<PAGE>
As filed with the Securities and Exchange Commission on February 7, 2000
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
ALLADVANTAGE.COM INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 7319 94-3327058
(State or other
jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or
organization) Classification Code Number) Identification Number)
</TABLE>
---------------
4010 Point Eden Way, Hayward, California 94545, (510) 888-3898
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
James Jorgensen
President and Chief Executive Officer
4010 Point Eden Way, Hayward, California 94545, (510) 888-3898
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
<TABLE>
<S> <C>
Laird H. Simons III, Esq. Gregory C. Smith, Esq.
Mark A. Leahy, Esq. Thomas J. Ivey, Esq.
Andrew Y. Luh, Esq. Skadden, Arps, Slate, Meagher & Flom LLP
Fenwick & West LLP 525 University Ave.
Two Palo Alto Square Suite 220
Palo Alto, CA 94306 Palo Alto, CA 94301
(650) 494-0600 (650) 470-4500
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, 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 of 1933, 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 of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- -------------------------------------------------------------
- -------------------------------------------------------------
<CAPTION>
Title of Each Class Proposed Maximum
of Securities to be Aggregate Amount of
Registered Offering Price (1) Registration Fee
- -------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.001 par
value per share....... $150,000,000 $39,600
- -------------------------------------------------------------
- -------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933.
---------------
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 Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and 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 FEBRUARY 7, 2000.
Shares
[AllAdvantage.com Logo]
Common Stock
--------
Prior to this offering, there has been no public market for our common stock.
The initial public offering price is expected to be between $ and $ per
share. We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "AADV."
The underwriters have an option to purchase a maximum of additional
shares to cover over-allotments of shares.
Investing in the common stock involves risks. See "Risk Factors" on page 6.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions AllAdvantage
-------- ------------- ------------
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total...................................... $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about ,
2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Joint Book-Running Managers
Credit Suisse First Boston Donaldson, Lufkin & Jenrette
Robertson Stephens
The date of this prospectus is , 2000.
<PAGE>
[Gatefold]
[AllAdvantage Logo] It's time to take advantage of the Internet.
[inside front cover artwork]
Title: The AllAdvantage Viewbar
[Graphic of the AllAdvantage Viewbar as it appears on a computer screen in a
horizontal position. The Viewbar has its Shopping pop-up menu expanded. This
menu is expanded further to show the Computers & Electronics menu. Search
function textbox is also expanded. In the Advertising sections of the Viewbar
AllAdvantage.com name and logo are shown.]
[text pointing to functional areas of the Viewbar includes the following text
labels:]
Labels:Members choose from seven available search engines. Just enter search
criteria while using any program and launch directly to the search results.
Check the weather, buy a car or book a vacation. Members select a
category and get direct access to popular sites.
Banner and tile advertising spaces allow persistent messaging throughout
the user's Internet experience.
Just one click minimizes the Viewbar at any time for ultimate
flexibility of use.
Use the menu bar to easily and conveniently navigate the Internet.
Targeting makes advertising content more relevant.
<PAGE>
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Special Note Regarding Forward-Looking Statements........................ 18
Use of Proceeds.......................................................... 19
Dividend Policy.......................................................... 19
Capitalization........................................................... 20
Dilution................................................................. 22
Selected Consolidated Financial Data..................................... 23
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 24
Business................................................................. 30
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management................................................................. 45
Related Party Transactions................................................. 55
Principal Stockholders..................................................... 59
Description of Capital Stock............................................... 61
Shares Eligible for Future Sale............................................ 65
Underwriting............................................................... 67
Notice to Canadian Residents............................................... 70
Legal Matters.............................................................. 71
Experts.................................................................... 71
Where You Can Find Additional Information.................................. 71
Index to Consolidated Financial Statements................................. F-1
</TABLE>
----------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
Dealer Prospectus Delivery Obligations
Until , 2000 (25 days after the commencement of this offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealers' obligation to deliver a prospectus when acting
as underwriters and with respect to unsold allotments or subscriptions.
2
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information and consolidated financial statements and notes thereto appearing
elsewhere in this prospectus. This prospectus contains forward-looking
statements. The outcome of the events described in these forward-looking
statements is subject to risks, and actual results could differ materially.
Please see "Special Note Regarding Forward-Looking Statements" on page 18 for
information on how those results may differ.
AllAdvantage.com Inc.
AllAdvantage has built a new Internet communications platform that connects
businesses and consumers using our proprietary Web interface and extensive
database of member profiles. We provide businesses with a powerful online
advertising, direct marketing and electronic commerce tool to target and reach
our large community of members. We provide our members cash compensation, as
well as simplified Internet navigation and electronic commerce links that
enhance their Internet experience.
Through our Web interface, and with our members' express permission, we
continuously track and collect data about their Internet behavior and
demographic information in order to develop highly accurate and detailed
personal profiles. While keeping each of our member's personal data private, we
use these profiles to enable businesses to reach their desired audience more
effectively by delivering highly-targeted advertisements to, and conducting
electronic commerce with, our members. In this way, we have become a leading
Internet-based information intermediary, or infomediary, acting as the
gatekeeper to our members while maintaining their privacy.
At the core of our service is the AllAdvantage Viewbar, an interactive
communications window that is persistently displayed on our members' computer
screens. The Viewbar is the channel through which we deliver highly-targeted
advertisements and direct marketing messages to, and collect data from, our
members. The Viewbar also facilitates Internet navigation and electronic
commerce and contains our advertising windows, a search field and pop-up menus
that contain direct links to over 400 Web sites.
From our inception in March 1999 to January 31, 2000, over 5.3 million users
registered to receive our service. We launched our Viewbar service in July 1999
and have activated the Viewbar for members in the United States, Australia,
Canada, France, Germany, New Zealand and the United Kingdom. We intend to
introduce our Viewbar service in additional countries during the first quarter
of 2000. During the three months ended January 31, 2000, over 1.7 million
members actively used our service, and we delivered advertisements for over
1,100 businesses. In the month of January 2000, we delivered over 6 billion
advertising impressions on our Viewbar.
Our objective is to become the leading Internet-based infomediary,
redefining the way businesses and consumers interact on the Internet. Key
elements of our strategy include expanding our database of profiled members,
expanding our business customer base, increasing the features and functionality
of our Viewbar and utilizing our communications platform to generate new
revenue opportunities. Also, we believe that, by increasing the number of our
members and the number of business customers using our communications channel,
we can offer increasingly compelling benefits to both businesses and members.
We were incorporated in California on March 24, 1999, and we intend to
reincorporate in Delaware prior to the closing of this offering. As of January
31, 2000, we had 390 full-time employees and contractors. Our address is 4010
Point Eden Way, Hayward, California 94545. Our telephone number is (510) 888-
3898. Our Web site is located at www.alladvantage.com. Information contained on
our Web site does not constitute part of this prospectus.
3
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered by AllAdvantage................ shares
Common stock to be outstanding after this offering.. shares
Use of proceeds..................................... For general corporate purposes, including
working capital and capital expenditures. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol.............. AADV
</TABLE>
The number of shares of common stock to be outstanding after this offering
is based on shares outstanding as of December 31, 1999, adjusted for the
issuance of 16,453,926 shares of our Series D preferred stock in February 2000.
This number of shares excludes:
. additional shares of common stock which will be issued upon conversion
of the Series D preferred stock in the event that the initial public
offering price is less than $12.10 per share; the number of additional
shares issuable increases as the initial public offering price
decreases, with the maximum number of additional shares equal to
approximately 4,132,231 shares;
. 10,484,233 shares issuable upon the exercise of stock options
outstanding as of December 31, 1999, at a weighted-average exercise
price of $0.69 per share;
. 477,550 shares issuable upon the exercise of warrants for Series C
preferred stock outstanding as of December 31, 1999 at an exercise price
of $0.03 per share, which will become exercisable for common stock upon
the completion of this offering;
. shares issuable upon the exercise of stock options granted after
December 31, 1999 and outstanding on , 2000, at a weighted-average
exercise price of $ per share;
. 75,000 shares issuable upon the exercise of a warrant for Series D
preferred stock issued after December 31, 1999 and outstanding on
February 4, 2000, at an exercise price of $6.05 per share, which will
become exercisable for common stock upon the completion of this
offering; and
. shares available for future issuance under the 1999 Equity
Incentive Plan and 2000 Equity Incentive Plan of our California
predecessor on , 2000 and our 2000 Equity Incentive Plan and 2000
Employee Stock Purchase Plan on , 2000, subject to automatic annual
increases each January 1 as described under "Management--Employee
Benefit Plans."
----------------
Except as otherwise indicated, all information in this prospectus assumes:
. the conversion of all outstanding shares of preferred stock into
shares of common stock upon the consummation of this offering at the
assumed public offering price of $ per share;
. the reincorporation of AllAdvantage in Delaware;
. the adoption of our 2000 Equity Incentive Plan and 2000 Employee Stock
Purchase Plan; and
. no exercise of the underwriters' over-allotment option.
Titles and logos of our products and services appearing in this prospectus,
including AllAdvantage, AllAdvantage.com, It's time to take advantage of the
Internet, and Viewbar, are trademarks or service marks of AllAdvantage.com Inc.
and may be registered in other jurisdictions. Each trademark or service mark of
any other company appearing in this prospectus belongs to its holder.
4
<PAGE>
Summary Consolidated Financial Data
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Period from Period from
Inception Three Months Inception
(March 24, 1999) Ended (March 24, 1999)
To September 30, December 31, To December 31,
1999 1999 1999
---------------- ------------ ----------------
(unaudited)
<S> <C> <C> <C>
Consolidated Statement of
Operations Data:
Revenues........................ $ 235 $ 5,016 $ 5,251
Loss from operations............ (8,428) (28,214) (36,642)
Net loss........................ (8,988) (28,121) (37,109)
Net loss per share(1):..........
Basic and diluted net loss per
share ....................... $ (1.27) $ (3.52) $ (5.04)
Shares used in per share
calculation ................. 7,050 8,000 7,367
Pro forma basic and diluted
net loss per share
(unaudited) ................. $ (0.97)
Shares used in pro forma per
share calculation
(unaudited) ................. 38,287
</TABLE>
The actual column in the following table presents actual summary
consolidated balance sheet data as of December 31, 1999. The pro forma
consolidated balance sheet data below reflects the sale of 16,453,926 shares of
our Series D preferred stock in February 2000 for net proceeds of approximately
$94.5 million, the conversion of all outstanding shares of preferred stock into
68,588,612 shares of common stock and the filing of our amended and restated
certificate of incorporation upon completion of this offering. The pro forma as
adjusted consolidated balance sheet data below also reflects the receipt of the
net proceeds from the sale of the shares of common stock offered by us at
an assumed initial public offering price of $ per share and after
deducting the estimated underwriting discounts and commissions and estimated
offering expenses payable by us.
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(unaudited)
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and restricted cash
(2)......................................... $ 30,019 $124,563 $
Working capital (deficit).................... (4,476) 90,068
Total assets................................. 39,871 134,415
Capital lease obligations, net of current
portion..................................... 254 254 254
Deferred stock compensation.................. (18,572) (18,572) (18,572)
Total stockholders' equity (net capital
deficiency)................................. (25) 94,519
</TABLE>
- --------
(1) See note 2 of notes to consolidated financial statements for the
determination of the number of shares used in computing net loss per share
and pro forma net loss per share amounts.
(2) Restricted cash was $10.0 million at December 31, 1999 and represented the
portion of the November 1999 $20 million customer advance not then
available for our use. Five million dollars of this restricted cash became
unrestricted on January 12, 2000, and the remaining $5.0 million will
become unrestricted on February 12, 2000.
5
<PAGE>
RISK FACTORS
An investment in our common stock is very risky. You should carefully
consider the risks described below, together with the other information in this
prospectus, before buying shares in this offering.
We face risks related to our business.
We cannot predict that our business will be successful, because our business
model is unproven and we have operated our business for only a short period of
time.
We were incorporated in March 1999. We have allowed members to use our
Viewbar since July 1999 and the current version of our Viewbar was released in
January 2000. Our limited operating history makes it difficult for members to
evaluate the services we make available to them and for businesses to evaluate
our members' response to advertisements and sponsorships provided on our
Viewbar. Because our business model is unproven, it will be difficult for you
to evaluate our performance.
We just recently began recognizing revenues, have incurred substantial losses
to date and expect to continue to incur losses.
We first recognized revenues in August 1999. As a result, you should not
consider our recent revenue growth as an indication of our future rate of
revenue growth. We had incurred net losses of $37.1 million as of December 31,
1999, and we expect to continue to incur operating losses for at least the next
two years. In the future, we expect our direct member payment costs, sales and
marketing expenses, general and administrative expenses and product development
expenses to increase significantly. We will also incur substantial non-cash
charges relating to the amortization of deferred compensation for issuances of
stock options. Our revenues may never exceed our expenses, so we may never
achieve profitability.
Our quarterly operating results may fluctuate, which could negatively affect
the market price of your shares.
Our quarterly results of operations are likely to vary significantly from
quarter to quarter. A number of factors are likely to cause these variations,
many of which are outside of our control. These factors include:
. changes in our revenue levels due to the advertising and marketing
budget cycles of our business customers;
. changes in our pricing policies, the pricing policies of our direct
competitors or the pricing policies for Internet advertising and
marketing generally;
. our rate of member acquisition and the level of activity of new and
existing members;
. changes in direct member expenditures, member referral expenditures and
other sales and marketing costs that we incur to attract and retain
members;
. the introduction of new products and services by us or by our
competitors;
. unexpected costs and delays resulting from the expansion of our
operations; and
. the occurrence of technical difficulties or unscheduled system downtime.
Due to these and other factors, we believe that quarter-to-quarter
comparisons of our operating results may not be meaningful, and you should not
rely upon them as an indication of our future performance.
If we fail to generate sufficient advertising and other revenues, we may not be
able to support our operations.
We currently depend primarily on our ability to generate advertising
revenues in order to support our operations. We generate, or intend to
generate, revenues from a variety of different arrangements including
6
<PAGE>
sales of traditional and highly-targeted advertising, sponsorships,
performance-based arrangements, referrals to third-party Web-sites, branded
product arrangements and sales of digital products and generalized market data.
During the fourth quarter of 1999, substantially all of the advertisements we
sold were not highly-targeted. Our strategy includes increasing highly-targeted
advertising as a percentage of both the total number of advertisements we sell
and of revenues from all advertising. We have limited experience marketing and
pricing highly-targeted advertisements and these other types of arrangements,
and have limited experience with respect to the performance of these
arrangements. Thus, we cannot be sure that we are appropriately pricing,
marketing or structuring these arrangements, or whether we will perform under
these arrangements to the satisfaction of our business customers. In addition,
the success of some of these arrangements will depend on our ability to target
members effectively based on demographic and other information. We may
encounter technical and other limitations on this ability, including problems
associated with the serving of advertisements, some of which are out of our
control. Further, we believe that we need to increase the size of our internal
sales force in order to sell additional advertising, particularly targeted
advertising. In light of these factors, we cannot assure you that we will be
able to generate sufficient advertising or other revenues to support our
operations.
If we are unable to continue to enhance the functionality of our Viewbar, our
business may be harmed.
If we are unable to continue to enhance the functionality of our Viewbar on
a timely and cost-effective basis, or if these enhancements do not achieve
widespread market acceptance, our membership growth may be reduced, we may miss
market opportunities and our business may be harmed. Implementing enhancements
to our Viewbar is costly and requires significant time of our management. Any
delays we experience in implementing enhancements to our Viewbar may result in
lost revenues and may harm our operating results. The life cycles of our
enhancements are difficult to predict because we operate in a new and emerging
market that is characterized by rapid technological change, changing customer
needs and evolving industry standards. The introduction of competing online
advertising delivery mechanisms that provide greater functionality or better
data collection could render our existing Viewbar obsolete and unmarketable.
We expect that the current version of the Viewbar, released in January 2000,
will be downloaded by existing members over the next several months and will be
available for download by new members starting in February 2000. We may
experience technical and customer support issues associated with this
introduction. We may also lose members who have used the prior version of our
Viewbar and either choose not to spend the time, or are unable, to upgrade
their Viewbar. We may also lose existing members who do not like aspects of the
current version of our Viewbar.
If we fail to grow or retain our member base, we may not be able to generate
revenues.
Membership growth and retention is crucial to our ability to generate
revenues. To date, we have relied on member referral marketing to attract the
vast majority of our new members, and we plan to do so for the foreseeable
future. This type of marketing is outside of our direct control and may not
generate rates of growth in our member base comparable to those experienced to
date. A large percentage of our referrals come from members of our A-Plus
group, which consists of members with 20 or more referrals each. Changes in our
payment policy or the failure of our payment policy to match that of a
competitor could have a disproportionate impact on our A-Plus group, which
might result in a disproportionate decrease in future membership growth.
We may also be unable to grow or retain our member base if a significant
number of our current registered members stopped using our service. Our members
are not required to use our service for a minimum period of time under our
membership agreement. There are a variety of reasons why members might
discontinue using our service, including:
. members might decide they do not like the presence of the Viewbar on
their computer screens or the amount of screen space it consumes;
. members might not like having their online activities tracked;
7
<PAGE>
. reliability issues, which we have experienced in the past and might
experience in the future, might cause member dissatisfaction;
. our members might forget their passwords;
. the Viewbar software might not be compatible with our members' Internet
service providers, Internet browsers or other computer systems;
. our member support group might not respond adequately or in a timely
manner to our members;
. we might reduce the amount we pay our members, or our competitors might
pay more than we do;
. the imposition of local taxes on members in connection with payments
made by us; and
. we might not provide the level of aggregated purchasing power or the
functionality that members expect.
We cannot assure you that we will be able to address these issues
successfully and retain our existing member base.
Our ability to operate our business could be seriously harmed if we lose, or
fail to assimilate, our senior managers and other key employees.
Many of our senior managers have only recently joined us. For example,
Michael Depatie, our Chief Financial Officer, joined us in October 1999, Tobin
Trevarthen, our Vice President Business Development, joined us in January 2000
and David Martin, our Vice President Business Intelligence, joined us in
January 2000. There can be no assurance that we will successfully assimilate
our recently hired officers or that we can successfully locate, hire,
assimilate and retain other qualified key management personnel. Our business is
largely dependent on the personal efforts and abilities of our senior
management and other key personnel, especially James Jorgensen, our President,
Chief Executive Officer and Chairman of the Board. Any of our officers or
employees can terminate his or her employment relationship at any time. The
loss of these key employees or our inability to attract or retain other
qualified employees could seriously harm our business and prospects. We do not
carry key man life insurance on any of our employees.
We may not be able to manage our growth, which could harm our ability to manage
our business.
We have grown our workforce substantially, from our four founders in March
1999 to 403 employees and contractors on January 31, 2000, and we plan to
continue to expand significantly our sales, media strategy and technology
organizations. Our growth has placed, and the anticipated future growth in our
operations will continue to place, a significant strain on our management
systems and resources. Our membership growth has exceeded, and may in the
future exceed, our ability to sell advertising on our Viewbar at reasonable
rates. To manage our growth effectively, we must:
. train and manage our employee base;
. enhance operational and financial systems;
. coordinate global operations; and
. lease additional facilities.
We may not be able to grow our business if we are not able to hire additional
personnel.
Our future success depends on our ability to attract, retain and motivate
highly skilled technical, managerial, sales and marketing personnel. We plan to
hire substantial numbers of additional personnel in all areas of our business.
Competition for personnel is intense, particularly in our location in Silicon
Valley, California, due to a number of factors, including the high
concentration of established and emerging growth technology companies. As a
result, we may be unable to successfully attract, assimilate or retain
qualified
8
<PAGE>
personnel. We may also be unable to retain the employees we currently employ.
We have experienced, and may continue to experience, difficulty in hiring
candidates with appropriate qualifications. If we fail to attract and retain
the necessary personnel, we may not be able to operate and grow our business.
For example, we may not be able to sell additional advertising on our Viewbar,
particularly targeted advertising, if we do not increase our internal sales
force.
We may not be able to grow our base of members and business customers if we are
unsuccessful in establishing and maintaining the AllAdvantage brand.
If we are unsuccessful in establishing or maintaining the AllAdvantage
brand, we may not be able to grow our base of members and business customers.
Promotion of the AllAdvantage brand will depend on our success in providing
high-quality services to our members and business customers. This success,
however, depends in part on the services and efforts of third parties, over
which we have little or no control. For instance, we currently rely on
technology provided by DoubleClick to deliver substantially all of the
advertisements on our Viewbar. If our members and business customers do not
perceive our existing services as high quality, or if we introduce new services
or enter into new business ventures that are not favorably received by our
members and business customers, then we might be unsuccessful in building brand
loyalty in the marketplace. In addition, we may also need to devote substantial
resources to create and maintain a distinct brand loyalty and to promote and
maintain the AllAdvantage brand in a very competitive market. If we incur
significant expenses in promoting and maintaining our brand, our financial
results could be seriously harmed.
Our revenues may significantly decrease if we were to lose key business
customers.
A significant portion of our revenues to date have been recognized from a
limited number of business customers. For example, 24/7 Media, a third party
advertising sales organization, sold advertisements that accounted for
approximately 19% of our revenues for the period from our inception through
December 31, 1999. We do not have long-term contracts with most of our business
customers, and customers can generally terminate their relationships with us
upon specified notice and without penalties. Our results of operations would be
harmed if key business customers were to cease doing business with us.
Our advertising revenues will suffer if our members do not actively use our
Viewbar and respond to Viewbar advertisements.
If our members do not actively use our Viewbar and respond to Viewbar
advertisements at levels acceptable to our business customers, our advertising
revenues will suffer. Given our limited history, we are unable to predict
Viewbar use and advertising response rates.
We face significant competition for business customers and members. If we are
unable to compete successfully, our business may fail.
We compete for business customers and members.
Competition for business customers
The market for online advertising and marketing is extremely competitive. We
may not compete successfully in this environment. Our ability to compete in
this market depends on many factors, some of which are beyond our control. If
we are unable to compete successfully our business may fail.
There is substantial competition for Internet-based advertising revenues
generally, and the amount of available advertising space on the Internet is
increasing at a significant rate. We expect competition for online advertising
space to increase due to the lack of significant barriers to entry for online
business generally. These factors are causing some Internet advertising rates
to decline, and it is possible that these rates will continue to decline in the
future, which may cause our advertising rates to decline. We believe our most
direct competitors
9
<PAGE>
for Internet advertising and sponsorship revenues will be providers of targeted
online advertisements. We also compete for those revenues with major Internet
service providers, content providers, large Web publishers, Web search engines
and portal companies, Internet advertising providers, content aggregation
companies, and various other companies that facilitate Internet advertising. We
may also face competition from traditional direct marketing companies that may
seek to offer online products or services. We face significant competition for
a share of advertisers' total advertising budgets from traditional media such
as television, radio, cable and print media. Businesses may be reluctant to
devote a significant portion of their advertising budget to Internet
advertising if they perceive the Internet to be a limited or ineffective
advertising medium.
Competition for members
Since space on a computer screen is limited, we believe our most direct
competitors for members are companies that offer Internet services or
compensation to consumers who allow a portion of their computer screen to be
dedicated to the applications or services of those companies. If our
competitors were to offer more attractive benefits than we do, such as higher
compensation, better functionality or greater aggregated purchasing power, then
our membership could decline, possibly reducing our revenues. In addition,
current and potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their services to address the needs of our current or prospective members. If
we are unable to compete successfully, our business may fail.
We will not be able to support increased numbers of members if we are unable to
enhance our network infrastructure.
Our network infrastructure is composed of a complex system of profiling,
member profile, advertising, payment and web servers. Service interruptions
within our network have occurred in the past and may occur in the future,
especially when usage exceeds capacity. Failures of our server networks would
prevent us from generating advertising revenues and could harm our reputation.
We will need to invest in substantial financial, operational and management
resources to enhance our systems, particularly our database servers and storage
capabilities, to handle a large and growing number of members. We cannot be
certain that we will be able to accomplish this on a timely basis and at a
commercially reasonable cost, or at all. If we fail to do so, our business may
not grow.
If the software or hardware we use contains errors, our business could be
seriously harmed.
The software and hardware we use to operate and provide our products and
services is complex and, accordingly, may contain undetected errors or
failures. We have in the past, and may in the future, encounter errors in the
software or hardware used to operate and provide our products and services. In
the past, these errors have resulted in occasional interruptions of, or
degradation in, our service for several hours at a time. Future hardware or
software errors could result in a variety of adverse consequences, including:
. members being disconnected from our service or being unable to access
our service;
. loss of revenue;
. inaccurate delivery of advertisements or other content that results in
legal liability;
. injury to our brand;
. diversion of development resources; or
. loss of data or privacy of data.
Our service could be disrupted, and demand for our service could be reduced, by
a security breach, virus or other problems caused by third parties.
The future success of our business will depend on the security of our
computer systems. An important feature of our service is our ability to develop
and maintain individual member profiles. We also maintain a
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database of our members' account balances. Computer viruses or problems caused
by third parties could lead to interruptions, delays or cessation in service to
our members or in serving our advertisements. Third parties could also
potentially jeopardize the security of confidential information stored in our
computer systems or our members' computer systems by their inappropriate use of
the Internet, including breaking into our payment databases and other parts of
our computer network. This could cause losses to us or our members. Third
parties may also potentially expose us to liability by posing as an
AllAdvantage employee. Unauthorized access by current and former employees or
others could also potentially jeopardize the security of confidential
information stored in our computer systems or those of our members. Any
compromise of security or public perception that we engaged in unauthorized
release of member information would harm our ability to attract and retain
members. Unauthorized access to or use of confidential information could result
in potential liability and damages under privacy laws. Any of these events
could harm our business, results of operations and financial conditions.
Our revenues could be harmed if programs that indicate an inactive member is
using the Internet or that disable the Viewbar become prevalent.
Various software programs have been developed that specifically target the
Viewbar and that falsely indicate a member is using the Internet. These
programs may result in members being paid by us when those members are not
actively using the Internet. Additionally, software programs have been
developed that attempt to blank out, or block, advertisements on the Viewbar or
completely delete the Viewbar from members' computer screens. While we believe
we have been able to limit the effectiveness of these attempts and that to date
they have not interrupted our operations, we cannot assure you that these
attempts will not disrupt our operations in the future. Widespread adoption of
this type of software may seriously damage our ability to operate our business
and generate revenues.
Our business could be shut down or severely impacted if a natural disaster,
power loss or telecommunications failure occurs.
Our operations and services, particularly our ability to have advertisements
placed on Viewbars and collect membership data, depend on our computer
equipment being protected against damage from fire, earthquakes, power loss,
telecommunications failures and similar events. Despite precautions taken by
us, a natural disaster or other unanticipated problem could cause interruption
in the services that we provide. For example, if an earthquake damages
equipment at our network operations center, we may have no means of replacing
this equipment on a timely basis or at all and our service may be shut down.
Furthermore, we do not currently have any business disruption insurance. Any
prolonged disruption of our services due to system failure could result in
decreased revenues.
Our operations will be harmed if services and products provided to us by third
parties do not perform satisfactorily or if we are unable to renew our licenses
to use those services or products.
We rely on third parties to provide us with services and products that are
integral to our ability to serve our members and businesses. Those services and
products include the following:
Advertisement Serving
We deliver substantially all of the advertisements on our Viewbar using
technology provided by DoubleClick. Other companies could provide the
technology for us to serve advertisements on our Viewbar, but it would
temporarily disrupt our business to switch to another provider. Our agreement
with DoubleClick expires in November 2002. Technology provided by third parties
for serving Internet advertising occasionally experiences errors in serving
advertisements. If DoubleClick's technology fails to allow us to serve
advertisements properly, or if we are not able to renew our agreement with
DoubleClick, reach agreement with others to provide technology to serve our
advertisements or internally develop advertising serving software in the
future, we may not be able to display advertisements effectively to our
members. In this event, our ability to generate advertising revenues would be
severely limited.
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Centralized Software System
Virtually every aspect of our operations, including finance, billing,
accounting, storage and retrieval of member data, and advertisement tracking,
uses or connects to a centralized software system provided by Oracle. We have
only limited experience with the operation of this system. Difficulty with, or
errors, defects or malfunctions in, the operation of this system could result
in loss of data, erroneous overcharges or undercharges to advertising customers
or disruption of operations.
Our Web Site
Our Web site is hosted by GlobalCenter Inc. In the past, our Web site has
become temporarily unavailable and has experienced degraded performance due to
unpredictable system malfunctions on our host's system. In the fourth quarter
of 1999, the longest period during which our Web site was unavailable was less
than two hours. Members may become frustrated with any further difficulties
with our Web site and discontinue using our service as a result.
Servers
The applications that run our various servers and networks run on
commercially available computers provided primarily by Sun Microsystems, Cisco
Systems and third party Intel processor-based manufacturers. These complex
computers can be expected to fail periodically, leading to the possible
interruption of service to our members. Although steps have been taken to
provide redundancy in order to minimize dependency on individual computer and
network connections, from time to time our members will experience outages
resulting from failures of these system components.
Our member referral program could generate negative media attention.
We rely primarily on member referrals to add to our membership. Although we
maintain an anti-spam policy regarding email solicitations for membership
growth, it is difficult for us to monitor the use of email by our members to
solicit referrals. Anti-spam groups or activists might generate negative media
attention respecting member referral activities. Further, anti-spam
legislation, in the United States or elsewhere, could restrict our ability or
the ability of our members to use email to solicit referrals.
Although members do not make any payment to us to participate in our member
referral program, some jurisdictions could assert a claim that the use of email
marketing to add to our membership violates laws restricting multi-level
marketing activities. In addition, our business model requires that we pay our
members cash for their Viewbar usage and that of their referrals. We believe
this program complies with applicable regulation. Any regulatory challenge or
limitation asserted or implied regarding these payments could significantly
harm our business. Any litigation could subject us to significant liability for
damages, attorneys fees and injunctions or other court orders that would
prevent us from using our primary method of membership marketing. These
lawsuits, regardless of their success, would likely be time-consuming and
expensive to resolve.
If we alter the current member payment structure, our business could be harmed.
In the future we may modify the amount of money paid to members for their
and their referred members' use of the Viewbar. Our membership agreement
specifies that we may alter the member payment structure, and we have altered
the member payment structure three times in the past. These modifications could
include increasing or decreasing the amount paid for each hour the Viewbar is
used, increasing or decreasing the amount paid for each hour the Viewbar is
used by referred members, or increasing or decreasing the maximum number of
hours per month of Viewbar use for which a member may receive payment. Any
decreases in the member payment structure could harm our ability to attract and
retain members and expose us to other costs or negative publicity. Any
increases in the member payment structure to attract or retain members could
substantially increase our costs. We may be required to alter our payment
structure for a variety of reasons, including business, tax or regulatory
concerns, any of which could significantly harm our business.
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We rely on our intellectual property rights, and if we are unable to protect
these rights, we might face increased competition or greater difficulty in
successfully establishing the AllAdvantage brand.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy or otherwise obtain and use our technology. Monitoring
unauthorized use of our technology is difficult, and we cannot be certain that
the steps we have taken will prevent unauthorized use of our technology,
particularly in foreign countries where laws or law enforcement practices may
not protect our proprietary rights as fully as in the United States.
We have one U.S. registered copyright. We have pending U.S. patent and
copyright applications and pending U.S. and foreign trademark applications. We
cannot assure you that our pending patent or trademark applications will be
approved, or that any of our applications for registration of our copyrights
will be granted. Even if they are approved or granted, our patents, copyrights
and trademarks may be successfully challenged by others or invalidated. We
cannot assure you that any of our proprietary rights will be viable or of value
since the validity, enforceability and scope of protection of proprietary
rights in Internet-related industries are uncertain and evolving. If our
trademark registrations are not approved because third parties own these
trademarks, our use of these trademarks would be restricted unless we entered
into arrangements with the third-party owners, which might not be possible on
reasonable terms.
We may incur substantial costs and diversion of management resources if we
infringe upon the proprietary rights of others.
Our business activities may infringe upon the proprietary rights of others.
From time to time, we have received and may continue to receive, claims of
infringement against us. We have a license from each developer of the software
that we use in our software. Although we do not believe that the intellectual
property we use, or any of the other elements of our business, infringe on the
proprietary rights of any third parties, third parties may assert claims
against us for infringement of their proprietary rights and these claims may be
successful. As with other providers of online services, patent claims could be
asserted against us based upon our services or technologies.
We have received notices from two third parties regarding their Internet
business model patents. We have reviewed these patents with outside counsel and
believe that we do not infringe these patents. However, any litigation filed by
these third parties could be costly and could distract managements' attention
from operating matters, which could harm our business. In addition, an adverse
judgment in any such litigation could also harm our business.
Any intellectual property litigation initiated against us could subject us
to significant liability for damages and attorneys' fees, invalidation of our
proprietary rights or injunctions or other court orders that would prevent us
from using certain technologies or engaging in certain business activities.
These lawsuits, regardless of their success, would likely be time consuming and
expensive to resolve and would divert management's time and attention away from
our business. Any potential intellectual property litigation could also force
us to do one or more of the following:
. cease using key aspects of our technology that incorporates the
challenged intellectual property;
. make significant changes to the structure and operation of our business;
. design around a third party's patent; or
. license technology from a third party.
Implementation of any of these alternatives could be costly and time
consuming, or may not be possible at all. Accordingly, an adverse determination
in any litigation that we are a party to would harm our business, results of
operations and financial condition.
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We may be subject to currency regulation.
We currently do not make payments to a member until the member's account has
accrued at least $20. In the future, we may offer members who have accrued over
$20 in their accounts the opportunity to keep those amounts in their accounts.
If we offer new programs or if any governmental agency deemed that our current
or any future services are subject to currency regulation, the cost of
compliance could harm our results of operations.
We are subject to foreign government regulation and taxation, currency issues,
difficulties in managing foreign operations and foreign political and economic
instability.
Our participation in international markets is subject to a number of risks,
including foreign government regulations, export license requirements, tariffs
and taxes, fluctuations in currency exchange rates, introduction of the
European Union common currency, difficulties in managing foreign operations and
political and economic instability. For instance, laws of foreign countries can
be more restrictive than U.S. laws respecting our collection and use of member
data and respecting advertisement content. To the extent our potential
international members are impacted by currency devaluations, general economic
crises or other macroeconomic events, the ability of our members to utilize our
services could be diminished. We cannot assure you that electronic commerce
will develop successfully in international markets. Any failure to develop our
business internationally may harm our competitive position and consequently our
business.
Potential acquisitions may be difficult to assimilate into our operations, use
a significant amount of our available cash, result in dilution to our
stockholders and harm our reported results of operations.
We may acquire or make investments in businesses, products, services or
technologies to implement our business strategy. We do not have any present
understanding regarding, nor are we having any discussions relating to, any
acquisition or investment. We have not made a significant acquisition or
investment to date. If we acquire businesses, products, services or
technologies, we could have difficulty in assimilating them into our
operations. These difficulties could disrupt our ongoing business, distract our
management and employees and increase our expenses. In addition, effecting
acquisitions could require use of a significant amount of our available cash.
Furthermore, we might have to issue equity or equity-linked securities to pay
for future acquisitions, and these issuances could be dilutive to existing and
future stockholders. In addition, acquisitions and investments might harm our
reported results of operations due to acquisition-related charges and
amortization of acquired technology and other intangibles. Any of these
acquisition-related risks or costs could harm our business, financial condition
and operating results.
We face risks related to the Internet industry.
Failure to comply with laws governing our service or material changes in the
regulatory environment relating to the Internet could harm our business.
Because of uncertainties as to the applicability of foreign, federal and
state laws and regulations to the Internet and, more specifically, to our
business, and considering our business has evolved and expanded in a relatively
short period of time, we may not in the future always be in compliance with
applicable foreign, federal and state laws and regulations. Failure to comply
with the laws and regulatory requirements of regulatory authorities may result
in, among other things, indemnification liability to business customers and
others doing business with us, administrative enforcement actions and fines,
class action lawsuits, cease and desist orders, and civil and criminal
liability. The occurrence of one or more of these events could materially harm
our business, results of operations and financial condition.
The parties conducting business with us, such as business customers,
similarly may be subject to foreign, federal and state regulation. These
parties act as independent contractors and not as our agents in their
solicitations and transactions with consumers. Consequently, we cannot ensure
that these entities will comply
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with applicable laws and regulations at all times. Failure on the part of a
business customer to comply with these laws or regulations could result in,
among other things, claims of vicarious liability or negatively impact our
reputation. The occurrence of one or more of these events could materially
harm our business, results of operations, and financial condition.
We may face risks if new laws or government regulations regarding the Internet
are enacted.
The laws relating to our business and operations are evolving and few clear
legal precedents have been established. Most of the laws governing Internet
transactions have not been substantially revised or updated to fully
accommodate electronic commerce. Moreover, it may take years to determine the
extent to which existing laws relating to issues such as intellectual property
ownership and infringement and personal privacy are applicable to the
Internet. Many of these laws were adopted prior to the advent of the Internet
and related technologies and, as a result, do not contemplate or address the
unique issues of the Internet and related technologies. Until these laws,
rules, and regulations are revised to clarify their applicability to
transactions conducted through electronic commerce, any company providing
services through the Internet or other means of electronic commerce will face
compliance uncertainty. Further, the adoption of new laws or the application
of existing laws may decrease the growth in the use of the Internet. These
results could decrease the demand for our services or increase our cost of
doing business, each of which would cause our revenues to decline and harm our
business. In particular, the following risks could occur:
Regulation of content, and access and marketing programs could limit our
ability to generate revenues and expose us to liability.
Prohibition or restriction of Internet content and access could dampen the
growth of Internet use, decrease the acceptance of the Internet as a
communications and commercial medium and expose us to liability. A variety of
restrictions on content and access, such as those that relate to children and
federal and state consumer protection laws prohibiting unfair or deceptive
acts or practices, have been enacted or proposed. Because of these content
restrictions and potential liability to us for materials carried on,
misdirected or disseminated through our systems, we may be required to
implement measures to reduce our exposure to liability. These measures may
require the expenditure of substantial resources or the discontinuation of our
product or service offerings that subject us to this liability. In addition,
our business model requires that we pay our members cash for their Viewbar
usage and that of their referrals. We believe this program complies with
applicable regulation. Any regulatory challenge or limitation asserted or
implied regarding these payments could significantly harm our business.
Further, we could incur substantial costs in defending against any of these
claims and we may be required to pay large judgments or settlements or alter
our business practices. Proposed laws could make compliance more difficult or
expensive, restrict our ability to provide services or otherwise harm our
business or prospects. In addition, our liability insurance may not cover
potential claims relating to the services we provide or may not be adequate to
indemnify us for all liabilities that may be imposed on us.
Our ability to sell targeted advertising may be limited if new laws relating
to member privacy are enacted.
Our ability to sell targeted advertising depends on our ability to use
personal information collected from our members. The Federal Trade Commission
and government agencies in certain states have been investigating Internet
companies regarding their use of personal information. The federal government
recently enacted legislation protecting the privacy of consumer nonpublic
personal information collected by financial institutions. We cannot assure you
that our current information collection procedures and disclosure policies
will be found to be in compliance with existing or future laws or regulations.
Our failure to comply with existing laws, including those of foreign
countries, or the adoption of new laws or regulations that require us to
change the way we conduct our business, could make it cost-prohibitive to
operate our business, and prevent us from pursuing our business strategies
including the sale of targeted advertising.
Our costs would be increased if our business or the Internet generally
becomes subject to taxation.
The tax treatment of activities on or relating to the Internet is currently
unsettled. A number of proposals have been made at the federal, state and
local levels and by foreign governments that could impose taxes on the
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online purchase and sale of services and other Internet activities. The
Internet Tax Freedom Act of 1998 has generally imposed a U.S. moratorium
through October 2001 on the imposition of some kinds of consumer-related taxes,
other than sales or use taxes, in connection with Internet access and Internet-
related sales. However, future laws imposing taxes or other regulations on
commerce over the Internet could substantially impair the growth of Internet
commerce and, as a result, decrease our revenues or make it cost-prohibitive to
operate our business.
Seasonal trends in Internet usage and advertising sales may harm our business.
Seasonal trends could affect the advertising revenues we generate from our
business. To the extent that our advertising revenues depend on the amount of
Internet usage by our members, seasonal fluctuations in Internet usage could
affect our advertising revenues during these periods of fluctuation. In
addition, the rate at which new members sign up for our services may be lower
during certain seasons and holiday periods. Because our operating history is so
limited, it is difficult for us to predict these trends accurately and plan
accordingly. Since our operating expenses are based on our expectations of
future revenues, it is possible that seasonal fluctuations could materially
harm our revenues and our operating results.
If Internet usage does not continue to increase, we may not be able to grow our
business and increase our revenues.
If our assumption that use of the Internet will continue to increase turns
out to be incorrect, we will not be able to grow our business and increase our
revenues. All of our revenues and current business strategies for growth are
dependent on the continued use and current rates of expansion of the Internet.
Use of the Internet has increased dramatically, but we cannot assure you that
usage of the Internet will continue to increase. A decrease in the use of the
Internet or a reduction in the currently anticipated growth of Internet usage
could cause our member base and our advertising revenues to decrease.
The Internet infrastructure may not be able to accommodate rapid growth, which
could harm our ability to retain our existing customers and to attract new
customers.
The Internet infrastructure may fail to support the growth of the Internet.
If the Internet continues to experience an increase in users, an increase in
frequency of use or an increase in the capacity requirements of users, we
cannot assure you that the Internet infrastructure will be able to support the
demands placed on it. Any actual or perceived failure of the Internet could
undermine the benefits and use of our services. In addition, the Internet could
lose its viability as a commercial medium due to delays in the development or
adoption of new technology required to accommodate increased levels of Internet
activity or due to increased government regulation. Changes in, or insufficient
availability of, telecommunications services to support the Internet could
result in slower response times and could hamper use of the Internet. Even if
the Internet infrastructure is able to accommodate rapid growth, we may be
required to spend heavily to adapt to new technologies.
We face risks related to the offering.
Our stock price could fall as a result of continued losses and negative cash
flow.
As of December 31, 1999, we had an accumulated deficit of approximately
$37.1 million. We expect that our losses and negative cash flow from operations
will increase for the foreseeable future as we continue to expand our
operations. Our ability to achieve profitability or positive cash flow depends
upon a number of factors, including our ability to increase revenue. We may be
unable to increase revenues, achieve profitability or achieve positive cash
flow. If we do achieve profitability, we may be unable to sustain or increase
profitability on a quarterly or annual basis in the future. If we fail to do
so, the market price for our common stock could suffer.
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Our common stock has not been publicly traded, and we expect that the price of
our stock may fluctuate substantially.
Recently, the stock prices of technology companies have been quite volatile.
Moreover, prior to this offering, there has been no public market for our
common stock. The initial public offering price has been determined through
negotiations between the underwriters and us. You may not be able to resell
your shares at or above the initial public offering price. The market price of
our common stock may fluctuate significantly in response to a number of
factors, including:
. changes in expectations about our future financial performance;
. changes in financial estimates of securities analysts;
. the failure of securities analysts to follow our stock;
. the operating and stock price performance of other comparable companies;
and
. actual or anticipated changes in economic conditions generally.
Due to these factors, the price of our stock may decline and the value of
your investment might be reduced. In addition, the stock market experiences
extreme volatility that often is unrelated or disproportionate to the
performance of particular companies. These market fluctuations may cause our
stock price to decline regardless of our performance.
Our business may be harmed by class action litigation due to stock price
volatility.
In the past, securities class action litigation often has been brought
against a company following periods of volatility in the market price of its
securities. Companies in the Internet industry and other technology industries
are particularly vulnerable to this kind of litigation due to the high
volatility of their stock prices. Accordingly, we may in the future be the
target of securities litigation. Securities litigation could result in
substantial costs and could divert our management's attention and resources.
We may be unable to obtain the additional capital required to grow our
business.
Our ability to grow depends significantly on our ability to grow our member
base, increase our revenues, hire additional personnel and expand our internal
network infrastructure. These expansion efforts will require significant cash
outlays and substantial capital equipment expenditures and commitments. If the
proceeds from this offering, together with our cash on hand, cash generated
from operations and the amounts available under bank lines, are not sufficient
to meet our cash requirements, we will need to seek additional capital to fund
our growth. We may not be able to raise needed cash on terms acceptable to us
or at all. Financings may be on terms that are dilutive or potentially dilutive
to our stockholders. The holders of new equity securities may also be granted
rights, preferences or privileges senior to those of existing holders of common
stock. If sources of financing are required, but are insufficient or
unavailable, we will be required to modify our growth and operating plans to
make them consistent with available funding. This would harm our ability to
grow our business.
Shares eligible for public sale after this offering could harm our stock price.
The market price of our common stock could decline as a result of sales by
our existing stockholders of shares of their common stock after this offering,
or the perception that these sales could occur. These sales also might make it
difficult for us to sell securities in the future at a time and at a price that
we deem appropriate. Please see "Shares Eligible For Future Sale" beginning on
page 65 for a more detailed discussion of when and how many additional shares
of our stock may be sold after this offering.
Provisions in our charter documents and Delaware law could prevent or delay a
change in control of AllAdvantage and may reduce the market price of our common
stock.
Provisions of our certificate of incorporation and bylaws could discourage,
delay or prevent a merger or acquisition that a stockholder might consider
favorable. These provisions include:
. authorizing the issuance of preferred stock without stockholder
approval;
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. providing for a classified board of directors with staggered, three-year
terms;
. prohibiting cumulative voting in the election of directors;
. requiring super-majority voting to amend some provisions in our
certificate of incorporation and bylaws;
. limiting the persons who may call special meetings of stockholders; and
. prohibiting stockholder actions by written consent.
Provisions of Delaware law also may discourage, delay or prevent someone
from acquiring or merging with us. Please see "Description of Capital Stock--
Anti-Takeover Provisions" beginning on page 63 for detailed information on
these protective provisions.
You will experience an immediate and substantial dilution in the book value of
your investment.
The initial public offering price of our common stock is substantially
higher than what the net tangible book value per share of the common stock will
be immediately after this offering. If you purchase our common stock in this
offering, you will incur immediate dilution of approximately $ in the net
tangible book value per share of our common stock from the price you pay for
our common stock. Please see "Dilution" beginning on page 22 for detailed
information on the dilution you will incur. The exercise of outstanding options
and warrants may result in further dilution.
Stockholders may not agree with management regarding the use of the net
proceeds of this offering.
Our management has broad discretion as to how to spend the net proceeds from
this offering and may spend those proceeds in ways with which our stockholders
may not agree. We cannot assure you that our investments and use of the net
proceeds of this offering will yield favorable returns or results.
Our officers and directors exert substantial influence over us, which could
limit your ability to influence us and which could delay or prevent a change of
control of us.
We anticipate that our executive officers, our directors and entities
affiliated with them and our 5% stockholders will beneficially own, in the
aggregate, approximately % of our outstanding common stock following the
completion of this offering. These stockholders may be able to exercise
substantial influence over all matters requiring approval by our stockholders,
including the election of directors and approval of significant corporate
transactions. This concentration of ownership may also have the effect of
delaying or preventing a change in control of us. We also plan to reserve up to
% of the shares offered in this offering under a directed share program in
which our executive officers, directors, principal stockholders, employees,
business associates and related persons may be able to purchase shares in this
offering at the initial public offering price. This program may further
increase the amount of stock held by persons whose interests are closely
aligned with management's interests.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"intends," "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions. We cannot
guarantee future results, levels of activity, performance or achievements. We
undertake no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of various factors, including new law and regulations
affecting online content or privacy issues, advertising expenditures over the
Internet and the other risks outlined under "Risk Factors" and elsewhere in
this prospectus.
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USE OF PROCEEDS
The net proceeds to us from the sale of the shares of common stock
offered by us will be approximately $ million, or approximately $
million if the underwriters' over-allotment option is exercised in full, at an
assumed initial public offering price of $ per share and after deducting
estimated underwriting discounts and commissions and the estimated offering
expenses payable by us.
We intend to use the net proceeds from this offering primarily for general
corporate purposes, such as working capital and capital expenditures. We may
use a portion of the net proceeds from this offering to acquire or invest in
businesses, technologies or services that are complementary to our business.
However, we have no present plans or commitments, and are not engaged in any
negotiations, with respect to any transactions of this type.
The amounts that we use for working capital purposes will vary significantly
depending on a number of factors. We will retain broad discretion in the
allocation and use of the net proceeds of this offering. Pending their use, we
intend to invest the net proceeds in short-term, interest-bearing, investment-
grade securities.
The principal purposes of this offering are to increase our working capital,
create a public market for our stock, increase our visibility and facilitate
future access by us to public equity markets.
DIVIDEND POLICY
We have never declared or paid cash dividends on shares of our capital
stock. We intend to retain any future earnings to finance future growth and do
not anticipate paying cash dividends in the foreseeable future.
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CAPITALIZATION
The following table sets forth our capitalization and our cash, cash
equivalents and restricted cash, as of December 31, 1999:
. on an actual basis;
. on a pro forma basis to reflect the sale of 16,453,926 shares of our
Series D preferred stock in February 2000 for net proceeds of
approximately $94.5 million, and the conversion of all outstanding
shares of preferred stock into 68,588,612 shares of common stock prior
to the closing of this offering; and
. on a pro forma as adjusted basis to reflect in addition, the receipt of
the net proceeds from sale of shares of common stock offered by us
at an assumed initial public offering price of $ per share and
after deducting estimated underwriting discounts and commissions and the
estimated offering expenses payable by us and the filing of our amended
and restated certificate of incorporation upon completion of this
offering.
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands except share
data)
<S> <C> <C> <C>
Cash, cash equivalents and restricted cash
(1)........................................... $ 30,019 $124,563 $
======== ======== ========
Capital lease obligations, net of current
portion....................................... $ 254 $ 254 $ 254
-------- -------- --------
Stockholders' equity (net capital deficiency):
Convertible preferred stock, $0.001 par
value: 22,663,266 shares authorized,
19,567,343 shares issued and outstanding,
actual; 36,335,044 shares authorized, none
issued or outstanding, pro forma; 5,000,000
shares authorized, none issued and
outstanding pro forma as adjusted........... 20 -- --
Common stock, $0.001 par value: 116,000,000
shares authorized, 28,498,133 shares issued
and outstanding, actual; 150,000,000 shares
authorized, 97,086,745 shares issued and
outstanding, pro forma; shares
authorized, shares issued and
outstanding, pro forma as adjusted.......... 28 97
Additional paid-in capital................... 55,608 150,103
Deferred stock compensation.................. (18,572) (18,572) (18,572)
Accumulated deficit.......................... (37,109) (37,109) (37,109)
-------- -------- --------
Total stockholders' equity (net capital
deficiency)............................... (25) 94,519
-------- -------- --------
Total capitalization..................... $ 229 $ 94,773 $
======== ======== ========
</TABLE>
- --------
(1) Restricted cash was $10.0 million as of December 31, 1999 and represented
the portion of a November 1999 $20 million customer advance not then
available for our use. Five million dollars of this restricted cash became
unrestricted on January 12, 2000, and the remaining $5.0 million will
become unrestricted on February 12, 2000.
The number of shares of common stock shown as outstanding in the table above
excludes the following:
. additional shares of common stock which will be issued upon conversion
of the Series D preferred stock in the event that the initial public
offering price is less than $12.10 per share; the number of additional
shares issuable increases as the initial public offering price
decreases, with the maximum number of additional shares equal to
approximately 4,132,231;
20
<PAGE>
. 10,484,233 shares issuable upon the exercise of stock options
outstanding as of December 31, 1999, at a weighted average exercise
price of $0.69 per share;
. 477,550 shares issuable upon the exercise of warrants for Series C
preferred stock outstanding as of December 31, 1999, at an exercise
price of $0.03 per share, which will become exercisable for common stock
upon the completion of this offering;
. shares issuable upon the exercise of stock options granted after
December 31, 1999 and outstanding on , 2000, at a weighted average
exercise price of $ per share;
. 75,000 shares issuable upon the exercise of a warrant for Series D
preferred stock issued after December 31, 1999 and outstanding on
February 4, 2000, at an exercise price of $6.05 per share, which will
become exercisable for common stock upon the completion of this
offering;
. shares available for future issuance under the 1999 equity
incentive plan and 2000 equity incentive plan of our California
predecessor on 2000 and our 2000 equity incentive plan and 2000
employee stock purchase plan on 2000, subject to automatic annual
increases each January 1 as described under "Management--Employee
Benefit Plans."
