% of all of your then unvested shares of Common
Stock (including such portion of your outstanding stock option referenced in
this paragraph) shall accelerate and vest and the applicable repurchase right
shall so lapse accordingly.
Release provides a comprehensive Cafeteria Benefits Program in which you will be
eligible to participate immediately upon your first day of employment. Release
provides you with $185 each month to use towards your benefit elections. This
program includes medical, dental, vision, disability, life insurance and health
care/dependent care reimbursement accounts. We also have a 401(k) Plan, which
you will be eligible to participate in beginning January 1, 1999. Release also
offers a Personal Time Off (PTO) Plan under which you accrue 1.66 days per month
to be used for vacation, illness or any other situation where time off is
needed. You will also receive 8 paid holidays per calendar year. Enclosed is a
benefits summary, which will give you an overview of the Release benefits. You
will receive detailed benefits information after your employment start date.
As a condition of employment at Release, you are required to produce
documentation that verifies your eligibility to be employed in the United
States. This documentation generally consists of two pieces of identification
(that is, Social Security, Card, a valid drivers license, or birth certificate).
This documentation must be available on your first day of work. It will also be
necessary to sign the Company's standard confidentiality agreement relating to
the protection of the Company's proprietary and confidential information, and
assignment of inventions.
<PAGE>
[ReleaseNow.com letterhead]
In addition, you will abide by the Company's strict policy that prohibits any
new employee from using or bringing with them, from any previous employer, any
confidential information, trade secrets, or proprietary materials or processes
of such former employer. Please note, as with all of our employees, your
employment with Release is not for a specific term and can be terminated by
either of us with or without cause, at any time, for any reason.
Again, let me indicate how pleased we are to extend you this offer and look
forward to having you as part of our team! If you have any questions, please do
not hesitate to call me at the office (650) 508-1006 or at home (650) 572-9356.
We look forward to seeing you soon.
Very truly yours,
/s/ Marielena Tidwell
Marielena Tidwell
Vice President of Human Resources & Administration
Release Software Corporation
To accept this offer and confirm your start date, please sign and date this
offer letter and return in the enclosed envelope.
I am pleased to accept this offer. I will start work on 1/4/99.
Signature: /s/ Joan Walsh Date: 12/9/98
2
<PAGE>
[Release Letterhead]
EXHIBIT 10.15
February 17, 1999
David Roman
19939 Charters Avenue
Saratoga, CA 95070
Dear David:
On behalf of Release Software Corporation (the "Company"), I am pleased to offer
you the position of Vice President of Marketing, reporting to Carolyn Rogers,
Chief Executive Officer. The terms of your relationship with the Company will
be indicated herein. Your expected start date with the Company is today,
February 17, 1999.
Your annual base salary will be $165,000. Your salary will be paid on a semi-
monthly basis (subject to normal required withholdings and deductions). You
will also be eligible for up to a $25,000 annual performance bonus (pro-rated to
your start date), based on achieving your mutually agreed upon MBO's with
Carolyn.
In addition, you will be granted an option to purchase 300,000 shares of Common
Stock at an exercise price equal to the fair market value of the Company's
Common Stock on the date of grant, subject to the approval of the Board of
Directors of the Company. This option shall be an incentive stock option to
maximum extent permitted by law and shall be immediately exercisable for all of
the option shares. This stock will vest at the rate of 1/4 of the shares one
year after commencement of employment and 1/48th of the shares each month
thereafter of completed employment for the subsequent 36 months. Therefore,
upon completion of your fourth full year of employment with the Company, the
stock option will be fully vested. Upon the consummation of a merger or sale of
assets involving more than a 50% change of ownership of the outstanding voting
securities of the Company, 50% of all of your then unvested shares of Common
Stock (including such portion of your outstanding stock option referenced in
this paragraph) shall accelerate and vest and the applicable repurchase right
shall so lapse accordingly.
Release provides a comprehensive Cafeteria Benefits Program in which you will be
eligible to participate immediately upon your first day of employment. Release
provides you with $185.00 each month to use towards your benefit elections. This
program includes medical, dental, vision, disability, life insurance and health
care/dependent care reimbursement accounts. We also have a 401(k) Plan, which
you will be eligible to participate in beginning April 1, 1999.
Release offers a Personal Time Off (PTO) Plan under which you accrue 1.66 days
per month to be used for vacation, illness or any other situation where time off
is needed. You will also receive 8 paid holidays per calendar year. Enclosed
is a benefits summary, which will give you an overview of the Release benefits.
You will receive detailed benefits information after your employment start date.
<PAGE>
As a condition of employment at Release, you are required to produce
documentation that verifies your eligibility to be employed in the United
States. This documentation generally consists of two pieces of identification
(that is, Social Security, Card, a valid drivers license, or birth certificate).
This documentation must be available on your first day of work. It will also be
necessary to sign the Company's standard confidentiality agreement relating to
the protection of the Company's proprietary and confidential information, and
assignment of inventions. In addition, you will abide by the Company's strict
policy that prohibits any new employee from using or bringing with her, from
any previous employer, any confidential information, trade secrets, or
proprietary materials or processes of such former employer. Please note, as
with all of our employees, your employment with Release is not for a specific
term and can be terminated by either of us with or without cause, at any time,
for any reason.
Again, let me indicate how pleased we are to extend you this offer and look
forward to having you as part of our team! If you have any questions, please do
not hesitate to call me at the office (650) 508-1006 or at home (650) 572-9356.
Very truly yours,
/s/ Marielena Tidwell
Marielena Tidwell
Vice President of Human Resources & Administration
Release Software Corporation
To accept this offer and confirm your start date, please sign and date this
offer letter and return in the enclosed envelope.
I am pleased to accept this offer. I will start work on 2/17/99.
Signature: /s/ David Roman Date: 2/17/99
2
<PAGE>
EXHIBIT 21.1
------------
Subsidiaries of Registrant
--------------------------
1. RELEASENOW.COM CANADA, INC.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our reports dated January 21, 2000, relating to the consolidated financial
statements and financial statement schedules of ReleaseNow.com Corporation,
which appear in such Registration Statement. We also consent to the references
to us under the headings "Experts" and "Selected Financial Data" in such
Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
San Jose, California
January 27, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 3,198,000 14,435,000
<SECURITIES> 2,100,000 2,200,000
<RECEIVABLES> 174,000 242,000
<ALLOWANCES> (72,000) (89,000)
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,608,000 17,153,000
<PP&E> 2,624,000 4,961,000
<DEPRECIATION> (766,000) (1,962,000)
<TOTAL-ASSETS> 7,760,000 21,849,000
<CURRENT-LIABILITIES> 2,507,000 5,625,000
<BONDS> 0 0
0 0
10,000 15,000
<COMMON> 2,000 5,000
<OTHER-SE> 4,841,000 15,343,000
<TOTAL-LIABILITY-AND-EQUITY> 7,760,000 21,849,000
<SALES> 6,573,000 12,749,000
<TOTAL-REVENUES> 6,573,000 12,749,000
<CGS> (5,882,000) (11,083,000)
<TOTAL-COSTS> 8,639,000 (21,303,000)
<OTHER-EXPENSES> 78,000 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (170,000) (283,000)
<INCOME-PRETAX> (7,856,000) (19,354,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (7,856,000) (19,354,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (7,856,000) (19,354,000)
<EPS-BASIC> (3.96) (8.24)
<EPS-DILUTED> (3.96) (8.24)
</TABLE>