The number of shares of common stock shown as outstanding in the table above
assumes that no adjustment will be made to the ratio at which our Series D
preferred stock will convert into common stock in connection with this
offering. If the initial public offering price of the shares in this offering
is less than $12.10 then the conversion ratio for the Series D preferred stock
will be adjusted such that each share of Series D preferred stock will convert
into that number of shares of common stock equal to the result obtained by
dividing $6.05 by the greater of one-half of the offering price or $4.84.
21
<PAGE>
DILUTION
As of December 31, 1999, our pro forma net tangible book value was
approximately $94.5 million, or $0.97 per share of common stock. Pro forma net
tangible book value per share represents our pro forma stockholders' equity
less intangible assets divided by the pro forma number of shares of common
stock outstanding after giving effect to the sale of 16,453,926 shares of our
Series D preferred stock in February 2000 for net proceeds of approximately
$94.5 million and the conversion of all outstanding shares of preferred stock
into 68,588,612 shares of common stock upon completion of this offering at an
assumed initial offering price of $ per share. Dilution per share represents
the difference between the amount per share paid by purchasers of shares of our
common stock in this offering and the net pro forma tangible book value per
share of our common stock immediately following this offering.
After giving effect to the receipt of the net proceeds from the sale of the
shares of our common stock at an assumed initial public offering price
of $ per share and after deducting estimated underwriting discounts and
commissions and the estimated offering expenses, our pro forma net tangible
book value as of December 31, 1999 would have been approximately $
million, or $ per share. This represents an immediate increase in pro
forma net tangible book value of $ per share to existing stockholders and
an immediate dilution of $ per share to new investors purchasing shares at
the initial public offering price. The following table illustrates the 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..................................... $ 0.97
Increase per share attributable to new investors.......
------
Pro forma net tangible book value per share after this
offering................................................
--------
Dilution per share to new investors...................... $
========
</TABLE>
The following table summarizes as of December 31, 1999, on the pro forma
basis described above, the number of shares of common stock purchased from us,
the total consideration paid to us and the average price per share paid by
existing stockholders and by new investors purchasing shares of common stock in
this offering, before deducting underwriting discounts and commissions and the
estimated offering expenses:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ -------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 97,086,745 % $128,985,000 % $1.33
New investors...........
---------- ----- ------------ ----- -----
Total................. 100.0% $ 100.0% $
========== ===== ============ ===== =====
</TABLE>
The above discussion and tables assume no exercise of any stock options or
warrants for common stock outstanding as of December 31, 1999. As of December
31, 1999, there were options outstanding to purchase a total of 10,484,233
shares of common stock at a weighted-average exercise price of $0.69 per share
and warrants outstanding to purchase a total of 238,775 shares of Series C
preferred stock with an exercise price of $0.06 per share, which will become
exercisable for a total of 477,550 shares of common stock with an exercise
price of $0.03 per share upon completion of this offering. In addition, between
December 31, 1999 and 2000, we issued options to purchase a total of
shares of common stock at a weighted-average exercise price of $ per
share, and a warrant to purchase 75,000 shares of Series D preferred stock at
an exercise price of $6.05 per share, which will become exercisable for 75,000
shares of common stock at an exercise price of $6.05 per share upon completion
of this offering. There are also shares of common stock available for
future issuance under our employee benefit plans as of , 2000. If any of
these options or warrants are exercised, there will be further dilution to new
public investors. Please see "Capitalization," "Management--Employee Benefit
Plans," and notes 4, 5, 10 and 11 of notes to consolidated financial
statements.
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with, and are qualified by reference to, our consolidated financial
statements and notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this
prospectus. The consolidated statement of operations data for the period from
inception (March 24, 1999) to December 31, 1999, and the consolidated balance
sheet data as of December 31, 1999, are derived from our audited consolidated
financial statements that are included elsewhere in this prospectus. The
consolidated statement of operations data for the period from inception (March
24, 1999) to September 30, 1999 and the three months ended December 31, 1999
are unaudited but in the opinion of management include all adjustments,
consisting only of normal recurring adjustments, that are necessary for a fair
presentation of our results of operations for these periods. The historical
results presented below are not necessarily indicative of future results.
<TABLE>
<CAPTION>
Period from Inception Three Months Period from Inception
(March 24, 1999) Ended (March 24, 1999)
To September 30, 1999 December 31, 1999 To December 31, 1999
--------------------- ----------------- ---------------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenues................ $ 235 $ 5,016 $ 5,251
Costs and expenses:
Direct member costs... 2,192 14,949 17,141
Sales and marketing... 1,580 10,022 11,602
General and
administrative....... 3,302 5,042 8,344
Product development... 1,267 1,644 2,911
Depreciation and
amortization......... 78 270 348
Stock-based
compensation......... 244 1,303 1,547
------- -------- --------
Total costs and
expenses........... 8,663 33,230 41,893
------- -------- --------
Loss from operations.... (8,428) (28,214) (36,642)
Interest expense........ (570) (257) (827)
Interest income......... 10 350 360
------- -------- --------
Net loss................ $(8,988) $(28,121) $(37,109)
======= ======== ========
Net loss per share(1):
Basic and diluted net
loss per share....... $ (1.27) $ (3.52) $ (5.04)
Shares used in per
share calculation.... 7,050 8,000 7,367
Pro forma basic and
diluted net loss per
share (unaudited) ... $ (0.97)
Shares used in pro
forma per share
calculation
(unaudited) ......... 38,287
</TABLE>
<TABLE>
<CAPTION>
As of
December 31, 1999
-----------------
<S> <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and restricted cash(2)................. $ 30,019
Working capital (deficit)..................................... (4,476)
Total assets.................................................. 39,871
Capital lease obligations, net of current portion............. 254
Deferred stock compensation................................... (18,572)
Net capital deficiency........................................ (25)
</TABLE>
- --------
(1) See note 2 of notes to consolidated financial statements for the
determination of the number of shares used in computing net loss per share
and pro forma net loss per share per share amounts .
(2) Restricted cash was $10.0 million at December 31, 1999 and represented the
portion of the November 1999 $20.0 million customer advance not then
available for our use. Five million dollars of this restricted cash became
unrestricted on January 12, 2000, and the remaining $5.0 million will
become unrestricted on February 12, 2000.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and the notes to the consolidated financial statements
included in this prospectus. This prospectus contains forward-looking
statements that involve risks and uncertainties. Our actual results could
differ significantly from those projected in the forward-looking statements as
a result of many factors, including those discussed in "Risk Factors,"
"Business" and elsewhere in this prospectus. We assume no obligation to update
the forward-looking statements or these factors.
Overview
AllAdvantage is a leading Internet information intermediary, or infomediary,
that enables businesses to deliver highly-targeted advertisements to, and
conduct electronic commerce with, an aggregated community of profiled members.
With our members' express permission, we utilize our proprietary Viewbar
technology to continuously track and collect data about their Internet activity
and demographics. We use this data to build accurate and detailed member
profiles. While keeping each of our members' personal data private, we use
these profiles to provide businesses with a powerful online advertising, direct
marketing and electronic commerce channel to more effectively reach the desired
audience. The Viewbar persistently displays advertising, electronic commerce
links and other Internet navigational features, such as search capabilities,
pop-up menus and links.
We were incorporated in March 1999 and released the first version of our
Viewbar in July 1999. We released the current version of our Viewbar to
selected members in January 2000, and plan a full release to current and new
members during the first quarter of 2000.
Revenues
We first recognized revenue in August 1999. In 1999, we generated
substantially all of our revenues from the sale of online advertisements on our
Viewbar. More recently, we have also generated revenue from commissions for
referring electronic commerce, fees for directing members to our business
customers' Web sites and the sale of sponsorships on the Viewbar. Advertisers
pay us for the number of impressions, or advertisements displayed, for the
number of times members click on advertisements, or based on other criteria,
such as the number of members who register for a service. In January 2000, we
released a substantially upgraded version of our Viewbar, on which we sell non-
exclusive sponsorships of the Viewbar's pop-up menu buttons and search field.
Under these arrangements, we may receive a fixed fee or a fee based on the
usage of the respective pop-up menu or search field. We also have arrangements
with our business customers under which we receive a fee for directing members
to their Web sites. These fees are based upon the number of times members are
directed to our business customers' Web sites via the Viewbar.
Online advertising and sponsorship revenues are recognized in the periods in
which the advertisement or sponsorship is displayed, based upon the total
number of impressions delivered, provided that no significant obligations on
our part remain and collection of the related receivable is probable. Our
obligations typically include the guarantee of a minimum number of impressions
or the satisfaction of other performance criteria. The guaranteed minimum
number of impressions is generally required to be delivered over the term of
the commitment, which has generally ranged from several weeks to two months.
Revenues from advertising sold through third-party sales organizations are
recognized net of commissions. Revenues from performance-based arrangements are
recognized as the related performance criteria are met, provided that no
significant obligations on our part remain and collection of the related
receivable is probable. Revenues from commissions for referring electronic
commerce are recognized upon receipt of payment. Fees paid to us in advance of
satisfaction of revenue recognition criteria are recorded as deferred revenue.
24
<PAGE>
Costs and Expenses
Costs and expenses consist of direct member costs, sales and marketing
expenses, general and administrative expenses, product development expenses,
depreciation and amortization and stock-based compensation expenses.
Direct Member Costs. Direct member costs consist of costs incurred to
compensate each member for using the Internet while our Viewbar is activated.
Members in the United States are currently compensated at a rate of $0.50 per
hour for up to 25 hours per month for using the Internet while our Viewbar is
activated. Members outside the United States are currently compensated at a
comparable rate in their local currency. Our membership agreement specifies
that we may alter the member payment structure at any time. Currently, members
are paid only after having accrued a minimum account balance of $20 at the end
of any given month.
Sales and Marketing. Sales and marketing expenses include personnel and
related costs for our direct sales force and marketing staff, marketing and
promotional programs, member referral costs and costs related to the delivery
of advertisements to the Viewbar. Member referral costs consist of payments to
members when new users whom they have referred to us download the Viewbar and
use the Internet while our Viewbar is activated. We currently limit payment for
these referrals to direct referrals and a maximum of four tiers of indirect
referrals. We currently compensate members $0.10 per hour for direct referrals
and $0.05 per hour for indirect referrals, for up to 25 hours of active
Internet use per month. These referral payments are further limited to the
number of hours the original referring member uses the Internet while our
Viewbar is activated. Our membership agreement specifies that we may alter the
member payment structure at any time.
General and Administrative. General and administrative expenses include
personnel and related costs for corporate functions such as accounting and
finance, human resources, facilities, legal and information systems.
Product Development. Product development expenses include personnel and
related costs for the development of our Viewbar and related systems, technical
support and quality assurance.
Depreciation and Amortization. Depreciation and amortization expenses
represent depreciation and amortization of computer software and equipment,
leasehold improvements and furniture and fixtures.
Stock-Based Compensation. Deferred stock compensation represents the
aggregate difference, at the date of grant, between the respective exercise
prices of stock options and the deemed fair market values of the underlying
stock. This deferred stock compensation is amortized as stock-based
compensation expense using the graded amortization method over the vesting
period of the related options, which is generally four years. Stock-based
compensation expense relates to stock options awarded to individuals in all
cost and expense categories.
Results of Operations
Period from Inception (March 24, 1999) to December 31, 1999
Revenues. Revenues for the period from inception (March 24, 1999) to
December 31, 1999 were $5.3 million. We have historically sold a significant
portion of our advertisements through third-party sales organizations. 24/7
Media, a third-party advertising sales organization, sold advertisements that
accounted for approximately 19% of our revenues. These advertisements were
typically not targeted. Our internal sales force generally sells targeted
advertising. We have received and we anticipate that we will continue to
receive higher advertising rates for targeted advertisements and sponsorships
than for non-targeted advertisements. As we grow our sales force, we believe
that we will be able to increase targeted advertising sales as a percentage of
our total advertising sales. To date, substantially all of our revenues have
been derived from United States business customers.
25
<PAGE>
Direct Member Costs. Direct member costs for the period from inception
(March 24, 1999) to December 31, 1999 were $17.1 million. Although we
anticipate that our direct member costs will decrease as a percentage of our
revenues, we expect our direct member costs will increase substantially in
absolute dollars as our membership base continues to grow.
Sales and Marketing Expenses. Sales and marketing expenses for the period
from inception (March 24, 1999) to December 31, 1999 were $11.6 million. During
that period, member referral costs were $3.0 million and costs related to the
delivery of advertisements to the Viewbar were $2.9 million. We expect our
sales and marketing expenses to continue to increase in absolute dollars as our
membership base continues to grow and as we hire additional sales personnel in
the United States and in other countries.
General and Administrative Expenses. General and administrative expenses for
the period from inception (March 24, 1999) to December 31, 1999 were $8.3
million. We expect that our general and administrative expenses will continue
to increase in absolute dollars as we hire additional personnel and incur costs
associated with being a public company.
Product Development Expenses. Product development expenses for the period
from inception (March 24, 1999) to December 31, 1999 were $2.9 million. We
expect that product development expenses will increase in absolute dollars as
we continue to enhance our Viewbar and related systems.
Depreciation and Amortization Expenses. Depreciation and amortization
expenses for the period from inception (March 24, 1999) to December 31, 1999
were $348,000. We intend to increase our capital expenditures in absolute
dollars to continue to expand our systems infrastructure, which will result in
increased depreciation and amortization expenses associated with these
expenditures.
Stock-Based Compensation Expenses. Stock-based compensation expenses for the
period from inception (March 24, 1999) to December 31, 1999 were $1.5 million.
The remaining deferred stock compensation at December 31, 1999 was $18.6
million, which will be amortized as follows: $9.7 million for the year ending
December 31, 2000, $5.1 million for the year ending December 31, 2001,
$2.7 million for the year ending December 31, 2002 and $1.1 million for the
year ending December 31, 2003. Terminations of option holders could cause
stock-based compensation in future years to be less than indicated.
Interest expense. Interest expense for the period from inception (March 24,
1999) to December 31, 1999 was $827,000. In connection with the issuance of
convertible notes payable in July 1999, we issued warrants to purchase Series C
preferred stock. We recorded a charge for the fair value of the warrants of
approximately $528,000 for the period from inception to December 31, 1999. We
also incurred interest expense from a $20.0 million customer advance received
in November 1999.
Interest Income. Interest income for the period from inception (March 24,
1999) to December 31, 1999 was $360,000. Interest income was generated from
cash balances resulting from our private equity financings and the cash advance
received from a customer.
Provision for Income Taxes. No provision for federal or state income taxes
was recorded for the period from inception (March 24, 1999) to December 31,
1999 because we incurred losses from inception through that date. As of
December 31, 1999, we had approximately $28.6 million of federal net operating
loss carryforwards which expire on various dates beginning in 2019. Due to the
uncertainty regarding the ultimate utilization of the net operating loss
carryforwards, we have not recorded any benefit for losses and a valuation
allowance has been recorded for the entire amount of the deferred tax asset. In
addition, certain future changes in our share ownership may restrict our
ability to utilize our net operating loss carryforwards.
26
<PAGE>
Liquidity and Capital Resources
Since our incorporation in March 1999, we have financed our operations
primarily through private placements of preferred and common stock and
convertible notes payable, raising $33.9 million through December 31, 1999. In
February 2000, we raised an additional $94.5 million through the issuance of
Series D convertible preferred stock in a private placement.
Cash and cash equivalents, including restricted cash, were $30.0 million at
December 31, 1999. Restricted cash was $10.0 million at December 31, 1999, and
represented a portion of a $20.0 million customer advance that we received in
November 1999. Five million dollars of this restricted cash became unrestricted
on January 12, 2000, and the remaining $5.0 million will become unrestricted on
February 12, 2000.
Net cash used in operating activities was $9.9 million for the period from
inception (March 24, 1999) to December 31, 1999. Net cash used in operating
activities consisted primarily of our net loss, substantially offset by
increases in accounts payable and other accrued liabilities, accrued member
payables and the unrestricted portion of a customer advance.
Net cash used in investing activities was $4.3 million for the period from
inception (March 24, 1999) to December 31, 1999. Net cash used in investing
activities consisted of capital expenditures for computer equipment, leasehold
improvements and furniture and fixtures.
Net cash provided by financing activities was $34.2 million for the period
from inception (March 24, 1999) to December 31, 1999. Net cash provided by
financing activities consisted primarily of the net proceeds from the private
sale of convertible preferred stock, proceeds from the issuance of convertible
notes payable and proceeds from the exercise of options to purchase common
stock.
As of December 31, 1999, our principal commitments consisted of operating
and capital leases. Future minimum cash payments under these non-cancelable
commitments are $1.5 million through the year 2000. In addition, in January
2000, we entered into several non-cancelable commitments for office leases for
the year beginning in January 2000, and are obligated to pay a total of $49.3
million through 2010 under these leases. As a condition of one of the leases,
we are required to provide a letter of credit of $2 million, which may increase
to as much as $6.3 million, as a security deposit. In addition, we currently
have commitments for capital expenditures of approximately $1.1 million.
Our working capital requirements depend on numerous factors, including
market acceptance of our products and services and the resources we allocate to
growing our member base, increasing our revenues, hiring additional personnel
and expanding our internal network infrastructure. We have experienced
substantial increases in our expenditures since our inception consistent with
the growth in our operations and personnel, and we anticipate that our
expenditures will continue to increase significantly for the foreseeable
future.
We believe that our available cash and cash equivalents and cash flows from
operations, combined with the net proceeds from this offering, will be
sufficient to meet our anticipated needs for working capital and capital
expenditures for at least the next 12 months. Thereafter, however, we may need
to raise additional funds to fund expansion, including significant increases in
member costs, personnel and office facilities, to develop new or enhance
existing services or products, to respond to competitive pressures or to
acquire or invest in complementary businesses, technologies, services or
products. In addition, to meet our long-term liquidity needs, we may need to
raise additional funds, establish credit facilities or seek other financing
arrangements. Additional funding may not be available on favorable terms, on a
timely basis or at all.
Year 2000 Compliance
The "Year 2000 Issue" refers generally to the problems that some software
may have in determining the correct century for the year. For example, software
with date-sensitive functions that is not Year 2000 compliant may not be able
to distinguish whether "00" means 1900 or 2000, which may result in failures or
the creation of erroneous results.
27
<PAGE>
Some commentators have predicted significant litigation regarding Year 2000
compliance issues, and we are aware of lawsuits against software vendors.
Because of the unprecedented nature of this litigation, it is uncertain whether
or to what extent we may be affected by it.
We designed our Internet-based programs as well as our Web site and related
technology infrastructure to be Year 2000 compliant, provided that the
underlying operating systems of our vendors', suppliers' and members' computers
and any other software and hardware used on their computers are Year 2000
compliant.
We have defined Year 2000 compliant as the ability to:
. correctly handle date information needed for the December 31, 1999 to
January 1, 2000 date change;
. function according to the product documentation provided for this date
change, without changes in operation resulting from the advent of a new
century, assuming correct configuration;
. respond to two-digit date input in a way that resolves the ambiguity as
to century in a disclosed, defined and predetermined manner;
. store and provide output of date information in ways that are
unambiguous as to century if that date elements in interfaces and data
specify the century; and
. recognize Year 2000 as a leap year;
provided that all other products, such as hardware, software and firmware, used
with our products properly exchange and recognize date data.
However, we rely on third-party hardware and software in the operation of
our business. We believe we have identified all of the major information
systems used in our internal operations, including operating systems, databases
and the software residing between databases and the user interface, and have
substantially completed all modifications, upgrades or replacements to minimize
the possibility of a material disruption of our business. These remediation
activities include updating these systems to the newest versions, which are
claimed to be Year 2000 compliant, and applying patches to current versions.
The expenditures that we have incurred to date and the expenditures we expect
to incur in this regard have not been and are not expected to be material to
our business, results of operations and financial condition.
We have also contacted the vendors of third-party hardware and software we
use in order to gauge their Year 2000 compliance. Based on these vendors'
representations and the activities we have conducted, we believe that the
third-party hardware and software we use are Year 2000 compliant. We cannot
assure you, however, that we will not experience unanticipated negative
consequences, including material costs caused by undetected errors or defects
in the technology used in our internal systems. If, in the future, it comes to
our attention that the software underlying our e-mail or Internet-based
programs requires modification, or that any of our third-party hardware and
software is not Year 2000 compliant, then we will seek to make modifications to
our systems. In this case, we expect these modifications will not have a
material effect on our results of operations. There can be no assurance,
however, that we will be able to modify our systems in a timely and successful
manner to comply with the Year 2000 requirements. Any failure to do so could
have a material adverse effect on our business, results of operations and
financial conditions. The worst case scenario for Year 2000 problems for us if
the third-party hardware and software we use in our service were to prove not
to be Year 2000 compliant would be the need to cease normal operations for an
indefinite period of time if our Web site were to become inoperative and the
need to fix transactions that were incorrectly processed or recorded.
We do not currently have complete information concerning the Year 2000
compliance status of our business customers. We have contacted business
customers to remind them of the Year 2000 problem and its potential effects on
their systems and to gauge their Year 2000 compliance. To the extent that our
business customers are no longer able to process transactions, process them
incorrectly, or transmit incorrect data to our systems, our business could be
harmed. If our current or future business customers fail to achieve Year 2000
28
<PAGE>
compliance or if they divert expenditures, especially technology expenditures
that were reserved for promotional products, to address Year 2000 compliance
problems, our business, results of operations or financial condition could be
materially harmed.
If Year 2000 issues prevent our members from accessing the Internet, our
business and operations will suffer. Any failure of our systems and our
communications infrastructure with respect to the Year 2000 problem could
result in:
. an extended interruption of our ability to provide services to our
members and to fulfill commitments to our business customers;
. our members and business customers seeking alternate providers or
advertising space; or
. an unmanageable burden on member service and technical support.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivatives and Hedging
Activities," or SFAS 133, as amended by SFAS 137, which establishes accounting
and reporting standards for derivative instruments, including derivative
instruments embedded in other contracts, and for hedging activities. Because we
do not currently hold any derivative instruments and do not currently engage in
hedging activities, we expect that the adoption of SFAS 133, as amended, will
not have a material impact on our financial position or results of operations.
We will be required to implement SFAS 133, as amended, for fiscal year 2001.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, or SAB 101. SAB 101 summarizes certain areas of
the Staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. We believe that our current
revenue recognition principles comply with SAB 101.
Disclosures about Market Risk
Our exposure to market risk is limited to interest income sensitivity, which
is affected by changes in the general level of interest rates in the United
States, particularly since the majority of our investments are in cash
equivalent debt securities issued by corporations or divisions of the United
States government. We place our investments with high quality issuers and limit
the amount of credit exposure to any one issuer. Due to the nature of our
investments, we believe that we are not subject to any material market risk
exposure.
We did not have any foreign currency hedging or other derivative financial
instruments as of December 31, 1999.
Inflation
The impact of inflation on our business has not been material.
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BUSINESS
This prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ significantly from the results
discussed in these forward-looking statements. Factors that may cause such a
difference include, but are not limited to, those discussed in "Risk Factors."
Overview
AllAdvantage is a leading Internet-based intermediary, or infomediary, that
enables businesses to deliver highly-targeted advertisements to, and conduct
electronic commerce with, a large community of profiled members. We have built
an Internet communications platform that connects businesses and consumers
through our proprietary Web interface, the AllAdvantage Viewbar. The Viewbar is
an interactive communications window that is persistently displayed on each
member's computer screen. The Viewbar is also the channel through which we
deliver highly-targeted advertising, direct marketing messages, electronic
commerce opportunities and digital products. The Viewbar also facilitates
Internet navigation and electronic commerce with our business customers, and
includes search capabilities and pop-up menus that contain direct links to over
400 Web sites.
With our members' express permission, we continuously track and collect data
about their Internet behavior and demographics with our proprietary Viewbar
technology. We use our proprietary database and profiling technology to develop
detailed personal profiles of our members. We use these profiles to provide
businesses with a powerful online advertising, direct marketing and electronic
commerce channel to more effectively reach their desired audience while keeping
each of our member's personal data private. To our members, we provide cash
compensation, as well as simplified Internet navigation and electronic commerce
links that enhance their Internet experience.
We believe that, by increasing our membership, our value to business
increases because we can deliver highly-targeted advertising and marketing
messages based on increasingly refined criteria to a large community of
members. We also believe that, as more businesses use our services, we can
offer increasingly compelling benefits to consumers, thereby enhancing our
ability to attract new members. The combination of these benefits to businesses
and consumers has the potential to create a self-perpetuating cycle of
increasing membership and increasing value to businesses.
Between our inception in March 1999 and January 31, 2000, over 5.3 million
users registered to receive our Viewbar service. We launched our Viewbar
service in July 1999 and, have made the Viewbar available for our members in
the United States, Australia, Canada, France, Germany, New Zealand and the
United Kingdom. Similarly, we intend to introduce our Viewbar service to our
members in additional countries during the first quarter of 2000. During the
three months ended January 31, 2000, over 1.7 million members actively used our
service. Since the introduction of our Viewbar in July 1999, we have delivered
advertisements for over 148 advertisers obtained by our direct sales force and
973 additional advertisers obtained through third party sales organizations. In
January 2000, we delivered over 6 billion advertising impressions on our
Viewbar.
Industry Background
The Growth of the Internet
The Internet has dramatically changed the way that millions of people
worldwide share information, communicate and conduct business. International
Data Corporation, or IDC, an independent technology research organization,
estimates that the total number of Internet users worldwide will grow from
approximately 196 million at the end of 1999 to approximately 502 million by
the end of 2003. IDC further estimates that worldwide electronic commerce over
the Internet will increase from $111 billion in 1999 to $1.3 trillion in 2003.
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The Growth of Online Advertising and Direct Marketing
As the Internet has grown, businesses have devoted increasing portions of
their budgets to online advertising and direct marketing. Forrester Research,
an independent technology research organization, projects that online
advertising expenditures worldwide will increase tenfold from $3.3 billion in
1999 to $33.1 billion in 2004. Currently, online advertising consists primarily
of banner advertisements and sponsorships on frequently visited portals and
other Web sites. Although these forms of online advertising have generally
allowed businesses to create an online awareness of their brands and products,
businesses are increasingly demanding the ability to target their desired
audience more effectively.
Limitations of Current Targeted Online Advertising Methods
While targeted online advertising has a number of advantages over
traditional advertising, there remain significant challenges to realizing its
full potential. The effectiveness of targeted online advertising is currently
limited by the lack of precise demographic and Internet behavioral data about
consumers. To date, online targeting methods have generally used unverifiable
data from surveys and registrations or incomplete Internet behavioral data
derived from a single Web site or limited network of Web sites. Further, the
effectiveness of existing online delivery methods is limited because users
often scroll traditional banner advertisements off of their computer screens or
leave a Web site before an advertisement can be served to that site.
Consumer Online Privacy and Control of Personal Data
Many companies on the Internet are collecting valuable data about consumers
without their knowledge or permission. Online consumers are becoming
increasingly aware of Internet privacy issues and concerned with the need to
control their personal data. According to Forrester Technographics,
approximately 67% of Internet users are extremely or very concerned about
releasing their personal data. To date, online consumers have had limited ways
to control this flow of data or realize any of its value.
Market Opportunity
We believe that a significant market opportunity exists for an Internet-
based infomediary to serve as an effective communication channel between
businesses and online consumers. This infomediary would collect consumers'
demographic and Internet behavioral data, with their permission, and build
detailed profiles from that information. The infomediary would use these
profiles to enable businesses to deliver highly-targeted, one-to-one marketing
messages and other products and services to specified consumers. The
infomediary, as the trusted custodian of their information, would empower
consumers to realize value from their data while protecting their privacy.
The AllAdvantage Solution
AllAdvantage is a leading Internet-based infomediary that enables businesses
to deliver highly-targeted advertisements to, and conduct electronic commerce
with, a large community of profiled members. We connect businesses with these
members through our Viewbar, an interactive communications window that is
persistently displayed on our members' computer screens. The Viewbar displays
advertising and also contains features such as a search field and menus of
links that facilitate electronic commerce by connecting our members directly to
Web sites and services of our business customers.
With our members' express permission, we collect their demographic
information upon registration and continuously capture data about their
Internet activity. Using our proprietary database and profiling system, we then
create, and continuously update, accurate and detailed profiles for each of our
members. These profiles enable us to deliver highly-targeted advertisements and
marketing messages on behalf of our business customers. We compensate our
members for time that they, and the members whom they have referred, spend
browsing the Internet while using the Viewbar.
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Benefits to Businesses
Accurate and Detailed Member Profiles. We enable businesses to deliver
highly-targeted advertising and marketing messages, based on accurate and
detailed member profiles, to our large community of members. With our members'
express permission, we collect extensive data on their actual browsing behavior
across the entire Internet. Because our members must provide us with accurate
names and addresses in order to receive payment, we are able to validate this
information. With our accurate and continuously updated database of profiles,
we enable businesses to continuously refine and optimize their online marketing
campaigns.
Higher Returns on Their Marketing Investment. Our highly-targeted
advertising and marketing messages are designed to generate higher consumer
response rates and advertising impact and, as a result, provide businesses with
a higher return on their marketing investments. We offer businesses an
effective means of delivering highly-targeted online advertisements and
marketing messages based on combinations of the following variables:
. profiled behavior, including personal interests and spending habits;
. demographic data, including gender, age, street address and zip code;
. geography, including local, regional, national or international
placement;
. specific Web sites or Web site topics, such as sports or travel;
. current Internet behavior, such as researching or buying;
. keywords searched, such as stocks or golf; and
. specific time, including time of day or week.
Using combinations of these variables, an advertiser can target a very specific
audience. For example, a local car dealership can target its advertising to
males, age 25-40, who live in the zip codes near the dealership when they are
using the Internet to research sport utility vehicles or browsing related
automotive Web sites. Also, a national airline could run a campaign in specific
cities where it has excess capacity. With our detailed member profiles, the
airline could target members who have frequented travel Web sites within the
past month or visited the Web sites of its closest competitors in the same time
period. This highly targeted advertising is designed to generate higher
consumer response rates and advertising impact and, as a result, provide
businesses with a higher return on their marketing investments.
Persistent and Rich Media Advertising. When activated, the Viewbar is always
visible on a member's computer screen, regardless of which Web site he or she
is viewing or which desktop application he or she is using. Accordingly,
businesses can have their advertisements viewed on a persistent basis, without
the possibility of their advertisements being scrolled off the screen. In
addition, we designed the Viewbar system to send advertisements to members
between downloads and uploads of data from the Internet, allowing us to
efficiently send more complex and appealing graphics, or rich media, to our
members.
Ability to Target Members Viewing Any Web Site. We can deliver
advertisements on the Viewbar while our members are viewing any Web site,
including sites that are sold out of advertising inventory or do not feature
advertising. Rather than separately negotiating for and purchasing advertising
space on a number of Web sites, a business can instead purchase advertising on
the Viewbar that will be displayed when members view any of those selected Web
sites.
Media Strategy Expertise. We work with business customers to evaluate,
develop, execute, analyze and refine their online marketing campaigns. Because
we can collect data on our members' activity across the Internet, we are able
to offer customers information that might otherwise be unavailable. We can
accurately identify the demographic and behavioral characteristics of those
members who have, and those who have not, responded to our advertisers'
campaigns. Our media strategy group uses this data to assist our business
customers to more effectively target their future campaigns.
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Platform for Electronic Commerce. Our Viewbar contains features that
facilitate electronic commerce between business customers and our members. For
example, the Viewbar contains a menu bar that provides links to over 400 sites
on which our members may engage in commerce. In addition, each of our active
members holds an AllAdvantage cash account. We have recently begun to allow
members to use their cash accounts for the direct purchase of goods and
services online.
Benefits to Members
Payments for Using the Internet and for Referrals. Our members are paid for
time they spend navigating the Internet while the Viewbar is active on their
computer screens. In this way, members are paid for activities they already
undertake and are able to share in the value that their personal information
has for Internet advertisers and marketers. Members who accrue a minimum
balance can receive the cash they earn in the form of a check we mail to them.
We have recently begun to enable our members to use the funds in their accounts
to make purchases online. Members can also be paid when other people they have
directly or indirectly referred to us become members and use the Internet while
their Viewbars are active.
Simplified Internet Navigation. When the Viewbar is active on a member's
computer screen, it serves as a persistent and private portal that is always
accessible. The Viewbar simplifies navigation of the Internet by featuring a
search field and a menu bar that provides direct links to selected Web sites.
We believe that our members will find these features easier to use and more
convenient than other alternatives.
Increased Purchasing Power. We have recently begun to help our members
capitalize on the value of our large member base by working with selected
vendors to obtain pricing discounts, promotional rewards and other benefits for
our members. We provide a vehicle by which consumers receive the benefit of
their collective purchasing power, which encourages them to participate
actively in the AllAdvantage community and refer other consumers for
membership.
Relevant Advertising and Electronic Commerce Offers. Each of our members has
given us express permission to deliver advertising and marketing messages to
him or her through the Viewbar. Our profiling capabilities enable us to deliver
these messages in a highly targeted fashion, increasing the likelihood that the
member will view and respond to a given message. As we collect additional data
regarding the interests, activities and Internet usage patterns of our members
over time, we believe we can increase the level of personalization and hence
the direct relevance and value of these messages to members. We believe that
receiving these highly-targeted messages can be valuable to our members and
will be viewed by them as useful and informative.
Privacy and Control. We believe we have built a trusted relationship with
our members by rigidly maintaining the privacy of their data. We expressly
state in our membership agreement that we will never sell or disclose to any
third parties our members' personally identifiable information, unless
permitted by our members or required by law. Additionally, members can control
our tracking of their Internet behavior by turning the Viewbar on and off at
any time.
Strategy
It is our objective to be the leading Internet-based infomediary. Key
elements of our strategy include:
Build a Premier and Trusted Brand. We believe that building strong brand
awareness is fundamental to establishing ourselves as the Internet-based
infomediary most trusted by consumers and as the most effective online
marketing channel for businesses. We intend to build a premier and trusted
brand by consistently delivering value to both businesses and consumers. We
also intend to maximize awareness of the AllAdvantage brand to businesses
through traditional marketing channels. We will also utilize multiple points of
contact with consumers, including our Viewbar, Web site, email and direct mail,
to increase brand awareness.
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Expand our Community of Profiled Members. We believe that expanding our
membership increases our attractiveness to businesses. We plan to continue to
rely on word-of-mouth referral marketing and may augment this strategy with
other marketing campaigns. We also intend to attract additional members by
improving member benefits with enhancements to the Viewbar and expanded product
and service offerings. Further, we intend to continue to grow our community
internationally by introducing the Viewbar in additional countries.
Expand our Business Customer Base. We intend to continue to increase our
sales force domestically and internationally in order to expand our worldwide
business customer base. We also intend to attract and retain business customers
by offering the services of our media strategy group, which assists these
customers in utilizing our extensive database to better evaluate, develop,
execute, analyze and refine their marketing campaigns.
Increase Targeted Advertising Sales. Businesses generally pay higher rates
for targeted online advertising than for traditional online advertising. As we
grow our sales force and media strategy group, we believe that we will be able
to increase targeted advertising sales as a percentage of our total advertising
sales. We believe that our business customers will experience higher response
rates from our increasingly targeted advertisements and that these higher
response rates will in turn encourage them to buy more targeted advertising
from us.
Pursue New Revenue Opportunities. We intend to leverage the purchasing power
of our large membership base and the functionality of the Viewbar to
aggressively pursue new revenue opportunities, including:
. Digital Products. We intend to offer businesses the opportunity to sell
or rent digital products, such as software, music, games and video, that
can be electronically distributed to our members through the Viewbar,
and be paid for by debiting members' accounts;
. Data Products. We intend to offer businesses the opportunity to purchase
reports using our extensive, aggregated market data, that will not
personally identify members; and
. Co-branded Products and Services. We intend to offer business the
opportunity to sell co-branded products and services, such as
permission-based email, financial services and telecommunication
services, to our large membership community.
We believe that, in the future, advertisements may be delivered through the
Internet to a number of digital devices in addition to computers, including
interactive television, Internet-enabled home appliances, hand-held computers,
cellular phones, pagers and automobile personal computers. Over time, we may
extend our technology to deliver targeted advertisements through some of these
emerging digital devices.
Enhance Viewbar Functionality and Member Experience. We intend to continue
to add functionality to the Viewbar in order to enhance our members'
experience. For instance, we recently added a menu bar and search field to our
Viewbar. These features facilitate more convenient Internet navigation and
electronic commerce. We intend to develop and acquire additional technology and
services that make our members' online experience more relevant and personal.
Enhance our Profiling and Data Analysis Technology. We intend to continue to
enhance our proprietary profiling and data analysis technology. We intend to
maximize the effectiveness of our targeted advertising capabilities by building
increasingly detailed and personalized member profiles. We also intend to
continue to enhance our data analysis capabilities in order to plan and execute
more effective advertising and marketing campaigns for our business customers.
The AllAdvantage Viewbar
At the core of our service is our Viewbar, an interactive communications
window that appears on each member's computer screen. The Viewbar is the
channel through which we gather valuable data about our
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members' Internet activity and through which we deliver highly-targeted
advertising and facilitate electronic commerce. The Viewbar contains a search
field and pop-up menus of links that allow members to navigate directly to Web
sites and services on the Internet. The current version of our Viewbar,
released in January 2000, is depicted below:
[insert graphic of Viewbar]
Title: The AllAdvantage Viewbar
[Graphic of the AllAdvantage Viewbar as it appears on a computer screen in a
horizontal position. The Viewbar has its Finance pop-up menu expanded. This
menu is expanded further to show the Stocks & Investing menu, which is
expanded further to show On-Line Trading and Research. Search function textbox
is also expanded. In the Advertising sections of the Viewbar AllAdvantage.com
name and logo are shown.]
[text pointing to functional areas of the Viewbar includes the following text
labels:]
Labels: Menu Bar with eight channels of detailed menus of links
Minimizer button for control of use
Banner and title advertising spaces
Direct link to our website homepage, www.AllAdvantage.com
Choice of seven search engines
Home menu button takes members directly to individual account page,
referral center and other areas of our web site.
The Viewbar can be downloaded from our Web site in Windows 95, Windows 98
and Windows NT 4.x and Macintosh 8.6 and 9.0 formats. Once a member downloads,
installs and launches the Viewbar, it opens a two-way communications channel
between the member's computer and AllAdvantage. The Viewbar appears on the
user's screen automatically when the computer is turned on, and its default
position is at the bottom of the screen. A member can move the Viewbar to any
part of the computer screen, and it remains visible throughout a computing
session unless minimized or closed. We control the type of content and the
frequency with which that content is displayed through the Viewbar, based on a
member's unique profile and Internet browsing behavior.
The Viewbar has the following interactive features:
. The Menu Bar. Along the top of the Viewbar there is a menu bar currently
containing eight category menus. The menu bar may be opened or closed at
the option of the member. Each menu contains direct links to select Web
sites. The current Viewbar features more than 400 direct links that may
be sold to sponsors in the future. We intend to increase the number of
category menus and links on the menu bar.
. The Search Field. On the left side of the Viewbar is a text box that
members can use to search the Internet. An expandable menu button from
this search text box allows users to choose the search engine of their
choice. We currently offer seven sponsored search engine options.
Members can type in their search criteria or a specific Web site address
in the search text box, even while using a non-Internet application.
This activates the member's Internet browser, which displays the search
results or takes the member to the Web site address entered.
. Advertising Windows. To the right of the search field, there are spaces
for standard-sized and tile-sized advertisements, both of which are
updated several times a minute.
AllAdvantage Membership Services
Member Payments
Members earn money for time they spend navigating the Internet while the
Viewbar is active on their computer screens. Members are paid only after
reaching a minimum account balance. Time for which a member is eligible for
payment is capped at a maximum number of hours per month. In addition to
earning money from their own Internet use, members are paid, at a lesser rate,
when other members they have referred to us directly or indirectly use the
Internet while their Viewbars are active. We currently limit payment for
referrals to five levels removed from the original referring member. The
amount paid to a member for their referrals' usage is based on an hourly rate
and is also limited by the Internet usage of the original referring member.
Our membership agreement specifies that we may alter the member payment
structure at any time. Users sign up free of charge at our Web site by
providing their name, gender, street address, email address and age. Because
we verify name and address information through the payment process, we believe
we have highly accurate personal data.
Web Site
Our Web site, www.alladvantage.com, contains:
. information about AllAdvantage and our Viewbar;
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. a download area for new Viewbar versions and digital products;
. password-protected access to member referral and account pages;
. information and tools to aid members in referring new members; and
. specialized community pages for A-Plus members, a designation for
members with 20 or more referrals.
The member account page, the most frequently visited page on our Web site, is
continuously updated to reflect member earnings and referrals. Many of our
members repeatedly visit their account pages over the course of a day. In each
month of the fourth quarter of 1999, PC Data ranked our Web site as one of the
20 most visited Web sites, measured by the number of unique users.
Specialized Member Offers
We have recently begun to provide our members with third party product and
service offerings that are generally not available elsewhere. For example, we
currently offer our members the ability to rent anti-virus software on a
monthly basis over the Internet, payable through direct deductions from their
individual AllAdvantage accounts. We intend to further leverage the value of
our large membership base and digital distribution channel, the Viewbar, to
obtain additional specialized third party product and service offerings.
Customer Service
We provide customer service to our members through our community and member
services departments. Our community department supports the member community,
communicating with members through email about new features and services. Our
member services department answers email queries from members about topics such
as Viewbar functionality, technology and usage and member accounts.
AllAdvantage Business Services
Advertising
We offer business customers the opportunity to purchase advertising on the
Viewbar. Customers may purchase standard-sized and also tile-sized
advertisements. Business customers may purchase either traditional online
advertisements or highly-targeted advertisements tailored to one or more
combinations of the individual member's demographics or Internet behavior.
These variables may include profiled behavior, age, gender, address, geography,
current Web activity or site, keywords, or time of day. To date, traditional
advertising sold by third party advertising sales organizations have generated
a significant portion of our total advertising sales and accounted for a
significant portion of the advertising impressions delivered to our Viewbar. As
we increase our internal sales force, we intend to generate an increasing
proportion of our revenue from targeted advertising.
Media Strategy
We offer business customers comprehensive media strategy services, which
include evaluating, developing, executing and refining online marketing
campaigns. We provide detailed reports that include data valuable to customers
for their online and offline marketing campaigns. Because we collect data about
our members' behavior wherever they go on the Internet, we are able to offer
business customers information that might otherwise be unavailable or might
require time-intensive and inefficient marketing campaigns. Because the Viewbar
provides a persistent one-to-one marketing channel from advertisers to our
members, we provide true one-stop shopping for our business customer's online
media plan.
Digital Products
The Viewbar is designed to serve as a digital distribution channel that our
business customers may use to distribute software, music, video and other
digital products directly to our members. For example, we currently
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offer our members the opportunity to download and rent anti-virus software from
Network Associates, for which we charge members a monthly fee that is deducted
automatically from their AllAdvantage member account.
Electronic Commerce
The current Viewbar contains over 400 direct links to specific Web sites
which we intend to sell. The menu bar containing these links is organized into
categories such as shopping, news, finance, travel and technology. Business
customers may pay to sponsor these links to their own Web sites and services.
For example, a finance-related Web site can sponsor a link in the finance menu,
so that their Web site is always one click away from our members. In addition,
businesses may sponsor the search field on the Viewbar. The tile portion of the
Viewbar and the certain pages on the AllAdvantage Web site are also available
for sponsorship, thereby providing businesses with multiple channels through
which they may communicate with our members. We have entered into agreements
with businesses where we receive fees based on the number of members who sign
up for their services, purchase their products or satisfy other performance
criteria. We may also receive an up-front payment or fee in these arrangements.
AllAdvantage Business Customers
From the introduction of our Viewbar in July 1999 through December 1999, we
have delivered advertisements for 148 advertisers obtained by our direct sales
force and 973 additional advertisers obtained through third party advertising
sales organizations. During that period, we entered into agreements with
DoubleClick and 24/7 Media under which they sell Viewbar advertising on behalf
of AllAdvantage.
Sales and Marketing
Customer Acquisition
We acquire business customers through our direct sales force and third-party
advertising sales organizations. As of January 31, 2000, our sales and
marketing organization included 156 employees located in the following
metropolitan areas: Atlanta, Boston, Charlotte, Chicago, Dallas, Detroit,
London, Los Angeles, Louisville, New York, San Francisco, Seattle, Sydney and
Washington, D.C. Our sales organization develops and maintains relationships
with leading advertisers and advertising agencies globally. We also have
entered into relationships with third-party advertising sales organizations in
order to augment the efforts of our sales personnel and accelerate the
expansion of our business internationally.
We use a variety of methods to build brand awareness of AllAdvantage and our
service offerings within our target market and to establish credibility and
leadership in the marketplace. These methods include marketing materials,
advertising, press coverage and other public relations efforts, direct
marketing, trade shows, seminars and conferences, relationships with recognized
industry analysts and the AllAdvantage Web site. We expect to increase our
business marketing activities in the future.
Member Acquisition
Since our inception, we have relied on word-of-mouth marketing to attract
the vast majority of our members. We employ a referral marketing system that
rewards members for referring other members to our service. Members derive
increased benefits from our service, such as referral payments and greater
purchasing power, as more members join, thereby motivating members to work to
further increase the membership base. Between the launch of our Web site in
March 1999 and January 31, 2000, over 5.3 million users registered to receive
our service. In addition, as of January 31, 2000, over 1,000,000 of our members
had successfully referred at least one new member to our service, and our over
100,000 A-Plus members had each referred 20 or more members to our service. We
may supplement our word-of-mouth member marketing efforts in the future with
more traditional marketing campaigns.
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Technology
As of January 31, 2000, our technology organization included 124 employees
and contractors. We have developed and continue to expand our proprietary
software architecture that enables us to detect and catalogue our members'
computer-usage behavior, create member profiles based on their browsing
behavior, improve the delivery of dynamic, targeted advertisements, and update
and maintain members' online accounts. This software architecture includes the
following components:
Viewbar. The Viewbar, which is downloaded by each member from our Web site,
runs on the member's computer and displays advertisements supplied by the
advertisement server. The Viewbar communicates continuously with our central
servers, keeping member earnings and profile information current and enabling
customization of advertising displayed on the Viewbar based on the most recent
profiles. The Viewbar is a client application programmed in C++ and designed to
be portable between operating systems. The Viewbar currently operates on the
Windows 95, Windows 98, and Windows NT 4.x and Macintosh 8.6 and 9.0 operating
systems.
Profiling Server. The profiling server collects data about each member's
actual Internet browsing behavior. This server gathers data describing the
sites visited, and the frequency and duration of these visits. This server is
also used to infer additional Internet behavior data regarding each member.
This data is transmitted to the member profile server and subsequently used to
target advertising on the Viewbar.
Member Profile Server. The member profile server stores the member data we
use to target advertisements and marketing messages. The member data consists
of demographic and Internet behavioral information. The member profile server
enables members to authenticate themselves to our system and transmit their
data through the Viewbar. The member profile server also maintains the
information about each of our members' referrals.
Advertising Server. The advertising server determines which advertisements
are shown to a particular member at a particular moment. Advertisements are
served based on targeting information provided to the advertising server by the
member's Viewbar and the member profile server, as well as the specific
targeting criteria associated with a particular marketing campaign. This server
maintains data regarding available advertising inventory and provides reports
on the delivery of advertisements. The server technology is licensed to us by
DoubleClick.
Payment Server. The payment server monitors the time members spend browsing
the Internet while the Viewbar is active. Based on this data, the payment
server computes each member's earnings, maintains an account for each member,
and computes the amount to be paid to each member based on the member's
browsing time and that of the members whom they have referred.
Web Server. The Web server supports the AllAdvantage Web site.
We have designed and constructed our software and related technology
infrastructure to comply with industry-standard security specifications, and we
utilize a broad range of monitoring and assessment tools to ensure the security
of our systems. We have designed our system to be highly scaleable and
reliable, and we believe the various components of our technology architecture
have the ability to scale well beyond their current configuration. We actively
monitor our systems to ensure that we have substantial available capacity. We
house our technology within the GlobalCenter facilities located in Sunnyvale,
California, and by the second quarter of 2000 we intend to have a second
hosting site located at GlobalCenter's facilities in Herndon, Virginia.
Our information technology infrastructure is built upon a number of hardware
and software components from well-known technology vendors, including:
. Intel-based servers for our Web site, running Microsoft's NT operating
system;
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. Sun Microsystems servers for our other servers, running Sun's Solaris
operating system;
. high-availability storage equipment from EMC;
. firewalls and network routing equipment from Cisco; and
. Oracle database software to manage the large amounts of data we collect
about our members' Internet usage activities.
Product Development
We consider our product functionality and architecture to be one of our
competitive advantages. An integral part of our strategy is to continually make
our service attractive to new and current members. We believe that, in order to
meet this goal, we will need to regularly improve and extend the functionality
of our Viewbar and related systems, which include profiling servers, a payment
server, and a Web server. To this end, we currently have software developers
and engineers working in a number of areas, including:
. database and server systems development;
. Web development;
. client software development;
. software testing; and
. systems support.
Our software developers rely on state-of-the-art development tools and
development environments.
The January 2000 release of our Viewbar was enhanced to include search
capability, electronic commerce menus and an auto-update feature, which allows
the Viewbar to automatically update itself with new or upgraded components. The
auto-update capability enables us to update members' Viewbars transparently
without disrupting online activity. We believe that this capability, when
combined with the Viewbar's modular design and ability to support several
operating systems, enables us to rapidly deploy new products and software
components that may be created by third-party developers to our members. Our
ability to centrally update the Viewbar and the server-side Web and database
systems facilitates rapid adjustments to all product components based on
consumer demand and business needs.
Privacy Policy
We believe that concerns regarding online privacy raised by consumer
advocates, legislatures and the media will increase as commercial usage of the
Internet increases. Foreign, federal and state laws increasingly may regulate
our use of personal information regarding our members. We have a stringent
privacy policy concerning how we use information about our members and the
extent to which others may have access to this information. We have a chief
privacy officer who oversees the creation and implementation of and compliance
with our privacy policy. We use information about our members for internal
purposes, such as to target advertisements and other communications to our
members, to improve our marketing and promotional efforts and to improve our
service and Web site. We do not give, sell, rent, share or trade any
identifiable personal information regarding our members to any third party,
except as required by law or expressly permitted by a member. We do, however,
offer summaries of generalized market data to our advertisers and other
interested parties, but we do not disclose personally indentifiable information
to these parties. In contrast to other companies on the Web that collect
personal data without the knowledge or permission of the Internet user, we have
a permission-based relationship with every one of our members.
Competition
We compete for business customers and members.
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Competition for businesses customers
The market for online advertising and marketing is extremely competitive. We
believe that the principal competitive factors in the online advertising market
are:
. the ability to target users based on specific demographic and inferred
behavioral criteria;
. brand recognition;
. size and characteristics of membership base;
. breadth and depth of reporting and other services;
. reliability and quality of data and technology infrastructure;
. pricing; and
. technical expertise.
There is substantial competition for Internet-based advertising revenues
generally, and the amount of available advertising space on the Internet is
increasing at a significant rate. We believe our most direct competitors for
Internet advertising and sponsorship revenues will be providers of targeted
online advertisements. We will also compete for those revenues with major
Internet service providers, content providers, large Web publishers, Web search
engines and portal companies, Internet advertising providers, content
aggregation companies, and various other companies that facilitate Internet
advertising. We may also face competition from traditional direct marketing
companies that may seek to offer online products or services. We face
significant competition from traditional media, such as television, radio,
cable and print, for a share of advertisers' total advertising budgets.
Businesses may be reluctant to devote a significant portion of their
advertising budget to Internet advertising if they perceive the Internet to be
a limited or ineffective advertising medium.
Competition for members
Since space on a computer screen is limited, we believe our most direct
competitors for members are companies that offer Internet services or
compensation to consumers who allow a portion of their computer screen to be
dedicated to the applications or services of those companies. If our
competitors were to offer more attractive benefits than we do, such as higher
compensation, better functionality or greater aggregated purchasing power, then
our membership could decline, possibly reducing our revenues. In addition,
current and potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their services to address the needs of our current or prospective members. If
we are unable to compete successfully, our business may fail.
Intellectual Property
We rely on a combination of patent, copyright, trademark, trade secret and
contract law to protect our intellectual property rights. Despite our efforts
to protect our proprietary rights, unauthorized parties may attempt to copy or
otherwise obtain and use our technology. Monitoring unauthorized use of our
technology is difficult, and we cannot be certain that the steps we have taken
will prevent unauthorized use of our technology.
We have one U.S. registered copyright. We have pending U.S. patent and
copyright applications and pending U.S. and foreign trademark applications. We
cannot assure you that our pending patent or trademark applications will be
approved, or that any of our applications for registration of our copyrights
will be granted. Even if they are approved or granted, our patents, copyrights
and trademarks may be successfully challenged by others or invalidated. We
cannot assure you that any of our proprietary rights will be viable or of value
since the validity, enforceability and scope of protection of proprietary
rights in Internet-related industries are
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uncertain and evolving. If our trademark registrations are not approved because
third parties own these trademarks, our use of these trademarks would be
restricted unless we entered into arrangements with the third-party owners,
which might not be possible on reasonable terms.
We generally enter into confidentiality or license agreements with our
employees and consultants, and control access to and distribution of our
technologies, documentation and other proprietary information. Despite our
efforts to protect our proprietary rights from unauthorized use or disclosure,
unauthorized parties may attempt to obtain, use or disclose our technologies.
We cannot assure you that the steps we have taken will prevent misappropriation
of our technologies, particularly in foreign countries where laws or law
enforcement practices may not protect our proprietary rights as fully as in the
United States.
Our business activities may infringe upon the proprietary rights of others,
and, from time to time, we have received and may continue to receive, claims of
infringement against us. We have permission and, in some cases, licenses from
each developer of the software that we use in our software. Although we do not
believe that the software or the trademarks we use or any of the other elements
of our business infringe on the proprietary rights of any third parties, third
parties may assert claims against us for infringement of their proprietary
rights and these claims may be successful. In addition, a number of third-party
owners of patents have claimed to hold patents that cover various forms of
online transactions or online technology generally. As with other online
service providers, patent claims could be asserted against us based upon our
services or technologies.
Litigation may be necessary to determine the validity and scope of the
proprietary rights of others. Any litigation could subject us to significant
liability for damages and attorneys fees, invalidation of our proprietary
rights, or injunctions or other court orders that would prevent us from using
certain technologies or engaging in certain business activities. These
lawsuits, regardless of their success, would likely be time-consuming and
expensive to resolve and would divert management's time and attention away from
our business. Any potential intellectual property litigation could also force
us to do one or more of the following:
. cease using key aspects of our technology that incorporate the
challenged intellectual property;
. make significant changes to the structure and operation of our business;
. design around a third party's patent; or
. license technology from a third party.
Implementation of any of these alternatives could be costly and time-
consuming, or may not be possible at all. Accordingly, an adverse determination
in any litigation to which we are a party would harm our business.
Governmental Regulation
Overview
The services we provide are subject to regulation by various federal, state
and foreign governmental authorities. Federal and state laws may, for example,
mandate protection of consumer privacy and regulate online content generally.
The laws relating to our business and operations are evolving. A number of
legislative and regulatory proposals under consideration by federal, state,
local and foreign governments may lead to additional laws or regulations
concerning online content, user privacy, taxation, parental consent for access
by their minor children, access charges, liability for third-party activities,
bulk e-mail, or spam, encryption standards, online sales of goods and services,
domain name registration and use, copyright infringement and other intellectual
property issues. The adoption of new laws or the application of existing laws
may decrease the growth in the use of the Internet. These results could
decrease the demand for our services or increase our cost of doing business,
each of which would harm our business.
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Foreign Laws and Jurisdiction.
It is not clear the extent to which we are, or may in the future be, subject
to regulatory activity of foreign jurisdictions. We could be held to be subject
to the laws or regulations of foreign jurisdictions because of the location of
our members, our presence on the Internet or the impact or effects of our
operations. We could also be held subject to foreign laws or regulations
because of possible future activities that specifically target or are based in
other countries. The possible application of foreign laws and regulations could
include a wide range of subjects. The application of foreign laws and
regulations to Internet and online activity has only limited precedents abroad
and is an evolving area of law. It is not clear how existing foreign laws and
regulations might be applied to our activities.
Regulation of Content and Access; Membership Program
Prohibition and restriction of Internet content and access could dampen the
growth of Internet use, decrease the acceptance of the Internet as a
communications and commercial medium or expose us to liability. A variety of
restrictions on content and access, primarily as they relate to children, have
been enacted or proposed. The Children's Online Privacy Protection Act of 1998,
for example, prohibits and imposes criminal penalties and civil liability on
anyone engaged in the business of selling or transferring, by means of the
World Wide Web, material that is harmful to minors, unless access to this
material is blocked to persons under 17 years of age. In addition, the Federal
Telecommunications Act of 1996 imposes fines on any entity that knowingly
permits any telecommunications facility under its control to be used to make
obscene or indecent material available to minors via an interactive computer
service. Numerous states have adopted or are currently considering similar
types of legislation. In addition, laws have been proposed that would require
Internet service providers to supply, at cost, filtering technologies to limit
or block the ability of minors to access unsuitable materials on the Internet.
Federal and state consumer protection laws, including the Federal Trade
Commission Act, generally prohibit unfair or deceptive acts or practices and
impose civil and criminal liability for violations.
Because of these content restrictions and potential liability to us for
materials carried on or disseminated through our systems, we may be required to
implement measures to reduce our exposure to liability. These measures might
require the expenditure of substantial resources or the discontinuation of our
product or service offerings that subject us to this liability. In addition,
our business model requires that we pay our members cash for their Viewbar
usage and that of their referrals. We believe this program complies with
applicable regulation. Any regulatory challenge or limitation asserted or
implied regarding these payments could significantly harm our business.
Further, we could incur substantial costs in defending against any of these
claims and we might be required to pay large judgments or settlements or alter
our business practices. In addition, our liability insurance might not cover
potential claims relating to the services we provide or might not be adequate
to indemnify us for all liabilities that could be imposed on us.
User Privacy Issues
Internet user privacy has become an issue both in the United States and
abroad. Some commentators, privacy advocates and government bodies have
recommended limitations on, or taken actions to limit, the use of personal
information by those collecting such information. For example, the Children's
Online Privacy Protection Act of 1998 requires, among other things, that online
operators obtain verifiable parental consent for the collection, use or
disclosure of personal information from children. The act further mandates that
the Federal Trade Commission publish regulations for the collection of data
from children by commercial Web site operators. We cannot predict the exact
form of the regulations that the FTC may finally adopt.
Congress has recently enacted the Gramm-Leach-Bliley Act, which contains
provisions protecting the privacy of consumer non-public personal information
collected by financial institutions. We may be deemed a financial institution
under the Gramm-Leach-Bliley Act. If so, we may be required to amend our
privacy policy and consumer authorizations and disclosures to comply with this
or other laws or regulations. Federal regulations implementing the statute are
being developed.
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Rights in Member Data
Our ability to sell targeted advertising depends on our ability to use
personal information collected from our members. We collect, with member
consent, various forms of data from and about our members, and market or
otherwise use that data. Although we attempt to protect, based on trade secret
law, copyright law and license agreements, among other means, the information
we collect, we cannot be certain that these means will be sufficient to
maintain the integrity or value of information collected. Also, some of the
data that we obtain and use may be derived in part from information contained
on Web sites operated by other parties. Although we endeavor not to violate any
of the proprietary rights of others in collecting or obtaining this
information, the law relating to ownership of information contained on Web
sites and in electronic and online databases is still developing, and third
parties may assert claims against us based on this data acquisition. New laws
relating to the protection of information contained in databases have been
proposed and are under consideration in the United States and in foreign
countries. A new law could impose obstacles to our rights to collect data or
give rise to claims by third party owners of data. It is not possible to
predict whether legislation will pass, what provisions it might contain, or the
scope of its possible impact on our business activities. We cannot assure you
that our current information collection procedures and disclosure policies will
be found to be in compliance with existing or future laws or regulations. Our
failure to comply with existing laws, including those of foreign countries, or
the adoption of new laws or regulations that require us to change the way we
conduct our business, could make it cost-prohibitive to operate our business,
and prevent us from pursuing our business strategies including the sale of
targeted advertising.
Internet Taxation
The tax treatment of activities on or relating to the Internet is currently
unsettled. A number of proposals have been made at the federal, state and local
levels and by foreign governments that could impose taxes on the online
purchase and sale of services and other Internet activities. The Internet Tax
Freedom Act of 1998 has generally imposed a moratorium through October 2001 on
the imposition of some kinds of consumer-related taxes, other than sales or use
taxes, in connection with Internet access and Internet-related sales in the
United States. Future laws imposing taxes or other regulations on commerce over
the Internet could, however, substantially impair the growth of Internet
commerce and as a result make it cost-prohibitive to operate our business.
The Workforce Investment Act of 1998
Section 508 of the Workforce Investment Act of 1998 requires that all Web
sites operated by a federal agency, as well as those operated by anyone doing
business with the federal government, modify their Web sites to make them
accessible to those who are handicapped. There are proposals to extend this act
to all Web sites, which could increase our costs and make our service less
attractive to the non-handicapped.
Employees
As of January 31, 2000, we had 403 employees, contract-to-hire personnel and
independent contractors--156 in sales and marketing, 59 in member services and
community, 124 in product development and information systems and operations,
and 64 in finance and administration. We have never had a work stoppage, and no
employees are represented under any collective bargaining agreement. Our
business and future success depends on the efforts and abilities of our senior
management and other key personnel and our ability to attract, retain and
motivate highly skilled technical, managerial, sales and marketing personnel.
Competition for qualified personnel is intense, particularly in our location in
Silicon Valley, California, due to a number of factors, including the high
concentration of established and emerging growth technology companies. As a
result, we may be unable to attract qualified personnel. We may also be unable
to retain the employees we currently employ.
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Facilities
Our principal administrative, marketing and technology operations are
located in two facilities comprising 63,000 square feet in Hayward, California.
The lease for one of these spaces expires on December 31, 2000 and the lease
for the other space expires on December 31, 2001. As of January 31, 2000, we
also had leased facilities in Atlanta, Boston, Chicago, Dallas, Detroit,
London, Los Angeles, New York, Paris, San Francisco, Seattle and Washington
D.C. We have entered into a lease agreement for a 135,000 square foot facility
in South San Francisco, California, which will replace our current facilities
in Hayward, California. We expect to occupy the new facility in the first
quarter of 2001. We continually evaluate our facilities requirements, and
believe that we must lease additional facilities in the next 12 months to
accommodate our plans to expand our sales, marketing, media strategy and
technology organizations. We cannot assure you that such leases will be
available on reasonable terms or at all.
Legal Proceedings
We are not a party to any material legal proceedings.
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MANAGEMENT
Executive Officers, Directors and Key Employees
Our executive officers, directors and key employees, and their ages and
positions as of January 31, 2000, were as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
James R. Jorgensen.......... 51 President, Chief Executive Officer and
Chairman
Michael A. Depatie.......... 42 Chief Financial Officer
Oliver Brock................ 30 Chief Technology Officer
Johannes A. Pohle........... 30 Vice President Product Management and
Director
David W. Johnson............ 41 General Counsel
Carl T. Anderson............ 27 Vice President Corporate Development
David Beckman-Robertson..... 44 Vice President Sales
Tobin W. Trevarthen......... 39 Vice President Business Development
Mauro Calvi................. 44 Vice President International
Chad D. Balch............... 41 Vice President Product Development
Joseph M. Feliu............. 49 Chief Information Officer and Vice President
Operations
Raymond Everett-Church...... 30 Chief Privacy Officer and Vice President
Public Policy
Nicola C. Barrett........... 40 Vice President Media Strategy
David C. Martin............. 36 Vice President Business Intelligence
Nancy Myers Booth........... 48 Vice President Product Marketing
Bernie J. Murphy............ 34 Vice President Finance, Treasurer
David W. Pidwell............ 52 Director
John F. Shoch .............. 50 Director
Thomas Unterman............. 55 Director
Richard A. LeFurgy.......... 43 Director
William L. Burnham.......... 28 Director
</TABLE>
James R. Jorgensen is a co-founder of AllAdvantage and has served as our
Chief Executive Officer and director of AllAdvantage since March 1999. From
August 1997 to September 1998, Mr. Jorgensen co-founded and served as Chief
Executive Officer and Chairman of the Board of Challenger Sports Corporation, a
children's sports training company where he continues to serve as Chairman of
the Board. From February 1995 to May 1996, Mr. Jorgensen co-founded and served
as Chairman of Qualtos Computer Corporation, a provider of 24/7 telephone
helpdesk services for individual and small business personal computer users.
From 1989 to 1992, Mr. Jorgensen co-founded and served as Chairman and CEO of
Discovery Zone, Inc. until it merged operations with Blockbuster Entertainment.
Since its founding in 1978, Mr. Jorgensen has served as Chief Executive Officer
of Nottingham Financial Corporation, a management consulting company
instrumental in the creation and management of start-ups in direct mail,
advertising agencies, magazine publishing, accounting, insurance and personal
computer software, sales and service. Mr. Jorgensen is a certified public
accountant and holds a B.B.A. in accounting and finance from the University of
Wisconsin and an M.B.A. from Stanford University.
Michael A. Depatie has served as our Chief Financial Officer since October
1999. From November 1996 to January 1999, he served as Executive Vice President
and Chief Financial Officer of Sunterra Corporation, a resort hotel developer
and operator and from October 1997 to December 1999 he served on the company's
Board of Directors. From July 1992 to August 1996, Mr. Depatie was Senior Vice
President of Finance and Chief Financing Officer of La Quinta Inns, Inc., a
hotel development and operating company. From 1989 to 1992, Mr. Depatie was co-
founder and Senior Vice President of Finance of Summerfield Hotel Corporation,
a hotel development and operating company. From 1988 to 1989, Mr. Depatie was
founder and Managing General Partner of Pacwest Capital Partners. From 1984 to
1988, Mr. Depatie served as Senior Vice President of Finance and Development of
The Residence Inn Company, a division of Marriott International, Inc.
Mr. Depatie holds a B.A. in business from Michigan State University and an
M.B.A. from Harvard Business School.
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Oliver Brock is a co-founder of AllAdvantage, served as our Chief Technology
Officer since March 1999 and served as a director of AllAdvantage from March
1999 to June 1999. From September 1994 to November 1999, Dr. Brock did doctoral
work in the computer science department at Stanford University, where he was
involved in the development of robotic motion technologies as well as
algorithmic robotics and geometric problems related to motion. From 1984 to
1989, Dr. Brock served as general manager at a billing management firm and a
snowboard manufacturing company. Dr. Brock holds a Diploma in computer science
from the Technical University of Berlin, an M.S. in computer science from
Stanford University and a Ph.D. in computer science from Stanford University.
Johannes A. Pohle is a co-founder of AllAdvantage and has served as our Vice
President Product Management and as a director since March 1999. From September
1996 to June 1998, Mr. Pohle attended the Graduate School of Business at
Stanford University. From December 1995 to September 1996, Pohle served as
Deputy CEO and Vice Chairman of the Board for Grupo Frio, a frozen foods
distributor in Mexico. From August 1994 to December 1995, Mr. Pohle served as
lead consultant for Booz, Allen & Hamilton, a management consulting company.
Mr. Pohle holds a B.S. in mechanical engineering from Northwestern University,
an M.S. in mechanical engineering from Stanford University and an M.B.A. from
Stanford University.
David W. Johnson has served as our General Counsel since September 1999.
From November 1996 to August 1999, Mr. Johnson was of counsel to Fenwick & West
LLP, a technology law firm. From September 1991 to October 1996, Mr. Johnson
did post doctoral work and taught at Stanford Law School. Mr. Johnson holds an
A.B. in political science from Carleton College, a J.D. from the University of
Miami, and is a J.S.D. candidate at Stanford Law School.
Carl T. Anderson is a co-founder of AllAdvantage and has served as our Vice
President Corporate Development since December 1999, as Vice President Business
Development from March 1999 to December 1999, and served as a director of
AllAdvantage from March 1999 to June 1999. From September 1997 to June 1999,
Mr. Anderson attended the Graduate School of Business at Stanford University.
From July 1995 to February 1997, Mr. Anderson worked as an Analyst in the
Mergers and Acquisitions Department for Gleacher & Co., an investment banking
firm. Mr. Anderson holds an A.B. in economics from Princeton University and an
M.B.A. from Stanford University.
David Beckman-Robertson has served as our Vice President Sales since August
1999. From August 1998 to August 1999, Mr. Beckman-Robertson served as Vice
President of CNN Interactive Sales for Time Warner. From January 1992 to July
1998, Mr. Beckman-Robertson served as sales manager for Turner Broadcasting.
From 1990 to 1992, Mr. Beckman-Robertson worked in promotions for Valassis
Inserts, a marketing and promotional company. From 1984 to 1990, Mr. Beckman-
Robertson worked on network and cable sports sales for Capital Cities/ABC. From
1979 to 1984, Mr. Beckman-Robertson worked in sales for Cox Broadcasting. Mr.
Beckman-Robertson holds a B.A. in television and film from Northwestern
University.
Tobin W. Trevarthen has served as our Vice President Business Development
since January 2000. From June 1993 to December 1999, Mr. Trevarthen served as
Corporate Sales Director for the Time Inc. division of Time Warner. From 1991
to 1993, Mr. Trevarthen served as Senior Marketing Manager for Meredith
Corporation, a publishing company. From 1987 to 1991, Mr. Trevarthen served as
Midwest Sales Manager for USA Weekend, a division of Gannet Corporation, a
media company. In May 1994, Mr. Trevarthen co-founded The Paradigm Network, a
technology, media and entertainment convergence group in Los Angeles.
Mr. Trevarthen holds a B.A. in advertising from Michigan State University.
Mauro Calvi has served as our Vice President International since December
1999. From 1998 to 1999, Mr. Calvi served as President of Telecom Italia
Ventures and served on the boards of Stream SpA, Italy's second largest pay
television network, Protozoa Inc. and Cygent Inc. From 1991 to 1997, Mr. Calvi
worked at Microsoft Corporation. During his tenure there, Mr. Calvi served from
1993 to 1997 as Lead Product Manager where he was responsible for the
international strategy, product planning and marketing of The Microsoft
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Network from its inception and, from 1991 to 1993, as Program Manager for the
Product Support Services Division. From 1990 to 1991, Mr. Calvi served as
International Product Manager for Ashton-Tate. Mr. Calvi holds an M.S. in
electrical engineering from the Politecnico di Milano, Italy.
Chad D. Balch has served as our Vice President Product Development since May
1999. From December 1997 to April 1999, Dr. Balch served as a technical
consultant in software development, working with start-up companies. From
February 1996 to October 1996, Dr. Balch worked as Manager of Motion Technology
for Parametric Technology Corporation, where he was in charge of core
development for mechanism simulation software. From September 1992 to February
1996, Dr. Balch served as Manager, Product Development for Rasna Corporation, a
producer of design and analysis software for engineers. From July 1980 to
February 1983, Dr. Balch worked as a research associate at the GWU/NASA Joint
Institute for the Advancement of Flight Sciences at NASA-Langley Research
Center. Dr. Balch holds a B.A. in physics from Harvard University, an M.S. in
mechanical engineering from George Washington University, and a Ph.D. in
aeronautical sciences from Stanford University.
Joseph M. Feliu has served as our Chief Information Officer and Vice
President Operations since May 1999. From August 1997 to August 1999, Mr. Feliu
served as Director of Information Technology at Integrated Device Technology, a
semiconductor manufacturer. From March 1996 to August 1997, Mr. Feliu served as
Senior Director of Information Technology at Applied Materials, Inc., a
semiconductor equipment manufacturer. In these positions, Mr. Feliu was
responsible for the operations of these companies' global information
technology infrastructure. From May 1981 to February 1996, Mr. Feliu held
several director-level positions in operations and information technology for
the United States Postal Service. In January 1994, Mr. Feliu was elected as
Chairman of the Northern California Chapter of the Society for Information
Management. Mr. Feliu holds a B.S. in mathematics from Manhattan College and an
M.S. in operations research from George Washington University.
Raymond B. Everett-Church has served as our Chief Privacy Officer and Vice
President Public Policy since August 1999. From November 1998 to August 1999,
Mr. Everett-Church served as an Associate with Haley Bader & Potts, a
technology law firm. Since 1996, Mr. Everett-Church has served as a technology
policy advocate and lobbyist on issues of privacy and anti-spam. Mr. Everett-
Church serves as an ad hoc advisor to the Internet Service Provider Security
Consortium of the International Computer Security Association, as a member of
the Congressional Internet Caucus' Advisory Committee for the 106th U.S.
Congress, and as a Fellow with the Internet Telecommunications Project. In
April 1999, Mr. Everett-Church was a founding board member of Whitehat.com, a
permission-based email marketing service bureau. In March 1997, Mr. Everett-
Church was a founding board member of the Coalition Against Unsolicited
Commercial Email. From August 1994 to November 1998, Mr. Everett-Church served
as a technology management and Internet consultant. From November 1992 to June
1994, Mr. Everett-Church served as an Information Specialist with the American
Immigration Lawyers Association. Mr. Everett-Church holds a B.A. from George
Mason University and a J.D. from George Washington University School of Law.
Nicola C. Barrett has served as our Vice President Media Strategy since
November 1999. From July 1995 to November 1999, Ms. Barrett worked at Ernst &
Young LLP, an accounting firm. During her tenure there, Ms. Barrett served from
October 1997 to November 1999 as Senior Manager, Strategic Services Development
where she focused on developing new service and business opportunities. From
July 1995 to October 1997, Ms. Barrett served as Manager, National Planning
where she advised executive management on strategic business issues. From 1994
to 1995, Ms. Barrett was a management consultant at Bankers Trust and from 1981
to 1992 worked at IBM Australia where she held a number of sales, marketing and
management positions. Ms. Barrett holds a B.Ru.Sci. honors degree from the
University of New England, Australia and a M.M. from the Kellogg Graduate
School of Management at Northwestern University.
David C. Martin has served as our Vice President Business Intelligence since
January 2000. From April 1995 to December 1999, Mr. Martin worked for
International Business Machines Corporation, where he most recently served as
development executive for global business intelligence solutions. During his
tenure at IBM, Mr. Martin also served as a senior development manager for
net.Mining Solutions and as an information
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technology specialist. From September 1992 to April 1995, Mr. Martin worked as
assistant director for innovative software systems for University of California
at San Francisco Library and Center for Knowledge Management. From 1991 to
1992, Mr. Martin worked as senior systems scientist for Molecular Simulations,
Inc., a computational science company. Mr. Martin holds a B.A. in
interdisciplinary science from the University of California at Berkeley and an
M.S. in computer science from the University of Wisconsin at Madison.
Nancy Myers Booth has served as our Vice President Product Marketing since
July 1999. From September 1996 to July 1999, Ms. Booth served as a marketing
and advertising consultant with Kensington Technology Group specializing in
product positioning and new product development. From 1990 to 1991, Ms. Booth
served as Vice President at Young & Rubicam, an advertising agency. From 1983
to 1989, Ms. Booth worked at Foote Cone & Belding, an advertising agency where
she served as Vice President, Management Supervisor from 1987 to 1989, as
Account Supervisor from 1985 to 1987 and as Account Executive from 1983 to
1985. In addition, Ms. Booth has held marketing positions at General Mills. Ms.
Booth holds a B.S. in Consumer Food Science from the University of California
at Davis and an M.B.A. from the University of California at Berkeley.
Bernie J. Murphy has served as our Vice President Finance, Treasurer since
December 1999. From June 1996 to December 1999, Mr. Murphy held various
positions at QuadraMed Corporation a health care information systems company.
From February 1998 to December 1999, he served as QuadraMed's Vice President,
Finance and Chief Accounting Officer and, from June 1996 to February 1998, as
Corporate Controller. From July 1988 to June 1996, Mr. Murphy worked at Arthur
Andersen LLP, where he served in various positions from July 1988 to August
1993 and as manager in the business advisory practice from September 1993 until
June 1996. Mr. Murphy holds a B.S. in Business Administration from the
University of San Francisco and is a certified public accountant.
David W. Pidwell has served as a director of AllAdvantage since June 1999.
Since January 1996, Mr. Pidwell has served as a venture partner with Alloy
Ventures, a venture capital firm. Mr. Pidwell serves on the boards of directors
of Informatica Corporation and several private companies, including eTranslate,
RAINfinity and Made To Order.com. From January 1987 to January 1996, Mr.
Pidwell served as Chief Executive Officer and President of Rasna Corp, a
mechanical design automation software company that he founded. Mr. Pidwell
holds a B.S. in electrical engineering and a M.S.I.S.E. in computer systems
engineering from Ohio University.
John F. Shoch has served as a director of AllAdvantage since June 1999. Dr.
Shoch serves as a general partner with Alloy Ventures, a venture capital firm.
From October 1985 until December 1995, Dr. Shoch was a general partner with
Asset Management Company, a venture capital firm. From 1971 until 1985, Dr.
Shoch held various positions with Xerox Corporation, initially at the Palo Alto
Research Center and ultimately as President of Xerox's Office Systems Division.
Dr. Shoch is a director of Remedy, Conductus and several private companies,
including BoldFish, InterSurvey, Kasenna, MontaVista, Network Elements, PostX,
UpShot and Zing. Dr. Shoch holds a B.A. in political science from Stanford
University, an M.S. in computer science from Stanford University, and a Ph.D.
in computer science from Stanford University.
Thomas Unterman has served as a director of AllAvantage since September
1999. Mr. Unterman serves as the Chief Executive Officer and a Partner of the
Rustic Canyon Group and the Manager of TMCT Ventures, a venture capital
investment firm, both of which are affiliated with Times Mirror. Mr. Unterman
held various other positions at Times Mirror including Vice President and
General Counsel from 1992 to 1994, Senior Vice President and General Counsel in
1995, then Senior Vice President and Chief Financial Officer in 1995, and
Executive Vice President and Chief Financial Officer from January 1998 to
December 1999. Prior to Times Mirror, Mr. Unterman was a partner at two law
firms, Morrison & Foerester and Orrick, Herrington and Sutcliffe. Mr. Unterman
is a member of the board of directors of Ticketmaster Online-City Search, Big
Entertainment and several privately-held companies. Mr. Unterman holds a A.B.
in public affairs from Princeton University and a J.D. from the University of
Chicago.
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Richard A. LeFurgy has served as a director of AllAdvantage since September
1999. Mr. LeFurgy is a Partner with WaldenVC, a venture capital firm. From June
1995 to August 1998, Mr. LeFurgy was a Senior Vice President of Sales at
Starwave, an online media company that was acquired by Disney in 1998. From
June 1978 to May 1995, Mr. LeFurgy was a director and an Executive Vice
President and Senior Partner of NW Ayer & Partners, an advertising agency. Mr.
LeFurgy was a Founder of the Internet Advertising Bureau and is its Chairman.
Mr. LeFurgy also serves on the board of the Advertising Research Foundation and
the Advertising Educational Foundation. Mr. LeFurgy is a director of
Snowball.com, an Internet media company, and Lot 21, an online advertising
agency. He received his B.S. in advertising from Syracuse University.
William L. Burnham has served as a director of AllAdvantage since February
2000. Since August 1999, Mr. Burnham has been managing director of SOFTBANK
Capital Partners L.P. From July 1998 to August 1999, Mr. Burnham was a Vice
President of Credit Suisse First Boston Corporation. From May 1998 to July
1998, Mr. Burnham served as a Vice President at Deutsche Morgan Grenfell, and
from April 1997 to May 1998, he served as a Vice President at US Bancorp Piper
Jaffray. From August 1993 to March 1997, Mr. Burnham served as a Senior
Associate at Booz Allen & Hamilton, a management consulting company. Mr.
Burnham is a director of Buy.com Inc., an Internet retailer. Mr. Burnham holds
an A.B. in political science from Washington University.
Board Composition
Our bylaws currently provide for a board of directors consisting of eight
members. The term of each of our current directors will expire at the next
annual meeting of stockholders. Commencing at the first annual meeting of
stockholders following the date on which we first have at least 800
stockholders, the board of directors will be divided into three classes,
serving staggered three-year terms: Class I, whose term will expire at the
first annual meeting of stockholders following the annual meeting of
stockholders when we first have at least 800 stockholders; Class II, whose term
will expire at the second annual meeting of stockholders following the annual
meeting of stockholders when we first have at least 800 stockholders; and Class
III, whose term will expire at the third annual meeting of stockholders
following the annual meeting of stockholders when we first have at least 800
stockholders. As a result, only one class of directors will be elected at each
annual meeting of stockholders, with the other classes continuing for the
remainder of their respective terms. Messrs. Shoch and Unterman have been
designated as Class I directors; Messrs. Burnham and Pohle have been designated
as Class II directors; and Messrs. Jorgensen, Pidwell and LeFurgy have been
designated as Class III directors. We do not expect to have 800 or more
stockholders immediately after this offering.
Board Committees
The audit committee consists of Messrs. Shoch, Unterman and Burnham. The
audit committee:
. reviews our financial statements and accounting practices;
. makes recommendations to the board of directors regarding the selection
of independent auditors; and
. reviews the results and scope of the audit and other services provided
by our independent auditors.
The compensation committee consists of Messrs. LeFurgy and Pidwell. The
compensation committee:
. reviews and recommends to the board of directors the compensation and
benefits of all officers, directors and consultants of AllAdvantage; and
. reviews general policy relating to compensation and benefits.
The board of directors currently administers the issuance of stock options
and other awards under the 1999 equity incentive plan and 2000 equity incentive
plan of our California predecessor and our 2000 equity incentive plan and our
2000 employee stock purchase plan.
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Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee has at any time been an
officer or employee of AllAdvantage. For a description of transactions between
AllAdvantage and members of the compensation committee or entities affiliated
with them, see "Related-Party Transactions." None of our executive officers
serves as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving as a member of our board
of directors or compensation committee.
Change of Control Arrangements
Mr. Jorgensen and Messrs. Depatie, Johnson and Pohle, whom we anticipate
will be executive officers named in our summary compensation table in future
years, have each purchased shares of common stock or received options to
purchase common stock subject to agreements providing for accelerated vesting
under certain circumstances following a change in control of AllAdvantage. With
respect to Mr. Jorgensen, upon a change in control transaction followed within
nine months by a termination of employment meeting specified conditions,
vesting will accelerate as to any unvested portion of the 7,333,336 shares of
common stock that he holds. With respect to Mr. Pohle, upon a change in control
transaction followed within nine months by a termination of employment meeting
specified conditions, vesting will accelerate as to any unvested portion of the
7,333,332 shares of common stock that he holds. With respect to Mr. Depatie,
upon a change in control transaction followed within 12 months by a termination
of employment meeting specified conditions, vesting will accelerate as to an
additional 175,000 shares subject to the stock option granted to him. With
respect to Mr. Johnson, upon a change in control transaction followed within 12
months by a termination of employment meeting specified conditions, vesting
will accelerate as to an additional 42,500 shares subject to the stock option
granted to him. However, this acceleration in vesting for Mr. Johnson will not
occur, subject to limited exceptions, if AllAdvantage undergoes, or agrees to
undergo, a change in control transaction on or before May 15, 2000.
Director Compensation
Directors of AllAdvantage do not receive cash compensation for their
services as directors, but are reimbursed for their reasonable and necessary
expenses for attending board and board committee meetings. All board members
are eligible to receive stock options pursuant to the discretionary option
grant program in effect under the 1999 equity incentive plan and 2000 equity
incentive plan of our California predecessor and under our 2000 equity
incentive plan.
In July 1999, David W. Pidwell was granted an option to purchase 200,000
shares of common stock under the 1999 equity incentive plan of our California
predecessor. This option was exercised in full in November 1999, but the shares
purchased are subject to our right of repurchase, which lapses with respect to
25% of the shares in July 2000 and 2.083% of the shares each month thereafter.
Each eligible director who is not our employee and who is or becomes a
member of our board will be automatically granted an option to purchase 10,000
shares of common stock under our 2000 equity incentive plan, unless that
director has previously received an option grant. Immediately following each
annual meeting of stockholders, each eligible director will automatically be
granted an option to purchase 10,000 shares of common stock under our 2000
equity incentive plan, provided that the director is a member of the board on
that date and has served continuously as a member of the board for a period of
at least one year since the date of the director's initial grant. All options
will have an exercise price equal to the fair market value of our common stock
on the date of grant. The options will have ten-year terms and will terminate
three months after the date the director ceases to be one of our directors or
consultants or 12 months after any termination due to death or disability.
Options granted under the plan will generally vest over four years. Any
unvested shares subject to these options will become fully vested and
exercisable upon a transaction that results in a change in our control.
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Executive Compensation
The following table shows all compensation awarded to, earned by or paid for
services rendered to AllAdvantage by our chief executive officer in 1999. None
of our executive officers or former executive officers earned compensation in
excess of $100,000 in 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Name and Principal Position Annual Compensation
- --------------------------- -------------------
Salary
------
<S> <C>
James R. Jorgensen......................................... $65,000(1)
Chief Executive Officer, President and Chairman
</TABLE>
- --------
(1) Represents salary from the formation of AllAdvantage in March 1999 through
December 1999. Mr. Jorgensen's salary for 2000 is $175,000.
We currently employ the following executive officers who we anticipate will
be named in the summary compensation table in future years. Those executives
are Michael A. Depatie, with an annual salary of $175,000 in 2000, David W.
Johnson, with an annual salary of $150,000 in 2000, Johannes A. Pohle, with an
annual salary of $120,000 in 2000 and Carl T. Anderson, with an annual salary
of $120,000.
Option Grants and Exercises in Last Fiscal Year
During 1999, we granted no options to Messrs. Anderson, Jorgensen or Pohle.
In October 1999, we granted an option to purchase 700,000 shares of our common
stock at an exercise price per share of $0.75 to Mr. Depatie and, in November
1999, Mr. Depatie exercised this option with respect to 133,333 shares. In
September 1999, we granted an option to purchase 170,000 shares of our common
stock at an exercise price per share of $0.18 to Mr. Johnson, and in September
1999, Mr. Johnson exercised this option in full. Each of these options was
immediately exercisable, but the shares issued upon exercise are subject to our
right of repurchase, which lapses with respect to 25% of the shares after one
year and 2.083% of the shares each month thereafter.
Employee Benefit Plans
1999 Equity Incentive Plan of our California Predecessor
The 1999 equity incentive plan of our California predecessor was adopted by
its board of directors in April 1999. As of December 31, 1999, 4,498,133 shares
of common stock had been purchased pursuant to the exercise of options granted
under this plan, options to purchase a total of 10,484,233 shares of common
stock with a weighted-average exercise price of $0.69 were outstanding under
this plan, and 217,634 shares remained available for future grants of options
under this plan. No further options will be granted under this plan following
this offering. All outstanding options granted under this plan will remain
outstanding and subject to the terms of this plan and relevant stock option
agreements until they are exercised, or until they terminate or expire by their
terms. Under this plan, upon a change in control of AllAdvantage though a
merger or sale of assets, if stock options and restricted stock awards are not
assumed or substituted with similar consideration by the successor or acquiring
corporation, then the stock options and restricted stock awards will terminate.
2000 Equity Incentive Plan of our California Predecessor
The 2000 equity incentive plan of our California predecessor was adopted by
its board of directors in January 2000. As of , 2000, shares of
common stock had been purchased pursuant to the exercise of options granted
under this plan, options to purchase a total of shares of common
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stock with a weighted-average exercise price of $ were outstanding under
this plan, and shares remained available for future grants under this
plan. No further options will be granted under this plan following this
offering. All outstanding options granted under this plan will remain
outstanding and subject to the terms of this plan and relevant stock option
agreements until they are exercised, or until they terminate or expire by their
terms. Under this plan, upon a change in control of AllAdvantage though a
merger or sale of assets, if stock options and restricted stock awards are not
assumed or substituted with similar consideration by the successor or acquiring
corporation, then the stock options and restricted stock awards will terminate.
2000 Equity Incentive Plan
Our 2000 equity incentive plan will become effective on the date of this
prospectus and will serve as the successor to the 1999 equity incentive plan
and 2000 equity incentive plan of our California predecessor. We have reserved
20,000,000 shares of common stock for issuance under this plan. Our 2000 equity
incentive plan authorizes the award of options, restricted stock awards and
stock bonuses. The number of shares reserved for issuance under this plan will
be increased to include:
. any shares reserved under the 1999 equity incentive plan or 2000 equity
incentive plan of our California predecessor not issued or subject to
outstanding grants on the date of this prospectus;
. any shares issued under the 1999 equity incentive plan or 2000 equity
incentive plan of our California predecessor that are repurchased by us
at the original purchase price; and
. any shares issuable upon exercise of options granted under the 1999
equity incentive plan or 2000 equity incentive plan of our California
predecessor that expire or become unexercisable without having been
exercised in full.
The number of shares reserved under this plan will be increased
automatically on January 1 of each year by an amount equal to 5% of our total
outstanding shares on the day before.
The following shares will again become available for grant and issuance
under our 2000 equity incentive plan:
. shares issuable upon exercise of an option granted under this plan that
is terminated or cancelled before it is exercised;
. shares issued upon exercise of an option granted under this plan that
are subsequently repurchased by us at the original purchase price;
. shares subject to awards granted under this plan that are subsequently
forfeited or repurchased by us at the original issue price; and
. shares subject to stock bonuses granted under this plan that otherwise
terminate without shares being issued.
No person will be eligible to receive more than 10,000,000 shares in any
calendar year under this plan. This plan is administered by the compensation
committee of our board of directors, all members of which are "outside
directors" as defined under applicable federal tax laws. The committee has the
authority to interpret this plan and any agreement made under the plan, grant
options, awards and stock bonuses and make all other determinations for the
administration of this plan. Also, our non-employee directors are entitled to
receive automatic annual grants of options to purchase shares of our common
stock, as described under "Management--Director Compensation."
Our 2000 equity incentive plan provides for the grant of both incentive
stock options that qualify under Section 422 of the Internal Revenue Code and
nonqualified stock options. Incentive stock options may be granted only to
employees. Nonqualified stock options, and all other awards other than
incentive stock options, may be granted to employees, officers, directors,
consultants, independent contractors and advisors of
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AllAdvantage or a parent or subsidiary of AllAdvantage. However, consultants,
independent contractors and advisors are only eligible to receive awards if
they render bona fide services not in connection with the offer and sale of
securities in a capital-raising transaction.
The exercise price of incentive stock options must be at least equal to the
fair market value of the underlying common stock on the date of grant. The
exercise price of incentive stock options granted to 10% stockholders must be
at least equal to 110% of that value, and the exercise price of nonqualified
stock options must be at least equal to 85% of that value. Options may be
granted that are exercisable only as they vest or may be immediately
exercisable with the shares issued subject to our right of repurchase that
lapses as the shares vest. In general, options will vest over a four-year
period. The maximum term of options granted under our 2000 equity incentive
plan is ten years. Awards granted under this plan may not be transferred in any
manner other than by will or by the laws of descent and distribution and may be
exercised during the lifetime of the optionee only by the optionee. The
compensation committee may allow exceptions to this restriction with respect to
awards that are not incentive stock options. Options granted under our 2000
equity incentive plan generally expire three months after the termination of
the optionee's service to AllAdvantage or a parent or subsidiary of
AllAdvantage. In the event of a dissolution, liquidation or change in control
of AllAdvantage, if the successor does not assume the options, they will expire
upon conditions determined by the compensation committee. Alternatively, the
compensation committee may accelerate the vesting of awards upon a change in
control of AllAdvantage. This plan will terminate in 2010, unless it is
terminated earlier pursuant to its terms.
2000 Employee Stock Purchase Plan
Our 2000 employee stock purchase plan will become effective on the first day
on which price quotations are available for our common stock on the Nasdaq
National Market. We have initially reserved 600,000 shares of common stock for
issuance under this plan. The number of shares reserved for issuance under our
2000 employee stock purchase plan will be increased automatically on January 1
of each year by an amount equal to 1% of our total outstanding shares on the
day before. Our board of directors or compensation committee may reduce the
amount of the increase in any particular year.
Our compensation committee will administer our 2000 employee stock purchase
plan. Employees generally will be eligible to participate in our 2000 employee
stock purchase plan if they are employed by AllAdvantage, or any subsidiaries
that AllAdvantage designates, for more than 20 hours per week and more than
five months in a calendar year. Employees are not eligible to participate in
our 2000 employee stock purchase plan if they are 5% stockholders, or would
become 5% stockholders as a result of their participation in this plan. Under
our 2000 employee stock purchase plan, eligible employees may acquire shares of
our common stock through payroll deductions. Eligible employees may select a
rate of payroll deduction between 1% and 15% of their cash compensation and are
subject to maximum purchase limitations. Participation in this plan will end
automatically upon termination of employment for any reason. A participant will
not be able to purchase shares having a fair market value of more than $25,000,
determined as of the first day of the applicable offering period, for each
calendar year in which the employee participates in this plan.
Each offering period under this plan will be for two years and will consist
of four six-month purchase periods. The first offering period is expected to
begin on the first business day on which price quotations for our common stock
are available on the Nasdaq National Market. The first purchase period may be
more or less than six months long. Offering periods thereafter will begin on
February 1 and August 1. The purchase price for common stock purchased under
this plan will be 85% of the lesser of the fair market value of our common
stock on the first day of the applicable offering period or the last day of
each purchase period. The compensation committee will have the power to change
the offering dates, the purchase dates and the duration of offering periods.
Our 2000 employee stock purchase plan is intended to qualify as an employee
stock purchase plan under Section 423 of the Internal Revenue Code. This plan
will terminate in 2010, unless it is terminated earlier pursuant to its terms.
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401(k) Plan
We sponsor a defined contribution plan intended to qualify under Section 401
of the Internal Revenue Code. Participants may make pre-tax contributions to
the plan of up to 25% of their eligible earnings, subject to a statutorily
prescribed annual limit, which is $10,500 in 2000. Contributions by the
participants to the 401(k) plan, and the earnings on these contributions, are
generally not taxable to the participants until withdrawn. Participants are
fully vested in their contributions and the earnings on these contributions.
Contributions are held in trust as required by law. Individual participants may
direct the trustee to invest their accounts in authorized investment
alternatives.
Limitation of Liability and Indemnification of Directors and Executive Officers
Our certificate of incorporation includes a provision that eliminates the
personal liability of a director for monetary damages resulting from breach of
his fiduciary duty as a director, except for liability:
. for any breach of the director's duty of loyalty to AllAdvantage or its
stockholders;
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. under section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
. for any transaction from which the director derived an improper personal
benefit.
Our bylaws provide that:
. we are required to indemnify our directors and officers to the fullest
extent permitted by the Delaware General Corporation Law, subject to
limited exceptions where indemnification is not permitted by applicable
law;
. we are required to advance expenses, as incurred, to our directors and
executive officers in connection with a legal proceeding to the fullest
extent permitted by the Delaware General Corporation Law, subject to
limited exceptions; and
. the rights conferred in the bylaws are not exclusive.
In addition to the indemnification required in our certificate of
incorporation and bylaws, before the completion of this offering, we intend to
enter into indemnity agreements with each of our current directors and
officers. These agreements will provide for the indemnification of our officers
and directors for all expenses and liabilities incurred in connection with any
action or proceeding brought against them by reason of the fact that they are
or were agents of AllAdvantage. We also intend to obtain directors' and
officers' insurance to cover our directors, officers and some of our employees
for liabilities, including liabilities under securities laws. We believe that
these indemnification provisions and agreements and this insurance are
necessary to attract and retain qualified directors and officers.
The limitation of liability and indemnification provisions in our
certificate of incorporation and bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty. They
may also reduce the likelihood of derivative litigation against directors and
officers, even though an action, if successful, might benefit us and other
stockholders. Furthermore, a stockholder's investment may be adversely affected
to the extent we pay the costs of settlement and damage awards against
directors and officers as required by these indemnification provisions. At
present, there is no pending litigation or proceeding involving any of our
directors, officers or employees regarding which indemnification by
AllAdvantage is sought, nor are we aware of any threatened litigation that may
result in claims for indemnification.
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RELATED PARTY TRANSACTIONS
Since we incorporated in March 1999, there has not been, nor is there
currently proposed, any transaction or series of similar transactions to which
we were or are to be a party in which the amount involved exceeds $60,000 and
in which any director, executive officer or holder of more than 5% of our
common stock or any member of their immediate family had or will have a direct
or indirect interest, other than compensation arrangements which are described
where required under "Management" and the transactions described below. Share
numbers and per share prices for the transactions described below are presented
on an as-converted to common stock basis and reflect the two-for-one common
stock splits effected on July 1, 1999 and October 13, 1999.
Issuances of Common Stock and Preferred Stock
The following table summarizes the shares of common stock and preferred
stock purchased in private placement transactions by directors, executive
officers, 5% stockholders and other stockholders of AllAdvantage since its
incorporation in March 1999.
<TABLE>
<CAPTION>
Preferred Stock Warrants for
Common ---------------------------------------- Series C
Stockholder Stock Series A Series B Series C Series D Preferred Stock
----------- --------- --------- --------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
James R. Jorgensen...... 7,333,336 8,000,000 -- -- -- --
Johannes A. Pohle....... 7,333,332 2,000,000 -- -- -- --
Carl T. Anderson........ 6,533,332 4,000,000 -- -- -- --
Oliver Brock............ 2,800,000 2,000,000 -- -- -- --
Entities affiliated with
Alloy Ventures
1998, LLC (1).......... -- -- 8,333,336 4,460,652 165,289 232,654
Pidwell Investments LLC
(2).................... -- -- 555,556 122,448 16,529 12,244
Entities affiliated with
J. & W. Seligman & Co.
Incorporated (3)....... -- -- -- 4,081,634 165,289 --
Entities affiliated with
Partech
International (4)...... -- -- -- 4,081,632 165,289 --
Technology Partners
Fund, L.P.............. -- -- -- 4,081,632 165,289 --
TMCT Ventures, L.P.
(5).................... -- -- -- 4,081,632 165,289 122,448
Walden Media and
Information Technology
Fund L.P............... -- -- -- 4,081,632 165,289 122,448
Michael A. Depatie Trust
U/A DTD 7/18/91 (6).... -- -- -- 816,326 -- --
Entities affiliated with
SOFTBANK Capital
Partners L.P. (7)...... -- -- -- -- 11,570,248 --
Putnam OTC & Emerging
Growth Fund............ -- -- -- -- 991,736 --
Putnam Emerging
Information Sciences
Trust.................. -- -- -- -- 247,934 --
T. Rowe Price........... -- -- -- -- 1,239,670 --
</TABLE>
- --------
(1) John F. Shoch is a managing member of Alloy Ventures 1998, LLC, which is
the general partner of the purchasers of these shares--each of AMA98
Corporate, L.P., AMA98 Investors, L.P., AMA98 Partners, L.P. and AMA98
Ventures, L.P. Alloy Ventures 1998, LLC is therefore deemed to exercise
voting and investment power over all of the shares held by AMA98 Corporate,
L.P., AMA98 Investors, L.P., AMA98 Partners, L.P. and AMA98 Ventures, L.P.
(2) David W. Pidwell is a managing member of Pidwell Investments LLC and is
therefore deemed to exercise voting and investment power over all of the
shares held by Pidwell Investments LLC. In July 1998 David Pidwell was
granted an option for 200,000 shares of common stock, which was exercised
in full in November 1999, as described under "Management--Director
Compensation."
(3) J. & W. Seligman & Co. Incorporated is the investment advisor to Seligman
New Technologies Fund, Inc., Seligman Communications and Information Fund,
Inc. and Seligman Investment Opportunities (Master) Fund--NTV Portfolio,
and is therefore deemed to exercise voting and investment power over all of
the shares held by these entities.
(4) Vincent Worms is the managing member of Axa U.S. Growth Fund, LLC, Parallel
I, LLC, Parallel II, LLC, Double Black Diamond II, LLC, 45th Parallel, LLC,
and Multinvest, LLC, the investment general partner of Partech U.S.
Partners III C.V., and the attorney-in-fact for Almanori Limited, and is
therefore deemed to exercise voting and investment power over all of the
shares held by these entities.
(5) Thomas Unterman is managing partner of Rustic Canyon Partners, LLC, which
is the general partner of TMCT Ventures, L.P. Rustic Canyon Partners, LLC
is therefore deemed to exercise voting and investment power over all of the
shares held by TMCT Ventures, L.P.
(6) In October 1999 Michael Depatie was granted an option for 700,000 shares of
common stock, which was exercised with respect to 133,333 shares in
November 1999, as described under "Management--Option Grants and Exercises
in Last Fiscal Year."
(7) William L. Burnham is a managing director of the general partner of
SOFTBANK Capital Partners L.P. and SOFTBANK Capital Advisors Fund L.P. The
general partner is therefore deemed to exercise voting and investment power
over all of the shares held by SOFTBANK Capital Partners L.P. and SOFTBANK
Capital Advisors Fund L.P.
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Issuance of Founders Stock and Series A Preferred Stock
In April 1999, we sold a total of 24,000,000 shares of common stock at a
price per share of $0.00104175, for a total purchase price of $25,002, to James
R. Jorgensen, Johannes A. Pohle, Carl T. Anderson and Oliver Brock, the
founders of AllAdvantage, pursuant to restricted stock purchase agreements. The
per share consideration paid represented $0.00104167 in cash and $0.00000008
for the assignment to AllAdvantage of technology for the Viewbar and related
systems developed by the founders. Messrs. Jorgensen, Pohle, Anderson and Brock
collectively made the valuation of this technology. At the time of issuance,
4,933,332 of the shares held by Mr. Jorgensen, 4,933,332 of the shares held by
Mr. Pohle, 4,933,332 of the shares held by Mr. Anderson and 1,200,000 of the
shares held by Mr. Brock were unvested and subject to our right of repurchase
upon termination of employment. This right of repurchase will expire as to 25%
of the shares one year after the date of issuance and 2.083% of the shares each
month thereafter. Upon a change in control transaction followed within nine
months by a termination of employment meeting specified conditions, vesting
will accelerate as to all of the then unvested shares.
In April 1999, we sold a total of 16,000,000 shares of Series A preferred
stock at a price per share of $0.0125, for a total purchase price of $200,000,
to Messrs. Jorgensen, Pohle, Anderson and Brock. The consideration paid was the
cancellation of indebtedness of AllAdvantage to the purchasers.
Issuance of Series B Preferred Stock
In June 1999, we sold a total of 10,000,000 shares of Series B preferred
stock at a price per share of $0.18 to several investors pursuant to a
preferred stock purchase agreement, including:
. entities affiliated with Alloy Ventures 1998, LLC, which purchased a
total of 8,333,336 shares of Series B preferred stock for a total
purchase price of $1,500,000; and
. Pidwell Investments LLC, which purchased a total of 555,556 shares of
Series B preferred stock for a total purchase price of $100,000.
Issuance of Series C Preferred Stock
In September 1999, we sold a total of 24,995,912 shares of Series C
preferred stock at price per share of $1.225 to several investors pursuant to a
preferred stock purchase agreement, including:
. entities affiliated with Alloy Ventures 1998, LLC, which purchased a
total of 4,460,652 shares of Series C preferred stock for a total
purchase price of $5,464,298;
. Pidwell Investments LLC, which purchased a total of 122,448 shares of
Series C preferred stock for a total purchase price of $149,999;
. the John M. Anderson Trust u/d/d July 16, 1999, as amended, whose
trustee is John Anderson, the father of Carl T. Anderson, which
purchased a total of 81,632 shares of Series C preferred stock for a
total purchase price of $99,999;
. entities affiliated with J. & W. Seligman & Co. Incorporated, which
purchased a total of 4,081,634 shares of Series C preferred stock for a
total purchase price of $5,000,002;
. entities affiliated with Partech International, which purchased a total
of 4,081,632 shares of Series C preferred stock for a total purchase
price of $4,999,999;
. Technology Partners Fund, L.P., which purchased a total of 4,081,632
shares of Series C preferred stock for a total purchase price of
$4,999,999;
. TMCT Ventures, L.P., which purchased a total of 4,081,632 shares of
Series C preferred stock for a total purchase price of $4,999,999; and
. Walden Media and Information Technology Fund L.P., which purchased a
total of 4,081,632 shares of Series C preferred stock for a total
purchase price of $4,999,999.
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In October 1999, we committed to sell an additional 816,326 shares of Series
C preferred stock at a price per share of $1.225 to the Michael A. Deptatie
Trust U/A DTD 7/18/91 pursuant to the preferred stock purchase agreement. These
shares were later sold to the trust.
Issuance of Series C Warrants
In September 1999, in connection with a bridge financing of convertible
notes, we issued warrants to purchase shares of our Series C preferred stock
with an exercise price of $0.03 per share to the following directors, executive
officers, 5% stockholders and entities associated with them. Unless exercised,
these warrants will remain outstanding after the completion of this offering at
which time they will each become exercisable for common stock. They will expire
in September 2009.
. entities affiliated with Alloy Ventures 1998, LLC received a warrant for
232,654 shares of Series C preferred stock;
. TMCT Ventures, L.P. received a warrant for 122,448 shares of Series C
preferred stock;
. Walden Media and Information Technology Fund L.P. received a warrant for
122,448 shares of Series C preferred stock; and
. David Pidwell received a warrant for 12,244 shares of Series C preferred
stock, which was exercised in full in November 1999.
Issuance of Series D Preferred Stock
In February 2000, we sold a total of 16,453,926 shares of Series D preferred
stock at price per share of $6.05 to several investors pursuant to a preferred
stock purchase agreement, including:
. entities affiliated with Alloy Ventures 1998, LLC, which purchased a
total of 165,289 shares of Series D preferred stock for a total purchase
price of $999,998;
. Pidwell Investments LLC, which purchased a total of 16,529 shares of
Series D preferred stock for a total purchase price of $100,000;
. entities affiliated with Partech International, which purchased a total
of 165,289 shares of Series D preferred stock for a total purchase price
of $999,998;
. entities affiliated with J & W. Seligman & Co. Incorporated, which
purchased a total of 165,289 shares of Series D preferred stock for a
total purchase price of $999,998;
. Technology Partners Fund, L.P., which purchased a total of 165,289
shares of Series D preferred stock for a total purchase price of
$999,998;
. TMCT Ventures, L.P., which purchased a total of 165,289 shares of Series
D preferred stock for a total purchase price of $999,998;
. Walden Media and Information Technology Fund L.P., which purchased a
total of 165,289 shares of Series D preferred stock for a total purchase
price of $999,998;
. Entities affiliated with SOFTBANK Capital Partners L.P., which together
purchased a total of 11,570,248 shares of Series D preferred stock for a
total purchase price of $70,000,000;
. Putnam Emerging Information Sciences Trust and Putman OTC & Emerging
Growth Fund, which together purchased a total of 1,239,670 shares of
Series D preferred stock for a total purchase price of $7,500,003; and
. T. Rowe Price, which purchased a total of 1,239,670 shares of Series D
preferred stock for a total purchase price of $7,500,003.
57
<PAGE>
Investors Rights Agreement
In connection with our issuances of Series B preferred stock, Series C
preferred stock and Series D preferred stock, we have entered into an investors
rights agreement granting the holders of the preferred stock registration
rights with respect to the common stock issuable upon conversion of their
preferred stock. Their registration rights are described in more detail under
"Description of Capital Stock--Registration Rights."
Contract with Summit Consulting Group
During 1999, Summit Group Consulting supplied recruiting and contract labor
services to us. During 1999, Summit Group Consulting recruited 30 employees for
us and was paid by us a total of $206,000 for those services. Summit Group
Consulting is owned by Bridget Jorgensen, the wife of James R. Jorgensen, our
President, Chief Executive Officer and Chairman.
58
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table presents information with respect to beneficial
ownership of our common stock as of February 4, 2000 by:
. each stockholder known by us to be the beneficial owner of more than 5%
of our common stock;
. other significant stockholders;
. each of our directors;
. the executive officer listed in the summary compensation table; and
. all current executive officers and directors as a group.
The percentage of beneficial ownership for the following table is based on
97,888,095 shares of common stock outstanding as of February 4, 2000, assuming
conversion of all outstanding shares of preferred stock into common stock.
Unless otherwise indicated, the address for each listed 5% stockholder is:
c/o AllAdvantage.com Inc., 4010 Point Eden Way, Hayward, California 94545. To
our knowledge, except as indicated in the footnotes to this table and under
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of common stock.
<TABLE>
<CAPTION>
Percentage of
Outstanding
Shares
Beneficially
Owned
-----------------
Number of Shares Before After
Name of Beneficial Owner Beneficially Owned Offering Offering
------------------------ ------------------ -------- --------
<S> <C> <C> <C>
James R. Jorgensen (1)................... 15,333,336 15.7
John F. Shoch
Entities affiliated with Alloy Ventures
1998, LLC (2)........................... 13,191,931 13.4
William L. Burnham
Entities affiliated with SOFTBANK
Capital Partners LP (3)................. 11,570,248 11.8
Carl T. Anderson (4)..................... 10,533,332 10.8
Johannes A. Pohle (5).................... 9,333,332 9.5
Oliver Brock (6)......................... 4,800,000 4.9
Thomas Unterman
TMCT Ventures, L.P. (7)................. 4,369,369 4.5
Richard A. LeFurgy
Walden Media and Information Technology
Fund L.P. (8)........................... 4,369,369 4.5
Entities affiliated with J. & W. Seligman
& Co. Incorporated (9).................. 4,246,923 4.3
Entities affiliated with Partech
International (10)...................... 4,246,921 4.3
Technology Partners Fund, L.P. .......... 4,246,921 4.3
T. Rowe Price ........................... 1,239,670 1.3
Putnam OTC & Emerging Growth Fund ....... 991,736 1.0
David W. Pidwell
Pidwell Investments LLC (11)............ 906,777 *
Putnam Emerging Information Sciences
Trust................................... 247,934 * *
All directors and executive officers as a
group (11 persons)(12).................. 71,724,651 72.6%
</TABLE>
- --------
*Less than 1%.
(1) Includes 4,933,332 shares subject to a right of repurchase held by us as of
February 4, 2000, which right of repurchase expires as to 25% of the shares
in April 2000 and 2.083% of the shares each month thereafter.
(2) Includes 9,454,097 shares held by AMA98 Ventures, L.P., 1,419,486 shares
held by AMA98 Investors, L.P., 1,134,494 shares held by AMA98 Corporate,
L.P., and 951,200 shares held by AMA98 Partners, L.P. Includes 232,654
shares subject to warrants held by these entities that are immediately
exercisable
59
<PAGE>
John F. Shoch is a managing member of Alloy Ventures 1998, LLC, which is
the general partner of each of AMA98 Corporate, L.P., AMA98 Investors,
L.P., AMA98 Partners, L.P. and AMA98 Ventures, L.P. The address of Mr.
Shoch and Alloy Ventures 1998, LLC is 480 Cowper Street, Palo Alto, CA
94301.
(3) Includes 11,404,793 shares held by SOFTBANK Capital Partners L.P. and
165,455 shares held by SOFTBANK Capital Advisors Fund L.P. William Burnham
is a managing director of the general partner of SOFTBANK Capital Partners
L.P. and SOFTBANK Capital Advisors Fund L.P. The address of Mr. Burnham and
these entities is 10 Langley Road, Suite 403, Newton Center, MA 02159.
(4) Includes 4,933,332 shares subject to a right of repurchase held by us as of
February 4, 2000, which right of repurchase expires as to 25% of the shares
in April 2000 and 2.083% of the shares each month thereafter.
(5) Includes 4,933,332 shares subject to a right of repurchase held by us as of
February 4, 2000, which right of repurchase expires as to 25% of the shares
in April 2000 and 2.083% of the shares each month thereafter.
(6) Includes 1,200,000 shares subject to a right of repurchase held by us as of
February 4, 2000, which right of repurchase expires as to 25% of the shares
in April 2000 and 2.083% of the shares each month thereafter.
(7) Includes 122,448 shares subject to a warrant held by TMCT Ventures, L.P.
that is immediately exercisable. Mr. Unterman is managing partner of Rustic
Canyon Partners, LLC, which is the general partner of TMCT Ventures, L.P.
(8) Includes 122,448 shares subject to a warrant that is immediately
exercisable. Richard A. LeFurgy, a representative of WaldenVC is one of our
directors, although he does not have voting power or investment power with
respect to the shares held by Walden Media and Information Technology Fund
L.P.
(9) Represents 2,786,642 shares held by Seligman New Technologies Fund, Inc.,
849,384 shares held by Seligman Communications and Information Fund, Inc.
and 610,897 shares held by Seligman Investment Opportunities (Master) Fund
NTV Portfolio. J. & W. Seligman & Co. Incorporated is the investment
advisor to Seligman New Technologies Fund, Inc., Seligman Communications
and Information Fund, Inc. and Seligman Investment Opportunities (Master)
Fund-NTV Portfolio.
(10) Represents 1,953,585 shares held by Partech U.S. Partners III C.V.,
862,125 shares held by Parallel Capital II, LLC, 719,428 shares held by
Parallel Capital I, LLC, 456,967 shares held by Axa U.S. Growth Fund, LLC,
127,409 shares held by Double Black Diamond II, LLC, 42,469 shares held by
45th Parallel, LLC, 42,469 shares held by Almanori Limited and 42,469
shares held by Multinvest, LLC. Vincent Worms is the investment general
partner of Partech U.S. Partners III C.V., the managing member of Parallel
Capital II, LLC, Parallel Capital I, LLC, Axa U.S. Growth Fund, LLC,
Double Black Diamond II, 45th Parallel, LLC and Multinvest, LLC, and the
attorney-in-fact for Almanori Limited.
(11) Represents 690,248 shares held by Pidwell Investments LLC and 200,000
shares held by David Pidwell. The 200,000 shares held by Mr. Pidwell are
subject to our right of repurchase as of February 4, 2000, which right of
repurchase expires as to 25% of the shares in July 2000 and 2.083% of the
shares each month thereafter. David Pidwell is a managing member of
Pidwell Investments LLC.
(12) Includes 16,199,996 shares subject to our right of repurchase as of
February 4, 2000. Includes 566,667 shares subject to an immediately
exercisable option and 355,102 shares subject to immediately exercisable
warrants. Does not include shares or warrants held by Walden Media and
Information Technology Fund L.P.
The shares included in the preceding table as beneficially owned by some of
our executive officers and directors include outstanding shares that we have
the right to repurchase upon termination of their employment or status as a
director or consultant. This repurchase right entitles us to repurchase the
shares at a price equal to the initial purchase price paid by the stockholder
for the shares. Our repurchase right generally lapses over a four-year period.
In addition, the shares included in the preceding table as beneficially
owned by some of our executive officers, directors and 5% stockholders include
shares that are issuable under stock options or warrants that are exercisable
on or before March 31, 2000. These shares are deemed outstanding for purposes
of computing the percentage held by the person holding the options or warrants
but are not deemed outstanding for purposes of computing the percentage of any
other person.
60
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Immediately following the closing of this offering, our authorized capital
stock will consist of shares of common stock, $0.001 par value per share,
and 5,000,000 shares of preferred stock, $0.001 par value per share. As of
February 4, 2000, and assuming the conversion of all outstanding preferred
stock into shares of common stock at the assumed initial public offering
price to $ per share and conversion of all warrants for preferred stock into
warrants for common stock, there were 97,888,095 shares of common stock
outstanding, of which 16,199,996 shares were subject to our right of
repurchase, options to purchase 9,682,883 shares of common stock and warrants
to purchase 552,550 shares of common stock.
Common Stock
Dividend Rights. Subject to preferences that may apply to shares of
preferred stock outstanding at the time, the holders of outstanding shares of
common stock are entitled to receive dividends out of assets legally available
at the times and in the amounts that the board of directors may determine from
time to time.
Voting Rights. Each holder of common stock is entitled to one vote for each
share of common stock held on all matters submitted to a vote of stockholders.
We have not provided for cumulative voting for the election of directors in our
certificate of incorporation. This means that, commencing at the first annual
meeting of stockholders following the date on which we first have at least 800
stockholders, the holders of a majority of the shares voted can elect all of
the directors then standing for election. Prior to that time, however,
cumulative voting in the election of directors will be in effect, meaning that
each share of voting stock will be entitled to a number of votes equal to the
number of votes to which that share would normally be entitled multiplied by
the number of directors to be elected. A stockholder may then cast all of these
votes for a single candidate or may allocate them among as many candidates as
the stockholder may choose. In addition, our certificate of incorporation and
bylaws require the approval of two-thirds, rather than a majority, of the
shares entitled to vote for some matters. For a description of these matters,
see "Description of Capital Stock--Anti-Takeover Provisions."
No Preemptive or Similar Rights. Our common stock is not entitled to
preemptive rights and is not subject to conversion or redemption.
Right to Receive Liquidation Distributions. Upon a liquidation, dissolution
or winding-up of AllAdvantage, the holders of common stock are entitled to
share ratably with holders of any participating preferred stock in all assets
remaining after payment of all liabilities and the liquidation preferences of
any outstanding preferred stock. Each outstanding share of common stock is, and
all shares of common stock to be outstanding upon completion of this offering
will be, fully paid and nonassessable.
Preferred Stock
Upon the closing of this offering, each outstanding share of preferred stock
will be converted into shares of common stock. See note 4 to the notes our
consolidated financial statements for a description of our preferred stock. If
the initial public offering price of the shares in this offering is less than
$12.10, then the conversion ratio for the Series D preferred stock will be
adjusted, so that each share of Series D preferred stock will convert into that
number of shares of common stock equal to the result obtained by dividing $6.05
by the greater of one-half of the offering price or $4.84.
Following the offering, we will be authorized, subject to limitations
imposed by Delaware law, to issue preferred stock in one or more series, to
establish from time to time the number of shares to be included in each series,
and to fix the rights, preferences and privileges of the shares of each wholly
unissued series and any of its qualifications, limitations or restrictions. The
board of directors can also increase or decrease the number of shares of any
series, but not below the number of shares of that series then outstanding,
without any further vote or action by the stockholders.
61
<PAGE>
The board may authorize the issuance of preferred stock with voting or
conversion rights that could harm the voting power or other rights of the
holders of the common stock. The issuance of preferred stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could, among other things, have the effect of delaying, deferring or
preventing a change in control of AllAdvantage and might harm the market price
of our common stock and the voting and other rights of the holders of common
stock. We have no current plans to issue any shares of preferred stock.
Warrants
As of February 4, 2000, we had outstanding the following warrants to
purchase our stock.
<TABLE>
<CAPTION>
Total Number of Shares Exercise Price
Type of Stock Subject to Warrants Per Share Expiration Date
------------- ---------------------- -------------- ---------------
<S> <C> <C> <C>
Series C Preferred
Stock.................. 238,775(1) $0.06(1) 9/22/09
Series D Preferred
Stock.................. 75,000(2) 6.05(2) 12/31/09
</TABLE>
- --------
(1) Unless exercised, these warrants will remain outstanding after the
completion of this offering, at which time they will become exercisable for
a total of 477,550 shares of common stock at an exercise price per share of
$0.03.
(2) Unless exercised, this warrant will remain outstanding after the completion
of this offering, at which time it will become exercisable for a total of
75,000 shares of common stock at an exercise price per share of $6.05.
Registration Rights
The holders of approximately 52,588,612 shares of common stock issuable upon
conversion of Series B, Series C and Series D preferred stock have the right to
require us to register their shares with the Securities and Exchange Commission
so that those shares may be publicly resold or to include their shares in any
registration statement we file.
Demand Registration Rights
At any time six months after the closing of this offering, the holders of at
least 40% of the shares having registration rights have the right to demand
that we register all or a portion of their shares. We are only obligated to
file three registration statements in response to these demand registration
rights. If neither the first nor the second demand registration right exercised
covers the sale of securities with a total public offering price of at least
$25 million, then the third demand registration right exercised must cover a
sale of at least $25 million of securities. We may postpone the filing of a
registration statement for up to 90 days once in a 12-month period if we
determine that the filing would be seriously detrimental to AllAdvantage and
its stockholders. The underwriters of any underwritten offering will have the
right to limit the number of shares to be included in a registration statement
filed in response to the exercise of these demand registration rights due to
marketing reasons.
Form S-3 Registration Rights
If we are eligible to file a registration statement on Form S-3, any holder
of shares having registration rights has the right to demand that we file a
registration statement on Form S-3, as long as the amount of securities to be
sold under the registration statement exceeds $1 million. We may postpone the
filing of a registration statement for up to 90 days once in a 12 month period
if we determine that the filing would be seriously detrimental to AllAdvantage
and its stockholders.
62
<PAGE>
Piggyback Registration Rights
If we register any securities for public sale, holders of shares with
registration rights will have the right to include their shares in the
registration statement. However, this right does not apply to a registration
statement filed pursuant to the exercise of demand registration rights or Form
S-3 registration rights. The underwriters of any underwritten offering will
have the right to limit the number of shares registered by these holders to 30%
of the total shares covered by the registration statement due to marketing
reasons.
Expenses of Registration
We will pay all expenses relating to any demand registration and the first
four piggyback registrations. However, we will not pay for the expenses of any
demand registration if the request is subsequently withdrawn by the holders of
a majority of the shares having registration rights, subject to very limited
exceptions.
Expiration of Registration Rights
The registration rights described above will expire five years after this
offering is completed.
Anti-Takeover Provisions
The provisions of Delaware law, our certificate of incorporation and our
bylaws may have the effect of delaying, deferring or discouraging another
person from acquiring control of us.
Delaware Law
We will be subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. This section prevents some
Delaware corporations from engaging, under some circumstances, in a business
combination, which includes a merger or sale of more than 10% of the
corporation's assets with any interested stockholder, which is a stockholder
who owns 15% or more of the corporation's outstanding voting stock, as well as
affiliates and associates of the stockholder, for three years following the
date that the stockholder became an "interested stockholder" unless:
. the transaction is approved by the board of directors prior to the date
the interested stockholder attained that status;
. upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced; or
. on or subsequent to that date the business combination is approved by
the board and authorized at an annual or special meeting of stockholders
by at least two-thirds of the outstanding voting stock that is not owned
by the interested stockholder.
A Delaware corporation may opt out of this provision with an express
provision in its original certificate of incorporation or an express provision
in its certificate or incorporation or bylaws resulting from a stockholders'
amendment approved by at least a majority of the outstanding voting shares.
However, we have not opted out of this provision. The statute could prohibit or
delay mergers or other takeover or change-in-control attempts and, accordingly,
may discourage attempts to acquire us.
Charter and Bylaws
Our certificate of incorporation and bylaws provide that:
. following the completion of this offering, no action can be taken by
stockholders except at an annual or special meeting of the stockholders
called in accordance with our bylaws and that stockholders may not act
by written consent;
63
<PAGE>
. following the completion of this offering, the approval of holders of
two-thirds of the shares entitled to vote at an election of directors
will be required to adopt, amend or repeal our bylaws or amend or repeal
the provisions of our certificate of incorporation regarding the
election and removal of directors and ability of stockholders to take
action;
. stockholders may not call special meetings of the stockholders or fill
vacancies on the board;
. commencing at the first annual meeting of stockholders following the
date on which we first have at least 800 stockholders, our board of
directors will be divided into three classes, each serving staggered
three-year terms. This means that only one class of directors will be
elected at each annual meeting of stockholders, with the other classes
continuing for the remainder of their respective terms. Directors may
only be removed for cause by the holders of two-thirds of the shares
entitled to vote at an election of directors (we do not expect to have
800 stockholders as a result of this offering, and we may not have this
many stockholders for some time, if at all); and
. we will indemnify officers and directors against losses that they may
incur in investigations and legal proceedings resulting from their
services to us, which may include services in connection with takeover
defense measures.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services.
Listing
We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the trading symbol "AADV."
64
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock, including shares issued
upon exercise of outstanding warrants or options, in the public market after
this offering could adversely affect market prices prevailing from time to time
and could impair our ability to raise capital through the sale of our equity
securities. Furthermore, as described below, no shares currently outstanding
will be available for sale immediately after this offering due to contractual
restrictions on resale. Sales of substantial amounts of our common stock in the
public market after these restrictions lapse could adversely affect the
prevailing market price and our ability to raise equity capital in the future.
Upon completion of this offering, based on shares outstanding at February 4,
2000, we will have outstanding shares of common stock, assuming no
exercise of the underwriters' over-allotment option and no exercise of
outstanding options and warrants. Shares held by our affiliates, which are
persons that directly or indirectly control, or are controlled by, or are under
common control with us, may generally only be sold in compliance with the
limitations of Rule 144 of the Securities Act. Of the outstanding shares, the
shares sold in this offering, shares of the underwriters' over-
allotment option is exercised in full, will be freely tradable without
restriction under the Securities Act unless purchased by our affiliates. The
remaining shares will be restricted securities as defined in Rule 144. We
issued and sold these restricted securities in private transactions in reliance
on exemptions from registration under the Securities Act. Restricted securities
may be sold in the public market only if they are registered or if they qualify
for an exemption from registration under Rule 144 or Rule 701 under the
Securities Act, as summarized below. The remaining shares will become eligible
for public sale as follows:
<TABLE>
<CAPTION>
Approximate
Number of
Shares
Eligible
for Future
Date Sale Comment
---- ----------- -------
<C> <C> <S>
Date of this prospectus 0 Freely tradable shares
Underwriters' lock-up released. These
181 days after the date of shares may be sold under Rules 144 or
this prospectus 701
At various times thereafter These shares may be sold under Rules
144, 144(k) or 701
</TABLE>
Lock-Up Agreements
All of our officers and directors and substantially all of our stockholders
have signed lock-up agreements under which they agreed not to sell, dispose of,
loan, pledge or grant any rights with respect to any shares of common stock or
any securities convertible into or exercisable or exchangeable for shares of
common stock without the prior written consent of Credit Suisse First Boston
Corporation and Donaldson, Lufkin & Jenrette Securities Corporation for a
period of 180 days after the date of this prospectus, subject to limited
exceptions.
Credit Suisse First Boston Corporation and Donaldson, Lufkin & Jenrette
Securities Corporation may in their sole discretion, at any time without
notice, choose to release some or all of these shares from these restrictions
prior to the expiration of this 180-day period.
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any three-
month period a number of shares that does not exceed the greater of:
. 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering; or
. the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale.
65
<PAGE>
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us. Shares otherwise eligible for sale under Rule 144 are still subject to
lock-up agreements and will only become eligible for sale when the 180-day
lock-up agreements expire.
Rule 144 (k)
Under Rule 144(k), a person who has not been one of our affiliates at any
time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, is entitled to sell those
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Rule 701
Any of our employees, officers, directors or consultants who purchased his
or her shares under a written compensatory plan or contract may be entitled to
sell his or her shares in reliance on Rule 701. Rule 701 permits affiliates to
sell their Rule 701 shares under Rule 144 without complying with the holding
period requirements of Rule 144. Rule 701 further provides that non-affiliates
may sell these shares in reliance on Rule 144 without having to comply with the
holding period, public information, volume limitation or notice provisions of
Rule 144. All holders of Rule 701 shares are required to wait until 90 days
after the date of this prospectus before selling those shares. However, all
shares issued under Rule 701 are subject to lock-up agreements and will only
become eligible for sale when the 180-day lock-up agreements expire.
Registration Rights
Upon completion of this offering, the holders of 52,588,612 shares of common
stock, or their transferees, will be entitled to rights with respect to the
registration of those shares under the Securities Act. For a discussion of
these rights please see "Description of Capital Stock--Registration Rights."
After these shares are registered, they will be freely tradable without
restriction under the Securities Act.
Stock Options
Immediately after this offering, we intend to file a registration statement
under the Securities Act covering approximately shares of common stock
subject to outstanding options and reserved for issuance under our stock option
and employee stock purchase plans. As of December 31, 1999, options to purchase
10,484,233 shares of common stock were issued and outstanding. Between December
31, 1999 and the date hereof, we granted options to purchase approximately
shares of common stock. Upon the expiration of the lock-up agreements
described above, shares of common stock will be subject to vested
options, based on options outstanding as of , 2000.
This registration statement is expected to be filed and become effective as
soon as practicable after the effective date of this offering. Accordingly,
shares registered under this registration statement will, subject to vesting
provisions and Rule 144 volume limitations applicable to our affiliates, be
freely tradeable immediately after the 180-day lock-up agreements expire.
Warrants
As of January 31, 2000, we had outstanding warrants to purchase 238,775
shares of Series C preferred stock and 75,000 shares of Series D preferred
stock, which will become exercisable for 477,550 and 75,000 shares,
respectively, of common stock upon the completion of this offering. When these
warrants are exercised and the exercise price is paid in cash, the shares must
be held for one year before they can be sold under Rule 144. Upon the
completion of this offering, these warrants to purchase up to 552,550 shares of
common stock will contain net exercise provisions. These provisions allow a
holder to exercise the warrant for a lesser number of shares of common stock in
lieu of paying cash. The number of shares that would be issued in this case
would be based upon the market price of the common stock at the time of the net
exercise. If the warrant had been held for at least one year, the shares of
commons stock could be publicly sold under Rule 144. After the lock-up
agreements described above expire, warrants to purchase 477,550 shares of our
common stock, which also contain net exercise provisions, will have been
outstanding for at least one year.
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<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation, Donaldson, Lufkin &
Jenrette Securities Corporation and FleetBoston Robertson Stephens Inc. are
acting as representatives the following respective numbers of shares of common
stock:
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation.............................
Donaldson, Lufkin & Jenrette Securities Corporation................
FleetBoston Robertson Stephens Inc. ...............................
-----
Total............................................................
=====
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public offering price
less the underwriting discounts and commissions. The option may be exercised
only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts
and Commissions paid by
us..................... $ $ $ $
Expenses payable by us.. $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933,
as amended, relating to, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares of our common
stock, in each case acquired prior to the date of this prospectus, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of Credit Suisse First Boston
Corporation and Donaldson, Lufkin & Jenrette Securities Corporation for a
period of 180 days after the date of this prospectus, except in our case
issuances pursuant to
67
<PAGE>
the exercise of stock options outstanding on the date hereof, grants of
employee stock options or the issuance of other common stock pursuant to the
1999 equity incentive plan and 2000 equity incentive plan of our California
predecessor, 2000 equity incentive plan or 2000 employee stock purchase plan in
effect on the date hereof, and issuances of common stock pursuant to the
exercise of those options.
Our executive officers and directors, and stockholders and holders of
options to purchase our common stock have agreed that they will not offer,
sell, contract to sell, pledge or otherwise dispose of, directly or indirectly,
any shares of our common stock, other than shares purchased in the open market,
including in this offering, or securities convertible into or exchangeable or
exercisable for any shares of our common stock, enter into a transaction which
would have the same effect, or enter into any swap, hedge or other arrangement
that transfers, in whole or in part, any of the economic consequences of
ownership of our common stock, whether any such aforementioned transaction is
to be settled by delivery of our common stock or such other securities, in cash
or otherwise, or publicly disclose the intention to make any such offer, sale,
pledge or disposition, or to enter into any such transaction, swap, hedge or
other arrangement, without, in each case, the prior written consent of Credit
Suisse First Boston Corporation and Donaldson, Lufkin & Jenrette Securities
Corporation for a period of 180 days after the date of this prospectus.
The underwriters have reserved for sale, at the initial offering price, up
to shares of common stock for employees, directors and other persons
associated with us who have expressed an interest in purchasing common stock in
the offering and up to shares of common stock for our members. The
number of shares available for sale to the general public in this offering will
be reduced to the extent those persons purchase the reserved shares. Any
reserved shares not so purchased will be offered by the underwriters to the
general public on the same terms as the other shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments that the underwriters may be required
to make in that respect.
DLJ ESC II LP, DLJ Fund Investment Partners II, L.P., DLJ Private Equity
Employees Fund, L.P. and DLJ Private Equity Partners Fund, L.P. (who are
affiliates of Donaldson, Lufkin & Jenrette Securities Corporation) have
purchased 49,587, 54,187, 4,959 and 139,201 shares of Series D preferred stock,
respectively, at $6.05 per share. Employees of Fleet Boston Robertson Stephens
have purchased 8,264 shares of Series D preferred stock at $6.05 per share.
Credit Suisse First Boston Venture Fund I L.P. has purchased 330,578 shares of
Series D preferred stock at a price of $6.05 per share. Under NASD Rules of
Fair Practice, the difference between the initial offering price of our common
stock and the purchase price could be deemed underwriting compensation.
Credit Suisse First Boston Corporation acted as placement agent in
connection with the sale of the Series D preferred stock for which it received
customary compensation.
We have made application to list the shares of common stock on The Nasdaq
Stock Market's National Market under the symbol "AADV."
Prior to the offering, there has been no public market for the common stock.
The initial public offering price for the common stock will be determined by
negotiation between us and the representatives, and may not reflect the market
price for the common stock following this offering. Among the principal factors
to be considered in determining the initial public offering price of our common
stock will be:
. the information in this prospectus or otherwise available to the
representatives;
. market conditions for initial public offerings;
. the history of and prospects for the industry in which we compete;
. the ability of our management;
. our prospects for future earnings, the present state of our development
and our current financial condition;
. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies; and
. the general condition of the securities markets at the time of this
offering.
68
<PAGE>
We can offer no assurances that the initial public offering price will
correspond to the price at which our common stock will trade in the public
market following this offering or that an active trading market for the common
stock will develop and continue after this offering.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934.
. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by that
syndicate member is purchased in a stabilizing transaction or a
syndicate covering transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
69
<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws,
which will vary depending on the relevant jurisdiction and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.
Representations of Purchasers
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from which that
purchase confirmation is received that (i) the purchaser is entitled under
applicable provincial securities laws to purchase the common stock without the
benefit of a prospectus qualified under those securities laws, (ii) where
required by law, the purchaser is purchasing as principal and not as agent, and
(iii) the purchaser has reviewed the text above under "Resale Restrictions."
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer, and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named in
this prospectus may be located outside of Canada and, as a result, it may not
be possible for Canadian purchasers to effect service of process within Canada
upon the issuer or those persons. All or a substantial portion of the assets of
the issuer and those persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or those
persons in Canada or to enforce a judgment obtained in Canadian courts against
the issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that he or she is required to file with the British Columbia
Securities Commission a report within ten days of the sale of any common stock
acquired by him or her in this offering. That report must be in the form
attached to British Columbia Securities Commission Blanket Order BOR #95/17, a
copy of which may be obtained from us. Only one report must be filed in respect
of common stock acquired on the same date and under the same prospectus
exemption.
Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
70
<PAGE>
LEGAL MATTERS
Fenwick & West LLP, Palo Alto, California, will pass upon the validity of
the issuance of the shares of common stock offered by this prospectus for
AllAdvantage. Skadden, Arps, Slate, Meagher & Flom LLP, Palo Alto, California,
will pass upon legal matters in connection with this offering for the
underwriters. Entities affiliated with Fenwick & West LLP hold 214,633 shares
of our common stock. In addition, Fenwick & West LLP or an affiliated entity
may purchase up to of the shares reserved by the underwriters for sale to
our employees and directors and other persons associated with us, as described
under "Underwriting."
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1999 and for the period from inception
(March 24, 1999) to December 31, 1999, as set forth in their report. We have
included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission, a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered by this prospectus. This prospectus does not contain all of the
information contained in the registration statement and the exhibits to the
registration statement. For further information with respect to AllAdvantage
and our common stock, we refer you to the registration statement and the
exhibits filed as a part of the registration statement. Statements contained in
this prospectus concerning the contents of any contract or any other document
to which reference is made are not necessarily complete; we refer you to the
copy of each contract or document filed as an exhibit to the registration
statement. Each statement is qualified in all respects by reference to that
exhibit. The registration statement, including exhibits, may be inspected
without charge at the public reference facilities maintained by the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
SEC located at Seven World Trade Center, 13th Floor, New York, New York 10048,
and the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies may be obtained from the SEC upon payment of
fees prescribed by the SEC. Information on the operation of the public
reference room may be obtained by calling the SEC at 1-800-SEC-0330. These
reports and other information may also be inspected without charge at a Web
site maintained by the SEC at http://www.sec.gov.
71
<PAGE>
AllAdvantage.com Inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........................ F-2
Consolidated Balance Sheet............................................... F-3
Consolidated Statement of Operations..................................... F-4
Consolidated Statement of Net Capital Deficiency......................... F-5
Consolidated Statement of Cash Flows..................................... F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
AllAdvantage.com Inc.
We have audited the accompanying consolidated balance sheet of
AllAdvantage.com Inc. as of December 31, 1999, and the related consolidated
statements of operations, net capital deficiency, and cash flows for the period
from inception (March 24, 1999) to December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
AllAdvantage.com Inc. at December 31, 1999, and the results of its operations
and its cash flows for the period from inception (March 24, 1999) to December
31, 1999, in conformity with accounting principles generally accepted in the
United States.
Ernst & Young LLP
Palo Alto, California
February 3, 2000 except for note 11, as to which the date is March , 2000
- --------------------------------------------------------------------------------
The foregoing report is in the form that will be signed upon the completion
of the reincorporation and other matters described in Note 11 to the
consolidated financial statements.
/s/ Ernst & Young LLP
Palo Alto, California
February 3, 2000
F-2
<PAGE>
AllAdvantage.com Inc.
CONSOLIDATED BALANCE SHEET
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Pro Forma Net
December 31, Capital Deficiency
1999 at December 31, 1999
------------ --------------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.................. $ 20,019
Restricted cash............................ 10,000
Accounts receivable, net of allowance of
$235...................................... 4,523
Prepaid expenses and other assets.......... 624
--------
Total current assets..................... 35,166
Property and equipment, net.................. 4,705
--------
Total assets............................. $ 39,871
========
Liabilities and net capital deficiency
Current liabilities:
Accounts payable........................... $ 1,753
Accrued member payables.................... 12,239
Other accrued liabilities.................. 5,362
Customer advance........................... 19,830
Deferred revenue........................... 75
Current portion of capital lease
obligations............................... 383
--------
Total current liabilities................ 39,642
Capital lease obligations, net of current
portion..................................... 254
Commitments
Net capital deficiency:
Convertible preferred stock, $0.001 par
value, issuable in series: 22,663,266
shares authorized; 19,567,343 shares
issued and outstanding at December 31,
1999, aggregate liquidation preference of
$34,014,990, pro forma--36,335,044 shares
authorized, no shares issued and
outstanding............................... 20 $ --
Common stock, $0.001 par value: 116,000,000
shares authorized, 28,498,133 shares
issued and outstanding at December 31,
1999, pro forma--150,000,000 shares
authorized, 80,632,819 shares issued and
outstanding............................... 28 81
Additional paid-in capital................. 55,608 55,575
Deferred stock compensation................ (18,572) (18,572)
Accumulated deficit........................ (37,109) (37,109)
-------- --------
Total net capital deficiency............. (25) $ (25)
-------- ========
Total liabilities and net capital
deficiency.............................. $ 39,871
========
</TABLE>
See accompanying notes.
F-3
<PAGE>
AllAdvantage.com Inc.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Period from
Inception
(March 24, 1999) to
December 31, 1999
-------------------
<S> <C>
Revenues.................................................. $ 5,251
Costs and expenses:
Direct member costs..................................... 17,141
Sales and marketing..................................... 11,602
General and administrative.............................. 8,344
Product development..................................... 2,911
Depreciation and amortization........................... 348
Stock-based compensation................................ 1,547
--------
Total costs and expenses.............................. 41,893
--------
Loss from operations...................................... (36,642)
Interest expense.......................................... (827)
Interest income........................................... 360
--------
Net loss.................................................. $(37,109)
========
Basic and diluted net loss per share...................... $ (5.04)
========
Shares used in per share calculation...................... 7,367
========
Pro forma basic and diluted net loss per share
(unaudited).............................................. $ (0.97)
========
Shares used in pro forma per share calculation
(unaudited).............................................. 38,287
========
</TABLE>
See accompanying notes.
F-4
<PAGE>
AllAdvantage.com Inc.
CONSOLIDATED STATEMENT OF NET CAPITAL DEFICIENCY
Period from Inception (March 24, 1999) to December 31, 1999
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock Additional Deferred Total Net
----------------- ----------------- Paid-in Stock Accumulated Capital
Shares Amount Shares Amount Capital Compensation Deficit Deficiency
---------- ------ ---------- ------ ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at inception
(March 24, 1999) ...... -- $-- -- $-- $ -- $ -- $ -- $ --
Issuance of common stock
to founders............ -- -- 24,000,000 24 1 -- -- 25
Issuance of Series A
preferred stock at
$0.05 per share
to founders, net of
issuance costs of $1... 4,000,000 4 -- -- 195 -- -- 199
Issuance of Series B
preferred stock at
$0.72 per share for
cash and exchange of
convertible notes
payable, net of
issuance costs of $34.. 2,500,000 3 -- -- 1,763 -- -- 1,766
Issuance of Series C
preferred stock at
$2.45 per share for
cash and exchange of
convertible notes
payable, net of
issuance costs of $88.. 13,067,343 13 -- -- 31,899 -- 31,912
Issuance of common stock
to employees upon
exercise of
stock options.......... -- -- 4,498,133 4 443 -- -- 447
Issuance of options to
purchase common stock
to non-employees....... -- -- -- -- 660 -- -- 660
Issuance of warrants to
purchase Series C
preferred stock in
connection with
issuance of notes
payable................ -- -- -- -- 528 -- -- 528
Deferred stock
compensation from the
issuance of stock
options................ -- -- -- -- 20,119 (20,119) -- --
Amortization of deferred
stock compensation..... -- -- -- -- -- 1,547 -- 1,547
Net loss................ -- -- -- -- -- -- (37,109) (37,109)
---------- --- ---------- --- ------- -------- -------- --------
Balance at December 31,
1999................... 19,567,343 $20 28,498,133 $28 $55,608 $(18,572) $(37,109) $ (25)
========== === ========== === ======= ======== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
AllAdvantage.com Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Period from
Inception
(March 24, 1999) to
December 31, 1999
-------------------
<S> <C>
Operating activities:
Net loss.................................................. $(37,109)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 348
Amortization of deferred stock compensation............. 1,547
Interest expense from issuance of warrants.............. 528
Other non-cash expense.................................. 660
Changes in assets and liabilities:
Restricted cash....................................... (10,000)
Accounts receivable................................... (4,523)
Prepaid expenses and other assets..................... (624)
Accounts payable and other accrued liabilities........ 7,115
Accrued member payables............................... 12,239
Customer advance...................................... 19,830
Deferred revenue...................................... 75
--------
Net cash used in operating activities..................... (9,914)
--------
Investing activities:
Purchase of equipment..................................... (4,290)
--------
Net cash used in investing activities..................... (4,290)
--------
Financing activities:
Proceeds from issuance of common and preferred stock,
net...................................................... 30,352
Proceeds from issuance of convertible notes payable....... 3,550
Proceeds from exercise of common stock options............ 447
Payments under capital lease obligations.................. (126)
--------
Net cash provided by financing activities................. 34,223
--------
Net increase in cash and cash equivalents................. 20,019
Cash and cash equivalents at beginning of period.......... --
--------
Cash and cash equivalents at end of period................ $ 20,019
========
Schedule of noncash investing and financing activities:
Conversion of notes payable to Series B Preferred Stock... $ 1,550
========
Conversion of notes payable to Series C Preferred Stock... $ 2,000
========
Equipment acquired under capital lease obligations........ $ 763
========
</TABLE>
See accompanying notes.
F-6
<PAGE>
AllAdvantage.com Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS
AllAdvantage.com Inc. (AllAdvantage or the Company) was incorporated on
March 24, 1999 and launched its service in July 1999. AllAdvantage provides
businesses with an online advertising, direct marketing and electronic commerce
tool to target and reach AllAdvantage's community of members through
AllAdvantage's proprietary Viewbar targeting technology. In turn, AllAdvantage
provides its members with cash compensation, as well as Internet navigation and
electronic commerce links, for actively using the Viewbar.
AllAdvantage has incurred net losses and negative cash flows from operations
since inception. AllAdvantage's ability to meet obligations in the ordinary
course of business is dependent on its ability to establish profitable
operations and raise additional funds through public or private equity
financings, collaborative or other arrangements with corporate sources, or
other sources of financing. In the period from inception (March 24, 1999) to
December 31, 1999, AllAdvantage has received financing of approximately
$33,900,000 through the issuance of common stock, Series A, B and C convertible
preferred stock and convertible notes payable (see Note 4). Management believes
that these funds, together with the Series D convertible preferred stock
financing, that closed in February 2000 (see Note 10), will be sufficient to
enable AllAdvantage to meet its planned expenditures through December 31, 2000.
If anticipated operating results are not achieved, management has the ability
and intends to delay or reduce expenditures so as not to require additional
financial resources, if those resources are not available on terms acceptable
to AllAdvantage.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of AllAdvantage
and its wholly-owned subsidiaries. All significant inter-company balances and
transactions have been eliminated.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and disclosures of contingent liabilities. Actual results could
differ from those estimates.
Cash Equivalents
AllAdvantage considers all highly liquid investments with a maturity of
three months or less from the date of purchase to be cash equivalents. Cash
equivalents consist of money market funds, commercial paper and government
agency instruments.
AllAdvantage accounts for marketable investments under Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," (SFAS No. 115). Under SFAS No. 115, management
determines the appropriate classification of debt securities at the time of
purchase and re-evaluates such designation as of each balance sheet date. To
date, all marketable securities have been classified as available-for-sale and
are carried at fair value at quoted market prices. Unrealized gains and losses
are reported as a separate component of accumulated comprehensive income. The
amortized cost of debt securities in this category is adjusted for amortization
of premiums and accretion of discounts to maturity. Such amortization or
accretion is included in interest income or interest expense respectively. The
cost of securities sold is based on the specific identification method.
Interest earned on securities classified as available-for-sale is included in
interest income.
F-7
<PAGE>
AllAdvantage.com Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
At December 31, 1999, AllAdvantage had U.S. Government securities and
commercial paper available for sale at fair market values of $249,000 and
$19,482,000, respectively, with fair values approximating amortized cost. As of
December 31, 1999, all available-for-sale securities were recorded as cash
equivalents since the maturities of the instruments at the date of purchase
were less than 90 days. By policy, the Company limits similar types of
investments and diversifies investing activities utilizing multiple investment
agencies.
Certain Risks and Concentrations
AllAdvantage has a limited operating history and its prospects are subject
to 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 Internet services. These risks include the failure to
develop and extend online service brands, the rejection of services by
AllAdvantage's members, vendors and/or advertisers and the inability of
AllAdvantage to maintain and increase its member base, as well as other risks
and uncertainties.
AllAdvantage's revenue is principally derived from the sale of
advertisements, the market for which is highly competitive and rapidly
changing. Significant changes in the industry or changes in customer buying
behavior could adversely affect operating results.
Financial instruments that potentially subject AllAdvantage to
concentrations of credit risk consist principally of investments in debt
securities and trade receivables. AllAdvantage is exposed to credit risks in
the event of default by the financial institutions or issuers of investments to
the extent those investments are recorded on the balance sheet. AllAdvantage
generally does not require collateral. From inception (March 24, 1999) to
December 31, 1999, one customer represented 19% of AllAdvantage's revenues.
AllAdvantage had no credit losses in the period from inception (March 24, 1999)
to December 31, 1999.
Fair Value of Financial Instruments
The Company's financial instruments, including cash and cash equivalents,
accounts receivable, accrued member payables and accounts payable, are carried
at historical cost, which approximates their fair value because of the short-
term maturities of these instruments. The fair value of capital lease
obligations is estimated based on current interest rates available to
AllAdvantage for debt instruments with similar terms, degrees of risk, and
remaining maturities. The carrying value of these obligations approximate their
fair values as of December 31, 1999.
Property and Equipment
Property and equipment are stated at historical cost. Depreciation and
amortization are computed using the straight-line method over the estimated
useful lives of the assets, generally three to five years. Leasehold
improvements are amortized using the straight-line method over the estimated
useful lives of the assets or terms of the leases, whichever are shorter.
Revenue Recognition
AllAdvantage's revenues were substantially derived from the sale of
advertisements, which includes arrangements for the delivery of impressions or
click-throughs and sponsorships. The foregoing may include additional
performance-based revenues based on arrangements with individual sponsors or
advertisers. Advertising and sponsorship revenues are recognized in the period
in which the advertisement or sponsorship placement is displayed, based upon
the total number of impressions delivered, provided that no significant
obligations remain and collection of the related receivable is probable.
AllAdvantage's obligations typically include the guarantee of a minimum number
of impressions or the satisfaction of other performance criteria.
F-8
<PAGE>
AllAdvantage.com Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The guaranteed minimum number of impressions is generally required to be
delivered over the term of the commitment, which has generally ranged from
several weeks to two months. Revenues from performance-based arrangements,
including click-throughs, are recognized as the related performance criteria
are met. Revenues from advertising sold through third-party sales organizations
are recognized net of commissions. Revenues from commissions for referring
electronic commerce are recognized upon receipt of payment. Fees paid to us in
advance of satisfaction of revenue recognition criteria are recorded as
deferred revenues.
To date, AllAdvantage has not recognized any revenue related to the
nonmonetary exchange of advertising for advertising or other services as such
exchanges were not objectively determinable based on criteria set forth in
Accounting Principles Board Opinion No. 29, "Accounting for Nonmonetary
Transactions."
Direct Member Costs
Direct member costs consist of costs incurred to compensate members for
using the Internet while the Viewbar is activated. These costs are expensed as
incurred.
Sales and Marketing
Sales and marketing expenses include personnel and related costs for the
direct sales force and marketing staff, marketing and promotional programs
fees, member referral costs and costs related to the delivery of advertisements
to the Viewbar. These costs are expensed as incurred. Member referral costs and
costs related to the delivery of advertisements to the Viewbar included in
sales and marketing expenses totaled $2,981,000 and $2,913,000 respectively,
for the period from inception to December 31, 1999. Advertising expenses, which
consist primarily of advertising to business customers, were $1,074,000 for the
period from inception to December 31, 1999. Advertising costs are expensed as
incurred in accordance with Statement of Position No. 93-7, "Reporting on
Advertising Costs."
Research and Development
Research and development expenditures are generally charged to operations as
incurred. Statement of Financial Accounting Standards (SFAS) No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise
Marketed," requires the capitalization of certain software development costs
subsequent to the establishment of technological feasibility. Based on
AllAdvantage's product development process, technological feasibility is
established upon the completion of a working model. Through December 31, 1999,
capitalizable costs incurred after achieving technological feasibility have not
been significant for any development project. Accordingly, AllAdvantage has
charged all costs to research and development expense in the periods they were
incurred.
AllAdvantage adopted SOP 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" during 1999, which requires
capitalization of certain costs incurred during the development of internal use
software. Through December 31, 1999 capitalizable costs incurred have not been
significant for any development project. Accordingly, AllAdvantage has charged
all costs to research and development expense in the periods they were
incurred.
Segment Reporting
Effective March 24, 1999, AllAdvantage adopted the provisions of SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information."
SFAS No. 131 establishes standards for the way companies report information
about operating segments in annual financial statements. It also establishes
standards for related disclosures about products and services, geographic areas
and major customers. AllAdvantage has determined that it did not have any
separately reportable business segments as of December 31, 1999.
F-9
<PAGE>
AllAdvantage.com Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Stock-Based Compensation
AllAdvantage accounts for its stock options and equity awards in accordance
with the provisions of Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and has elected to follow the "disclosure only"
alternative prescribed by Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123). AllAdvantage accounts for stock options issued to
non-employees in accordance with the provisions of SFAS No. 123 and Emerging
Issues Task Force 96-18.
Comprehensive Loss
AllAdvantage has adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income," which establishes standards for
reporting comprehensive loss and its components in the financial statements. To
date, AllAdvantage's comprehensive loss has equaled its net loss.
Net Loss Per Share
Basic net loss per share and diluted net loss per share are presented in
conformity with Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" (SFAS No. 128), for the period presented. Pursuant to the Securities
and Exchange Commission Staff Accounting Bulletin No. 98, common stock and
convertible preferred stock issued or granted for nominal consideration prior
to the anticipated effective date of the initial public offering must be
included in the calculation of basic and diluted net loss per share as if they
had been outstanding for all periods presented. Through December 31, 1999,
AllAdvantage had not had any issuances or grants for nominal consideration.
In accordance with SFAS No. 128, basic and diluted net loss per share have
been computed using the weighted-average number of shares outstanding during
the period, less the weighted-average number of shares of common stock issued
to founders, investors and employees that are subject to repurchase. Basic and
diluted pro forma net loss per share, as presented in the statement of
operations, has been computed as described above and also gives effect, under
Securities and Exchange Commission ("SEC") guidance, to the conversion of the
convertible preferred stock (using the if-converted method) as though it had
happened on the original date of issuance. The following table presents the
calculations of basic and diluted and pro forma basic and diluted net loss per
share:
<TABLE>
<CAPTION>
Period from Inception
(March 24, 1999) to
December 31, 1999
---------------------
<S> <C>
Net loss................................................. $ 37,109,000
============
Basic and diluted:
Weighted-average shares of common stock outstanding.... 23,344,138
Less: weighted-average shares subject to repurchase.... (15,977,627)
------------
Weighted-average shares used in computing basic and
diluted net loss per share.............................. 7,366,511
============
Basic and diluted net loss per share..................... $ (5.04)
============
Pro forma:
Shares used above...................................... 7,366,511
Pro forma adjustment to reflect weighted effect of
assumed conversion of convertible preferred stock..... 31,006,461
Less: weighted-average shares of convertible preferred
stock subject to repurchase........................... (85,773)
------------
Shares used in computing pro forma basic and diluted
net loss per share (unaudited)...................... 38,287,199
============
Pro forma basic and diluted net loss per share
(unaudited)......................................... $ (0.97)
============
</TABLE>
F-10
<PAGE>
AllAdvantage.com Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
AllAdvantage has excluded all convertible preferred stock, warrants for
convertible preferred stock, outstanding stock options and shares subject to
repurchase from the calculation of diluted net loss per share because all these
securities are antidilutive for the period presented. If the offering
contemplated by this prospectus is consummated, all of the convertible
preferred stock outstanding will automatically be converted into common stock.
Unaudited pro forma stockholders' equity at December 31, 1999, as adjusted for
the assumed conversion of convertible preferred stock based on the shares of
convertible preferred stock outstanding at December 31, 1999, is disclosed on
the accompanying consolidated balance sheet. In February 2000, AllAdvantage
completed a private placement of 16,453,926 shares of Series D convertible
preferred stock (See Note 10). Had this transaction occurred prior to December
31, 1999, the pro forma weighted average shares calculated above would have
been higher. The total number of shares excluded from the calculations of
diluted net loss per share were as follows:
<TABLE>
<CAPTION>
Total
Shares
----------
<S> <C>
Common stock, subject to repurchase............................. 20,498,129
Preferred stock (prior to conversion to common stock)........... 19,567,343
Common stock options outstanding................................ 10,484,233
Warrants to purchase preferred stock (prior to conversion to
common stock).................................................. 238,775
----------
50,788,480
==========
</TABLE>
Income Taxes
Since incorporation, AllAdvantage has recognized income taxes under the
liability method. Deferred income taxes are recognized for differences between
the financial statement and tax basis of assets and liabilities at enacted
statutory tax rates in effect for the years in which the differences are
expected to reverse. The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date. In
addition, valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be realized.
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 AllAdvantage to
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through net income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of the derivative are either offset against the change in fair value
of assets, liabilities, or firm commitments through earnings or recognized in
other comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of the derivative's change in fair value will be
immediately recognized in earnings. SFAS No. 133 is effective for years
beginning after June 15, 2000. AllAdvantage does not currently hold any
derivatives and does not expect this pronouncement to materially impact the
results of its operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"). SAB 101 summarizes certain areas of
the Staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. AllAdvantage believes that its
current revenue recognition principles comply with SAB 101.
F-11
<PAGE>
AllAdvantage.com Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Computer software and equipment............................... $4,660
Leasehold improvements........................................ 241
Furniture and fixtures........................................ 152
------
Total....................................................... 5,053
Less: accumulated depreciation and amortization............... (348)
------
$4,705
======
</TABLE>
4. STOCKHOLDERS' EQUITY
Convertible Preferred Stock:
<TABLE>
<CAPTION>
Shares Issued and
Shares Outstanding at Liquidation
Authorized December 31, 1999 Preference
---------- ----------------- -----------
<S> <C> <C> <C>
Series A........................ 4,000,000 4,000,000 $ 200,000
Series B........................ 2,500,000 2,500,000 1,800,000
Series C........................ 16,163,266 13,067,343 32,014,990
---------- ---------- -----------
Total convertible preferred
stock........................ 22,663,266 19,567,343 $34,014,990
========== ========== ===========
</TABLE>
Holders of AllAdvantage's Series A, B and C preferred stock are entitled to
one vote for each share of common stock into which the preferred stock is
convertible. Holders of AllAdvantage's preferred stock are also entitled to
vote separately as a class with regard to customary protective provisions.
The holders of Series A, B and C preferred stock are entitled to annual
noncumulative dividends per share of $0.005, $0.072 and $0.245, respectively,
when and if declared by the board of directors. In the event of any voluntary
or involuntary liquidation of AllAdvantage, Series A, B and C stockholders are
entitled to a liquidation preference of $0.05, $0.72 and $2.45 per share,
respectively, all in preference to the holders of the common stock. After
payment to the Series A, B and C stockholders of all preferential amounts in
the event of liquidation, the holders of the common stock will receive any and
all remaining assets of AllAdvantage.
The holders of Series A, B and C preferred stock have the right at any time
to convert their shares into common stock. Series A and B preferred stock will
convert into four shares of common stock, while Series C preferred stock will
convert into two shares of common stock. Each share of preferred stock will be
automatically converted into common stock upon the closing of a firm commitment
of a public offering of AllAdvantage common stock with aggregate proceeds in
excess of $10,000,000.
In May and June 1999, AllAdvantage issued $1,550,000 of convertible notes
payable. In June 1999, the convertible notes payable were converted into
2,152,777 shares of Series B preferred stock.
In July 1999, AllAdvantage issued $2,000,000 of convertible notes payable.
In September 1999, the convertible notes payable were converted into 816,327
shares of Series C preferred stock.
F-12
<PAGE>
AllAdvantage.com Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Warrants
In connection with the issuance of convertible notes payable of $2,000,000
in July 1999, AllAdvantage issued warrants to purchase 244,897 shares of
Series C Preferred Stock at $0.06 per share, of which warrants to purchase
6,122 shares were exercised in 1999. AllAdvantage valued the warrants using
the Black-Scholes option model. The following assumptions were used in the
option pricing model: stock price of $2.45, exercise price of $0.06, warrant
term of 10 years, risk-free rate of interest of 6.1%, 100% volatility, and a
dividend yield of 0%. The value of the warrants (approximately $528,000) was
expensed as additional interest expense during the period for which the notes
remained outstanding.
Common Stock
AllAdvantage issued 24,000,000 shares of common stock to its founders. The
shares issued to founders were sold pursuant to restricted stock purchase
agreements containing lapsing repurchase provisions established by the board
of directors. These provisions give AllAdvantage the right to repurchase
shares at the original sales price. This right expires at the rate of 25%
after one year and 2.08% each month thereafter. At December 31, 1999,
15,999,996 of the shares issued outside of the 1999 Equity Incentive Plan,
remained subject to repurchase.
As of December 31, 1999, shares of common stock reserved for future
issuance consisted of the following:
<TABLE>
<S> <C>
Stock options..................................................... 10,701,867
Series A, B and C convertible preferred stock..................... 52,134,686
Series C warrants................................................. 477,550
----------
63,314,103
==========
</TABLE>
Stock Splits
AllAdvantage effected a two-for-one stock split of common stock in both
July and October 1999. The common share information and preferred stock
conversion ratios in the accompanying financial statements have been
retroactively restated to reflect the effect of the stock splits.
5. EQUITY INCENTIVE PLAN
In April 1999, the board of directors approved the 1999 Equity Incentive
Plan (the "Plan"). Under the Plan, AllAdvantage has reserved 15,200,000 shares
for issuance to eligible participants. The Plan provides for option grants at
an option price no less than 85% of the fair market value of the stock subject
to the option on the date the option is granted. The options vest at a rate of
25% after one year of service and ratably over 36 months thereafter, and are
immediately exercisable in full, with the unvested portion of the shares
remaining subject to repurchase by AllAdvantage at the exercise price until
the shares become vested.
AllAdvantage had 4,498,133 unvested shares of common stock issued and
outstanding under the Plan at December 31, 1999, which were subject to
repurchase by the Company at the original exercise price. All options under
the Plan expire ten years after their grant.
The Plan also provides for restricted stock awards. The purchase price of
restricted stock under these awards must not be less than 85% of the fair
market value of the stock on the date the award is made or the purchase is
consummated. No restricted stock had been awarded at December 31, 1999.
F-13
<PAGE>
AllAdvantage.com Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Aggregate activity under the Plan is summarized as follows:
<TABLE>
<CAPTION>
Options Outstanding
-----------------------
Shares Weighted-
Available Number of Price per Average
for Grant Shares Share Exercise Price
----------- ---------- ------------- --------------
<S> <C> <C> <C> <C>
Authorized.............. 15,200,000 -- -- --
Options granted......... (15,543,366) 15,543,366 $0.03 - $1.25 $0.50
Options canceled........ 561,000 (561,000) $0.03 - $0.18 $0.04
Options exercised....... -- (4,498,133) $0.03 - $0.75 $0.10
----------- ----------
Balance at December 31,
1999................... 217,634 10,484,233 $0.03 - $1.25 $0.69
=========== ==========
</TABLE>
The following table summarizes information regarding options outstanding and
exercisable at December 31, 1999:
<TABLE>
<CAPTION>
Weighted-
Number Weighted- Average
Outstanding Average Remaining
Exercise and Exercise Contractual
Prices Exercisable Price Age (Years)
-------- ----------- --------- -----------
<S> <C> <C> <C>
$0.03.................................... 2,250,000 $0.03 9.56
0.18.................................... 2,017,000 0.18 9.68
0.75.................................... 1,843,367 0.75 9.78
1.25.................................... 4,373,866 1.25 9.97
----------
10,484,233 $0.69 9.79
==========
</TABLE>
In the period from inception (March 24, 1999) to December 31, 1999,
AllAdvantage recorded deferred stock compensation of approximately $20,119,000,
representing the aggregate difference between the exercise prices and the
deemed fair values of the AllAdvantage common stock on the dates these stock
options were granted. This amount is included as a reduction in stockholders'
equity and is being amortized by charges to operations on a graded vesting
method. AllAdvantage recorded amortization of deferred stock compensation of
approximately $1,547,000 for the period from inception (March 24, 1999) to
December 31, 1999. At December 31, 1999, AllAdvantage had a total of
$18,572,000 remaining to be amortized over the corresponding vesting periods of
the options, generally four years. The remaining deferred stock compensation at
December 31, 1999 will be amortized as follows: $9.7 million for the year
ending December 31, 2000, $5.1 million for the year ending December 31, 2001,
$2.7 million for the year ending December 31, 2002 and $1.1 million for the
year ending December 31, 2003. Stock-based compensation expense relates to
stock options awarded to individuals in all cost and expense categories.
In 1999, AllAdvantage issued options to purchase 159,323 shares of common
stock to several third party consultants in exchange for services rendered. In
connection with these options to purchase common stock, AllAdvantage recorded a
non-cash charge of $660,000 in its statement of operations for the period from
inception (March 24, 1999) to December 31, 1999.
F-14
<PAGE>
AllAdvantage.com Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Stock-Based Compensation
AllAdvantage has elected to follow APB 25 and related interpretations in
accounting for its employee stock-based compensation plans. Because the
exercise price of the employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is generally
recognized. Pro forma information regarding net loss has been determined as if
AllAdvantage accounted for its employee stock options under the fair value
method prescribed by SFAS 123. The resulting effect on pro forma net loss
disclosed is not likely to be representative of the effects on net loss on a
pro forma basis in future years, due to additional grants and years of vesting
in subsequent years. The fair value of each option granted through December 31,
1999 was estimated on the date of grant using the minimum value method, with
the following weighted-average assumptions:
<TABLE>
<CAPTION>
Period from Inception
(March 24, 1999) to
December 31, 1999
---------------------
<S> <C>
Dividend yield....................................... 0
Risk-free interest rate.............................. 6%
Expected life........................................ 4 years
Weighted-average fair value of options granted....... $ 1.46
</TABLE>
For the purposes of pro forma disclosures, the estimated fair value of the
options is amortized to pro forma expense over the options' vesting period, and
results in a pro forma net loss of approximately $37,237,000 for the period
from inception (March 24, 1999) to December 31, 1999 and pro forma basic and
diluted net loss per share of $5.05 ($0.97 assuming conversion of the
convertible preferred stock that was outstanding at December 31, 1999).
6. PROVISION FOR INCOME TAXES
Due to operating losses and the inability to recognize the benefits
therefrom, there is no provision for income taxes for the period from inception
(March 24, 1999) to December 31, 1999.
As of December 31, 1999, AllAdvantage had federal net operating loss
carryforwards of approximately $28,600,000. The net operating loss
carryforwards will expire beginning in 2019, if not utilized.
Utilization of the net operating losses and credits may be subject to a
substantial limitation due to the "change in ownership" provisions of the
Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.
Deferred tax assets and liabilities reflect the net tax effects of net
operating loss and credit carryforwards and of temporary differences between
the carrying amounts of assets and liabilities for financial reporting and the
amounts used for income tax purposes. Significant components of AllAdvantage's
deferred tax assets are as follows (in thousands):
<TABLE>
<CAPTION>
As of
December 31,
1999
------------
<S> <C>
Deferred tax assets:
Net operating loss carryforwards............................ $ 11,700
Accrued member payouts...................................... 2,700
Other individually immaterial items......................... 300
--------
Total deferred tax assets................................. 14,700
Valuation allowance for deferred tax assets................... (14,700)
--------
Net deferred tax assets....................................... $ --
========
</TABLE>
F-15
<PAGE>
AllAdvantage.com Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FASB No. 109 provides for the recognition of deferred tax assets if
realization of these assets is more likely than not. Based upon the weight of
available evidence, which includes AllAdvantage's historical operating
performance, the Company has provided a full valuation allowance against its
total deferred tax assets.
7. CUSTOMER ADVANCE
In November 1999, AllAdvantage entered into an arrangement with a company,
whereby AllAdvantage is required to provide the other company with a certain
amount of advertising impressions on a monthly basis. In return, AllAdvantage
received an advance of $20,000,000. The advance accrues interest at 10% and is
secured by the advance itself. Under the terms of the arrangement, AllAdvantage
may use $5,000,000 per month for general corporate uses, with all restrictions
expiring on February 12, 2000. AllAdvantage has classified $10,000,000 as
restricted cash at December 31, 1999. Revenue earned by Alladvantage for
providing monthly advertising impressions is reduced from the cash advance on a
monthly basis. In addition, in November 1999, AllAdvantage entered into a
three-year arrangement with this company for that company to provide ad serving
services. AllAdvantage pays the company based on the number of impressions
served during each month, with a guaranteed minimum monthly fee.
8. COMMITMENTS
At December 31, 1999, AllAdvantage's aggregate commitments under
noncancelable lease arrangements for office space and computer equipment were
as follows (in thousands):
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
Year ending December 31,
2000..................................................... $ 444 $1,085
2001..................................................... 255 894
2002..................................................... -- 927
2003..................................................... -- 183
2004..................................................... -- 189
Thereafter............................................... -- 344
----- ------
Total minimum payments required.......................... 699 $3,622
======
Less amount representing interest........................ (62)
-----
Present value of future payments......................... 637
Less current portion..................................... (383)
-----
$ 254
=====
</TABLE>
Rent expense, principally for leased office space under operating lease
commitments, was approximately $365,000 for the period from inception (March
24, 1999) to December 31, 1999. AllAdvantage acquired $763,000 of equipment
under capital lease obligations for the period from inception (March 24, 1999)
to December 31, 1999. Accumulated depreciation for this equipment was $56,000
at December 31, 1999.
9. RELATED PARTY TRANSACTIONS
During 1999, one of the founders' spouses, through their placement firm
supplied recruiting and contract labor services to AllAdvantage. AllAdvantage
paid the placement firm $206,000 for such services rendered during 1999.
Management believes such services were rendered at fair value.
F-16
<PAGE>
AllAdvantage.com Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. PRIVATE PLACEMENT EQUITY OFFERING OF SERIES D CONVERTIBLE PREFERRED STOCK
In February 2000, AllAdvantage completed a private placement of 16,453,926
shares of Series D convertible preferred stock at $6.05 per share, resulting in
net cash proceeds of $94,544,000. Holders of Series D preferred stock are
entitled to annual noncumulative dividends of $0.605 per share when and if
declared by the board of directors. In the event of voluntary or involuntary
liquidation of AllAdvantage, holders of Series D Convertible Preferred Stock
are entitled to a liquidation preference of $6.05 per share plus all declared
and unpaid dividends. Holders of Series D preferred stock are entitled to one
vote for each share of common stock into which the preferred stock is
convertible. Each share of preferred stock will be automatically converted into
one share of common stock upon the closing of a firm commitment of a public
offering of AllAdvantage common stock with aggregate proceeds in excess of
$10,000,000. If the initial public offering price of the shares in this
offering is less than $12.05, then the conversion ratio for the Series D
preferred stock will be adjusted such that each share of Series D preferred
stock will convert into the number of shares of common stock equal to the
result obtained by dividing $6.05 by the greater of one-half of the offering
price or $4.84.
11. SUBSEQUENT EVENTS (unaudited)
Initial Public Offering
In January 2000, the board of directors authorized AllAdvantage to file a
registration statement with the SEC for an initial public offering of
AllAdvantage's common stock.
Amended Articles of Incorporation
In January 2000, the board of directors approved the reincorporation of
AllAdvantage in the State of Delaware, and an increase in the number of
authorized shares, which will be effected prior to the closing of the initial
public offering.
Lease Commitment
In January 1999, AllAdvantage entered into a ten-year lease arrangement for
its yet to be constructed headquarters. Under the terms and conditions of the
lease arrangement, AllAdvantage will commence making lease payments in December
2000, the approximate completion date of construction. Aggregate lease payments
under the term of the lease will be approximately $46,428,000 over the 10 year
term of the lease. As a condition of the lease agreement, AllAdvantage is
required to provide a letter of credit of $2 million (which may increase to as
much as $6.3 million) as a security deposit. In connection with the lease
arrangement, AllAdvantage issued a warrant to the lessor to purchase 75,000
shares of Series D Preferred Stock at $6.05 per share. The value of the warrant
will be capitalized as deferred rental expense and expensed over the period of
the lease arrangement, commencing with occupation of the building.
2000 Equity Incentive Plans
The 2000 equity incentive plan of our California predecessor was adopted by
AllAdvantage's board of directors in January, 2000. As of December 31, 1999, no
options had been granted under this plan.
In February, 2000, AllAdvantage's board of directors approved the adoption
of the 2000 Equity Incentive Plan. A total of 20,000,000 shares of common stock
have been reserved for issuance under this plan. The number of shares reserved
under this plan will be increased automatically on January 1, of each year by
an
F-17
<PAGE>
AllAdvantage.com Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
amount equal to 5% of AllAdvantage's total outstanding shares on the previous
day. This plan will serve as the successor to the 1999 equity incentive plan
and 2000 equity incentive plan of our California predecessor.
2000 Employee Stock Purchase Plan
In February, 2000, the board of directors approved the adoption of the 2000
Employee Stock Purchase Plan. A total of 600,000 shares of common stock has
been reserved for issuance under this plan, plus, commencing on January 1,
2001, annual increases equal to 1% of the outstanding common shares on the
previous day or a lesser amount determined by the board of directors. The plan
enables eligible employees to acquire shares of AllAdvantage common stock
through periodic payroll deductions of up to 15% of their cash compensation,
subject to maximum purchase limitations. The purchase plan will be implemented
in a series of offering periods, each approximately two years in duration,
consisting of four six-month purchase periods. The price at which the common
stock may be purchased is 85% of the lesser of the fair market value of
AllAdvantage's common stock on the first day of the applicable offering period
or on the last day of the respective purchase period. The initial offering
period will commence on the effectiveness of the initial public offering.
F-18
<PAGE>
[Insert description of graphics on inside back cover page]
<PAGE>
[AllAdvantage Logo]
<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 to be paid by
AllAdvantage in connection with the sale of the shares of common stock being
registered hereby. All amounts are estimates except for the SEC registration
fee, the NASD filing fee and the Nasdaq National Market filing fee.
<TABLE>
<S> <C>
SEC registration fee............................................... $ 39,600
NASD filing fee.................................................... 15,500
Nasdaq National Market filing fee.................................. 95,000
Printing and engraving............................................. *
Legal fees and expenses of the Registrant.......................... *
Accounting fees and expenses....................................... *
Directors and officers liability insurance......................... *
Blue sky fees and expenses......................................... *
Transfer agent and registrar fees and expenses..................... *
Miscellaneous...................................................... *
--------
Total............................................................ $
========
</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, indemnity to directors
and officers under certain circumstances and subject to certain limitations.
The terms of Section 145 of the Delaware General Corporation Law are
sufficiently broad to permit indemnification under certain circumstances for
liabilities, including reimbursement of expenses incurred, arising under the
Securities Act of 1933 (the "Securities Act").
As permitted by the Delaware General Corporation Law, the Registrant's
certificate of incorporation includes a provision that eliminates the personal
liability of a director for monetary damages resulting from breach of his
fiduciary duty as a director, except for liability:
. for any breach of the director's duty of loyalty to the Registrant or
its stockholders;
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. under section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
. for any transaction from which the director derived an improper personal
benefit.
As permitted by the Delaware General Corporation Law, the Registrant's
bylaws provide that:
. the Registrant is required to indemnify its directors and officers to
the fullest extent permitted by the Delaware General Corporation Law,
subject to certain very limited exceptions;
. the Registrant is required to advance expenses, as incurred, to its
directors and officers in connection with a legal proceeding to the
fullest extent permitted by the Delaware General Corporation Law,
subject to certain very limited exceptions; and
. the rights conferred in the Bylaws are not exclusive.
II-1
<PAGE>
In addition, the Registrant intends to enter into indemnity agreements with
each of its current directors and officers. These agreements will provide for
the indemnification of officers and directors for all expenses and liabilities
incurred in connection with any action or proceeding brought against them by
reason of the fact that they are or were agents of the Registrant.
The Registrant intends to obtain directors' and officers' insurance to cover
its directors, officers and some of its employees for certain liabilities,
including public securities matters.
The Underwriting Agreement filed as Exhibit 1.01 to this Registration
Statement provides for indemnification by the underwriters of the Registrant
and its directors and officers for certain liabilities under the Securities Act
of 1933, or otherwise.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
Exhibit Document Number
---------------- ------
<S> <C>
Form of Underwriting Agreement...................................... 1.01
Form of Second Amended and Restated Certificate of Incorporation of
the Registrant..................................................... 3.03
Restated Bylaws of the Registrant................................... 3.05
Form of Indemnity Agreement......................................... 10.01
</TABLE>
ITEM 15. Recent Sales of Unregistered Securities.
Since our inception in March 1999, we have issued and sold the following
unregistered securities:
1. In April 1999, 24,000,000 shares of common stock were issued to our
founders pursuant to restricted stock purchase agreements.
2. In April 1999, we issued and sold a total of 4,000,000 shares of
Series A preferred stock to our founders for a total purchase price of
$200,000 paid through cancellation of indebtedness.
3. In June 1999, we issued and sold a total of 2,500,000 shares of
Series B preferred stock to private investors for a total purchase price of
$1,800,000, $1,550,000 of which was paid through conversion of promissory
notes and the remainder of which was paid in cash.
4. In September 1999, we issued and sold a total of 12,497,956 shares of
Series C preferred stock to private investors for a total purchase price of
$30,619,992, $2,000,000 of which was paid through conversion of promissory
notes and the remainder of which was paid in cash. In October 1999, we
issued and sold an additional 155,102 shares of Series C preferred stock to
private investors for a total purchase price of $380,000 in cash. In
October 1999, we committed to issue, and in December 1999, we issued and
sold an additional 408,163 shares of Series C preferred stock to the
Michael A. Depatie Trust U/A DTD 7/18/91 for a purchase price of $999,999
in cash.
5. In September 1999, we issued warrants to purchase a total of 244,897
shares of Series C preferred stock with an exercise price of $0.06 per
share to private investors. In November 1999, a warrant to purchase 6,122
shares of Series C preferred stock was exercised. As of December 31, 1999,
warrants to purchase a total of 238,775 shares of Series C preferred stock
remained outstanding.
6. In February 2000, we issued and sold a total of 16,453,926 shares of
Series D preferred stock to private investors for a total purchase price of
$99,546,252 in cash.
7. In February 2000, we issued a warrant to purchase a total of 75,000
shares of our Series D preferred stock with an exercise price of $6.05 per
share for a purchase price of $750 to a landlord.
8. Since March 1999, shares of common stock have been issued to
our employees, consultants and other service providers upon exercise of
options, and as of December 31, 1999, 10,484,233 shares of common stock
were issuable upon exercise of outstanding options.
II-2
<PAGE>
The 4,000,000 shares of Series A preferred stock will automatically convert
on a four-for-one basis into 16,000,000 shares of common stock upon the
consummation of this offering as a result of two-for-one common stock splits
effected on July 1, 1999 and October 13, 1999. The 2,500,000 shares of Series B
preferred stock will automatically convert on a four-for-one basis into
10,000,000 shares of common stock upon the consummation of this offering as a
result of two-for-one common stock splits effected on July 1, 1999 and October
13, 1999. The 13,067,343 shares of Series C preferred stock will automatically
convert on a two-for-one basis into 26,134,686 shares of common stock upon the
consummation of this offering as a result of a two-for-one common stock split
effected on October 13, 1999.
The 16,453,926 shares of Series D preferred stock will automatically convert
on a one-for-one basis into 16,453,926 shares of common stock upon the
consummation of this offering. However, if the shares in this offering are
offered at a price of less than $12.10, then the conversion ratio for the
Series D preferred stock will be adjusted, such that each share of Series D
preferred stock will convert into that number of shares of common stock equal
to the quotient obtained by dividing $6.05 by the greater of one-half of the
offering price or $4.84.
The sale of the above securities was deemed to be exempt from registration
under the Securities Act in reliance upon Section 4(2) of the Securities Act
and/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 Rule 701. These sales were
made without general solicitation or advertising. 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. Each purchaser was a sophisticated investor with access
to all relevant information necessary to evaluate the investment.
ITEM 16. Exhibits and Financial Statement Schedules.
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
------- -------------
<C> <S> <C>
1.01* Form of Underwriting Agreement.
2.01* Form of Agreement and Plan of Merger between the Registrant and
the Registrant's California predecessor.
3.01 Certificate of Incorporation of the Registrant, filed with the
Delaware Secretary of State on January 4, 2000.
3.02* Form of First Amended and Restated Certificate of Incorporation
of the Registrant to be filed and effective prior to completion
of this offering.
3.03* Form of Second Amended and Restated Certificate of Incorporation
of the Registrant to be filed and effective upon the completion
of this offering.
3.04 Bylaws of the Registrant.
3.05* Restated Bylaws of the Registrant to be effective prior to
completion of this offering.
4.01* Form of Specimen Certificate for Registrant's common stock.
4.02* Second Amended and Restated Investors' Rights Agreement.
5.01* Opinion of Fenwick & West LLP regarding legality of the
securities being registered.
10.01* Form of Indemnity Agreement entered into between the Registrant
and its directors and executive officers.
10.02 1999 equity incentive plan of Registrant's California
predecessor and related forms of stock option agreements and
stock option exercise agreements.
10.03* 2000 equity incentive plan of Registrant's California
predecessor and related forms of stock option agreements and
stock option exercise agreements.
10.04* 2000 equity incentive plan and related forms of stock option
agreements and stock option exercise agreements.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.05* 2000 employee stock purchase plan and related enrollment form,
notice of suspension and notice of withdrawal.
10.06 Form of Restricted Stock Purchase Agreement entered into between
Registrant and its founders.
10.07** Network Affiliate Agreement entered into between Registrant and
DoubleClick Inc.
10.08** DART Services Agreement for Publishers entered into between
Registrant and DoubleClick Inc.
Network Affiliation Agreement entered into between Registrant and
10.09** 24/7 Media Inc.
10.10 Lease Agreement entered into between Registrant and Hayward Point
Eden I Limited Partnership.
Office Building Lease entered into between Registrant and HMS
10.11 Gateway Office, L.P.
10.12* Series D Preferred Stock Purchase Agreement.
10.13 Viewbar Agreement.
21.01 List of subsidiaries.
23.01* Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of Ernst & Young LLP, Independent Auditors.
24.01 Power of Attorney (included on signature page).
27.01 Financial Data Schedule.
</TABLE>
- --------
*To be supplied by amendment.
**Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the
Securities and Exchange Commission.
(b) Financial statement schedules are omitted because the information called
for is not required or is shown either in the financial statements or the 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 provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 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 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 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Hayward,
State of California, on the 7th day of February, 2000.
AllAdvantage.com Inc.
/s/ James Jorgensen
By: _________________________________
James Jorgensen
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints James Jorgensen, Michael Depatie and
David Johnson, and each of them, his true and lawful attorneys-in-fact and
agents with full power of substitution, for him and in his 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 the Registration
Statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act of 1933, as amended, and all post-
effective amendments thereto, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his or
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, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
/s/ James Jorgensen President, Chief Executive February 7, 2000
_______________________________ Officer and Chairman of the
James R. Jorgensen Board of Directors
(Principal Executive Officer)
/s/ Michael Depatie Chief Financial Officer February 7, 2000
_______________________________ (Principal Financial
Michael A. Depatie Officer)
/s/ Bernie Murphy Vice President Finance, February 7, 2000
_______________________________ Treasurer (Principal
Bernie Murphy Accounting Officer)
/s/ William Burnham Director February 7, 2000
_______________________________
William L. Burnham
/s/ Richard LeFurgy Director February 7, 2000
_______________________________
Richard LeFurgy
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
/s/ David Pidwell Director February 7, 2000
_______________________________
David Pidwell
/s/ Johannes Pohle Director February 7, 2000
_______________________________
Johannes Pohle
/s/ John Shoch Director February 7, 2000
_______________________________
John Shoch
/s/ Thomas Unterman Director February 7, 2000
_______________________________
Thomas Unterman
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
------- -------------
<C> <S>
1.01* Form of Underwriting Agreement.
2.01* Form of Agreement and Plan of Merger between the Registrant and the
Registrant's California predecessor.
3.01 Certificate of Incorporation of the Registrant, filed with the
Delaware Secretary of State on January 4, 2000.
3.02* Form of First Amended and Restated Certificate of Incorporation of the
Registrant to be filed and effective prior to completion of this
offering.
3.03* Form of Second Amended and Restated Certificate of Incorporation of
the Registrant to be filed and effective upon the completion of this
offering.
3.04 Bylaws of the Registrant.
3.05* Restated Bylaws of the Registrant to be effective prior to completion
of this offering.
4.01* Form of Specimen Certificate for Registrant's common stock.
4.02* Second Amended and Restated Investors' Rights Agreement.
5.01* Opinion of Fenwick & West LLP regarding legality of the securities
being registered.
10.01* Form of Indemnity Agreement entered into between the Registrant and
its directors and executive officers.
10.02 1999 equity incentive plan of Registrant's California predecessor and
related forms of stock option agreements and stock option exercise
agreements.
10.03* 2000 equity incentive plan of Registrant's California predecessor and
related forms of stock option agreements and stock option exercise
agreements.
10.04* 2000 equity incentive plan and related forms of stock option
agreements and stock option exercise agreements.
10.05* 2000 employee stock purchase plan and related enrollment form, notice
of suspension and notice of withdrawal.
10.06 Form of Restricted Stock Purchase Agreement entered into between
Registrant and its founders.
10.07** Network Affiliate Agreement entered into between Registrant and
DoubleClick Inc.
10.08** DART Services Agreement for Publishers entered into between Registrant
and DoubleClick Inc.
10.09** Network Affiliation Agreement entered into between Registrant and 24/7
Media Inc.
10.10 Lease Agreement entered into between Registrant and Hayward Point Eden
I Limited Partnership.
10.11 Office Building Lease entered into between Registrant and HMS Gateway
Office, L.P.
10.12* Series D Preferred Stock Purchase Agreement.
10.13 Viewbar Agreement.
21.01 List of subsidiaries.
23.01* Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of Ernst & Young LLP, Independent Auditors.
24.01 Power of Attorney (included on signature page).
27.01 Financial Data Schedule.
</TABLE>
- --------
*To be supplied by amendment.
** Confidential treatment has been requested with respect to certain portions
of this exhibit. Omitted portions have been filed separately with the
Securities and Exchange Commission.
<PAGE>
EXHIBIT 3.01
CERTIFICATE OF INCORPORATION
OF
ALLADVANTAGE.COM INC.
ARTICLE I
The name of the corporation is AllAdvantage.com Inc.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is 15 East North Street, City of Dover, County of Kent. The name of
its registered agent at that address is Incorporating Services, Ltd.
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 the
State of Delaware.
ARTICLE IV
The total number of shares of stock which the corporation has authority to
issue is One Thousand (1,000) shares, all of which shall be Common Stock, $0.001
par value per share.
ARTICLE V
The Board of Directors of the corporation shall have the power to adopt,
amend or repeal the Bylaws of the corporation.
ARTICLE VI
Election of directors need not be by written ballot unless the Bylaws of
the corporation shall so provide.
ARTICLE VII
To the fullest extent permitted by law, no director of the corporation
shall be personally liable for monetary damages for breach of fiduciary duty as
a director. Without limiting the effect of the preceding sentence, if the
Delaware General Corporation Law is hereafter amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
<PAGE>
Neither any amendment nor repeal of this Article VII, nor the adoption of
any provision of this Certificate of Incorporation inconsistent with this
Article VII, shall eliminate, reduce or otherwise adversely affect any
limitation on the personal liability of a director of the corporation existing
at the time of such amendment, repeal or adoption of such an inconsistent
provision.
ARTICLE VIII
The name and mailing address of the incorporator is Andrew Luh, c/o Fenwick
& West LLP, Two Palo Alto Square, Palo Alto, California 94306.
The undersigned incorporator hereby acknowledges that the foregoing
certificate is his act and deed and that the facts stated herein are true.
Dated: January 4, 2000
/s/ Andrew Luh
--------------
Andrew Luh, Incorporator
-2-
<PAGE>
EXHIBIT 3.04
BYLAWS
OF
ALLADVANTAGE.COM INC.
(a Delaware corporation)
As Adopted January 4, 2000
<PAGE>
BYLAWS
OF
ALLADVANTAGE.COM INC.
(a Delaware corporation)
TABLE OF CONTENTS
PAGE
----
Article I - STOCKHOLDERS........................................... 1
Section 1.1: Annual Meetings.............................. 1
Section 1.2: Special Meetings............................. 1
Section 1.3: Notice of Meetings........................... 1
Section 1.4: Adjournments................................. 1
Section 1.5: Quorum....................................... 1
Section 1.6: Organization................................. 2
Section 1.7: Voting; Proxies.............................. 2
Section 1.8: Fixing Date for Determination of Stockholders
of Record.................................... 2
Section 1.9: List of Stockholders Entitled to Vote........ 3
Section 1.10: Action by Written Consent of Stockholders.... 3
Section 1.11: Inspectors of Elections...................... 4
Article II - BOARD OF DIRECTORS.................................... 5
Section 2.1: Number; Qualifications....................... 5
Section 2.2: Election; Resignation; Removal; Vacancies.... 5
Section 2.3: Regular Meetings............................. 5
i
<PAGE>
BYLAWS
OF
ALLADVANTAGE.COM INC.
(a Delaware corporation)
TABLE OF CONTENTS (cont'd)
PAGE
----
Section 2.4: Special Meetings...................... 5
Section 2.5: Telephonic Meetings Permitted......... 6
Section 2.6: Quorum; Vote Required for Action...... 6
Section 2.7: Organization.......................... 6
Section 2.8: Written Action by Directors........... 6
Section 2.9: Powers................................ 6
Section 2.10: Compensation of Directors............. 6
Article III - COMMITTEES.................................... 7
Section 3.1: Committees............................ 7
Section 3.2: Committee Rules....................... 7
Article IV - OFFICERS....................................... 7
Section 4.1: Generally............................. 7
Section 4.2: Chief Executive Officer............... 8
Section 4.3: Chairperson of the Board.............. 8
Section 4.4: President............................. 8
Section 4.5: Vice President........................ 9
Section 4.6: Chief Financial Officer............... 9
Section 4.7: Treasurer............................. 9
Section 4.8: Secretary............................. 9
ii
<PAGE>
BYLAWS
OF
ALLADVANTAGE.COM INC.
(a Delaware corporation)
TABLE OF CONTENTS (cont'd)
PAGE
----
Section 4.9: Delegation of Authority.......................... 9
Section 4.10: Removal.......................................... 9
Article V - STOCK...................................................... 9
Section 5.l: Certificates..................................... 9
Section 5.2: Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificate...................... 9
Section 5.3: Other Regulations................................ 10
Article VI - INDEMNIFICATION........................................... 10
Section 6.1: Indemnification of Officers and Directors........ 10
Section 6.2: Advance of Expenses.............................. 10
Section 6.3: Non-Exclusivity of Rights........................ 11
Section 6.4: Indemnification Contracts........................ 11
Section 6.5: Effect of Amendment.............................. 11
Article VII - NOTICES.................................................. 11
Section 7.l: Notice........................................... 11
Section 7.2: Waiver of Notice................................. 12
Article VIII - INTERESTED DIRECTORS.................................... 12
Section 8.1: Interested Directors; Quorum..................... 12
iii
<PAGE>
BYLAWS
OF
ALLADVANTAGE.COM INC.
(a Delaware corporation)
TABLE OF CONTENTS (cont'd)
PAGE
----
Article IX - MISCELLANEOUS...................................... 12
Section 9.1: Fiscal Year............................... 12
Section 9.2: Seal...................................... 12
Section 9.3: Form of Records........................... 13
Section 9.4: Reliance Upon Books and Records........... 13
Section 9.5: Certificate of Incorporation Governs...... 13
Section 9.6: Severability.............................. 13
Article X - AMENDMENT........................................... 13
Section 10.1: Amendments................................ 13
iv
<PAGE>
BYLAWS
OF
ALLADVANTAGE.COM INC.
(a Delaware corporation)
As Adopted January 4, 2000
ARTICLE I
STOCKHOLDERS
Section 1.1: Annual Meetings. Unless directors are elected by written
----------- ---------------
consent in lieu of an annual meeting as permitted by Section 211 of the Delaware
General Corporation Law, an annual meeting of stockholders shall be held for the
election of directors at such date, time and place, either within or without the
State of Delaware, as the Board of Directors shall each year fix. Any other
proper business may be transacted at the annual meeting.
Section 1.2: Special Meetings. Special meetings of stockholders for any
----------- ----------------
purpose or purposes may be called at any time by the Board of Directors, the
Chairperson of the Board of Directors, the Chief Executive Officer, the
President, the holders of shares of the Corporation that are entitled to cast
not less than ten percent (10%) of the total number of votes entitled to be cast
by all stockholders at such meeting, or by a majority of the members of the
Board of Directors. Special meetings may not be called by any other person or
persons.
Section 1.3: Notice of Meetings. Written notice of all meetings of
----------- ------------------
stockholders shall be given stating the place, date and time of the meeting and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise required by applicable law or the Certificate of
Incorporation of the Corporation, such notice shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting to each
stockholder of record entitled to vote at such meeting.
Section 1.4: Adjournments. Any meeting of stockholders may adjourn from
----------- ------------
time to time to reconvene at the same or another place, and notice need not be
given of any such adjourned meeting if the time, date and place thereof are
announced at the meeting at which the adjournment is taken; provided, however,
-------- -------
that if the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, then a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting. At the adjourned meeting the Corporation may transact
any business that might have been transacted at the original meeting.
Section 1.5: Quorum. At each meeting of stockholders the holders of a
----------- ------
majority of the shares of stock entitled to vote at the meeting, present in
person or represented by proxy, shall
<PAGE>
constitute a quorum for the transaction of business, except if otherwise
required by applicable law. If a quorum shall fail to attend any meeting, the
chairperson of the meeting or the holders of a majority of the shares entitled
to vote who are present, in person or by proxy, at the meeting may adjourn the
meeting. Shares of the Corporation's stock belonging to the Corporation (or to
another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation are held, directly or
indirectly, by the Corporation), shall neither be entitled to vote nor be
counted for quorum purposes; provided, however, that the foregoing shall not
-------- -------
limit the right of the Corporation or any other corporation to vote any shares
of the Corporation's stock held by it in a fiduciary capacity.
Section 1.6: Organization. Meetings of stockholders shall be presided
----------- ------------
over by such person as the Board of Directors may designate, or, in the absence
of such a person, the Chairperson of the Board of Directors, or, in the absence
of such person, the President of the Corporation, or, in the absence of such
person, such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, at the meeting. Such
person shall be chairperson of the meeting and, subject to Section 1.11 hereof,
shall determine the order of business and the procedure at the meeting,
including such regulation of the manner of voting and the conduct of discussion
as seems to him or her to be in order. The Secretary of the Corporation shall
act as secretary of the meeting, but in such person's absence the chairperson of
the meeting may appoint any person to act as secretary of the meeting.
Section 1.7: Voting; Proxies. Unless otherwise provided by law or the
----------- ---------------
Certificate of Incorporation, and subject to the provisions of Section 1.8 of
these Bylaws, each stockholder shall be entitled to one (1) vote for each share
of stock held by such stockholder. Each stockholder entitled to vote at a
meeting of stockholders, or to express consent or dissent to corporate action in
writing without a meeting, may authorize another person or persons to act for
such stockholder by proxy. Such a proxy may be prepared, transmitted and
delivered in any manner permitted by applicable law. Voting at meetings of
stockholders need not be by written ballot unless such is demanded at the
meeting before voting begins by a stockholder or stockholders holding shares
representing at least one percent (1%) of the votes entitled to vote at such
meeting, or by such stockholder's or stockholders' proxy; provided, however,
-------- -------
that an election of directors shall be by written ballot if demand is so made by
any stockholder at the meeting before voting begins. If a vote is to be taken
by written ballot, then each such ballot shall state the name of the stockholder
or proxy voting and such other information as the chairperson of the meeting
deems appropriate. Directors shall be elected by a plurality of the votes of
the shares present in person or represented by proxy at the meeting and entitled
to vote on the election of directors. Unless otherwise provided by applicable
law, the Certificate of Incorporation or these Bylaws, every matter other than
the election of directors shall be decided by the affirmative vote of the
holders of a majority of the shares of stock entitled to vote thereon that are
present in person or represented by proxy at the meeting and are voted for or
against the matter.
Section 1.8: Fixing Date for Determination of Stockholders of Record. In
----------- -------------------------------------------------------
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing
-2-
<PAGE>
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not precede the date upon which the resolution fixing the record
date is adopted by the Board of Directors and which shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. If no record date is fixed by the
Board of Directors, then the record date shall be as provided by applicable law.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
--------
however, that the Board of Directors may fix a new record date for the adjourned
- -------
meeting.
Section 1.9: List of Stockholders Entitled to Vote. A complete list of
----------- -------------------------------------
stockholders entitled to vote at any meeting of stockholders, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in the name of each stockholder, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present at the meeting.
Section 1.10: Action by Written Consent of Stockholders.
------------ -----------------------------------------
(a) Procedure. Unless otherwise provided by the Certificate of
---------
Incorporation, any action required or permitted to be taken at any annual or
special meeting of the stockholders may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding stock
having not less than the number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Written stockholder consents shall bear the date of
signature of each stockholder who signs the consent and shall be delivered to
the Corporation by delivery to its registered office in the State of Delaware,
to its principal place of business or to any officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. No written
consent shall be effective to take the action set forth therein unless, within
sixty (60) days of the earliest dated consent delivered to the Corporation in
the manner provided above, written consents signed by a sufficient number of
stockholders to take the action set forth therein are delivered to the
Corporation in the manner provided above.
(b) Notice of Consent. Prompt notice of the taking of corporate action by
-----------------
stockholders without a meeting by less than unanimous written consent of the
stockholders shall be given to those stockholders who have not consented thereto
in writing and who, if the action had been taken at a meeting, would have been
entitled to notice of the meeting if the record date for such meeting had been
the date that written consents signed by a sufficient number of holders to take
the action were delivered to the Corporation. In the case of a
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Certificate Action (as defined below), if the Delaware General Corporation Law
so requires, such notice shall be given prior to filing of the certificate in
question. If the action which is consented to requires the filing of a
certificate under the Delaware General Corporation Law (a "Certificate Action"),
then if the Delaware General Corporation Law so requires, the certificate so
filed shall state that written stockholder consent has been given in accordance
with Section 228 of the Delaware General Corporation Law and that written notice
of the taking of corporate action by stockholders without a meeting as described
herein has been given as provided in such section.
Section 1.11: Inspectors of Elections.
------------ -----------------------
(a) Applicability. Unless otherwise provided in the Corporation's
-------------
Certificate of Incorporation or required by the Delaware General Corporation
Law, the following provisions of this Section 1.11 shall apply only if and when
the Corporation has a class of voting stock that is: (i) listed on a national
securities exchange; (ii) authorized for quotation on an automated interdealer
quotation system of a registered national securities association; or (iii) held
of record by more than 2,000 stockholders; in all other cases, observance of the
provisions of this Section 1.11 shall be optional, and at the discretion of the
Corporation.
(b) Appointment. The Corporation shall, in advance of any meeting of
-----------
stockholders, appoint one or more inspectors of election to act at the meeting
and make a written report thereof. The Corporation may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. If
no inspector or alternate is able to act at a meeting of stockholders, the
person presiding at the meeting shall appoint one or more inspectors to act at
the meeting.
(c) Inspector's Oath. Each inspector of election, before entering upon the
----------------
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of such
inspector's ability.
(d) Duties of Inspectors. At a meeting of stockholders, the inspectors of
--------------------
election shall (i) ascertain the number of shares outstanding and the voting
power of each share, (ii) determine the shares represented at a meeting and the
validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period of time a record of the disposition
of any challenges made to any determination by the inspectors, and (v) certify
their determination of the number of shares represented at the meeting, and
their count of all votes and ballots. The inspectors may appoint or retain
other persons or entities to assist the inspectors in the performance of the
duties of the inspectors.
(e) Opening and Closing of Polls. The date and time of the opening and the
----------------------------
closing of the polls for each matter upon which the stockholders will vote at a
meeting shall be announced by the inspectors at the meeting. No ballot, proxies
or votes, nor any revocations thereof or changes thereto, shall be accepted by
the inspectors after the closing of the polls unless the Court of Chancery upon
application by a stockholder shall determine otherwise.
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(f) Determinations. In determining the validity and counting of proxies
--------------
and ballots, the inspectors shall be limited to an examination of the proxies,
any envelopes submitted with those proxies, any information provided in
connection with proxies in accordance with Section 212(c)(2) of the Delaware
General Corporation Law, ballots and the regular books and records of the
Corporation, except that the inspectors may consider other reliable information
for the limited purpose of reconciling proxies and ballots submitted by or on
behalf of banks, brokers, their nominees or similar persons which represent more
votes than the holder of a proxy is authorized by the record owner to cast or
more votes than the stockholder holds of record. If the inspectors consider
other reliable information for the limited purpose permitted herein, the
inspectors at the time they make their certification of their determinations
pursuant to this Section 1.11 shall specify the precise information considered
by them, including the person or persons from whom they obtained the
information, when the information was obtained, the means by which the
information was obtained and the basis for the inspectors' belief that such
information is accurate and reliable.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1: Number; Qualifications. The Board of Directors shall consist
----------- ----------------------
of one or more members. The initial number of directors shall be eight (8), and
thereafter shall be fixed from time to time by resolution of the Board of
Directors. No decrease in the authorized number of directors constituting the
Board of Directors shall shorten the term of any incumbent director. Directors
need not be stockholders of the Corporation.
Section 2.2: Election; Resignation; Removal; Vacancies. The Board of
----------- -----------------------------------------
Directors shall initially consist of the person or persons elected by the
incorporator or named in the Corporation's initial Certificate of Incorporation.
Each director shall hold office until such director's successor is elected and
qualified, or until such director's earlier death, resignation or removal. Any
director may resign at any time upon written notice to the Corporation. Subject
to the rights of any holders of Preferred Stock then outstanding: (i) any
director or the entire Board of Directors may be removed, with or without cause,
by the holders of a majority of the shares then entitled to vote at an election
of directors and (ii) any vacancy occurring in the Board of Directors for any
cause, and any newly created directorship resulting from any increase in the
authorized number of directors to be elected by all stockholders having the
right to vote as a single class, may be filled by the stockholders, by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
Section 2.3: Regular Meetings. Regular meetings of the Board of Directors
----------- ----------------
may be held at such places, within or without the State of Delaware, and at such
times as the Board of Directors may from time to time determine. Notice of
regular meetings need not be given if the date, times and places thereof are
fixed by resolution of the Board of Directors.
Section 2.4: Special Meetings. Special meetings of the Board of Directors
----------- ----------------
may be called by the Chairperson of the Board of Directors, the President or a
majority of the members of the Board of Directors then in office and may be held
at any time, date or place, within or
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<PAGE>
without the State of Delaware, as the person or persons calling the meeting
shall fix. Notice of the time, date and place of such meeting shall be given,
orally or in writing, by the person or persons calling the meeting to all
directors at least four (4) days before the meeting if the notice is mailed, or
at least twenty-four (24) hours before the meeting if such notice is given by
telephone, hand delivery, telegram, telex, mailgram, facsimile or similar
communication method. Unless otherwise indicated in the notice, any and all
business may be transacted at a special meeting.
Section 2.5: Telephonic Meetings Permitted. Members of the Board of
----------- -----------------------------
Directors, or any committee of the Board, may participate in a meeting of the
Board or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to
conference telephone or similar communications equipment shall constitute
presence in person at such meeting.
Section 2.6: Quorum; Vote Required for Action. At all meetings of the
----------- --------------------------------
Board of Directors a majority of the total number of authorized directors shall
constitute a quorum for the transaction of business. Except as otherwise
provided herein or in the Certificate of Incorporation, or required by law, the
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
Section 2.7: Organization. Meetings of the Board of Directors shall be
----------- ------------
presided over by the Chairperson of the Board of Directors, or in such person's
absence by the President, or in such person's absence by a chairperson chosen at
the meeting. The Secretary shall act as secretary of the meeting, but in such
person's absence the chairperson of the meeting may appoint any person to act as
secretary of the meeting.
Section 2.8: Written Action by Directors. Any action required or
----------- ---------------------------
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board or
such committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board or committee,
respectively.
Section 2.9: Powers. The Board of Directors may, except as otherwise
------------ ------
required by law or the Certificate of Incorporation, exercise all such powers
and do all such acts and things as may be exercised or done by the Corporation.
Section 2.10: Compensation of Directors. Directors, as such, may receive,
------------ -------------------------
pursuant to a resolution of the Board of Directors, fees and other compensation
for their services as directors, including without limitation their services as
members of committees of the Board of Directors.
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ARTICLE III
COMMITTEES
Section 3.1: Committees. The Board of Directors may designate one or more
----------- ----------
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of the committee, the member or members thereof present at any meeting of
such committee who are not disqualified from voting, whether or not such member
or members constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in place of any such absent or
disqualified member. Any such committee, to the extent provided in a resolution
of the Board of Directors, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation and may authorize the seal of the Corporation to be
affixed to all papers that may require it; but no such committee shall have the
power or authority in reference to the following matters: (i) approving or
adopting, or recommending to the stockholders, any action or matter expressly
required by the Delaware General Corporation Law to be submitted to stockholders
for approval or (ii) adopting, amending or repealing any bylaw of the
Corporation.
Section 3.2: Committee Rules. Unless the Board of Directors otherwise
----------- ---------------
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such rules
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these Bylaws.
ARTICLE IV
OFFICERS
Section 4.1: Generally. The officers of the Corporation shall consist of
----------- ---------
a Chief Executive Officer and/or a President, a Secretary, a Treasurer and such
other officers as may from time to time be appointed by the Board of Directors.
All officers shall be elected by the Board of Directors; provided, however, that
-------- -------
the Board of Directors may empower the Chief Executive Officer of the
Corporation to appoint officers other than the Chairperson of the Board, the
Chief Executive Officer, the President, the Chief Financial Officer or the
Treasurer. Each officer shall hold office until such person's successor is
elected and qualified or until such person's earlier resignation or removal.
Any number of offices may be held by the same person. Any officer may resign at
any time upon written notice to the Corporation. Any vacancy occurring in any
office of the Corporation by death, resignation, removal or otherwise may be
filled by the Board of Directors.
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Section 4.2: Chief Executive Officer. Subject to the control of the Board
----------- -----------------------
of Directors and such supervisory powers, if any, as may be given by the Board
of Directors, the powers and duties of the Chief Executive Officer of the
Corporation are:
(a) To act as the general manager and, subject to the control of the Board
of Directors, to have general supervision, direction and control of the business
and affairs of the Corporation;
(b) To preside at all meetings of the stockholders;
(c) To call meetings of the stockholders to be held at such times and,
subject to the limitations prescribed by law or by these Bylaws, at such places
as he or she shall deem proper; and
(d) To affix the signature of the Corporation to all deeds, conveyances,
mortgages, guarantees, leases, obligations, bonds, certificates and other papers
and instruments in writing which have been authorized by the Board of Directors
or which, in the judgment of the Chief Executive Officer, should be executed on
behalf of the Corporation; to sign certificates for shares of stock of the
Corporation; and, subject to the direction of the Board of Directors, to have
general charge of the property of the Corporation and to supervise and control
all officers, agents and employees of the Corporation.
The President shall be the Chief Executive Officer of the Corporation unless the
Board of Directors shall designate another officer to be the Chief Executive
Officer. If there is no President, and the Board of Directors has not
designated any other officer to be the Chief Executive Officer, then the
Chairperson of the Board of Directors shall be the Chief Executive Officer.
Section 4.3: Chairperson of the Board. The Chairperson of the Board of
----------- ------------------------
Directors shall have the power to preside at all meetings of the Board of
Directors and shall have such other powers and duties as provided in these
Bylaws and as the Board of Directors may from time to time prescribe.
Section 4.4: President. The President shall be the Chief Executive
----------- ---------
Officer of the Corporation unless the Board of Directors shall have designated
another officer as the Chief Executive Officer of the Corporation. Subject to
the provisions of these Bylaws and to the direction of the Board of Directors,
and subject to the supervisory powers of the Chief Executive Officer (if the
Chief Executive Officer is an officer other than the President), and subject to
such supervisory powers and authority as may be given by the Board of Directors
to the Chairperson of the Board of Directors, and/or to any other officer, the
President shall have the responsibility for the general management the control
of the business and affairs of the Corporation and the general supervision and
direction of all of the officers, employees and agents of the Corporation (other
than the Chief Executive Officer, if the Chief Executive Officer is an officer
other than the President) and shall perform all duties and have all powers that
are commonly incident to the office of President or that are delegated to the
President by the Board of Directors.
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<PAGE>
Section 4.5: Vice President. Each Vice President shall have all such
----------- --------------
powers and duties as are commonly incident to the office of Vice President, or
that are delegated to him or her by the Board of Directors or the Chief
Executive Officer. A Vice President may be designated by the Board to perform
the duties and exercise the powers of the Chief Executive Officer in the event
of the Chief Executive Officer's absence or disability.
Section 4.6: Chief Financial Officer. The Chief Financial Officer shall
----------- -----------------------
be the Treasurer of the Corporation unless the Board of Directors shall have
designated another officer as the Treasurer of the Corporation. Subject to the
direction of the Board of Directors and the Chief Executive Officer, the Chief
Financial Officer shall perform all duties and have all powers that are commonly
incident to the office of Chief Financial Officer.
Section 4.7: Treasurer. The Treasurer shall have custody of all monies
----------- ---------
and securities of the Corporation. The Treasurer shall make such disbursements
of the funds of the Corporation as are authorized and shall render from time to
time an account of all such transactions. The Treasurer shall also perform such
other duties and have such other powers as are commonly incident to the office
of Treasurer, or as the Board of Directors or the Chief Executive Officer may
from time to time prescribe.
Section 4.8: Secretary. The Secretary shall issue or cause to be issued
----------- ---------
all authorized notices for, and shall keep, or cause to be kept, minutes of all
meetings of the stockholders and the Board of Directors. The Secretary shall
have charge of the corporate minute books and similar records and shall perform
such other duties and have such other powers as are commonly incident to the
office of Secretary, or as the Board of Directors or the Chief Executive Officer
may from time to time prescribe.
Section 4.9: Delegation of Authority. The Board of Directors may from
----------- -----------------------
time to time delegate the powers or duties of any officer to any other officers
or agents, notwithstanding any provision hereof.
Section 4.10: Removal. Any officer of the Corporation shall serve at the
------------ -------
pleasure of the Board of Directors and may be removed at any time, with or
without cause, by the Board of Directors. Such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation.
ARTICLE V
STOCK
Section 5.1: Certificates. Every holder of stock shall be entitled to
----------- ------------
have a certificate signed by or in the name of the Corporation by the
Chairperson or Vice-Chairperson of the Board of Directors, or the President or a
Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary, of the Corporation, certifying the number of shares
owned by such stockholder in the Corporation. Any or all of the signatures on
the certificate may be a facsimile.
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<PAGE>
Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of New
----------- -------------------------------------------------------------
Certificates. The Corporation may issue a new certificate of stock in the place
- ------------
of any certificate previously issued by it, alleged to have been lost, stolen or
destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or such owner's legal representative, to agree to
indemnify the Corporation and/or to give the Corporation a bond sufficient to
indemnify it, against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
Section 5.3: Other Regulations. The issue, transfer, conversion and
----------- -----------------
registration of stock certificates shall be governed by such other regulations
as the Board of Directors may establish.
ARTICLE VI
INDEMNIFICATION
Section 6.1 Indemnification of Officers and Directors. Each person who
----------- -----------------------------------------
was or is made a party to, or is threatened to be made a party to, or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "Proceeding"), by reason of the fact that
such person (or a person of whom such person is the legal representative), is or
was a director or officer of the Corporation or a Reincorporated Predecessor (as
defined below) or is or was serving at the request of the Corporation or a
Reincorporated Predecessor (as defined below) as a director or officer of
another corporation, or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, shall be
indemnified and held harmless by the Corporation to the fullest extent permitted
by the Delaware General Corporation Law, against all expenses, liability and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes and
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith, provided such person acted in
good faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the person's
conduct was unlawful. Such indemnification shall continue as to a person who
has ceased to be a director or officer and shall inure to the benefit of such
person's heirs, executors and administrators. Notwithstanding the foregoing,
the Corporation shall indemnify any such person seeking indemnity in connection
with a Proceeding (or part thereof) initiated by such person only if such
Proceeding (or part thereof) was authorized by the Board of Directors of the
Corporation. As used herein, the term "Reincorporated Predecessor" means a
corporation that is merged with and into the Corporation in a statutory merger
where (a) the Corporation is the surviving corporation of such merger; (b) the
primary purpose of such merger is to change the corporate domicile of the
Reincorporated Predecessor to Delaware.
Section 6.2: Advance of Expenses. The Corporation shall pay all expenses
----------- -------------------
(including attorneys' fees) incurred by such a director or officer in defending
any such Proceeding as they are incurred in advance of its final disposition;
provided, however, that if the Delaware General Corporation Law then so
- -------- -------
requires, the payment of such expenses incurred by such a director or
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<PAGE>
officer in advance of the final disposition of such Proceeding shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it should be determined
ultimately that such director or officer is not entitled to be indemnified under
this Article VI or otherwise; and provided, further, that the Corporation shall
-------- -------
not be required to advance any expenses to a person against whom the Corporation
directly brings a claim, in a Proceeding, alleging that such person has breached
such person's duty of loyalty to the Corporation, committed an act or omission
not in good faith or that involves intentional misconduct or a knowing violation
of law, or derived an improper personal benefit from a transaction.
Section 6.3: Non-Exclusivity of Rights. The rights conferred on any
------------ -------------------------
person in this Article VI shall not be exclusive of any other right that such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaw, agreement, vote or consent of stockholders
or disinterested directors, or otherwise. Additionally, nothing in this Article
VI shall limit the ability of the Corporation, in its discretion, to indemnify
or advance expenses to persons whom the Corporation is not obligated to
indemnify or advance expenses pursuant to this Article VI.
Section 6.4: Indemnification Contracts. The Board of Directors is
----------- -------------------------
authorized to cause the Corporation to enter into indemnification contracts with
any director, officer, employee or agent of the Corporation, or any person
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including employee benefit plans, providing indemnification rights
to such person. Such rights may be greater than those provided in this Article
VI.
Section 6.5: Effect of Amendment. Any amendment, repeal or modification
----------- -------------------
of any provision of this Article VI shall be prospective only, and shall not
adversely affect any right or protection conferred on a person pursuant to this
Article VI and existing at the time of such amendment, repeal or modification.
ARTICLE VII
NOTICES
Section 7.1: Notice. Except as otherwise specifically provided herein or
----------- ------
required by law, all notices required to be given pursuant to these Bylaws shall
be in writing and may in every instance be effectively given by hand delivery
(including use of a delivery service), by depositing such notice in the mail,
postage prepaid, or by sending such notice by prepaid telegram, telex, overnight
express courier, mailgram or facsimile. Any such notice shall be addressed to
the person to whom notice is to be given at such person's address as it appears
on the records of the Corporation. The notice shall be deemed given (i) in the
case of hand delivery, when received by the person to whom notice is to be given
or by any person accepting such notice on behalf of such person, (ii) in the
case of delivery by mail, upon deposit in the mail, (iii) in the case of
delivery by overnight express courier, when dispatched, and (iv) in the case of
delivery via telegram, telex, mailgram or facsimile, when dispatched.
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Section 7.2: Waiver of Notice. Whenever notice is required to be given
----------- ----------------
under any provision of these Bylaws, a written waiver of notice, signed by the
person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
ARTICLE VIII
INTERESTED DIRECTORS
Section 8.1: Interested Directors; Quorum. No contract or transaction
----------- ----------------------------
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof that
authorizes the contract or transaction, or solely because his, her or their
votes are counted for such purpose, if: (i) the material facts as to his, her or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; (ii) the material
facts as to his, her or their relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified by the
Board of Directors, a committee thereof, or the stockholders. Interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IX
MISCELLANEOUS
Section 9.1: Fiscal Year. The fiscal year of the Corporation shall be
----------- -----------
determined by resolution of the Board of Directors.
Section 9.2: Seal. The Board of Directors may provide for a corporate
----------- ----
seal, which shall have the name of the Corporation inscribed thereon and shall
otherwise be in such form as may be approved from time to time by the Board of
Directors.
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Section 9.3: Form of Records. Any records maintained by the Corporation
----------- ---------------
in the regular course of its business, including its stock ledger, books of
account and minute books, may be kept on, or be in the form of, magnetic tape,
diskettes, photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 9.4: Reliance Upon Books and Records. A member of the Board of
----------- -------------------------------
Directors, or a member of any committee designated by the Board of Directors
shall, in the performance of such person's duties, be fully protected in relying
in good faith upon records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of the
Corporation's officers or employees, or committees of the Board of Directors, or
by any other person as to matters the member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
Section 9.5: Certificate of Incorporation Governs. In the event of any
----------- ------------------------------------
conflict between the provisions of the Corporation's Certificate of
Incorporation and Bylaws, the provisions of the Certificate of Incorporation
shall govern.
Section 9.6: Severability. If any provision of these Bylaws shall be held
----------- ------------
to be invalid, illegal, unenforceable or in conflict with the provisions of the
Corporation's Certificate of Incorporation, then such provision shall
nonetheless be enforced to the maximum extent possible consistent with such
holding and the remaining provisions of these Bylaws (including without
limitation, all portions of any section of these Bylaws containing any such
provision held to be invalid, illegal, unenforceable or in conflict with the
Certificate of Incorporation, that are not themselves invalid, illegal,
unenforceable or in conflict with the Certificate of Incorporation) shall remain
in full force and effect.
ARTICLE X
AMENDMENT
Section 10.1: Amendments. Stockholders of the Corporation holding a
------------ ----------
majority of the Corporation's outstanding voting stock then entitled to vote at
an election of directors shall have the power to adopt, amend or repeal Bylaws
To the extent provided in the Corporation's Certificate of Incorporation, the
Board of Directors of the Corporation shall also have the power to adopt, amend
or repeal Bylaws of the Corporation.
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CERTIFICATION OF BYLAWS
OF
ALLADVANTAGE.COM INC.
(a Delaware corporation)
KNOW ALL BY THESE PRESENTS:
I, David Johnson, certify that I am Secretary of AllAdvantage.com Inc., a
Delaware corporation (the "Company"), that I am duly authorized to make and
deliver this certification, that the attached Bylaws are a true and correct copy
of the Bylaws of the Company in effect as of the date of this certificate.
Dated: January 4, 2000
/S/ DAVID JOHNSON
----------------------------
David Johnson, Secretary
<PAGE>
Exhibit 10.02
ALLADVANTAGE.COM
1999 EQUITY INCENTIVE PLAN
As Adopted on April 26, 1999
As Amended on September 9, 1999
As Amended on November 16, 1999
1. PURPOSE. The purpose of this Plan is to provide incentives to attract,
-------
retain and motivate eligible persons whose present and potential contributions
are important to the success of the Company, its Parent and Subsidiaries, by
offering them an opportunity to participate in the Company's future performance
through awards of Options and Restricted Stock. Capitalized terms not defined
in the text are defined in Section 22 hereof. This Plan is intended to be a
written compensatory benefit plan within the meaning of Rule 701 promulgated
under the Securities Act.
2. SHARES SUBJECT TO THE PLAN.
--------------------------
2.1 Number of Shares Available. Subject to Sections 2.2 and 17
--------------------------
hereof, the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 15,200,000 Shares or such lesser number of Shares
as permitted under Section 260.140.45 of Title 10 of the California Code of
Regulations. Subject to Sections 2.2, 5.10 and 17 hereof, Shares subject to
Awards previously granted will again be available for grant and issuance in
connection with future Awards under this Plan to the extent such Shares: (i)
cease to be subject to issuance upon exercise of an Option, other than due to
exercise of such Option; (ii) are subject to an Award granted hereunder but the
Shares subject to such Award are forfeited or repurchased by the Company at the
original issue price; or (iii) are subject to an Award that otherwise terminates
without Shares being issued. At all times the Company will reserve and keep
available a sufficient number of Shares as will be required to satisfy the
requirements of all Awards granted and outstanding under this Plan.
2.2 Adjustment of Shares. In the event that the number of
--------------------
outstanding shares of the Company's Common Stock is changed by a stock dividend,
recapitalization, stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the Company
without consideration, then (i) the number of Shares reserved for issuance under
this Plan, (ii) the Exercise Prices of and number of Shares subject to
outstanding Options and (iii) the Purchase Prices of and number of Shares
subject to other outstanding Awards will be proportionately adjusted, subject to
any required action by the Board or the shareholders of the Company and
compliance with applicable securities laws; provided, however, that fractions of
a Share will not be issued but will either be paid in cash at the Fair Market
Value of such fraction of a Share or will be rounded down to the nearest whole
Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 hereof) may be granted only
-----------
to employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. NQSOs (as defined in
Section 5 hereof) and Restricted Stock Awards may be granted to employees,
officers, directors and consultants of the Company or any Parent or Subsidiary
of the Company; provided such consultants render bona fide services
1
<PAGE>
not in connection with the offer and sale of securities in a capital-raising
transaction. A person may be granted more than one Award under this Plan.
4. ADMINISTRATION.
--------------
4.1 Committee Authority. This Plan will be administered by the
-------------------
Committee or the Board if no Committee is created by the Board. Subject to the
general purposes, terms and conditions of this Plan, and to the direction of the
Board, the Committee will have full power to implement and carry out this Plan.
Without limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and any
other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations relating to
this Plan;
(c) approve persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject to
Awards;
(f) determine whether Awards will be granted singly, in combination
with, in tandem with, in replacement of, or as alternatives to,
other Awards under this Plan or awards under any other incentive
or compensation plan of the Company or any Parent or Subsidiary
of the Company;
(g) grant waivers of any conditions of this Plan or any Award;
(h) determine the terms of vesting, exercisability and payment of
Awards;
(i) correct any defect, supply any omission, or reconcile any
inconsistency in this Plan, any Award, any Award Agreement, any
Exercise Agreement or any Restricted Stock Purchase Agreement;
(j) determine whether an Award has been earned;
(k) make all other determinations necessary or advisable for the
administration of this Plan; and
(l) extend the vesting period beyond a Participant's Termination
Date.
4.2 Committee Discretion. Unless in contravention of any express
--------------------
terms of this Plan or Award, any determination made by the Committee with
respect to any Award will be made in its sole discretion either (i) at the time
of grant of the Award, or (ii) subject to Section 5.9 hereof, at any later time.
Any such determination will be final and binding on the Company and on all
persons having an interest in any Award under this Plan. The Committee may
delegate to one or more officers of the Company the authority to grant an Award
under this Plan, provided such officer or officers are members of the Board.
5. OPTIONS. The Committee may grant Options to eligible persons described
-------
in Section 3 hereof and will determine whether such Options will be Incentive
Stock Options within
2
<PAGE>
the meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the
number of Shares subject to the Option, the Exercise Price of the Option, the
period during which the Option may be exercised, and all other terms and
conditions of the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan will
--------------------
be evidenced by an Award Agreement which will expressly identify the Option as
an ISO or an NQSO ("Stock Option Agreement"), and will be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be the date
-------------
on which the Committee makes the determination to grant such Option, unless a
later date is otherwise specified by the Committee. The Stock Option Agreement
and a copy of this Plan will be delivered to the Participant within a reasonable
time after the granting of the Option.
5.3 Exercise Period. Options may be exercisable immediately but
---------------
subject to repurchase pursuant to Section 11 hereof or may be exercisable within
the times or upon the events determined by the Committee as set forth in the
Stock Option Agreement governing such Option; provided, however, that no Option
will be exercisable after the expiration of ten (10) years from the date the
Option is granted; and provided further that no ISO granted to a person who
directly or by attribution owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any Parent or
Subsidiary of the Company ("Ten Percent Shareholder") will be exercisable after
the expiration of five (5) years from the date the ISO is granted. The
Committee also may provide for Options to become exercisable at one time or from
time to time, periodically or otherwise, in such number of Shares or percentage
of Shares as the Committee determines. Subject to earlier termination of the
Option as provided herein, each Participant who is not an officer, director or
consultant of the Company or of a Parent or Subsidiary of the Company shall have
the right to exercise an Option granted hereunder at the rate of no less than
twenty percent (20%) per year over five (5) years from the date such Option is
granted.
5.4 Exercise Price. The Exercise Price of an Option will be
--------------
determined by the Committee when the Option is granted and may not be less than
eighty-five percent (85%) of the Fair Market Value of the Shares on the date of
grant; provided that (i) the Exercise Price of an ISO will not be less than one
hundred percent (100%) of the Fair Market Value of the Shares on the date of
grant and (ii) the Exercise Price of any Option granted to a Ten Percent
Shareholder will not be less than one hundred ten percent (110%) of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased must be made in accordance with Section 7 hereof.
5.5 Method of Exercise. Options may be exercised only by delivery to
------------------
the Company of a written stock option exercise agreement (the "Exercise
Agreement") in a form approved by the Committee (which need not be the same for
each Participant). The Exercise Agreement will state (i) the number of Shares
being purchased, (ii) the restrictions imposed on the Shares purchased under
such Exercise Agreement, if any, and (iii) such representations and agreements
regarding Participant's investment intent and access to information and other
matters, if any, as may be required or desirable by the Company to comply with
applicable securities laws. Participant shall execute and deliver to the
Company the Exercise Agreement together
3
<PAGE>
with payment in full of the Exercise Price, and any applicable taxes, for the
number of Shares being purchased.
5.6 Termination. Subject to earlier termination pursuant to Sections
-----------
17 and 18 hereof and notwithstanding the exercise periods set forth in the Stock
Option Agreement, exercise of an Option will always be subject to the following:
(a) If the Participant is Terminated for any reason other than death,
Disability or for Cause, then the Participant may exercise such
Participant's Options only to the extent that such Options are
exercisable upon the Termination Date or as otherwise determined
by the Committee. Such Options must be exercised by the
Participant, if at all, as to all or some of the Vested Shares
calculated as of the Termination Date or such other date
determined by the Committee, within three (3) months after the
Termination Date (or within such shorter time period, not less
than thirty (30) days, or within such longer time period, not
exceeding five (5) years, after the Termination Date as may be
determined by the Committee, with any exercise beyond three (3)
months after the Termination Date deemed to be an NQSO) but in
any event, no later than the expiration date of the Options.
(b) If the Participant is Terminated because of Participant's death
or Disability (or the Participant dies within three (3) months
after a Termination other than for Cause), then Participant's
Options may be exercised only to the extent that such Options are
exercisable by Participant on the Termination Date or as
otherwise determined by the Committee. Such options must be
exercised by Participant (or Participant's legal representative
or authorized assignee), if at all, as to all or some of the
Vested Shares calculated as of the Termination Date or such other
date determined by the Committee, within twelve (12) months after
the Termination Date (or within such shorter time period, not
less than six (6) months, or within such longer time period, not
exceeding five (5) years, after the Termination Date as may be
determined by the Committee, with any exercise beyond (i) three
(3) months after the Termination Date when the Termination is for
any reason other than the Participant's death or disability,
within the meaning of Section 22(e)(3) of the Code, or (ii)
twelve (12) months after the Termination Date when the
Termination is for Participant's disability, within the meaning
of Section 22(e)(3) of the Code, deemed to be an NQSO) but in any
event no later than the expiration date of the Options.
(c) If the Participant is terminated for Cause, then Participant's
Options shall expire on such Participant's Termination Date, or
at such later time and on such conditions as are determined by
the Committee.
5.7 Limitations on Exercise. The Committee may specify a reasonable
-----------------------
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent Participant from exercising
the Option for the full number of Shares for which it is then exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value (determined
-------------------
as of the date of grant) of Shares with respect to which ISOs are exercisable
for the first time by a
4
<PAGE>
Participant during any calendar year (under this Plan or under any other
incentive stock option plan of the Company or any Parent or Subsidiary of the
Company) will not exceed One Hundred Thousand Dollars ($100,000). If the Fair
Market Value of Shares on the date of grant with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year exceeds
One Hundred Thousand Dollars ($100,000), then the Options for the first One
Hundred Thousand Dollars ($100,000) worth of Shares to become exercisable in
such calendar year will be ISOs and the Options for the amount in excess of One
Hundred Thousand Dollars ($100,000) that become exercisable in that calendar
year will be NQSOs. In the event that the Code or the regulations promulgated
thereunder are amended after the Effective Date (as defined in Section 18
hereof) to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISOs, then such different limit will be automatically
incorporated herein and will apply to any Options granted after the effective
date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may modify,
----------------------------------
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of a Participant, impair any of such Participant's rights under
any Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code. Subject to Section 5.10 hereof, the Committee may reduce the
Exercise Price of outstanding Options without the consent of Participants by a
written notice to them; provided, however, that the Exercise Price may not be
reduced below the minimum Exercise Price that would be permitted under Section
5.4 hereof for Options granted on the date the action is taken to reduce the
Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision in
-------------------
this Plan, no term of this Plan relating to ISOs will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant, to disqualify any Participant's ISO
under Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company
----------------
to sell to an eligible person Shares that are subject to certain specified
restrictions. The Committee will determine to whom an offer will be made, the
number of Shares the person may purchase, the Purchase Price, the restrictions
to which the Shares will be subject, and all other terms and conditions of the
Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a Restricted
------------------------------
Stock Award made pursuant to this Plan will be evidenced by an Award Agreement
("Restricted Stock Purchase Agreement") that will be in such form (which need
not be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. The Restricted Stock Award will be accepted by the Participant's
execution and delivery of the Restricted Stock Purchase Agreement and full
payment for the Shares to the Company within thirty (30) days from the date the
Restricted Stock Purchase Agreement is delivered to the person. If such person
does not execute and deliver the Restricted Stock Purchase Agreement along with
full payment for the Shares to the Company within such thirty (30) days, then
the offer will terminate, unless otherwise determined by the Committee.
5
<PAGE>
6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a
--------------
Restricted Stock Award will be determined by the Committee and will be at least
eighty-five percent (85%) of the Fair Market Value of the Shares on the date the
Restricted Stock Award is granted or at the time the purchase is consummated,
except in the case of a sale to a Ten Percent Shareholder, in which case the
Purchase Price will be one hundred percent (100%) of the Fair Market Value on
the date the Restricted Stock Award is granted or at the time the purchase is
consummated. Payment of the Purchase Price must be made in accordance with
Section 7 hereof.
6.3 Restrictions. Restricted Stock Awards may be subject to the
------------
restrictions set forth in Section 11 hereof or such other restrictions not
inconsistent with Section 25102(o) of the California Corporations Code.
7. PAYMENT FOR SHARE PURCHASES.
---------------------------
7.1 Payment. Payment for Shares purchased pursuant to this Plan may
-------
be made in cash (by check) or, where expressly approved for the Participant by
the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company owed to the
Participant;
(b) by surrender of shares that: (i) either (A) have been owned by
Participant for more than six (6) months and have been paid for
within the meaning of SEC Rule 144 (and, if such shares were
purchased from the Company by use of a promissory note, such note
has been fully paid with respect to such shares) or (B) were
obtained by Participant in the public market and (ii) are clear
of all liens, claims, encumbrances or security interests;
(c) by tender of a full recourse promissory note having such terms as
may be approved by the Committee and bearing interest at a rate
sufficient to avoid imputation of income under Sections 483 and
1274 of the Code; provided, however, that Participants who are
not employees or directors of the Company will not be entitled to
purchase Shares with a promissory note unless the note is
adequately secured by collateral other than the Shares;
(d) by waiver of compensation due or accrued to the Participant from
the Company for services rendered;
(e) with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(i) through a "same day sale" commitment from the Participant
and a broker-dealer that is a member of the National
Association of Securities Dealers (an "NASD Dealer")
whereby the Participant irrevocably elects to exercise the
Option and to sell a portion of the Shares so purchased
sufficient to pay the total Exercise Price, and whereby
the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the total Exercise Price directly to the
Company; or
6
<PAGE>
(ii) through a "margin" commitment from the Participant and an
NASD Dealer whereby the Participant irrevocably elects to
exercise the Option and to pledge the Shares so purchased
to the NASD Dealer in a margin account as security for a
loan from the NASD Dealer in the amount of the total
Exercise Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the total
Exercise Price directly to the Company; or
(f) by any combination of the foregoing.
7.2 Loan Guarantees. The Committee may, in its sole discretion,
---------------
elect to assist the Participant in paying for Shares purchased under this Plan
by authorizing a guarantee by the Company of a third-party loan to the
Participant.
8. WITHHOLDING TAXES.
-----------------
8.1 Withholding Generally. Whenever Shares are to be issued in
---------------------
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan,
payments in satisfaction of Awards are to be made in cash by the Company, such
payment will be net of an amount sufficient to satisfy federal, state, and local
withholding tax requirements.
8.2 Stock Withholding. When, under applicable tax laws, a
-----------------
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee for such elections and be in writing in a form
acceptable to the Committee.
9. PRIVILEGES OF STOCK OWNERSHIP.
-----------------------------
9.1 Voting and Dividends. No Participant will have any of the rights
--------------------
of a shareholder with respect to any Shares until the Shares are issued to the
Participant. After Shares are issued to the Participant, the Participant will
be a shareholder and have all the rights of a shareholder with respect to such
Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock. The Participant will have no right to retain such stock
dividends or stock distributions with respect to Unvested Shares that are
repurchased pursuant to Section 11 hereof. The Company will comply with Section
260.140.1 of Title 10 of the California Code of Regulations with respect to the
voting rights of Common Stock.
7
<PAGE>
9.2 Financial Statements. The Company will provide financial
--------------------
statements to each Participant annually during the period such Participant has
Awards outstanding, or as otherwise required under Section 260.140.46 of Title
10 of the California Code of Regulations. Notwithstanding the foregoing, the
Company will not be required to provide such financial statements to
Participants when issuance is limited to key employees whose services in
connection with the Company assure them access to equivalent information.
10. TRANSFERABILITY. Awards granted under this Plan, and any interest
---------------
therein, will not be transferable or assignable by Participant, other than by
will or by the laws of descent and distribution, and may not be made subject to
execution, attachment or similar process. During the lifetime of the
Participant an Award will be exercisable only by the Participant or
Participant's legal representative and any elections with respect to an Award
may be made only by the Participant or Participant's legal representative.
11. RESTRICTIONS ON SHARES.
----------------------
11.1 Right of First Refusal. At the discretion of the Committee, the
----------------------
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, unless
otherwise not permitted by Section 25102(o) of the California Corporations Code,
provided that such right of first refusal terminates upon the Company's initial
public offering of Common Stock pursuant to an effective registration statement
filed under the Securities Act.
11.2 Right of Repurchase. At the discretion of the Committee, the
-------------------
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase Unvested Shares held by a Participant for cash and/or
cancellation of purchase money indebtedness owed to the Company by the
Participant following such Participant's Termination at any time within the
later of ninety (90) days after the Participant's Termination Date and the date
the Participant purchases Shares under the Plan at the Participant's Exercise
Price or Purchase Price, as the case may be, provided that, unless the
Participant is an officer, director or consultant of the Company or of a Parent
or Subsidiary of the Company, such right of repurchase lapses at the rate of no
less than twenty percent (20%) per year over five (5) years from: (a) the date
of grant of the Option or (b) in the case of Restricted Stock, the date the
Participant purchases the Shares.
12. CERTIFICATES. All certificates for Shares or other securities
------------
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
13. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
------------------------
Participant's Shares set forth in Section 11 hereof, the Committee may require
the Participant to deposit all certificates representing Shares, together with
stock powers or other instruments of transfer approved by the Committee,
appropriately endorsed in blank, with the Company or an agent designated by the
Company to hold in escrow until such restrictions have lapsed or terminated.
The Committee may cause a legend or legends referencing such restrictions to be
placed on the certificates. Any Participant who is permitted to execute a
promissory note as partial or full consideration for the purchase of Shares
under this Plan will be required to pledge
8
<PAGE>
and deposit with the Company all or part of the Shares so purchased as
collateral to secure the payment of Participant's obligation to the Company
under the promissory note; provided, however, that the Committee may require or
accept other or additional forms of collateral to secure the payment of such
obligation and, in any event, the Company will have full recourse against the
Participant under the promissory note notwithstanding any pledge of the
Participant's Shares or other collateral. In connection with any pledge of the
Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve.
14. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from
-----------------------------
time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, shares of Common
Stock of the Company (including Restricted Stock) or other consideration, based
on such terms and conditions as the Committee and the Participant may agree.
15. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. This Plan is intended
----------------------------------------------
to comply with Section 25102(o) of the California Corporations Code. Any
provision of this Plan which is inconsistent with Section 25102(o) shall,
without further act or amendment by the Company or the Board, be reformed to
comply with the requirements of Section 25102(o). An Award will not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance.
Notwithstanding any other provision in this Plan, the Company will have no
obligation to issue or deliver certificates for Shares under this Plan prior to
(i) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable, and/or (ii) compliance with any
exemption, completion of any registration or other qualification of such Shares
under any state or federal law or ruling of any governmental body that the
Company determines to be necessary or advisable. The Company will be under no
obligation to register the Shares with the SEC or to effect compliance with the
exemption, registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
will have no liability for any inability or failure to do so.
16. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
-----------------------
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
Cause.
17. CORPORATE TRANSACTIONS.
----------------------
17.1 Assumption or Replacement of Awards by Successor or Acquiring
-------------------------------------------------------------
Corporation. In the event of (i) a dissolution or liquidation of the Company,
- -----------
(ii) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different
9
<PAGE>
jurisdiction, or other transaction in which there is no substantial change in
the shareholders of the Company or their relative stock holdings and the Awards
granted under this Plan are assumed, converted or replaced by the successor or
acquiring corporation, which assumption, conversion or replacement will be
binding on all Participants), (iii) a merger in which the Company is the
surviving corporation but after which the shareholders of the Company
immediately prior to such merger (other than any shareholder which merges with
the Company in such merger, or which owns or controls another corporation which
merges with the Company in such merger) cease to own their shares or other
equity interests in the Company, or (iv) the sale of all or substantially all of
the assets of the Company, any or all outstanding Awards may be assumed,
converted or replaced by the successor or acquiring corporation (if any), which
assumption, conversion or replacement will be binding on all Participants. In
the alternative, the successor or acquiring corporation may substitute
equivalent Awards or provide substantially similar consideration to Participants
as was provided to shareholders (after taking into account the existing
provisions of the Awards). The successor or acquiring corporation may also
substitute by issuing, in place of outstanding Shares of the Company held by the
Participant, substantially similar shares or other property subject to
repurchase restrictions and other provisions no less favorable to the
Participant than those which applied to such outstanding Shares immediately
prior to such transaction described in this Section 17.1. In the event such
successor or acquiring corporation (if any) refuses to assume or substitute
Awards, as provided above, pursuant to a transaction described in this Section
17.1, then notwithstanding any other provision in this Plan to the contrary,
such Awards will expire on such transaction at such time and on such conditions
as the Board will determine.
17.2 Other Treatment of Awards. Subject to any greater rights
-------------------------
granted to Participants under the foregoing provisions of this Section 17, in
the event of the occurrence of any transaction described in Section 17.1 hereof,
any outstanding Awards will be treated as provided in the applicable agreement
or plan of merger, consolidation, dissolution, liquidation or sale of assets.
17.3 Assumption of Awards by the Company. The Company, from time to
-----------------------------------
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either (i) granting an Award under this Plan in substitution of
such other company's award or (ii) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
18. ADOPTION AND SHAREHOLDER APPROVAL. This Plan will become effective on
---------------------------------
the date that it is adopted by the Board (the "Effective Date"). This Plan will
be approved by the shareholders of the Company (excluding Shares issued pursuant
to this Plan), consistent with applicable laws, within twelve (12) months before
or after the Effective Date. Upon the Effective Date, the Board may grant
Awards pursuant to this Plan; provided, however,
10
<PAGE>
that: (i) no Option may be exercised prior to initial shareholder approval of
this Plan; (ii) no Option granted pursuant to an increase in the number of
Shares approved by the Board shall be exercised prior to the time such increase
has been approved by the shareholders of the Company; (iii) in the event that
initial shareholder approval is not obtained within the time period provided
herein, all Awards granted hereunder shall be canceled, any Shares issued
pursuant to any Award shall be canceled and any purchase of Shares issued
hereunder shall be rescinded; and (iv) Awards granted pursuant to an increase in
the number of Shares approved by the Board which increase is not timely approved
by shareholders shall be canceled, any Shares issued pursuant to any such Awards
shall be canceled, and any purchase of Shares subject to any such Award shall be
rescinded.
19. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
--------------------------
herein, this Plan will terminate ten (10) years from the Effective Date or, if
earlier, the date of shareholder approval. This Plan and all agreements
hereunder shall be governed by and construed in accordance with the laws of the
State of California.
20. AMENDMENT OR TERMINATION OF PLAN. Subject to Section 5.9 hereof, the
---------------------------------
Board may at any time terminate or amend this Plan in any respect, including
without limitation amendment of any form of Award Agreement or instrument to be
executed pursuant to this Plan; provided, however, that the Board will not,
without the approval of the shareholders of the Company, amend this Plan in any
manner that requires such shareholder approval pursuant to Section 25102(o) of
the California Corporations Code or the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans.
21. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the
--------------------------
Board, the submission of this Plan to the shareholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and other equity awards otherwise than under this
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases.
22. DEFINITIONS. As used in this Plan, the following terms will have the
-----------
following meanings:
"Award" means any award under this Plan, including any Option or
Restricted Stock Award.
"Award Agreement" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award, including the Stock Option Agreement and
Restricted Stock Agreement.
"Board" means the Board of Directors of the Company.
"Cause" means Termination because of (i) any willful, material
violation by the Participant of any law or regulation applicable to the business
of the Company or a Parent or Subsidiary of the Company, the Participant's
conviction for, or guilty plea to, a felony or a crime involving moral
turpitude, or any willful perpetration by the Participant of a common law fraud,
(ii) the Participant's commission of an act of personal dishonesty which
involves personal profit in connection with the Company or any other entity
having a business relationship with the Company, (iii) any material breach by
the Participant of any provision of any agreement or
11
<PAGE>
understanding between the Company or any Parent or Subsidiary of the Company and
the Participant regarding the terms of the Participant's service as an employee,
officer, director or consultant to the Company or a Parent or Subsidiary of the
Company, including without limitation, the willful and continued failure or
refusal of the Participant to perform the material duties required of such
Participant as an employee, officer, director or consultant of the Company or a
Parent or Subsidiary of the Company, other than as a result of having a
Disability, or a breach of any applicable invention assignment and
confidentiality agreement or similar agreement between the Company or a Parent
or Subsidiary of the Company and the Participant, (iv) Participant's disregard
of the policies of the Company or any Parent or Subsidiary of the Company so as
to cause loss, damage or injury to the property, reputation or employees of the
Company or a Parent or Subsidiary of the Company, or (v) any other misconduct by
the Participant which is materially injurious to the financial condition or
business reputation of, or is otherwise materially injurious to, the Company or
a Parent or Subsidiary of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee created and appointed by the Board to
administer this Plan, or if no committee is created and appointed, the Board.
"Company" means AllAdvantage.com, or any successor corporation.
"Disability" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.
"Exercise Price" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the
date of determination as reported in The Wall Street Journal;
-----------------------
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of
determination on the principal national securities exchange on
which the Common Stock is listed or admitted to trading as
reported in The Wall Street Journal;
-----------------------
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and
asked prices on the date of determination as reported by The Wall
--------
Street Journal (or, if not so reported, as otherwise reported by
--------------
any newspaper or other source as the Board may determine); or
(d) if none of the foregoing is applicable, by the Committee in good
faith.
"Option" means an award of an option to purchase Shares pursuant to
Section 5 hereof.
12
<PAGE>
"Parent" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if each of such corporations other
than the Company owns stock representing 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.
"Participant" means a person who receives an Award under this Plan.
"Plan" means this AllAdvantage.com, 1999 Equity Incentive Plan, as
amended from time to time.
"Purchase Price" means the price at which a Participant may purchase
Restricted Stock.
"Restricted Stock" means Shares purchased pursuant to a Restricted
Stock Award.
"Restricted Stock Award" means an award of Shares pursuant to Section
6 hereof.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 17 hereof, and
any successor security.
"Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
representing 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.
"Termination" or "Terminated" means, for purposes of this Plan with
respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director or consultant to the Company
or a Parent or Subsidiary of the Company. A Participant will not be deemed to
have ceased to provide services in the case of (i) sick leave, (ii) military
leave, or (iii) any other leave of absence approved by the Committee, provided
that such leave is for a period of not more than ninety (90) days (a) unless
reinstatement (or, in the case of an employee with an ISO, reemployment) upon
the expiration of such leave is guaranteed by contract or statute, or (b) unless
provided otherwise pursuant to formal policy adopted from time to time by the
Company's Board and issued and promulgated in writing. In the case of any
Participant on (i) sick leave, (ii) military leave or (iii) an approved leave of
absence, the Committee may make such provisions respecting suspension of vesting
of the Award while on leave from the Company or a Parent or Subsidiary of the
Company as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the Stock Option
Agreement. The Committee will have sole discretion to determine whether a
Participant has ceased to provide services and the effective date on which the
Participant ceased to provide services (the "Termination Date").
"Unvested Shares" means "Unvested Shares" as defined in the Award
Agreement.
"Vested Shares" means "Vested Shares" as defined in the Award
Agreement.
13
<PAGE>
No.___
ALLADVANTAGE.COM
1999 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") is made and entered into
as of the date of grant set forth below (the "Date of Grant") by and between
AllAdvantage.com, a California corporation (the "Company"), and the participant
named below (the "Participant"). Capitalized terms not defined herein shall
have the meaning ascribed to them in the Company's 1999 Equity Incentive Plan
(the "Plan").
Participant: _____________________________________________
Social Security Number: _____________________________________________
Address: _____________________________________________
_____________________________________________
Total Option Shares: _____________________________________________
Exercise Price Per Share: _____________________________________________
Date of Grant: _____________________________________________
First Vesting Date: _____________________________________________
Expiration Date: _____________________________________________
(unless earlier terminated under Section 5.6 of
the Plan)
Type of Stock Option
(Check one): [ ] Incentive Stock Option
[ ] Nonqualified Stock Option
1. Grant of Option. The Company hereby grants to Participant an
---------------
option (this "Option") to purchase the total number of shares of Common Stock of
the Company set forth above as Total Option Shares (the "Shares") at the
Exercise Price Per Share set forth above (the "Exercise Price"), subject to all
of the terms and conditions of this Agreement and the Plan. If designated as an
Incentive Stock Option above, the Option is intended to qualify as an "incentive
stock option" (the "ISO") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
2. Exercise Period.
---------------
2.1 Exercise Period of Option. This Option is immediately
-------------------------
exercisable although the Shares issued upon exercise of the Option will be
subject to the restrictions on transfer, Repurchase Option and Right of First
Refusal set forth in Sections 7, 8 and 9 below. Provided Participant continues
to provide services to the Company or to any Parent or Subsidiary
14
<PAGE>
of the Company, the Shares issuable upon exercise of this Option will become
vested with respect to twenty-five percent (25%) of the Total Option Shares (as
set forth on the first page of this Agreement) on the First Vesting Date set
forth on the first page of this Agreement (the "First Vesting Date") and
thereafter at the end of each full succeeding month after the First Vesting Date
an additional 2.08333% of the Total Option Shares will become vested until the
Shares are vested with respect to one hundred percent (100%) of the Shares. If
application of the vesting percentage causes a fractional share, such share
shall be rounded down to the nearest whole share for each month except for the
36th month following the First Vesting Date, at the end of which month this
Option shall become exercisable for the full remainder of the Shares. Unvested
Shares may not be sold or otherwise transferred by Participant without the
Company's prior written consent. Notwithstanding any provision in the Plan or
this Agreement to the contrary, Options for Unvested Shares (as defined in
Section 2.2 of this Agreement) will not be exercisable on or after Participant's
Termination Date.
2.2 Vesting of Options. Shares that are vested pursuant to the
------------------
schedule set forth in Section 2.1 are "Vested Shares." Shares that are not
vested pursuant to the schedule set forth in Section 2.1 are "Unvested Shares."
2.3 Expiration. The Option shall expire on the Expiration Date set
----------
forth above or earlier as provided in Section 3 below or pursuant to Section 5.6
of the Plan.
3. Termination.
-----------
3.1 Termination for Any Reason Except Death, Disability or Cause. If
------------------------------------------------------------
Participant is Terminated for any reason, except death, Disability or for Cause,
the Option, to the extent (and only to the extent) that it would have been
exercisable by Participant on the Termination Date, may be exercised by
Participant no later than three (3) months after the Termination Date, but in
any event no later than the Expiration Date.
3.2 Termination Because of Death or Disability. If Participant is
------------------------------------------
Terminated because of death or Disability of Participant (or Participant dies
within three (3) months of Termination when Termination is for any reason other
than Participant's Disability or for Cause), the Option, to the extent that it
is exercisable by Participant on the Termination Date, may be exercised by
Participant (or Participant's legal representative) no later than twelve (12)
months after the Termination Date, but in any event no later than the Expiration
Date. Any exercise beyond (i) three (3) months after the Termination Date when
the Termination is for any reason other than the Participant's death or
disability, within the meaning of Section 22(e)(3) of the Code; or (ii) twelve
(12) months after the Termination Date when the termination is for Participant's
disability, within the meaning of Section 22(e)(3) of the Code, is deemed to be
an NQSO.
3.3 Termination for Cause. If Participant is Terminated for Cause,
---------------------
then the Option will expire on Participant's Termination Date, or at such later
time and on such conditions as are determined by the Committee.
3.4 No Obligation to Employ. Nothing in the Plan or this Agreement
-----------------------
shall confer on Participant any right to continue in the employ of, or other
relationship with, the Company or any Parent or Subsidiary of the Company, or
limit in any way the right of the
15
<PAGE>
Company or any Parent or Subsidiary of the Company to terminate Participant's
employment or other relationship at any time, with or without Cause.
4. Manner of Exercise.
------------------
4.1 Stock Option Exercise Agreement. To exercise this Option,
-------------------------------
Participant (or in the case of exercise after Participant's death or incapacity,
Participant's executor, administrator, heir or legatee, as the case may be) must
deliver to the Company an executed stock option exercise agreement in the form
attached hereto as Exhibit A, or in such other form as may be approved by the
---------
Committee from time to time (the "Exercise Agreement"), which shall set forth,
inter alia, (i) Participant's election to exercise the Option, (ii) the number
- ----- ----
of Shares being purchased, (iii) any restrictions imposed on the Shares and (iv)
any representations, warranties and agreements regarding Participant's
investment intent and access to information as may be required by the Company to
comply with applicable securities laws. If someone other than Participant
exercises the Option, then such person must submit documentation reasonably
acceptable to the Company verifying that such person has the legal right to
exercise the Option.
4.2 Limitations on Exercise. The Option may not be exercised
-----------------------
unless such exercise is in compliance with all applicable federal and state
securities laws, as they are in effect on the date of exercise. The Option may
not be exercised as to fewer than one hundred (100) Shares unless it is
exercised as to all Shares as to which the Option is then exercisable.
4.3 Payment. The Exercise Agreement shall be accompanied by full
-------
payment of the Exercise Price for the shares being purchased in cash (by check),
or where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares of the Company's Common Stock that
(i) either (A) have been owned by Participant for more than
six (6) months and have been paid for within the meaning of
SEC Rule 144 (and, if such shares were purchased from the
Company by use of a promissory note, such note has been
fully paid with respect to such shares); or (B) were
obtained by Participant in the open public market; and (ii)
are clear of all liens, claims, encumbrances or security
interests;
(c) by waiver of compensation due or accrued to Participant for
services rendered;
(d) provided that a public market for the Company's stock
exists: (i) through a "same day sale" commitment from
Participant and a broker-dealer that is a member of the
National Association of Securities Dealers (an "NASD
Dealer") whereby Participant irrevocably elects to exercise
the Option and to sell a portion of the Shares so purchased
sufficient to pay for the total Exercise Price and whereby
the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the total Exercise Price directly to the
Company, or (ii) through a "margin" commitment from
Participant
16
<PAGE>
and an NASD Dealer whereby Participant irrevocably elects to
exercise the Option and to pledge the Shares so purchased to
the NASD Dealer in a margin account as security for a loan
from the NASD Dealer in the amount of the total Exercise
Price, and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the total Exercise Price
directly to the Company; or
(e) any other form of consideration approved by the Committee;
or
(f) by any combination of the foregoing.
4.4 Tax Withholding. Prior to the issuance of the Shares upon
---------------
exercise of the Option, Participant must pay or provide for any applicable
federal, state and local withholding obligations of the Company. If the
Committee permits, Participant may provide for payment of withholding taxes upon
exercise of the Option by requesting that the Company retain the minimum number
of Shares with a Fair Market Value equal to the minimum amount of taxes required
to be withheld; but in no event will the Company withhold Shares if such
withholding would result in adverse accounting consequences to the Company. In
such case, the Company shall issue the net number of Shares to the Participant
by deducting the Shares retained from the Shares issuable upon exercise.
4.5 Issuance of Shares. Provided that the Exercise Agreement
------------------
and payment are in form and substance satisfactory to counsel for the Company,
the Company shall issue the Shares registered in the name of Participant,
Participant's authorized assignee, or Participant's legal representative, and
shall deliver certificates representing the Shares with the appropriate legends
affixed thereto.
5. Notice of Disqualifying Disposition of ISO Shares. If the Option
-------------------------------------------------
is an ISO, and if Participant sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (i) the date two (2)
years after the Date of Grant, and (ii) the date one (1) year after transfer of
such Shares to Participant upon exercise of the Option, Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the Company
on the compensation income recognized by Participant from the early disposition
by payment in cash or out of the current wages or other compensation payable to
Participant.
6. Compliance with Laws and Regulations. The Plan and this
------------------------------------
Agreement are intended to comply with Section 25102(o) of the California
Corporations Code and any regulations relating thereto. Any provision of this
Agreement which is inconsistent with Section 25102(o) or any regulations
relating thereto shall, without further act or amendment by the Company or the
Board, be reformed to comply with the requirements of Section 25102(o) and any
regulations relating thereto. The exercise of the Option and the issuance and
transfer of Shares shall be subject to compliance by the Company and Participant
with all applicable requirements of federal and state securities laws and with
all applicable requirements of any stock exchange on which the Company's Common
Stock may be listed at the time of such issuance or transfer. Participant
understands that the Company is under no obligation to register or qualify the
Shares with the SEC, any state securities commission or any stock exchange to
effect such compliance.
17
<PAGE>
7. Nontransferability of Option. The Option may not be transferred
----------------------------
in any manner other than by will or by the laws of descent and distribution and
may be exercised during the lifetime of Participant only by Participant or in
the event of Participant's incapacity, by Participant's legal representative.
The terms of the Option shall be binding upon the executors, administrators,
successors and assigns of Participant.
8. Company's Repurchase Option for Unvested Shares. The Company, or
-----------------------------------------------
its assignee, shall have the option to repurchase Participant's Unvested Shares
(as defined in Section 2.2 of this Agreement) on the terms and conditions set
forth in the Exercise Agreement (the "Repurchase Option") if Participant is
Terminated (as defined in the Plan) for any reason, or no reason, including
without limitation Participant's death, Disability (as defined in the Plan),
voluntary resignation or termination by the Company with or without Cause.
Notwithstanding the foregoing, the Company shall retain the Repurchase Option
for Unvested Shares only as to that number of Unvested Shares (whether or not
exercised) that exceeds the number of shares which remain unexercised.
9. Company's Right of First Refusal. Unvested Shares may not be
--------------------------------
sold or otherwise transferred by Participant without the Company's prior written
consent. Before any Vested Shares held by Participant or any transferee of such
Vested Shares may be sold or otherwise transferred (including without limitation
a transfer by gift or operation of law), the Company and/or its assignee(s)
shall have an assignable right of first refusal to purchase the Vested Shares to
be sold or transferred on the terms and conditions set forth in the Exercise
Agreement (the "Right of First Refusal"). The Company's Right of First Refusal
will terminate when the Company's securities become publicly traded.
10. Tax Consequences. Set forth below is a brief summary as of the
----------------
Effective Date of the Plan of some of the federal and California tax
consequences of exercise of the Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE
OPTION OR DISPOSING OF THE SHARES.
10.1 Exercise of ISO. If the Option qualifies as an ISO, 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 a tax
preference item for federal alternative minimum tax purposes and may subject the
Participant to the alternative minimum tax in the year of exercise.
10.2 Exercise of Nonqualified Stock Option. If the Option does
-------------------------------------
not qualify as an ISO, there may be a regular federal and California income tax
liability upon the exercise of the Option. Participant 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 Participant is a current or former
employee of the Company, the Company may be required to withhold from
Participant's compensation or collect from Participant and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
18
<PAGE>
10.3 Disposition of Shares. The following tax consequences may
---------------------
apply upon disposition of the Shares.
(a) Incentive Stock Options. If the Shares are held for
-----------------------
more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an ISO and are disposed of more than two (2) years
after the Date of Grant, any gain realized on disposition of the Shares will be
treated as long term capital gain for federal and California income tax
purposes. If Shares purchased under an ISO are disposed of within the applicable
one (1) year or two (2) year period, any gain realized on such disposition will
be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price.
(b) Nonqualified Stock Options. If the Shares are held for
--------------------------
more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an NQSO, any gain realized on disposition of the
Shares will be treated as long term capital gain.
(c) Withholding. The Company may be required to withhold
-----------
from the Participant's compensation or collect from the Participant and pay to
the applicable taxing authorities an amount equal to a percentage of this
compensation income.
10.4. Section 83(b) Election for Unvested Shares. With respect to
------------------------------------------
Unvested Shares, which are subject to the Repurchase Option, unless an election
is filed by the Participant with the Internal Revenue Service (and, if
necessary, the proper state taxing authorities), within 30 days of the purchase
--------------
of the Unvested Shares, electing pursuant to Section 83(b) of the Code (and
similar state tax provisions, if applicable) to be taxed currently on any
difference between the Exercise Price of the Unvested Shares and their Fair
Market Value on the date of purchase, there may be a recognition of taxable
income (including, where applicable, alternative minimum taxable income) to the
Participant, measured by the excess, if any, of the Fair Market Value of the
Unvested Shares at the time they cease to be Unvested Shares, over the Exercise
Price of the Unvested Shares.
11. Privileges of Stock Ownership. Participant shall not have any of
-----------------------------
the rights of a shareholder with respect to any Shares until the Shares are
issued to Participant.
12. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Participant or the Company to the Committee for
review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.
13. Entire Agreement. The Plan is incorporated herein by reference.
----------------
This Agreement and the Plan constitute the entire agreement of the parties and
supersede all prior undertakings and agreements with respect to the subject
matter hereof.
14. Notices. Any notice required to be given or delivered to the
-------
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company.
19
<PAGE>
All notices shall be deemed to have been given or delivered upon: (i) personal
delivery; (ii) three (3) days after deposit in the United States mail by
certified or registered mail (return receipt requested); (iii) one (1) business
day after deposit with any return receipt express courier (prepaid); or (iv) one
(1) business day after transmission by facsimile, rapifax or telecopier.
15. Successors and Assigns. The Company may assign any of its rights
----------------------
under this Agreement, including its rights to purchase Shares under the
Repurchase Option and the Right of First Refusal. This Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer set forth herein, this
Agreement shall be binding upon Participant and Participant's heirs, executors,
administrators, legal representatives, successors and assigns.
16. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of California as such laws are applied
to agreements between California residents entered into and to be performed
entirely within California. If any provision of this Agreement is determined by
a court of law to be illegal or unenforceable, then such provision will be
enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable.
17. Acceptance. Participant hereby acknowledges receipt of a copy of
----------
the Plan and this Agreement. Participant has read and understands the terms and
provisions thereof, and accepts the Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of the Option or disposition of
the Shares and that Participant should consult a tax adviser prior to such
exercise or disposition.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in triplicate by its duly authorized representative and Participant has
executed this Agreement in triplicate, effective as of the Date of Grant.
ALLADVANTAGE.COM PARTICIPANT
By:___________________________ ______________________________
(Signature)
_____________________________ ______________________________
(Please print name) (Please print name)
_____________________________
(Please print title)
20
<PAGE>
EXHIBIT A
---------
FORM OF STOCK OPTION EXERCISE AGREEMENT
1
<PAGE>
No.___
ALLADVANTAGE.COM
1999 EQUITY INCENTIVE PLAN
STOCK OPTION EXERCISE AGREEMENT
This Stock Option Exercise Agreement (the "Exercise Agreement") is made and
entered into as of _________________________, _____ (the "Effective Date") by
and between AllAdvantage.com, a California corporation (the "Company"), and the
purchaser named below (the "Purchaser"). Capitalized terms not defined herein
shall have the meanings ascribed to them in the Company's 1999 Equity Incentive
Plan (the "Plan").
Purchaser: ____________________________________________________
____________________________________________________
Social Security Number: ____________________________________________________
Address: ____________________________________________________
____________________________________________________
Total Option Shares: ____________________________________________________
Exercise Price Per Share: ____________________________________________________
Date of Grant: ____________________________________________________
First Vesting Date: ____________________________________________________
Expiration Date: ____________________________________________________
(Unless earlier terminated under Section 5.6 of the
Plan)
Type of Stock Option
(Check one): [ ] Incentive Stock Option
[ ] Nonqualified Stock Option
1. Exercise of Option.
------------------
1.1 Exercise. Pursuant to exercise of that certain option (the
--------
"Option") granted to Purchaser under the Plan and subject to the terms and
conditions of this Exercise Agreement, Purchaser hereby purchases from the
Company, and the Company hereby sells to Purchaser, the Total Number of Shares
set forth above (the "Shares") of the Company's Common Stock at the Exercise
Price Per Share set forth above (the "Exercise Price"). As used in this
Exercise Agreement, the term "Shares" refers to the Shares purchased under this
Exercise Agreement and includes all securities received (i) in replacement of
the Shares, (ii) as a result of stock dividends or stock splits with respect to
the Shares, and (iii) all securities received in
2
<PAGE>
replacement of the Shares in a merger, recapitalization, reorganization or
similar corporate transaction.
1.2 Title to Shares. The exact spelling of the name(s) under which
---------------
Purchaser will take title to the Shares is:
________________________________________________________________
________________________________________________________________
Purchaser desires to take title to the Shares as follows:
[ ] Individual, as separate property
[ ] Husband and wife, as community property
[ ] Joint Tenants
[ ] Other; please specify:_____________________________________
To assign the Shares to a trust, a stock transfer agreement in the
form reasonably requested by the Company must be completed and executed;
provided, that Unvested Shares may not be assigned to a trust.
1.3 Payment. Purchaser hereby delivers payment of the Exercise Price
-------
in the manner permitted in the Stock Option Agreement as follows (check and
complete as appropriate):
[ ] in cash (by check) in the amount of $____________, receipt
of which is acknowledged by the Company;
[ ] by cancellation of indebtedness of the Company owed to
Purchaser in the amount of $_______________;
[ ] by delivery of _________ fully-paid, nonassessable and
vested shares of the Common Stock of the Company owned by
Purchaser for at least six (6) months prior to the date
hereof which have been paid for within the meaning of SEC
Rule 144, (if purchased by use of a promissory note, such
note has been fully paid with respect to such vested
shares), or obtained by Purchaser in the open public market,
and owned free and clear of all liens, claims, encumbrances
or security interests, valued at the current Fair Market
Value of $___________ per share;
[ ] by the waiver hereby of compensation due or accrued for
services rendered in the amount of $_________.]
2. Delivery.
--------
2.1 Deliveries by Purchaser. Purchaser hereby delivers to the Company
-----------------------
(i) this Exercise Agreement, (ii) two (2) copies of a blank Stock Power and
Assignment Separate from Stock Certificate in the form of Exhibit 1 attached
---------
hereto (the "Stock Powers"), both executed by Purchaser (and Purchaser's spouse,
if any), (iii) if Purchaser is married, a Consent of
3
<PAGE>
Spouse in the form of Exhibit 2 attached hereto (the "Spouse Consent") executed
---------
by Purchaser's spouse, and (iv) the Exercise Price and payment or other
provision for any applicable tax obligations.
2.2 Deliveries by the Company. Upon its receipt of the Exercise
-------------------------
Price, payment or other provision for any applicable tax obligations and all the
documents to be executed and delivered by Purchaser to the Company under Section
2.1, the Company will issue a duly executed stock certificate evidencing the
Shares in the name of Purchaser to be placed in escrow as provided in Section 11
until expiration or termination of the Company's Repurchase Option and Right of
First Refusal described in Section 8 and 9.
3. Representations and Warranties of Purchaser. Purchaser represents and
-------------------------------------------
warrants to the Company that:
3.1 Agrees to Terms of the Plan. Purchaser has received a copy of the
---------------------------
Plan and the Stock Option Agreement, has read and understands the terms of the
Plan, the Stock Option Agreement and this Exercise Agreement, and agrees to be
bound by their terms and conditions. Purchaser acknowledges that there may be
adverse tax consequences upon exercise of the Option or disposition of the
Shares, and that Purchaser should consult a tax adviser prior to such exercise
or disposition.
3.2 Purchase for Own Account for Investment. Purchaser is purchasing
---------------------------------------
the Shares for Purchaser's own account for investment purposes only and not with
a view to, or for sale in connection with, a distribution of the Shares within
the meaning of the Securities Act. Purchaser has no present intention of selling
or otherwise disposing of all or any portion of the Shares and no one other than
Purchaser has any beneficial ownership of any of the Shares.
3.3 Access to Information. Purchaser has had access to all
---------------------
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares, and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.
3.4 Understanding of Risks. Purchaser is fully aware of: (i) the
----------------------
highly speculative nature of the investment in the Shares; (ii) the financial
hazards involved; (iii) the lack of liquidity of the Shares and the restrictions
on transferability of the Shares (e.g., that Purchaser may not be able to sell
----
or dispose of the Shares or use them as collateral for loans); (iv) the
qualifications and backgrounds of the management of the Company; and (v) the tax
consequences of investment in the Shares. Purchaser is capable of evaluating the
merits and risks of this investment, has the ability to protect Purchaser's own
interests in this transaction and is financially capable of bearing a total loss
of this investment.
3.5 No General Solicitation. At no time was Purchaser presented with
-----------------------
or solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer, sale and purchase of the Shares.
4
<PAGE>
4. Compliance with Securities Laws.
-------------------------------
4.1 Compliance with U.S. Federal Securities Laws. Purchaser
--------------------------------------------
understands and acknowledges that the Shares have not been registered with the
SEC under the Securities Act and that, notwithstanding any other provision of
the Stock Option Agreement to the contrary, the exercise of any rights to
purchase any Shares is expressly conditioned upon compliance with the Securities
Act and all applicable state securities laws. Purchaser agrees to cooperate with
the Company to ensure compliance with such laws. The Shares are being issued
under the Securities Act pursuant to the exemption provided by SEC Rule 701.
4.2 Compliance with California Securities Laws. THE PLAN, THE STOCK
------------------------------------------
OPTION AGREEMENT, AND THIS EXERCISE AGREEMENT ARE INTENDED TO COMPLY WITH
SECTION 25102(o) OF THE CALIFORNIA CORPORATIONS CODE AND ANY RULES (INCLUDING
COMMISSIONER RULES, IF APPLICABLE) OR REGULATIONS PROMULGATED THEREUNDER BY THE
CALIFORNIA DEPARTMENT OF CORPORATIONS (THE "REGULATIONS"). ANY PROVISION OF THIS
EXERCISE AGREEMENT WHICH IS INCONSISTENT WITH SECTION 25102(o) SHALL, WITHOUT
FURTHER ACT OR AMENDMENT BY THE COMPANY OR THE BOARD, BE REFORMED TO COMPLY WITH
THE REQUIREMENTS OF SECTION 25102(o). THE SALE OF THE SECURITIES THAT ARE THE
SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET QUALIFIED WITH THE CALIFORNIA
COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH QUALIFICATION, IS SUBJECT
TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH SECURITIES, AND THE RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL
UNLESS THE SALE IS EXEMPT. THE RIGHTS OF THE PARTIES TO THIS EXERCISE AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION
BEING AVAILABLE.
5. Restricted Securities.
---------------------
5.1 No Transfer Unless Registered or Exempt. Purchaser understands
---------------------------------------
that Purchaser may not transfer any Shares unless such Shares are registered
under the Securities Act or qualified under applicable state securities laws or
unless, in the opinion of counsel to the Company, exemptions from such
registration and qualification requirements are available. Purchaser understands
that only the Company may file a registration statement with the SEC and that
the Company is under no obligation to do so with respect to the Shares.
Purchaser has also been advised that exemptions from registration and
qualification may not be available or may not permit Purchaser to transfer all
or any of the Shares in the amounts or at the times proposed by Purchaser.
5.2 SEC Rule 144. In addition, Purchaser has been advised that SEC
------------
Rule 144 promulgated under the Securities Act, which permits certain limited
sales of unregistered securities, is not presently available with respect to the
Shares and, in any event, requires that the Shares be held for a minimum of one
(1) year, and in certain cases two (2) years, after they have been purchased and
---
paid for (within the meaning of Rule 144). Purchaser understands that Rule 144
- --------
may indefinitely restrict transfer of the Shares so long as Purchaser remains an
"affiliate" of
5
<PAGE>
the Company or if "current public information" about the Company (as defined in
Rule 144) is not publicly available.
5.3 SEC Rule 701. The Shares are issued pursuant to SEC Rule 701
------------
promulgated under the Securities Act and may become freely tradeable by non-
affiliates (under limited conditions regarding the method of sale) ninety (90)
days after 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
SEC, subject to the lengthier market standoff agreement contained in Section 7
of this Exercise Agreement or any other agreement entered into by Purchaser.
Affiliates must comply with the provisions (other than the holding period
requirements) of Rule 144.
6. Restrictions on Transfers.
-------------------------
6.1 Disposition of Shares. Purchaser hereby agrees that Purchaser
---------------------
shall make no disposition of the Shares (other than as permitted by this
Exercise Agreement) unless and until:
(a) Purchaser shall have notified the Company of the proposed
disposition and provided a written summary of the terms and conditions of the
proposed disposition;
(b) Purchaser shall have complied with all requirements of this
Exercise Agreement applicable to the disposition of the Shares;
(c) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to counsel for the Company, that
(i) the proposed disposition does not require registration of the Shares under
the Securities Act or (ii) all appropriate actions necessary for compliance with
the registration requirements of the Securities Act or of any exemption from
registration available under the Securities Act (including Rule 144) have been
taken; and
(d) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to the Company, that the proposed
disposition will not result in the contravention of any transfer restrictions
applicable to the Shares pursuant to the provisions of the Regulations referred
to in Section 4.2 hereof.
6.2 Restriction on Transfer. Purchaser shall not transfer, assign,
-----------------------
grant a lien or security interest in, pledge, hypothecate, encumber or otherwise
dispose of any of the Shares which are subject to the Company's Repurchase
Option or the Company's Right of First Refusal described below, except as
permitted by this Exercise Agreement.
6.3 Transferee Obligations. Each person (other than the Company) to
----------------------
whom the Shares are transferred by means of one of the permitted transfers
specified in this Exercise Agreement must, as a condition precedent to the
validity of such transfer, acknowledge in writing to the Company that such
person is bound by the provisions of this Exercise Agreement and that the
transferred Shares are subject to (i) both the Company's Repurchase Option and
the Company's Right of First Refusal granted hereunder and (ii) the market
stand-off provisions of Section 7 hereof, to the same extent such Shares would
be so subject if retained by the Purchaser.
6
<PAGE>
7. Market Standoff Agreement. Purchaser agrees in connection with any
-------------------------
registration of the Company's securities that, upon the request of the Company
or the underwriters managing any public offering of the Company's securities,
Purchaser will not sell or otherwise dispose of any Shares without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed one hundred eighty (180) days) after the
effective date of such registration requested by such managing underwriters and
subject to all restrictions as the Company or the underwriters may specify.
Purchaser further agrees to enter into any agreement reasonably required by the
underwriters to implement the foregoing. The term "Company", as used in this
Section 7, includes any wholly-owned subsidiary of the Company into or with
which the Company merges or consolidates.
8. Company's Repurchase Option for Unvested Shares. The Company, or its
-----------------------------------------------
assignee, shall have the option to repurchase all or a portion of the
Purchaser's Unvested Shares (as defined in Section 2.2 of the Stock Option
Agreement) on the terms and conditions set forth in this Section (the
"Repurchase Option") if Purchaser is Terminated (as defined in the Plan) for any
reason, or no reason, including without limitation, Purchaser's death,
Disability (as defined in the Plan), voluntary resignation or termination by the
Company with or without Cause. Notwithstanding the foregoing, the Company shall
retain the Repurchase Option for Unvested Shares only as to that number of
Unvested Shares (whether or not exercised) that exceeds the number of shares
which remain unexercised.
8.1 Termination and Termination Date. In case of any dispute as to
--------------------------------
whether Purchaser is Terminated, the Committee shall have discretion to
determine whether Purchaser has been Terminated and the effective date of such
Termination (the "Termination Date").
8.2 Exercise of Repurchase Option. At any time within ninety (90)
-----------------------------
days after the Purchaser's Termination Date (or, in the case of securities
issued upon exercise of an Option after the Purchaser's Termination Date, within
ninety (90) days after the date of such exercise), the Company, or its assignee,
may elect to repurchase any or all the Purchaser's Unvested Shares by giving
Purchaser written notice of exercise of the Repurchase Option.
8.3 Calculation of Repurchase Price for Unvested Shares. The Company
---------------------------------------------------
or its assignee shall have the option to repurchase from Purchaser (or from
Purchaser's personal representative as the case may be) the Unvested Shares at
the Purchaser's Exercise Price, proportionately adjusted for any stock split or
similar change in the capital structure of the Company as set forth in Section
2.2 of the Plan (the "Repurchase Price").
8.4 Payment of Repurchase Price. The Repurchase Price shall be
---------------------------
payable, at the option of the Company or its assignee, by check or by
cancellation of all or a portion of any outstanding indebtedness owed by
Purchaser to the Company or such assignee, or by any combination thereof. The
Repurchase Price shall be paid without interest within sixty (60) days after
exercise of the Repurchase Option.
8.5 Right of Termination Unaffected. Nothing in this Exercise
-------------------------------
Agreement shall be construed to limit or otherwise affect in any manner
whatsoever the right or power of the Company (or any Parent or Subsidiary of the
Company) to terminate Purchaser's employment or other relationship with Company
(or the Parent or Subsidiary of the Company) at any time, for any reason or no
reason, with or without Cause.
7
<PAGE>
9. Company's Right of First Refusal. Unvested Shares may not be sold or
--------------------------------
otherwise transferred by Purchaser without the Company's prior written consent.
Before any Vested Shares held by Purchaser or any transferee of such Vested
Shares (either sometimes referred to herein as the "Holder") may be sold or
otherwise transferred (including, without limitation, a transfer by gift or
operation of law), the Company and/or its assignee(s) will have a right of first
refusal to purchase the Vested Shares to be sold or transferred (the "Offered
Shares") on the terms and conditions set forth in this Section (the "Right of
First Refusal").
9.1 Notice of Proposed Transfer. The Holder of the Offered Shares
---------------------------
will deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer the Offered Shares;
(ii) the name and address of each proposed purchaser or other transferee (the
"Proposed Transferee"); (iii) the number of Offered Shares to be transferred to
each Proposed Transferee; (iv) the bona fide cash price or other consideration
for which the Holder proposes to transfer the Offered Shares (the "Offered
Price"); and (v) that the Holder acknowledges this Notice is an offer to sell
the Offered Shares to the Company and/or its assignee(s) pursuant to the
Company's Right of First Refusal at the Offered Price as provided for in this
Exercise Agreement.
9.2 Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after the date of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all (or, with the
consent of the Holder, less than all) the Offered Shares proposed to be
transferred to any one or more of the Proposed Transferees named in the Notice,
at the purchase price, determined as specified below.
9.3 Purchase Price. The purchase price for the Offered Shares
--------------
purchased under this Section will be the Offered Price, provided that if the
Offered Price consists of no legal consideration (as, for example, in the case
of a transfer by gift) the purchase price will be the fair market value of the
Offered Shares as determined in good faith by the Company's Board of Directors.
If the Offered Price includes consideration other than cash, then the value of
the non-cash consideration, as determined in good faith by the Company's Board
of Directors, will conclusively be deemed to be the cash equivalent value of
such non-cash consideration.
9.4 Payment. Payment of the purchase price for the Offered Shares
-------
will be payable, at the option of the Company and/or its assignee(s) (as
applicable), by check or by cancellation of all or a portion of any outstanding
indebtedness owed by the Holder to the Company (or to such assignee, in the case
of a purchase of Offered Shares by such assignee) or by any combination thereof.
The purchase price will be paid without interest within sixty (60) days after
the Company's receipt of the Notice, or, at the option of the Company and/or its
assignee(s), in the manner and at the time(s) set forth in the Notice.
9.5 Holder's Right to Transfer. If all of the Offered 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, then the
Holder may sell or otherwise transfer such Offered Shares to each Proposed
Transferee at the Offered Price or at a higher price, provided that (i) such
--------
sale or other transfer is consummated within one hundred twenty (120) days after
the date of the Notice, (ii) any such sale or other transfer is effected in
compliance with all applicable securities laws, and (iii) each Proposed
Transferee agrees in writing that the provisions of this Section will continue
to apply to the Offered Shares in the hands of such
8
<PAGE>
Proposed Transferee. If the Offered Shares described in the Notice are not
transferred to each Proposed Transferee within such one hundred twenty (120) day
period, then a new Notice must be given to the Company pursuant to which the
Company will again be offered the Right of First Refusal before any Shares held
by the Holder may be sold or otherwise transferred.
9.6 Exempt Transfers. Notwithstanding anything to the contrary in
----------------
this Section, the following transfers of Vested Shares will be exempt from the
Right of First Refusal: (i) the transfer of any or all of the Vested Shares
during Purchaser's lifetime by gift or on Purchaser's death by will or intestacy
to Purchaser's "Immediate Family" (as defined below) or to a trust for the
benefit of Purchaser or Purchaser's Immediate Family, provided that each
transferee or other recipient agrees in a writing satisfactory to the Company
that the provisions of this Section will continue to apply to the transferred
Vested Shares in the hands of such transferee or other recipient; (ii) any
transfer of Vested Shares made pursuant to a statutory merger or statutory
consolidation of the Company with or into another corporation or corporations
(except that the Right of First Refusal will continue to apply thereafter to
such Vested Shares, in which case the surviving corporation of such merger or
consolidation shall succeed to the rights of the Company under this Section
unless the agreement of merger or consolidation expressly otherwise provides);
or (iii) any transfer of Vested Shares pursuant to the winding up and
dissolution of the Company. As used herein, the term "Immediate Family" will
mean Purchaser's spouse, the lineal descendant or antecedent, father, mother,
brother or sister, child, adopted child, grandchild or adopted grandchild of the
Purchaser or the Purchaser's spouse, or the spouse of any child, adopted child,
grandchild or adopted grandchild of Purchaser or the Purchaser's spouse or
Spousal Equivalent, as defined herein. As used herein, a person is deemed to be
a "Spousal Equivalent" provided the following circumstances are true: (i)
irrespective of whether or not the Participant and the Spousal Equivalent are
the same sex, they are the sole spousal equivalent of the other for the last
twelve (12) months, (ii) they intend to remain so indefinitely, (iii) neither
are married to anyone else, (iv) both are at least 18 years of age and mentally
competent to consent to contract, (v) they are not related by blood to a degree
of closeness that which would prohibit legal marriage in the state in which they
legally reside, (vi) they are jointly responsible for each other's common
welfare and financial obligations, and (vii) they reside together in the same
residence for the last twelve (12) months and intend to do so indefinitely.
9.7 Termination of Right of First Refusal. The Right of First Refusal
-------------------------------------
will terminate as to all Shares on the effective date of 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 SEC under the Securities Act
(other than a registration statement relating solely to the issuance of Common
Stock pursuant to a business combination or an employee incentive or benefit
plan).
9.8 Encumbrances on Vested Shares. Purchaser may grant a lien or
-----------------------------
security interest in, or pledge, hypothecate or encumber Vested Shares only if
each party to whom such lien or security interest is granted, or to whom such
pledge, hypothecation or other encumbrance is made, agrees in a writing
satisfactory to the Company that: (i) such lien, security interest, pledge,
hypothecation or encumbrance will not apply to such Vested Shares after they are
acquired by the Company and/or its assignees under this Section; and (ii) the
provisions of this Section will continue to apply to such Vested Shares in the
hands of such party and any transferee of such party. Purchaser may not grant a
lien or security interest in, or pledge, hypothecate or encumber, any Unvested
Shares.
9
<PAGE>
10. Rights as a Shareholder. Subject to the terms and conditions of this
-----------------------
Exercise Agreement, Purchaser will have all of the rights of a shareholder of
the Company with respect to the Shares from and after the date that Shares are
issued to Purchaser until such time as Purchaser disposes of the Shares or the
Company and/or its assignee(s) exercise(s) the Repurchase Option or Right of
First Refusal. Upon an exercise of the Repurchase Option or the Right of First
Refusal, Purchaser will have no further rights as a holder of the Shares so
purchased upon such exercise, other than the right to receive payment for the
Shares so purchased in accordance with the provisions of this Exercise
Agreement, and Purchaser will promptly surrender the stock certificate(s)
evidencing the Shares so purchased to the Company for transfer or cancellation.
11. Escrow. As security for Purchaser's faithful performance of this
------
Exercise Agreement, Purchaser agrees, immediately upon receipt of the stock
certificate(s) evidencing the Shares, to deliver such certificate(s), together
with the Stock Powers executed by Purchaser and by Purchaser's spouse, if any
(with the date and number of Shares left blank), to the Secretary of the Company
or other designee of the Company (the "Escrow Holder"), who is hereby appointed
to hold such certificate(s) and Stock Powers in escrow and to take all such
actions and to effectuate all such transfers and/or releases of such Shares as
are in accordance with the terms of this Exercise Agreement. Purchaser and the
Company agree that Escrow Holder will not be liable to any party to this
Exercise Agreement (or to any other party) for any actions or omissions unless
Escrow Holder is grossly negligent or intentionally fraudulent in carrying out
the duties of Escrow Holder under this Exercise Agreement. Escrow Holder may
rely upon any letter, notice or other document executed with any signature
purported to be genuine and may rely on the advice of counsel and obey any order
of any court with respect to the transactions contemplated by this Exercise
Agreement. The Shares will be released from escrow upon termination of both the
Repurchase Option and the Right of First Refusal.
12. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
12.1 Legends. Purchaser understands and agrees that the Company will
-------
place the legends set forth below or similar legends on any stock certificate(s)
evidencing the Shares, together with any other legends that may be required by
state or U.S. Federal securities laws, the Company's Articles of Incorporation
or Bylaws, any other agreement between Purchaser and the Company or any
agreement between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION
OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY
MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
10
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON PUBLIC RESALE AND TRANSFER,
INCLUDING THE RIGHT OF REPURCHASE AND RIGHT OF FIRST REFUSAL
OPTIONS HELD BY THE ISSUER AND/OR ITS ASSIGNEE(S) AS SET
FORTH IN A STOCK OPTION EXERCISE AGREEMENT BETWEEN THE
ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF
WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.
SUCH PUBLIC SALE AND TRANSFER RESTRICTIONS INCLUDING THE
RIGHT OF REPURCHASE AND RIGHT OF FIRST REFUSAL ARE BINDING
ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
180 DAY MARKET STANDOFF RESTRICTION AS SET FORTH IN A
CERTAIN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER
OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE ISSUER. AS A RESULT OF SUCH
AGREEMENT, THESE SHARES MAY NOT BE TRADED PRIOR TO 180 DAYS
AFTER THE EFFECTIVE DATE OF THE INITIAL PUBLIC OFFERING OF
THE COMMON STOCK OF THE ISSUER HEREOF. SUCH RESTRICTION IS
BINDING ON TRANSFEREES OF THESE SHARES.
12.2 Stop-Transfer Instructions. Purchaser agrees that, to ensure
--------------------------
compliance with the restrictions imposed by this Exercise Agreement, the Company
may issue appropriate "stop-transfer" instructions to its transfer agent, if
any, and if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
12.3 Refusal to Transfer. The Company will 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 Exercise 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 have been so transferred.
13. Tax Consequences. PURCHASER UNDERSTANDS THAT PURCHASER MAY SUFFER
----------------
ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER'S PURCHASE OR DISPOSITION OF
THE SHARES. PURCHASER REPRESENTS: (i) THAT PURCHASER HAS CONSULTED WITH ANY TAX
ADVISER THAT PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND (ii) THAT PURCHASER IS NOT RELYING ON THE COMPANY
FOR ANY TAX ADVICE. IN PARTICULAR, IF UNVESTED SHARES ARE SUBJECT TO REPURCHASE
BY THE COMPANY, PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED WITH
PURCHASER'S OWN TAX ADVISER CONCERNING THE ADVISABILITY OF FILING AN 83(b)
ELECTION WITH THE INTERNAL REVENUE SERVICE WHICH MUST BE FILED WITHIN THIRTY
(30) DAYS OF THE PURCHASE OF SHARES TO BE EFFECTIVE. Set forth below is a brief
summary as of the date the Plan was adopted by the Board of some of the U.S.
Federal and California tax consequences of exercise of the Option and
disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PURCHASER SHOULD CONSULT HIS
11
<PAGE>
OR HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
13.1 Exercise of Incentive Stock Option. If the Option qualifies
----------------------------------
as an ISO, there will be no regular U.S. Federal income tax liability 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 a tax preference item for U.S.
Federal alternative minimum tax purposes and may subject Purchaser to the
alternative minimum tax in the year of exercise.
13.2 Exercise of Nonqualified Stock Option. If the Option does not
-------------------------------------
qualify as an ISO, there may be a regular U.S. Federal income tax liability and
a California income tax liability upon the exercise of the Option. Purchaser
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 Purchaser is or was
an employee of the Company, the Company may be required to withhold from
Purchaser's compensation or collect from Purchaser and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
13.3 Disposition of Shares. The following tax consequences may
---------------------
apply upon disposition of the Shares.
(a) Incentive Stock Options. If the Shares are held for
-----------------------
more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an ISO and are disposed of more than two (2) years
after the Date of Grant, any gain realized on disposition of the Shares will be
treated as long term capital gain for federal and California income tax
purposes. If Shares purchased under an ISO are disposed of within the applicable
one (1) year or two (2) year period, any gain realized on such disposition will
be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price.
(b) Nonqualified Stock Options. If the Shares are held for
--------------------------
more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an NQSO, any gain realized on disposition of the
Shares will be treated as long term capital gain.
(c) Withholding. The Company may be required to withhold
-----------
from the Purchaser's compensation or collect from the Purchaser and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income.
13.4 Section 83(b) Election for Unvested Shares. With respect to
------------------------------------------
Unvested Shares, which are subject to the Repurchase Option, unless an election
is filed by the Purchaser with the Internal Revenue Service (and, if necessary,
the proper state taxing authorities), within 30 days of the purchase of the
------------------------------
Unvested Shares, electing pursuant to Section 83(b) of the Code (and similar
state tax provisions, if applicable) to be taxed currently on any difference
between the Exercise Price of the Unvested Shares and their Fair Market Value
on the date of purchase, there may be a recognition of taxable income
(including, where applicable, alternative minimum taxable income) to the
Purchaser, measured by the excess, if any, of the Fair Market Value of the
Unvested Shares at the time they cease to be Unvested Shares, over the Exercise
Price of the
12
<PAGE>
Unvested Shares. A form of Election under Section 83(b) is attached hereto as
Exhibit 3 for reference.
- ---------
14. Compliance with Laws and Regulations. The issuance and transfer of the
------------------------------------
Shares will be subject to and conditioned upon compliance by the Company and
Purchaser with all applicable state and U.S. Federal laws and regulations and
with all applicable requirements of any stock exchange or automated quotation
system on which the Company's Common Stock may be listed or quoted at the time
of such issuance or transfer.
15. Successors and Assigns. The Company may assign any of its rights under
----------------------
this Exercise Agreement, including its rights to purchase Shares under the
Repurchase Option and the Right of First Refusal. This Exercise Agreement shall
be binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer herein set forth, this
Exercise Agreement will be binding upon Purchaser and Purchaser's heirs,
executors, administrators, legal representatives, successors and assigns.
16. Governing Law; Severability. This Exercise Agreement shall be governed
---------------------------
by and construed in accordance with the internal laws of the State of California
as such laws are applied to agreements between California residents entered into
and to be performed entirely within California. If any provision of this
Exercise Agreement is determined by a court of law to be illegal or
unenforceable, then such provision will be enforced to the maximum extent
possible and the other provisions will remain fully effective and enforceable.
17. Notices. Any notice required to be given or delivered to the Company
-------
shall be in writing and addressed to the Corporate Secretary of the Company at
its principal corporate offices. Any notice required to be given or delivered
to Purchaser shall be in writing and addressed to Purchaser at the address
indicated above or to such other address as Purchaser may designate in writing
from time to time to the Company. All notices shall be deemed effectively given
upon personal delivery, (i) three (3) days after deposit in the United States
mail by certified or registered mail (return receipt requested), (ii) one (1)
business day after its deposit with any return receipt express courier
(prepaid), or (iii) one (1) business day after transmission by rapifax or
telecopier.
18. Further Instruments. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Exercise Agreement.
19. Headings. The captions and headings of this Exercise Agreement are
--------
included for ease of reference only and will be disregarded in interpreting or
construing this Exercise Agreement. All references herein to Sections will
refer to Sections of this Exercise Agreement.
20. Entire Agreement. The Plan, the Stock Option Agreement and this
----------------
Exercise Agreement, together with all Exhibits thereto, constitute the entire
agreement and understanding of the parties with respect to the subject matter of
this Exercise Agreement, and supersede all prior understandings and agreements,
whether oral or written, between the parties hereto with respect to the specific
subject matter hereof.
13
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Exercise Agreement to be
executed in triplicate by its duly authorized representative and Purchaser has
executed this Exercise Agreement in triplicate as of the Effective Date,
indicated above.
ALLADVANTAGE.COM PURCHASER
By:__________________________ __________________________________
(Signature)
_____________________________ __________________________________
(Please print name) (Please print name)
_____________________________
(Please print title)
[Signature page to AllAdvantage.com Stock Option Exercise Agreement]
14
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Spouse Consent
Exhibit 3: Section 83(b) Election
15
<PAGE>
EXHIBIT 1
---------
STOCK POWER AND ASSIGNMENT
--------------------------
SEPARATE FROM STOCK CERTIFICATE
-------------------------------
16
<PAGE>
Stock Power and Assignment
--------------------------
Separate from Stock Certificate
-------------------------------
FOR VALUE RECEIVED and pursuant to that certain Stock Option Exercise
Agreement No. ________ dated as of _______________, _____, (the "Agreement"),
the undersigned hereby sells, assigns and transfers unto
_______________________________, __________ shares of the Common Stock of
AllAdvantage.com, a California corporation (the "Company"), standing in the
undersigned's name on the books of the Company represented by Certificate No(s).
______ delivered herewith, and does hereby irrevocably constitute and appoint
the Secretary of the Company as the undersigned's attorney-in-fact, with full
power of substitution, to transfer said stock on the books of the Company. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS
THERETO.
Dated: _______________, _____
PURCHASER
__________________________________
(Signature)
__________________________________
(Please Print Name)
_________________________________
(Spouse's Signature, if any)
__________________________________
(Please Print Spouse's Name)
Instructions to Purchaser: Please do not fill in any blanks other than the
- -------------------------
signature line. The purpose of this Stock Power and Assignment is to enable the
Company to acquire the shares and to exercise its "Repurchase Option" and/or
"Right of First Refusal" set forth in the Exercise Agreement without requiring
additional signatures on the part of the Purchaser or Purchaser's Spouse.
17
<PAGE>
Stock Power and Assignment
--------------------------
Separate from Stock Certificate
-------------------------------
FOR VALUE RECEIVED and pursuant to that certain Stock Option Exercise
Agreement No. ________ dated as of _______________, _____, (the "Agreement"),
the undersigned hereby sells, assigns and transfers unto
_______________________________, __________ shares of the Common Stock of
AllAdvantage.com, a California corporation (the "Company"), standing in the
undersigned's name on the books of the Company represented by Certificate No(s).
______ delivered herewith, and does hereby irrevocably constitute and appoint
the Secretary of the Company as the undersigned's attorney-in-fact, with full
power of substitution, to transfer said stock on the books of the Company. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS
THERETO.
Dated: _______________, _____
PURCHASER
________________________________
(Signature)
________________________________
(Please Print Name)
________________________________
(Spouse's Signature, if any)
________________________________
(Please Print Spouse's Name)
Instructions to Purchaser: Please do not fill in any blanks other than the
- -------------------------
signature line. The purpose of this Stock Power and Assignment is to enable the
Company to acquire the shares and to exercise its "Repurchase Option" and/or
"Right of First Refusal" set forth in the Exercise Agreement without requiring
additional signatures on the part of the Purchaser or Purchaser's Spouse.
18
<PAGE>
EXHIBIT 2
---------
SPOUSE CONSENT
--------------
19
<PAGE>
Spouse Consent
--------------
The undersigned spouse of ______________________________ (the "Purchaser")
has read, understands, and hereby approves the Stock Option Exercise Agreement
between Purchaser and the Company (the "Agreement"). In consideration of the
Company's granting my spouse the right to purchase the Shares as set forth in
the Agreement, the undersigned hereby agrees to be irrevocably bound by the
Agreement and further agrees that any community property interest I may have in
the Shares shall similarly be bound by the Agreement. The undersigned hereby
appoints Purchaser as my attorney-in-fact with respect to any amendment or
exercise of any rights under the Agreement.
Date: _______________________
______________________________________
Print Name of Purchaser's Spouse
______________________________________
Signature of Purchaser's Spouse
Address:______________________________
______________________________
______________________________
20
<PAGE>
EXHIBIT 3
---------
SECTION 83(b) ELECTION
----------------------
1
<PAGE>
FOR AMT AND DISQUALIFYING DISPOSITION PURPOSES
ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE
The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include the excess, if any, of the
fair market value of the property described below at the time of transfer over
the amount paid for such property, as compensation for services in the
calculation of: (1) regular gross income; (2) alternative minimum taxable income
or (3) disqualifying disposition gross income, as the case may be.
1. TAXPAYER'S NAME: ___________________________________________
TAXPAYER'S ADDRESS: ___________________________________________
___________________________________________
SOCIAL SECURITY NUMBER: ___________________________________________
2. The property with respect to which the election is made is described as
follows: _______ shares of Common Stock of AllAdvantage.com, a California
corporation (the "Company") which were transferred upon exercise of an
option by Company, which is Taxpayer's employer or the corporation for whom
the Taxpayer performs services.
3. The date on which the shares were transferred pursuant to the exercise of
the option was ____________________, _____ and this election is made for
calendar year _____.
4. The shares received upon exercise of the option are subject to the
following restrictions: The Company may repurchase all or a portion of the
shares at the Taxpayer's original purchase price under certain conditions
at the time of Taxpayer's termination of employment or services.
5. The fair market value of the shares (without regard to restrictions other
than restrictions which by their terms will never lapse) was $_____ per
share at the time of exercise of the option.
6. The amount paid for such shares upon exercise of the option was $_____ per
share.
7. The Taxpayer has submitted a copy of this statement to the Company.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS"), AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER
--------------
THE DATE OF TRANSFER OF THE SHARES, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE REVOKED
WITHOUT THE CONSENT OF THE IRS.
Dated:_______________________ _____________________________________
Taxpayer's Signature
1
<PAGE>
Exhibit 10.06
FOUNDER'S RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement is made and entered into as of April 26, 1999 (the
"Effective Date") between AllAdvantage.com (the "Company"), a California
corporation, and ________ (the "Purchaser").
1. PURCHASE OF SHARES. On the Effective Date and subject to the terms
------------------
and conditions of this Agreement, Purchaser hereby purchases from the Company,
and Company hereby sells to Purchaser, an aggregate of ____________ (_____)
shares of the Company's Common Stock (the "Shares") at an aggregate purchase
price of $_____ (the "Purchase Price") or $0.004167 per Share (the "Purchase
Price Per Share"). Additionally, in connection with the purchase of the Shares,
Purchaser agrees to assign to the Company as a contribution to capital certain
technology and related rights pursuant to the form of Assignment Agreement
attached hereto as Exhibit 2. As used in this Agreement, the term "Shares"
refers to the Shares purchased under this Agreement and includes all securities
received (i) in replacement of the Shares, (ii) as a result of stock dividends
or stock splits with respect to the Shares, and (iii) in replacement of the
Shares in a merger, recapitalization, reorganization or similar corporate
transaction.
2. PAYMENT OF PURCHASE PRICE; CLOSING.
----------------------------------
2.1 Deliveries by Purchaser. Purchaser hereby delivers to the
-----------------------
Company: (i) a duly executed copy of this Agreement, (ii) two (2) copies of a
blank Stock Power and Assignment Separate from Stock Certificate in the form of
Exhibit 1 attached hereto (the "Stock Powers"), both executed by Purchaser (and
- ---------
Purchaser's spouse, if any), and (iii) payment of the Purchase Price in cash, by
delivery of a check, a copy of which is attached hereto as Exhibit 2. Purchaser
---------
also hereby assigns to the Company certain technology and related rights owned
by Purchaser by delivery to the Company of an Assignment Agreement in the form
attached hereto as Exhibit 2, duly executed by Purchaser.
---------
2.2 Deliveries by the Company. Upon its receipt of the entire
-------------------------
Purchase Price and all the documents to be executed and delivered by Purchaser
to the Company under Section 2.1, the Company will issue a duly executed stock
certificate evidencing the Shares in the name of Purchaser, registered in
Purchaser's name in accordance with Section 14, with such certificate to be
placed in escrow as provided in Section 8 until expiration or termination of
both the Company's Repurchase Option and Right of First Refusal described in
Sections 5 and 6.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
-------------------------------------------
warrants to the Company that:
3.1 Purchase for Own Account for Investment. Purchaser is purchasing
---------------------------------------
the Shares for Purchaser's own account for investment purposes only and not with
a view to, or for sale in connection with, a distribution of the Shares within
the meaning of the Securities Act of 1933, as amended (the "1933 Act").
Purchaser has no present intention of selling or otherwise disposing of all or
any portion of the Shares and no one other than Purchaser has any beneficial
ownership of any of the Shares.
3.2 Access to Information. Purchaser has had access to all
---------------------
information regarding the Company and its present and prospective business,
assets, liabilities and financial
1
<PAGE>
condition that Purchaser reasonably considers important in making the decision
to purchase the Shares, and Purchaser has had ample opportunity to ask questions
of the Company's representatives concerning such matters and this investment.
3.3 Understanding of Risks. Purchaser is a founder of the Company
----------------------
and is fully aware of: (i) the highly speculative nature of the investment in
the Shares; (ii) the financial hazards involved; (iii) the lack of liquidity of
the Shares and the restrictions on transferability of the Shares (e.g., that
----
Purchaser may not be able to sell or dispose of the Shares or use them as
collateral for loans); (iv) the qualifications and backgrounds of the management
of the Company; and (v) the tax consequences of investment in the Shares.
3.4 Purchaser's Qualifications. Purchaser has a preexisting personal
--------------------------
or business relationship with the Company and/or certain of its officers and/or
directors of a nature and duration sufficient to make Purchaser aware of the
character, business acumen and general business and financial circumstances of
the Company and/or such officers and directors. By reason of Purchaser's
business or financial experience, Purchaser is capable of evaluating the merits
and risks of this investment, has the ability to protect Purchaser's own
interests in this transaction and is financially capable of bearing a total loss
of this investment.
3.5 No General Solicitation. At no time was Purchaser presented with
-----------------------
or solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer, sale and purchase of the Shares.
3.6 Compliance with Securities Laws. Purchaser understands and
-------------------------------
acknowledges that, in reliance upon the representations and warranties made by
Purchaser herein, the Shares are not being registered with the Securities and
Exchange Commission ("SEC") under the 1933 Act or being qualified under the
California Corporate Securities Law of 1968, as amended (the "Law"), but instead
are being issued under an exemption or exemptions from the registration and
qualification requirements of the 1933 Act and the Law which impose certain
restrictions on Purchaser's ability to transfer the Shares.
3.7 Restrictions on Transfer. Purchaser understands that Purchaser
------------------------
may not transfer any Shares unless such Shares are registered under the 1933 Act
or qualified under the Law or unless, in the opinion of counsel to the Company,
exemptions from such registration and qualification requirements are available.
Purchaser understands that only the Company may file a registration statement
with the SEC or the California Commissioner of Corporations and that the Company
is under no obligation to do so with respect to the Shares. Purchaser has also
been advised that exemptions from registration and qualification may not be
available or may not permit Purchaser to transfer all or any of the Shares in
the amounts or at the times proposed by Purchaser.
3.8 Rule 144. In addition, Purchaser has been advised that SEC Rule
--------
144 promulgated under the 1933 Act, which permits certain limited sales of
unregistered securities, is not presently available with respect to the Shares
and, in any event, requires that the Shares be held for a minimum of one (1)
year, and in certain cases two (2) years, after they have been purchased and
---
paid for (within the meaning of Rule 144), before they may be resold under Rule
- --------
144. Purchaser understands that Rule 144 may indefinitely restrict transfer of
the Shares so long as Purchaser remains an "affiliate" of the Company and
"current public information" about the Company (as defined in Rule 144) is not
publicly available.
2
<PAGE>
4. COMPLIANCE WITH CALIFORNIA SECURITIES LAWS. THE SALE OF THE
------------------------------------------
SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT, IF NOT YET
QUALIFIED WITH THE CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT
EXEMPT FROM SUCH QUALIFICATION, IS SUBJECT TO SUCH QUALIFICATION, AND
THE ISSUANCE OF SUCH SECURITIES, AND THE RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS
THE SALE IS EXEMPT. THE RIGHTS OF THE PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN
EXEMPTION BEING AVAILABLE.
5. COMPANY'S REPURCHASE OPTION. The Company or its assignees shall have
---------------------------
the option to repurchase all or a portion of the Unvested Shares (as defined
below) on the terms and conditions set forth in this Section (the "Repurchase
Option") if Purchaser ceases to be employed by the Company (as defined herein)
for any reason, or no reason, including without limitation Purchaser's death,
disability, voluntary resignation or termination by the Company with or without
cause.
5.1 Definition of "Employed by the Company"; "Termination Date". For
----------------------------------------------------------
purposes of this Agreement, Purchaser will be considered to be "employed by the
Company" if the Board of Directors of the Company determines that Purchaser is
rendering substantial services as an officer, employee, consultant or
independent contractor to the Company or to any parent, subsidiary or affiliate
of the Company. In case of any dispute as to whether Purchaser is employed by
the Company, the Board of Directors of the Company shall have sole discretion to
determine whether Purchaser has ceased to be employed by the Company or any
parent, subsidiary or affiliate of the Company and the effective date on which
Purchaser's employment terminated (the "Termination Date").
5.2 Unvested and Vested Shares. Shares that are vested pursuant to
--------------------------
the schedule set forth herein are "Vested Shares". Shares that are not vested
pursuant to the schedule set forth herein are "Unvested Shares". Unvested
Shares may not be sold or otherwise transferred by Purchaser without the
Company's prior written consent. On the Effective Date __________of the Shares
will be Unvested Shares. For so long (and only for so long) as Purchaser
remains continuously employed by the Company or any Subsidiary or Parent of the
Company, at all times after the Effective Date, 1/4 of the originally Unvested
Shares will become Vested Shares one year following the Effective Date and an
additional 1/48 of the originally Unvested Shares will become Vested Shares upon
the expiration of each full succeeding month elapsed thereafter; provided,
however, that all Unvested Shares shall become Vested Shares immediately prior
to the closing of a Change of Control (as defined below). No Unvested Shares
will become Vested Shares after the Termination Date. If the application of the
vesting percentage causes a fractional share, such share shall be rounded down
to the nearest whole share for each month except for the last month in such
vesting period, at the end of which last month the balance of Unvested Shares
shall become fully Vested Shares. A "Change of Control" shall mean the
occurrence of any of the following events: (i) a merger, reorganization or
consolidation of the Company in which the shareholders of the Company before
such merger, reorganization or consolidation own less than fifty percent (50%)
of the outstanding voting equity securities of the Company or entity surviving
such merger, reorganization or consolidation, (ii) a sale or other transfer of
all or substantially all of the assets of the Company, or (iii) a transfer of
more than
3
<PAGE>
fifty percent (50%) of the outstanding voting equity securities of the Company
in one transaction or a series of related transactions.
5.3 Adjustments. The number of Shares that are Vested Shares or
-----------
Unvested Shares will be proportionally adjusted to reflect any stock dividend,
stock split, reverse stock split or recapitalization of the common stock of the
Company occurring after the Effective Date.
5.4 Exercise of Repurchase Option at Original Price. At any time
-----------------------------------------------
within ninety (90) days after the Termination Date, the Company may elect to
repurchase any or all of the Unvested Shares by giving Purchaser written notice
of exercise of the Repurchase Option. The Company and/or its assignee(s) will
then have the option to repurchase from Purchaser (or from Purchaser's personal
representative as the case may be) any or all of the Unvested Shares at the
Purchaser's original Purchase Price Per Share, as proportionally adjusted to
reflect any stock dividend, stock split, reverse stock split or recapitalization
of the common stock of the Company occurring after the Effective Date (the
"Repurchase Price").
5.5 Payment of Repurchase Price. The Repurchase Price will be
---------------------------
payable, at the option of the Company or its assignee(s), by check or by
cancellation of all or a portion of any outstanding indebtedness owed by
Purchaser to the Company (or to such assignee) or by any combination thereof.
The Repurchase Price will be paid without interest within one hundred twenty
(120) days after the Termination Date.
5.6 Right of Termination Unaffected. Nothing in this Agreement will
-------------------------------
be construed to limit or otherwise affect in any manner whatsoever the right or
power of the Company (or any parent, subsidiary or affiliate of the Company) to
terminate Purchaser's employment with the Company (or any parent, subsidiary or
affiliate of the Company) at any time for any reason or no reason, with or
without cause.
6. RIGHT OF FIRST REFUSAL. Unvested Shares may not be sold, pledged or
----------------------
otherwise transferred by gift or otherwise (a "Transfer") by Purchaser without
the Company's prior written consent. Before any Vested Shares held by Purchaser
or any transferee of such Vested Shares (either being sometimes referred to
herein as the "Holder") may be Transferred (including without limitation any
Transfer by (i) an assignment of any Shares for the benefit of creditors of the
Holder, (ii) operation of law, (iii) an execution of judgment against the Shares
or the acquisition of record or beneficial ownership of Shares by a lender or
creditor, (iv) will or under the laws of descent and distribution, (v) any
decree of divorce, dissolution or separate maintenance, any property settlement,
any separation agreement or any other agreement with a spouse (except for bona
fide estate planning purposes) under which any Shares are Transferred or awarded
to the spouse of the Holder or are required to be sold, or (vi) the filing by
the Holder of a petition for relief or the filing of an involuntary petition
against Holder, under the bankruptcy laws of the United States or of any other
nation (each instance referred to hereafter as the "Involuntary Transfer")), the
Company and/or its assignee(s) will have a right of first refusal to purchase
the Shares to be Transferred (the "Offered Shares") on the terms and conditions
set forth in this Section (the "Right of First Refusal").
6.1 Notice of Proposed Transfer. In the event the Holder proposes to
---------------------------
Transfer any Vested Shares, other than by Involuntary Transfer, the Holder of
the Offered Shares will deliver to the Company a written notice (the "Voluntary
Transfer Notice") stating: (i) the Holder's bona fide intention to Transfer the
Offered Shares; (ii) the name of each proposed bona
4
<PAGE>
fide purchaser or other transferee (the "Proposed Transferee"); (iii) the number
of Offered Shares to be Transferred to each Proposed Transferee; (iv) the bona
fide cash price or other consideration for which the Holder proposes to Transfer
the Offered Shares (the "Offered Price"); and (v) that the Holder acknowledges
this Voluntary Transfer Notice is an offer to sell the Offered Shares to the
Company and/or its assignee(s) pursuant to the Company's Right of First Refusal
at the Offered Price as provided for in this Agreement. In the event of any
Involuntary Transfer of any Vested Shares, the Holder shall deliver to the
Company a written notice (the "Involuntary Transfer Notice") stating: (i) the
number of Shares subject to the Involuntary Transfer, (ii) the manner,
circumstances and date of the Involuntary Transfer, and (iii) the name and
address of the Holder and transferee. If the Company subsequently requests
additional information concerning the Involuntary Transfer or transferee, Holder
agrees to promptly provide the requested information to the Company.
6.2 Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after the date of the Voluntary Transfer Notice or the Involuntary
Transfer Notice (either being sometimes referred to herein as the "Notice"), the
Company and/or its assignee(s) may, by giving written notice to the Holder,
elect to purchase all (or, with the consent of the Holder, less than all) the
Offered Shares proposed to be Transferred to any one or more of the Proposed
Transferees named in the Notice, at the purchase price determined as specified
below.
6.3 Purchase Price. The purchase price for the Offered Shares
--------------
purchased under this Section will be the Offered Price. If no price or other
legal consideration is to be paid for the Shares, the Transfer will be referred
to as a "Donative Transfer". If the Offered Price includes consideration other
than cash, then the cash equivalent value of the non-cash consideration shall
conclusively be deemed to be the present fair market value of such non-cash
consideration as conclusively determined in good faith by the Company's Board of
Directors. In the case of a Donative Transfer or Involuntary Transfer, the
Offered Price to be paid to the Holder by the Company or its assignee will be
the fair market value of the Offered Shares on the proposed transfer date, as
conclusively determined in good faith by the Board of Directors of the Company.
6.4 Payment. Payment of the Offered Price will be payable, at the
-------
option of the Company and/or its assignee(s) (as applicable), by check or by
cancellation of all or a portion of any outstanding indebtedness owed by the
Holder to the Company (or to such assignee, in the case of a purchase of Offered
Shares by such assignee) or by any combination thereof. The Offered Price will
be paid without interest within sixty (60) days after the Company's receipt of
the Notice, or, at the option of the Company and/or its assignee(s), in the
manner and at the time(s) set forth in the Notice.
6.5 Holder's Right to Transfer. If all of the Offered 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,
then the Holder may Transfer such Offered Shares to that Proposed Transferee at
the Offered Price or at a higher price, provided that (i) such Transfer is
--------
consummated within one hundred twenty (120) days after the date of the Notice,
(ii) any such Transfer is effected in compliance with all applicable securities
laws, and (iii) the Proposed Transferee agrees in writing that the provisions of
this Section will continue to apply to the Offered Shares in the hands of such
Proposed Transferee. If the Offered Shares described in the Notice are not
Transferred to the Proposed Transferee within such one hundred twenty (120)
5
<PAGE>
day period, then a new Notice must be given to the Company, pursuant to which
the Company will again be offered the Right of First Refusal before any Shares
held by the Holder may be Transferred.
6.6 Exempt Transfers. Notwithstanding anything to the contrary in
----------------
this Section, the following Transfers of Vested Shares will be exempt from the
Right of First Refusal: (i) the Transfer of any or all of the Vested Shares
during Purchaser's lifetime by gift or on Purchaser's death by will or intestacy
to Purchaser's "Immediate Family" (as defined below) or to a trust for the
benefit of Purchaser or Purchaser's Immediate Family, provided that each
transferee or other recipient agrees in a writing satisfactory to the Company
that the provisions of this Section will continue to apply to the Transferred
Vested Shares in the hands of such transferee or other recipient; (ii) any
Transfer of Vested Shares made pursuant to a statutory merger or statutory
consolidation of the Company with or into another corporation or corporations
(except that the Right of First Refusal will continue to apply thereafter to
such Vested Shares, in which case the surviving corporation of such merger or
consolidation shall succeed to the rights of the Company under this Section
unless the agreement of merger or consolidation expressly otherwise provides);
or (iii) any Transfer of Vested Shares pursuant to the winding up and
dissolution of the Company. As used herein, the term "Immediate Family" will
mean Purchaser's spouse, the lineal descendant or antecedent, father, mother,
brother or sister, child, adopted child or grandchild or adopted grandchild of
Purchaser or Purchaser's spouse, or the spouse of any child, adopted child,
grandchild or adopted grandchild of Purchaser or Purchaser's spouse.
6.7 Termination of Right of First Refusal. The Right of First
-------------------------------------
Refusal will terminate as to all Shares on the effective date of 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 SEC under the 1933 Act (other
than a registration statement relating solely to the issuance of Common Stock
pursuant to a business combination or an employee incentive or benefit plan).
6.8 Encumbrances on Vested Shares. Purchaser may grant a lien or
-----------------------------
security interest in, or pledge, hypothecate or encumber Vested Shares only if
each party to whom such lien or security interest is granted, or to whom such
pledge, hypothecation or other encumbrance is made, agrees in a writing
satisfactory to the Company that: (i) such lien, security interest, pledge,
hypothecation or encumbrance will not apply to such Vested Shares after they are
acquired by the Company and/or its assignees under this Section; and (ii) the
provisions of this Section will continue to apply to such Vested Shares in the
hands of such party and any transferee of such party. Purchaser may not grant a
lien or security interest in, or pledge, hypothecate or encumber, any Unvested
Shares.
7. RIGHTS AS SHAREHOLDER. Subject to the terms and conditions of this
---------------------
Agreement, Purchaser will have all of the rights of a shareholder of the Company
with respect to the Shares from and after the date that Purchaser delivers
payment of the Purchase Price until such time as Purchaser disposes of the
Shares or the Company and/or its assignee(s) exercise(s) the Repurchase Option
or Right of First Refusal. Upon an exercise of the Repurchase Option or the
Right of First Refusal, Purchaser will have no further rights as a holder of the
Shares so purchased upon such exercise, except the right to receive payment for
the Shares so purchased in accordance with the provisions of this Agreement, and
Purchaser will promptly surrender the
6
<PAGE>
stock certificate(s) evidencing the Shares so purchased to the Company for
transfer or cancellation.
8. ESCROW. As security for Purchaser's faithful performance of this
------
Agreement, Purchaser agrees, immediately upon receipt of the stock
certificate(s) evidencing the Shares, to deliver such certificate(s), together
with the Stock Powers executed by Purchaser and by Purchaser's spouse, if any
(with the date and number of Shares left blank), to the Secretary of the Company
or other designee of the Company (the "Escrow Holder"), who is hereby appointed
to hold such certificate(s) and Stock Powers in escrow and to take all such
actions and to effectuate all such transfers and/or releases of such Shares as
are in accordance with the terms of this Agreement. Escrow Holder will act
solely for the Company as its agent and not as a fiduciary. Purchaser and the
Company agree that Escrow Holder will not be liable to any party to this
Agreement (or to any other party) for any actions or omissions unless Escrow
Holder is grossly negligent or intentionally fraudulent in carrying out the
duties of Escrow Holder under this Agreement. Escrow Holder may rely upon any
letter, notice or other document executed with any signature purported to be
genuine and may rely on the advice of counsel and obey any order of any court
with respect to the transactions contemplated by this Agreement. The Shares
will be released from escrow upon termination of the Repurchase Option and the
Right of First Refusal.
9. TAX CONSEQUENCES. 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 IS NOT RELYING ON THE COMPANY
FOR ANY TAX ADVICE. Purchaser hereby acknowledges that Purchaser has been
informed that, unless an election is filed by the Purchaser with the Internal
Revenue Service (and, if necessary, the proper state taxing authorities) within
------
30 days of the purchase of the Shares to be effective, electing pursuant to
- -------
Section 83(b) of the Internal Revenue Code (and similar state tax provisions, if
applicable) to be taxed currently on any difference between the Purchase Price
of the Shares and their fair market value on the date of purchase, there will be
a recognition of taxable income to the Purchaser, measured by the excess, if
any, of the fair market value of the Shares, at the time they cease to be
Unvested Shares, over the Purchase Price for such Shares. Purchaser represents
that Purchaser has consulted any tax advisors Purchaser deems advisable in
connection with Purchaser's purchase of the Shares and the filing of the
election under Section 83(b) and similar tax provisions. A form of Election
under Section 83(b) is attached hereto as Exhibit 3 for reference. PURCHASER
---------
HEREBY ASSUMES ALL RESPONSIBILITY FOR FILING SUCH ELECTION AND PAYING ANY TAXES
RESULTING FROM SUCH ELECTION OR FROM FAILURE TO FILE THE ELECTION AND PAYING
TAXES RESULTING FROM THE LAPSE OF THE REPURCHASE RESTRICTIONS ON THE UNVESTED
SHARES.
10. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
--------------------------------------------
10.1 Legends. Purchaser understands and agrees that the Company will
-------
place the legends set forth below or similar legends on any stock certificate(s)
evidencing the Shares, together with any other legends that may be required by
state or federal securities laws, the Company's Articles of Incorporation or
Bylaws, any other agreement between Purchaser and the Company or any agreement
between Purchaser and any third party:
7
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON PUBLIC RESALE AND TRANSFER, INCLUDING THE RIGHTS OF
REPURCHASE AND FIRST REFUSAL HELD BY THE ISSUER AND/OR ITS ASSIGNEE(S)
AS SET FORTH IN A FOUNDER'S RESTRICTED STOCK PURCHASE AGREEMENT
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF
WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
PUBLIC SALE AND TRANSFER RESTRICTIONS, INCLUDING THE RIGHTS OF
REPURCHASE AND FIRST REFUSAL, ARE BINDING ON TRANSFEREES OF THESE
SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A 180 DAY
MARKET STANDOFF RESTRICTION AS SET FORTH IN A CERTAIN AGREEMENT
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF
WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. AS A
RESULT OF SUCH AGREEMENT, THESE SHARES MAY NOT BE TRADED PRIOR TO 180
DAYS AFTER THE EFFECTIVE DATE OF THE INITIAL PUBLIC OFFERING OF THE
COMMON STOCK OF THE ISSUER HEREOF. SUCH RESTRICTION IS BINDING ON
TRANSFEREES OF THESE SHARES.
10.2 Stop-Transfer Instructions. Purchaser agrees that, to ensure
--------------------------
compliance with the restrictions imposed by this Agreement, the Company may
issue appropriate "stop-transfer" instructions to its transfer agent, if any,
and if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
10.3 Refusal to Transfer. The Company will 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 have been so transferred.
11. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection with any
-------------------------
registration of the Company's securities under the 1933 Act that, upon the
request of the Company or the underwriters managing any registered public
offering of the Company's securities, Purchaser will not sell, pledge, transfer
or otherwise dispose of any Shares without the prior written consent of the
Company or such underwriters, as the case may be, for such period of
8
<PAGE>
time (not to exceed one hundred eighty (180) days) after the effective date of
such registration requested by such managing underwriters and subject to all
restrictions as the Company or the managing underwriters may specify for
employee-shareholders generally. Purchaser further agrees to enter into any
agreement reasonably required by the underwriters to implement the foregoing.
12. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of
------------------------------------
the Shares will be subject to and conditioned upon compliance by the Company and
Purchaser with all applicable state and federal laws and regulations and with
all applicable requirements of any stock exchange or automated quotation system
on which the Company's Common Stock may be listed or quoted at the time of such
issuance or transfer.
13. GENERAL PROVISIONS.
------------------
13.1 Assignments; Successors and Assigns. The Company may assign any
-----------------------------------
of its rights and obligations under this Agreement, including its rights to
repurchase Shares under the Repurchase Option and the Right of First Refusal.
Any assignment of rights and obligations by any other party to this Agreement
requires the Company's prior written consent. This Agreement, and the rights
and obligations of the parties hereunder, will be binding upon and inure to the
benefit of their respective successors, assigns, heirs, executors,
administrators and legal representatives.
13.2 Governing Law. This Agreement will be governed by and construed
-------------
in accordance with the laws of the State of California, without giving effect to
that body of laws pertaining to conflict of laws.
13.3 Notices. Any and all notices required or permitted to be given
-------
to a party pursuant to the provisions of this Agreement will be in writing and
will be effective and deemed to provide such party sufficient notice under this
Agreement on the earliest of the following: (i) at the time of personal
delivery, if delivery is in person; (ii) at the time of transmission by
facsimile or telecopier, addressed to the other party at its facsimile number or
telecopier address specified herein (or hereafter modified by subsequent notice
to the parties hereto), with confirmation of receipt made by both telephone and
printed confirmation sheet verifying successful transmission of the facsimile;
(iii) one (1) business day after deposit with an express overnight courier for
United States deliveries, or two (2) business days after such deposit for
deliveries outside of the United States; or (iv) three (3) business days after
deposit in the United States mail by registered or certified mail (return
receipt requested) for United States deliveries.
All notices for delivery outside the United States will be sent by
facsimile or by express courier. All notices not delivered personally or by
facsimile will be sent with postage and/or other charges prepaid and properly
addressed to the party to be notified at the address set forth below, or at such
other address as such other party may designate by ten (10) days advance written
notice to the other parties hereto. Notices to the Company will be marked
"Attention: President."
9
<PAGE>
To: AllAdvantage.com To:
101 First Street, #586
Los Altos, CA 94022
Attention to: President
Facsimile: (650) 856-8402
13.4 Further Assurances. The parties agree to execute such further
------------------
documents and instruments and to take such further actions as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
13.5 Titles and Headings. The titles, captions and headings of this
-------------------
Agreement are included for ease of reference only and will be disregarded in
interpreting or construing this Agreement. Unless otherwise specifically
stated, all references herein to "sections" and "exhibits" will mean "sections"
and "exhibits" to this Agreement.
13.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered will be deemed an
original, and all of which together shall constitute one and the same agreement.
13.7 Severability. If any provision of this Agreement is determined
------------
by any court or arbitrator of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, such provision will be enforced to the maximum
extent possible given the intent of the parties hereto. If such clause or
provision cannot be so enforced, such provision shall be stricken from this
Agreement and the remainder of this Agreement shall be enforced as if such
invalid, illegal or unenforceable clause or provision had (to the extent not
enforceable) never been contained in this Agreement. Notwithstanding the
forgoing, if the value of this Agreement based upon the substantial benefit of
the bargain for any party is materially impaired, as determined by such party in
its sole discretion, then this Agreement will not be enforceable against such
affected party and both parties agree to renegotiate such provision(s) in good
faith.
13.8 Facsimile Signatures. This Agreement may be executed and
--------------------
delivered by facsimile and upon such delivery the facsimile signature will be
deemed to have the same effect as if the original signature had been delivered
to the other party. The original signature copy shall be delivered to the other
party by express overnight delivery. The failure to deliver the original
signature copy and/or the nonreceipt of the original signature copy shall have
no effect upon the binding and enforceable nature of this Agreement.
13.9 Amendment and Waivers. This Agreement may be amended only by a
---------------------
written agreement executed by each of the parties hereto. No amendment of or
waiver of, or modification of any obligation under this Agreement will be
enforceable unless set forth in a writing signed by the party against which
enforcement is sought. Any amendment effected in accordance with this section
will be binding upon all parties hereto and each of their respective successors
and assigns. No delay or failure to require performance of any provision of
this Agreement shall constitute a waiver of that provision as to that or any
other instance. No waiver granted under this Agreement as to any one provision
herein shall constitute a subsequent waiver of such provision or of any other
provision herein, nor shall it constitute the waiver of any performance other
than the actual performance specifically waived.
10
<PAGE>
14. Entire Agreement. This Agreement and the documents referred to herein
----------------
constitute the entire agreement and understanding of the parties with respect to
the subject matter of this Agreement, and supersede all prior understandings and
agreements, whether oral or written, between or among the parties hereto with
respect to the specific subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
triplicate by its duly authorized representative and Purchaser has executed this
Agreement in triplicate, as of the Effective Date.
COMPANY: PURCHASER:
ALLADVANTAGE.COM
By:____________________________ By:_______________________________
Name:__________________________ Address: 101 First Street, #586
Title:________________________ Los Altos, CA 94022
Address: 101 First Street, #586
Los Altos, CA 94022 Fax: (650) 856-8402
Fax: (650) 856-8402 Phone: (650) 858-1362
Phone: (650) 858-1362
Signature Page To Founder's Restricted Stock Purchase Agreement
11
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Copy of Purchaser's Check and Assignment Agreement
Exhibit 3: Election Under Section 83(b) of the Internal Revenue Code
12
<PAGE>
EXHIBIT 1
---------
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
<PAGE>
STOCK POWER AND ASSIGNMENT
SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Founder's Restricted Stock
Purchase Agreement dated as of April 26, 1999 (the "Agreement"), the undersigned
hereby sells, assigns and transfers unto ______________________________,
__________ shares of the Common Stock of AllAdvantage.com, a California
corporation (the "Company"), standing in the undersigned's name on the books of
the Company represented by Certificate No(s). ____ delivered herewith, and does
hereby irrevocably constitute and appoint the Secretary of the Company as the
undersigned's attorney-in-fact, with full power of substitution, to transfer
said stock on the books of the Company. THIS ASSIGNMENT MAY ONLY BE USED AS
AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS THERETO.
Dated: _________________________
PURCHASER
_______________________________________
(Signature)
_______________________________________
(Please Print Name)
_______________________________________
(Spouse's Signature, if any)
_______________________________________
(Please Print Spouse's Name)
Instructions to Purchaser: Please do not fill in any blanks other than the
- ------------------------- ---
signature line. The purpose of this Stock Power and Assignment is to enable the
Company and/or its assignee(s) to acquire the shares upon exercise of its
"Repurchase Option" and/or "Right of First Refusal" set forth in the Agreement
without requiring additional signatures on the part of the Purchaser or
Purchaser's Spouse, if any.
<PAGE>
EXHIBIT 2
---------
COPY OF PURCHASER'S CHECK
AND ASSIGNMENT AGREEMENT
<PAGE>
ASSIGNMENT OF TECHNOLOGY AGREEMENT
----------------------------------
This Assignment of Technology Agreement (this "Agreement") is made and
entered into effective as of April 26, 1999 by and between AllAdvantage.com, a
California corporation (the "Company"), and ____________ (the "Assignor").
R E C I T A L S
- - - - - - - -
A. Assignor is an author/inventor and an owner of the Technology (as
defined below), and Assignor desires to assign and transfer to the Company all
of Assignor's right, title and interest in and to the Technology and other
related rights in connection with the Company's issuance to Assignor of
____________ (_____) shares of the Company's Common Stock (the "Shares").
B. The parties are entering into this Agreement pursuant to that certain
Founder's Restricted Stock Purchase Agreement by and between the Company and
Assignor dated of even date herewith (the "Stock Purchase Agreement").
NOW THEREFORE, the parties hereby agree as follows:
1. Certain Definitions. As used herein, the following terms will have the
-------------------
meanings set forth below:
1.1 Technology. The term "Technology" means the invention, design,
----------
development, prototype, expression or idea creation of (1) an on screen (client)
viewbar (browser) that communicates with a predetermined server supplying
instructions for display of content and a referral payment system to compensate
and encourage existing users to refer potential new users; and (2) all related
business plans, white papers and design documents, and all technology, trade
secrets and know-how related thereto.
1.2 Derivative. The term "Derivative" means: (i) any derivative work
----------
of the Technology (as defined in Section 101 of the U.S. Copyright Act); (ii)
all improvements, modifications, alterations, adaptations, enhancements and new
versions of the Technology (the "Technology Derivatives"); and (iii) all
technology, inventions, products or other items that, directly or indirectly,
incorporate, or are derived from, any part of the Technology or any Technology
Derivative.
1.3 Intellectual Property Rights. The term "Intellectual Property
----------------------------
Rights" means, collectively, all worldwide patents, patent applications, patent
rights, copyrights, copyright registrations, moral rights, trade names,
trademarks, service marks, domain names and registrations and/or applications
for all of the foregoing, trade secrets, know-how, mask work rights, rights in
trade dress and packaging, goodwill and all other intellectual property rights
and proprietary rights relating in any way to the Technology, any Derivative or
any Embodiment, whether arising under the laws of the United States of America
or the laws of any other state, country or jurisdiction.
1
<PAGE>
1.4 Embodiment. The term "Embodiment" means all documentation,
----------
drafts, papers, designs, schematics, diagrams, models, prototypes, source and
object code (in any form or format and for all hardware platforms), computer-
stored data, diskettes, manuscripts and other items describing all or any part
of the Technology, any Derivative, any Intellectual Property Rights or any
information related thereto or in which all of any part of the Technology, any
Derivative, any Intellectual Property Right or such information is set forth,
embodied, recorded or stored.
1.5 Assigned Assets. The term "Assigned Assets" refers to the
---------------
Technology, all Derivatives, all Intellectual Property Rights and all
Embodiments, collectively.
2. Assignment. In partial consideration of the issuance by the Company
----------
to Assignor of the Shares, receipt of which is hereby acknowledged, Assignor
hereby forever sells, assigns, transfers, releases and conveys to the Company,
and its successors and assigns, Assignor's entire right, title and interest in
and to each and all of the Assigned Assets.
3. Delivery. Assignor agrees to deliver all Embodiments of all Assigned
--------
Assets to the Company at a location designated by the Company no later than
April 26, 1999.
4. Assignor Representations and Warranties. Assignor represents and
---------------------------------------
warrants to the Company that Assignor is an owner, inventor and/or author of,
and that Assignor can transfer all of his right, title and interest in and to,
each of the Assigned Assets and that none of the Assigned Assets are subject to
any dispute, claim, prior license or other agreement, assignment, lien or rights
of any third party, or any other rights that might interfere with the Company's
use, or exercise of ownership of, any Assigned Assets. Assignor further
represents and warrants to the Company that the Assigned Assets are free of any
claim of any prior employer or third party client of Assignor or any school,
university or other institution Assignor attended, and that Assignor is not
aware of any claims by any third party to any rights of any kind in or to any of
the Assigned Assets. Assignor agrees to immediately notify the Company upon
becoming aware of any such claims.
5. Further Assurances. The parties agree to execute such further
------------------
documents and instruments and to take such further actions as may be reasonably
necessary to carry out the purposes and intent of this Agreement. Assignor
further agrees, promptly upon request of the Company, or any of its successors
or assigns, to execute and deliver, without further compensation of any kind,
any power of attorney, assignment, application for copyright, patent or other
intellectual property right protection, or any other papers which may be
necessary or desirable to fully secure to the Company, its successors and
assigns, all right, title and interest in and to each of the Assigned Assets,
and to cooperate and assist in the prosecution of any opposition proceedings
involving said rights and any adjudication of the same. Further, Assignor
agrees never to assert any claims, rights or moral rights in or to any of the
Assigned Assets.
6. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered will be deemed an
original, and all of which together shall constitute one and the same agreement.
7. Governing Law. This Agreement will be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
that body of laws pertaining to conflict of laws.
2
<PAGE>
8. Entire Agreement. This Agreement and the documents referred to
----------------
herein, including but not limited to the Stock Purchase Agreement, constitute
the entire agreement and understanding of the parties with respect to the
subject matter of this Agreement, and supersede all prior understandings and
agreements, whether oral or written, between or among the parties hereto with
respect to the specific subject matter hereof.
9. Successors and Assigns; Assignment. Except as otherwise provided in
----------------------------------
this Agreement, this Agreement, and the rights and obligations of the parties
hereunder, will be binding upon an inure to the benefit of their respective
successors, assigns, heirs, executors, administrators and legal representatives.
The Company may assign any of its rights and obligations under this Agreement.
No other party to this Agreement may assign, whether voluntarily or by operation
of law, any of its rights and obligations under this Agreement, except with the
prior written consent of the Company. An assignment by operation of law
includes, without limitation, (i) a merger, reorganization, consolidation or
other transaction in which the shareholders of such party before such merger,
reorganization, consolidation or other transaction own less than fifty percent
(50%) of the outstanding voting equity securities of the surviving corporation,
(ii) a sale or other transfer of all or substantially all of the assets of such
party, or (iii) a transfer of more than fifty percent (50%) of the outstanding
voting equity securities of such party in one transaction or a series of related
transactions.
10. Notices. Any and all notices required or permitted to be given to a
-------
party pursuant to the provisions of this Agreement will be in writing and will
be effective and deemed to provide such party sufficient notice under this
Agreement on the earliest of the following: (i) at the time of personal
delivery, if delivery is in person; (ii) at the time of transmission by
facsimile or telecopier, addressed to the other party at its facsimile number or
telecopier address specified herein (or hereafter modified by subsequent notice
to the parties hereto), with confirmation of receipt made by both telephone and
printed confirmation sheet verifying successful transmission of the facsimile;
(iii) one (1) business day after deposit with an express overnight courier for
United States deliveries, or two (2) business days after such deposit for
deliveries outside of the United States, with proof of delivery from the courier
requested; or (iv) three (3) business days after deposit in the United States
mail by registered or certified mail (return receipt requested) for United
States deliveries.
All notices for delivery outside the United States will be sent by
facsimile or by express courier. All notices not delivered personally or by
facsimile will be sent with postage and/or other charges prepaid and properly
addressed to the party to be notified at the address set forth below, or at such
other address as such other party may designate by ten (10) days advance written
notice to the other parties hereto. Notices to the Company will be marked
"Attention: President."
To: AllAdvantage.com To:
101 First Street, #586
Los Altos, CA 94022 Facsimile:
Attention to: President
Facsimile: (650) 856-8402
3
<PAGE>
11. Titles and Headings. The titles, captions and headings of this
-------------------
Agreement are included for ease of reference only and will be disregarded in
interpreting or construing this Agreement. Unless otherwise specifically
stated, all references herein to "sections" and "exhibits" will mean "sections"
and "exhibits" to this Agreement.
12. Severability. If any provision of this Agreement is determined by any
------------
court or arbitrator of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, such provision will be enforced to the maximum
extent possible given the intent of the parties hereto. If such clause or
provision cannot be so enforced, such provision shall be stricken from this
Agreement and the remainder of this Agreement shall be enforced as if such
invalid, illegal or unenforceable clause or provision had (to the extent not
enforceable) never been contained in this Agreement. Notwithstanding the
forgoing, if the value of this Agreement based upon the substantial benefit of
the bargain for any party is materially impaired, which determination as made by
the presiding court or arbitrator of competent jurisdiction shall be binding,
then this Agreement will not be enforceable against such affected party and both
parties agree to renegotiate such provision(s) in good faith.
13. Amendment and Waivers. This Agreement may be amended only by a
---------------------
written agreement executed by each of the parties hereto. No amendment of or
waiver of, or modification of any obligation under this Agreement will be
enforceable unless set forth in a writing signed by the party against which
enforcement is sought. Any amendment effected in accordance with this section
will be binding upon all parties hereto and each of their respective successors
and assigns. No delay or failure to require performance of any provision of
this Agreement shall constitute a waiver of that provision as to that or any
other instance. No waiver granted under this Agreement as to any one provision
herein shall constitute a subsequent waiver of such provision or of any other
provision herein, nor shall it constitute the waiver of any performance other
than the actual performance specifically waived.
14. Facsimile Signatures. This Agreement may be executed and delivered by
--------------------
facsimile and upon such delivery the facsimile signature will be deemed to have
the same effect as if the original signature had been delivered to the other
party.
[remainder of page intentionally left blank]
4
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date and year first above written.
COMPANY: ASSIGNOR:
ALLADVANTAGE.COM
By:_______________________________ By:_________________________________
Name:_____________________________ Address: 101 First Street, #586
Title:____________________________ Los Altos, CA 94022
Address: 101 First Street, #586
Los Altos, CA 94022 Fax: (650) 856-8402
Fax: (650) 856-8402 Phone: (650) 858-1362
Phone: (650) 858-1362
Signature Page To Assignment of Technology Agreement
5
<PAGE>
EXHIBIT 3
---------
ELECTION UNDER SECTION 83(b) OF THE
INTERNAL REVENUE CODE
<PAGE>
ELECTION UNDER SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, as amended, to include in gross income for the Taxpayer's
current taxable year the excess, if any, of the fair market value of the
property described below at the time of transfer over the amount paid for such
property, as compensation for services.
1. TAXPAYER'S NAME:
TAXPAYER'S ADDRESS: 101 First Street, 586
Los Altos, CA 94022
SOCIAL SECURITY NUMBER:
2. The property with respect to which the election is made is described as
follows: _________ shares of Common Stock of AllAdvantage.com, a California
corporation (the "Company"), which is Taxpayer's employer or the corporation
for whom the Taxpayer performs services.
3. The date on which the shares were transferred was April 26, 1999 and this
election is made for calendar year 1999.
4. The shares are subject to the following restrictions: The Company may
repurchase all or a portion of the shares at the Taxpayer's original
purchase price under certain conditions at the time of Taxpayer's
termination of employment or services.
5. The fair market value of the shares (without regard to restrictions other
than restrictions which by their terms will never lapse) was $0.004167 per
share at the time of transfer.
6. The amount paid for such shares was $0.004167 per share.
7. The Taxpayer has submitted a copy of this statement to the Company.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS"), AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER
--------------
THE DATE OF TRANSFER OF THE PROPERTY, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE REVOKED
WITHOUT THE CONSENT OF THE IRS.
Dated: ___________________________ ______________________________________
Taxpayer's Signature
<PAGE>
EXHIBIT 10.07
NETWORK AFFILIATE AGREEMENT
Company: All Advantage.com
---------------------------------------------------
Address: 25954 Eden Landing Road, Hayward, CA 94545
---------------------------------------------------
Web Site: The All Advantage "Viewbar" Technology
--------------------------------------------------
This Agreement is made and entered into as of November 11, 1999 (the
"Effective Date") by and between the above named company ("Company"), and
DoubleClick Inc. ("DoubleClick"), and will constitute a valid and binding
agreement between Company and DoubleClick according to the specific terms and
conditions set forth below and those terms and conditions set forth in the
Standard Terms and Conditions (together, the "Agreement"). All terms not
otherwise defined below shall be as defined in Section 8 of the Standard Terms
and Conditions.
I. DESCRIPTION OF SERVICES/INVENTORY
- --------------------------------------
A. Company hereby agrees to provide DoubleClick with Advertising inventory
("Inventory") from the Web Site in accordance with a schedule attached
hereto as Exhibit A, which schedule sets forth the minimum amount of
Inventory to be provided by Company over each month of the Term (the
"Minimum Inventory Level(s)"). During each month of the Term,
DoubleClick may request inventory in any amount, including an amount over
and above the Minimum Inventory Level for that month; provided, however,
Company shall only be obligated to provide inventory up to the Minimum
Inventory Level for that month. If Company does not provide DoubleClick
with the amount of inventory it requests in any month of the Term and
such requested amount is at or below the Minimum Inventory Level for that
month (a "Shortfall Month"), Company agrees to pay DoubleClick, as
DoubleClick's sole and exclusive remedy (subject to Section III C), an
amount calculated as follows: take the difference between the Minimum
Inventory Level for that Shortfall Month and DoubleClick's requested
amount for such month, divide such difference by [*], and multiply such
resulting number by $[*] (the "Shortfall Payment"). Such Shortfall
Payment shall be payable within fifteen (15) days of the end of the
month, and shall be deducted from the Advance (as defined below). Company
agrees that the inventory it provides to DoubleClick pursuant to this
Agreement shall be for U.S. Advertising and constitute a random sampling
(in terms of click-through rates, demographic make-up and other factors
that indicate value of inventory) of all Inventory available on the Web
Site. In addition, Company agrees that the tags it passes to DoubleClick
for such inventory shall include all relevant targeting information,
including, without limitation, geographic and demographic information,
site name, channel and/or keyword targeting information (if available)
("Targeted Inventory"), that DoubleClick may or may not sell as such, in
DoubleClick's sole discretion. DoubleClick shall not use such tags for
any purpose other than targeting Advertisements pursuant to this
Agreement.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED FROM THE PUBLIC FILING
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTIONS.
<PAGE>
Company shall treat the time during which an advertisement is displayed
within the Web Site to a user (the "Ad Display Time") for the Inventory
the same as it treats the Ad Display Time for other inventory on the Web
Site.
B. DoubleClick hereby agrees to link the Web Site to the Service and through
such Service, DoubleClick shall deliver all Advertisers' Advertising to
users accessing the Web Site subject to the terms and conditions of this
Agreement and the DART Services Agreement for Publishers, entered into by
the parties on November 11, 1999 (the "DART Agreement").
C. Company hereby appoints DoubleClick a non-exclusive representative for
the sale of Advertising on the Web Site pursuant to the terms and
conditions of this Agreement. DoubleClick will sell all Advertising
under this Agreement as "blind inventory" as part of a pool of
advertising inventory for multiple web properties such that Advertisers
do not know that they are purchasing Advertising on the Web Site.
II. CASH ADVANCE
- -----------------
DoubleClick hereby agrees to pay Company a cash advance in the amount of
[*] dollars ($[*]), payable by wire transfer to a Company account
(designated by Company in writing to DoubleClick) on Wednesday November
17, 1999 (the "Advance"). Company shall deposit the Advance in a
segregated account of Company (the "Account"), in which Account
DoubleClick shall have and is hereby granted a security interest.
Company may withdraw no more than $[*] upon receipt of the Advance, and
may not withdraw from the Account more than $[*] per month thereafter
(measured on the 12th of each such month, such that the operative dates
for withdrawals shall be: November 18; December 12; January 12 and
February 12); provided, however, that there shall be no further
limitations or restrictions on Company's withdrawal from or use of the
Account or the Advance. Company agrees to cooperate with DoubleClick to
enable DoubleClick to complete those filings necessary to perfect the
security interest described above. If, at or after the point at which
the balance of the Account is less than $[*], Company suffers a
fundamental inability to deliver Inventory, measured by at least 3
consecutive days in which Inventory available to DoubleClick falls more
than [*]% below the level to which Company is otherwise obligated
herein (an "Inventory Default"), DoubleClick may make formal, written
demand (an "Inventory Demand") to Company to cure such Inventory
Default. If Company fails to cure such Inventory Default within seven
(7) days of its receipt of such Inventory Demand, then DoubleClick may
request that Company remit to DoubleClick any unearned portion of the
Advance (a "Payment Demand"). If Company fails to remit such demanded
portion of the Advance (the "Demanded Amount") within five (5) days of
its receipt of such Payment Demand, then Company shall immediately
provide to DoubleClick, and DoubleClick shall be entitled to enter with
a court of competent jurisdiction, a consent judgment against Company
for the Demanded Amount.
2
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED FROM THE PUBLIC FILING
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTIONS.
<PAGE>
III. TERM/TERMINATION
- ---------------------
A. Except as otherwise provided herein, the term (the "Term") of this
Agreement shall commence on the Effective Date and shall continue in
effect for so long as a balance remains outstanding for the Advance or
two (2) years from the Effective Date, whichever is earlier, unless
otherwise terminated by the parties as set forth below; provided,
however, that if a balance remains outstanding at the end of such two (2)
year period, Company agrees to refund to DoubleClick the remaining,
unused portion of the Advance (calculated in accordance with Section
IV.A) within five (5) business days of such termination.
B. If, during any month of the Term, the average click-through rate for the
Inventory on the Web Site for such month drops below 0.2% (the "Initial
Month"), DoubleClick may provide Company with written notice of its data
in support of such finding, and if, after receipt of such notice, the
click-through rate for all inventory for the Initial Month and the
following two (2) months (three (3) months in total) is still below 0.2%,
DoubleClick shall have the right, upon prior written notice to Company,
to terminate this Agreement (the "Termination Right"). The parties agree
that if, during the Term, Company should require its users to click on
Advertisements as a condition to receiving Company's service and/or
products, the click-through rate described above shall be calculated
excluding all such required clicks. If DoubleClick exercises the
Termination Right, Company agrees to refund to DoubleClick the remaining,
unused portion of the Advance (calculated in accordance with Section
IV.A) within five (5) business days of such termination.
C. Either party shall have the right to immediately terminate this Agreement
in the event that (i) the other party commits a material breach of this
Agreement and such breach is not cured by the breaching party within
thirty (30) days of its receipt of written notice describing such breach
from the non breaching party, or (ii) the other party is adjudged
insolvent or bankrupt; or a proceeding is instituted by the other party
seeking relief, reorganization or arrangement under any laws relating to
insolvency; or a proceeding is instituted against the other party seeking
relief, reorganization or arrangement under any laws relating to
insolvency that is not dismissed within sixty (60) days; or the other
party makes an assignment for the benefit of its creditors; or upon the
appointment of a receiver, liquidator, or trustee of any of the other
party's property or assets, or upon liquidation, dissolution or winding
up of the other party's businesses. Finally, DoubleClick shall have the
right to terminate this Agreement (i) upon thirty (30) days written
notice to Company if Company has a cumulative shortfall in inventory in
three Shortfall Months which is below the amount of inventory requested
by DoubleClick for such three Shortfall Months by greater than [*]
percent ([*]%), or (ii) immediately if Company has terminated the DART
Agreement for convenience in accordance with Section 10.3 of the DART
Agreement. Further, either party may terminate immediately at either
party's election if (A) the DART Agreement is terminated for
3
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED FROM THE PUBLIC FILING
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTIONS.
<PAGE>
cause, or (B) with respect to a DoubleClick termination right, in the
event that an entity who owns, either directly or indirectly, an Internet
advertising solution, that is widely regarded by recognized Internet
industry analysts as a direct competitor of DoubleClick, or with respect
to a Company termination right, in the event that an entity who owns,
either directly or indirectly, an Internet service that is widely
regarded by recognized Internet industry analysts as a direct competitor
of Company, acquires or is acquired by (i) Company or DoubleClick, as
applicable, through a merger or consolidation pursuant to which the
stockholders of Company or DoubleClick, as applicable, immediately prior
to such merger or consolidation will not own, immediately after such
merger or consolidation, at least 40% of the voting power of the
surviving entity's voting securities, whether or not such entity is
Company or DoubleClick, as applicable; (ii) securities representing a
majority of Company's or DoubleClick's, as applicable, voting securities
as a result of a tender or exchange offer, open market purchase,
privately negotiated purchases, share exchange, extraordinary dividend,
acquisition, disposition or recapitalization (or series of related
transactions of such nature) (other than a merger or consolidation), and
(iii) all or substantially all of Company's or DoubleClick's, as
applicable, assets. In the event of any termination of the Agreement by
either party pursuant to this Section III.C., Company agrees to refund to
DoubleClick the remaining, unused portion of the Advance (calculated in
accordance with Section IV.A) within (i) five (5) business days of such
termination if this Agreement is terminated by DoubleClick, and (ii) if
this Agreement is terminated by Company, thirty (30) days from (1)
DoubleClick's admission of material breach and Company's right to
terminate, or (2) judgment by a court of competent jurisdiction of
DoubleClick's material breach and Company's right to terminate.
D. If during any month of the Term, the Ad Display Time for a material
amount of the Inventory falls below twenty (20) seconds at any time, (the
"Ad Delivery Default"), DoubleClick's sole and exclusive remedy shall be
to terminate this Agreement upon thirty (30) days prior written notice to
Company; provided, however, that such termination right shall not apply
if Company is able to cure the Ad Delivery Default within such thirty
(30) day notice period, such that all Inventory has an ad delivery time
of twenty (20) seconds or above. If DoubleClick exercises such a
termination for an Ad Delivery Default, Company agrees to refund to
DoubleClick the remaining, unused portion of the Advance (calculated in
accordance with Section IV.A) within five (5) business days of such
termination.
E. Company shall have the right to terminate this Agreement on six (6)
months prior written notice to DoubleClick if during at least three (3)
months of the Term, the average CPM rate that DoubleClick charged
Advertisers for Advertising on the Web Site during that month is less
than the average CPM rate that Company charged its advertisers for
advertising throughout all channels on the Web Site during that same
month, as such CPM rates are calculated at least thirty (30) days after
the applicable month. In the event of termination of this Agreement by
Company pursuant to this Section III.E., Company agrees to refund to
DoubleClick the remaining, unused
4
<PAGE>
portion of the Advance (calculated in accordance with Section IV.A)
within five (5) business days of such termination.
F. If DoubleClick exercises the Termination Right in accordance with Section
III.B. or Company terminates the Agreement in accordance with Section
III.C.- or III.E., Company shall have the right, within four (4) weeks of
the applicable notice of such termination, to provide DoubleClick with
six (6) months prior written notice of Company's election to terminate
the DART Agreement.
G. Upon termination or expiration of this Agreement, all rights of
DoubleClick to sell and deliver Advertisements under this Agreement shall
cease. Sections VI, and the Standard Terms and Conditions will survive
any expiration or termination of this Agreement.
IV. COMPENSATION/PAYMENT
- -------------------------
A. With respect to the placement and delivery of Advertising, the parties
agree that Company shall deduct from the Advance, [*] percent ([*]%)
percent of the Net Revenues generated on Advertising which is delivered
through the Service to the Web Site. The Net Revenue for a given month
of the Term, along with the applicable deduction amount described above
for such month, shall be set forth in Company's "Site Compensation
Report" provided by DoubleClick to Company within five (5) days after
each month of the Term. Company may only deduct its share of Net
Revenues for a given month in which Advertisers' Advertising is delivered
to the Web Site forty-two (42) days following the end of such month in
order to account for the timing of revenue collections by DoubleClick.
Notwithstanding the foregoing, upon expiration or termination of this
Agreement, Company shall be entitled to deduct from the Advance all
amounts earned for Advertisements delivered up to the date of
termination. DoubleClick shall provide Company with a final Site
Compensation Report on the date of termination or expiration of this
Agreement in order to permit Company to deduct all amounts earned from
the Advance and calculate the unearned balance of the Advance.
B. Company shall be solely responsible for any costs or expenses it incurs
in connection with the Service or performance of its obligations under
this Agreement including, without limitation, expenses associated with
any HTML programming and linking the Web Site to the Service.
C. Company agrees to pay DoubleClick on a monthly basis within fifteen (15)
days of the end of each month, an interest payment (calculated using a
ten percent (10%) annual interest rate) on the portion of the Advance
that remains outstanding after each month of the Term.
D. Upon reasonable prior notice and during normal business hours, Company
may inspect the records of DoubleClick on which the Net Revenues are
calculated and the
5
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED FROM THE PUBLIC FILING
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTIONS.
<PAGE>
deductions from the Advance under this Agreement are based no more than
twice per calendar year and once within one (1) year after termination of
this Agreement. Such audit shall be conducted by a nationally-recognized
independent certified public accountant selected and paid for by Company.
If, upon performing such audit, it is determined that DoubleClick, in the
Site Compensation Report, has understated the amount of Net Revenues to
be deducted from the Advance, such accountant will indicate to
DoubleClick and Company the amount of the understated deduction within
five (5) days of completion of the audit. If such understated deduction
exceeds five percent (5%) of the amounts meant to be deducted by Company
in the period being audited, DoubleClick shall bear all reasonable
expenses and costs of such audit.
V. COMPANY OBLIGATIONS AND RIGHTS
- -----------------------------------
A. Company agrees to effect all necessary HTML programming with respect to
the Web Site in accordance with the HTML modifications (the "HTML
Modifications") mutually agreed upon by DoubleClick and Company so as to
enable DoubleClick to perform its obligations under this Agreement.
DoubleClick and Company shall mutually agree upon the Spots on the Web
Site.
B. Company will maintain its Web Site at a quality standard that is no less
than the standard that exists as of the date of this Agreement.
C. Company agrees that DoubleClick has no responsibility to review the
contents of the Web Site.
D. Company shall have the right to ban and remove Advertising from the Web
Site, and to establish domain restrictions to prevent delivery of
Advertising linked to certain domains, by accessing the Manage Site
Application (located at www.doubleclick.net). Company, in its
--------------------
discretion, shall have the right to explicitly approve Advertisements
before they are served to the Web Site or remove Advertisements once they
have begun to be served on the Web Site.
VI. DOUBLECLICK OBLIGATIONS AND RIGHTS
- ---------------------------------------
A. Subject to V.D. above and the other terms and conditions of this
Agreement, DoubleClick shall determine in its sole discretion, which
Advertisers shall have access to the Service.
B. Company has the sole and exclusive ownership and right to use all data
derived from the Parties' use of the Service for purposes of executing
this agreement ("Data"); provided that DoubleClick may use and disclose
only the aggregate number of ads delivered throughout the Service (other
than personally-identifiable information) derived from Company's use of
the Service only (i) for DoubleClick's reporting purposes, consisting of
compilation of aggregated statistics about the Service such that Company
is not identifiable that may be provided to customers, potential
customers and the general public; (ii) and if required by court order,
law or governmental
6
<PAGE>
agency. DoubleClick may not sell, lease or use the Data for commercial
gain or profiling of user behavior, except that DoubleClick may use "IP
Address" data of Company's users (all of which is non-personally
identifiable) for DART targeting purposes. DoubleClick agrees that in no
event shall any information by which individual users accessing Company's
advertising through the Service can be identified, contacted or grouped
by name, e-mail address or other personal or individual characteristics
(including, but not limited to, user registration information collected
by Company) ("User Info") be used or disclosed by DoubleClick or used by
any third party without Company's prior written consent. In addition, in
no event shall DoubleClick disclose Company's Confidential Information
(as defined in Section 5 of the Standard Terms and Conditions) to any
third parties. DoubleClick may collect the following Data and User Info
through the Service for the sole and exclusive purpose of providing
Company with the Service: Browser Type, Browser Version, Browser
Language, Operating System, Time of Day, Date, User IP, Geographic
Location, Area code, Zip code, Country, SIC Code, Domain, Domain type,
and Ad Frequency. Should DoubleClick desire to collect additional User
Info or Data through the Service, DoubleClick shall obtain Company's
prior written consent and the parties shall mutually agree on
DoubleClick's permitted use of such information. DoubleClick shall not
collect or use User clickstream behavior data. The parties agree that
the terms of this Section 8 shall survive termination of this Agreement.
C. DoubleClick will make site reports available to Company through
DoubleClick's web site (www.doubleclick.net) listing the number of
Impressions and click-over rates on the Web Site.
D. It is understood and agreed that, subject to Section III.E, DoubleClick
shall determine the rate card (and any applicable discount) charged to
said Advertisers for delivery of Advertising.
E. DoubleClick agrees that Company has no responsibility to review the
contents of the Advertising.
DOUBLECLICK INC. COMPANY
By: /s/ Jeff Epstein By: /s/ Carl Anderson
---------------------------- ----------------------------
(Signature) (Signature)
Name: Jeff Epstein Name: Carl Anderson
Title: Executive Vice-President Title: Vice-President, Business
Development
Dated: November 11, 1999 Dated: November 11, 1999
7
<PAGE>
STANDARD TERMS AND CONDITIONS
-----------------------------
1. No Assignment. Neither party to this Agreement shall sell,
-------------
transfer or assign this Agreement or the rights or obligations hereunder, other
than to a parent or subsidiary, without the prior written consent of the other
party. Notwithstanding the foregoing, either party shall have the right to
transfer or assign this Agreement to a third party successor-in-interest, which
for the purposes of this Section shall mean any third party which acquires all
or substantially all of the assets of either party, or more than 75% of the
outstanding stock of such party, whether by sale, consolidation, merger or
otherwise. Any act in derogation of the foregoing shall be null and void.
2. Proprietary Rights. Company understands and agrees that Company
------------------
shall not have, nor will it claim, any right, title or interest in and to any
Advertising (other than its own Advertising), the Service or any elements
thereof (including, without limitation, the grant of a license in or to the
Service or any software, source codes, modifications, updates and enhancements
thereof or any other aspect of the Service), the name "DoubleClick" or any
derivatives thereof, or any other trademarks and logos which are owned or
controlled by DoubleClick and made available to Company through the Service or
otherwise. DoubleClick understands and agrees that DoubleClick shall not have,
nor will it claim, any right, title or interest in and to the Web Site, the name
"All Advantage" or any derivatives thereof, or any other trademarks and logos
which are owned or controlled by Company and made available to DoubleClick
through the Service or otherwise.
3. Representation and Indemnity. Company warrants and represents at
----------------------------
all times that Company (i) has the right and full power and authority to enter
into this Agreement, to grant the rights herein granted and fully to perform its
obligations hereunder, (ii) owns the Web Site and that such Web Site will not
infringe upon or conflict with the copyright, trademark, trade secret or issued
U.S. patent held by any third party, and (iii) owns and/or has the right to use
all materials contained on the Web Site (other than the Advertising), including,
without limitation, all copyrights, trademarks and other proprietary rights in
and to such materials. In furtherance of the foregoing, Company agrees to
indemnify and hold DoubleClick and the Advertisers harmless from and against any
and all claims, actions, losses, damages, liability, costs and expenses
(including reasonable attorneys' fees) arising out of or in connection with (i)
the breach of any representation, warranty or agreement made by Company
hereunder and/or (ii) the Web Site or DoubleClick's use of the Targeted
Inventory. DoubleClick shall promptly notify Company of all claims and
proceedings related thereto of which DoubleClick becomes aware. DoubleClick
warrants and represents at all times that DoubleClick (i) has the right and full
power and authority to enter into this Agreement, to grant the rights herein
granted and fully to perform its obligations hereunder, and (ii) owns the
Service and that such Service will not infringe upon or conflict with the
copyright, trademark, trade secret or issued U.S. patent held by any third
party. In furtherance of the foregoing, DoubleClick shall indemnify, defend and
hold Company harmless from and against any and all claims, actions, losses,
damages, liabilities, costs and expenses (including reasonable attorneys' fees)
resulting from or arising out of or in connection with (i) the breach of any
representation, warranty or agreement made by DoubleClick hereunder and/or (ii)
the Service. Company shall promptly notify DoubleClick of all claims and
proceedings related thereto of which Company becomes aware. DoubleClick will
include in its standard insertion order which it provides to Advertisers a
provision requiring such Advertisers to agree to indemnify DoubleClick and
Company with respect to any Advertising delivered to the Web Site. In the event
a claim or action is brought against Company with respect to Advertising placed
on the Web Site through the Service, then DoubleClick shall, upon Company's
prior written request, assign to Company the right to pursue any applicable
remedies and causes of action which DoubleClick has against such Advertiser.
DoubleClick also agrees to indemnify, defend and hold Company harmless from any
Claims with respect to Advertising delivered to the Web Site, provided said
Claims arise out of or in connection with DoubleClick's failure to obtain from
an Advertiser an agreement requiring said Advertiser to indemnify and hold
Company harmless from and against any Claims arising out of such Advertising.
4. No Warranties/Liabilities. EXCEPT AS EXPRESSLY PROVIDED ABOVE,
-------------------------
NEITHER PARTY MAKES ANY WARRANTIES OF ANY KIND, WHETHER EXPRESS OR IMPLIED,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS OF THE SERVICE OR
THE WEB SITE FOR A PARTICULAR PURPOSE INCLUDING, WITHOUT LIMITATION, THE TYPE
OF
<PAGE>
ADVERTISING OR AMOUNT OF ADVERTISING WHICH WILL BE DELIVERED TO THE WEB SITE
THROUGH THE SERVICE. EXCEPT AS EXPRESSLY PROVIDED ABOVE, DOUBLECLICK SHALL NOT
BE LIABLE FOR ANY ADVERTISERS WHOSE ADVERTISING APPEARS ON THE SERVICE, NOR THE
CONTENTS OF ANY ADVERTISING, NOR SHALL DOUBLECLICK BE LIABLE FOR ANY LOSS, COST,
DAMAGE OR EXPENSE (INCLUDING COUNSEL FEES) INCURRED BY COMPANY IN CONNECTION
WITH COMPANY'S PARTICIPATION IN THE SERVICE. NEITHER PARTY SHALL BE LIABLE TO
THE OTHER PARTY FOR ANY TECHNICAL MALFUNCTION, COMPUTER ERROR OR LOSS OF DATA OR
OTHER INJURY, DAMAGE OR DISRUPTION TO COMPANY'S WEB SITE OR THE SERVICE. IN NO
EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT,
INCIDENTAL OR CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES ARISING OUT OF OR IN
RELATION TO THIS AGREEMENT.
5. Confidentiality. Any information relating to or disclosed in the
---------------
course of this Agreement by either party (the "Disclosing Party") to the other
party (the "Receiving Party"), which is or should be reasonably understood to be
confidential or proprietary to the Disclosing Party, including but not limited
to, the material terms of this Agreement, information about the Service or the
Web Site and technical processes and formulas, source code, product designs,
sales, cost and other unpublished financial information, product and business
plans, projections, marketing data, Company member data and targeting
information provided or impression data collected under this Agreement shall be
deemed "Confidential Information" and shall not be used, disclosed or reproduced
by the Receiving Party without the Disclosing Party's prior written consent.
"Confidential Information" shall not include information (a) already lawfully
known to or independently developed by the Receiving Party, (b) disclosed in
published materials, (c) generally known to the public, (d) lawfully obtained
from any third party, or (e) required to be disclosed by law. Notwithstanding
the foregoing, Company shall be entitled to disclose the existence of and the
terms of this Agreement to investment bankers and potential investors of the
Company, so long as such disclosure is done under an obligation of
confidentiality. Upon termination or expiration of this Agreement, each party
shall return to the other, or destroy, at the Disclosing Party's option, all
Confidential Information of the other party in its possession or control.
6. Miscellaneous. Notwithstanding any provision hereof, for the
-------------
purpose of this Agreement each party shall be and act as an independent
contractor and not as an employee, partner, joint venturer, or agent of the
other and shall not bind nor attempt to bind the other to any contract.
This Agreement, including the Standard Terms and Conditions, represents the
entire understanding between DoubleClick and Company regarding DoubleClick's
services and supersedes all prior agreements. No waiver, modification or
addition to this Agreement shall be valid unless in writing and signed by the
parties to this Agreement. Notwithstanding the foregoing, DoubleClick shall
have the right to modify or make additions to the placement algorithm governing
Advertising delivery and the HTML Modifications, from time to time upon
reasonable prior written notice to Company and Company, acting reasonably, shall
be entitled to reject any such modifications.
If any provision of this Agreement shall be adjudicated by any court of
competent jurisdiction to be unenforceable or invalid, that provision shall be
limited or eliminated to the minimum extent necessary so that this Agreement
shall otherwise remain in full force and effect and the other provisions shall
be unaffected.
If the performance of this Agreement, or any obligation hereunder, except the
making of payments, is prevented, restricted or interfered with by any act or
condition whatsoever beyond the reasonable control of the affected party, the
party so affected, upon giving prompt notice to the other party, shall be
excused from such performance to the extent of such prevention, restriction or
interference.
This Agreement may be executed in two or more counterparts each of which shall
be deemed to be an original, but all of which together shall constitute one and
the same instrument.
2
<PAGE>
7. Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the substantive laws of the State of New York and
Company agrees that jurisdiction and venue of all matters relating to this
Agreement shall be vested exclusively in the federal, state or local courts
within the State of New York.
8. Definitions. "Advertiser" is defined as a company, entity or
-----------
individual which provides Advertising to DoubleClick for distribution through
the Service to the Web Site. "Advertising" or "Advertisement" is defined as
third party "banners" of Advertisers which are sold by DoubleClick under this
Agreement and delivered via the Service to the Web Site. "Impression" is defined
as occurring each time Advertising appears on the Web Site resulting from a user
accessing or visiting such Web Site. "Net Revenues" is defined as the gross
billings earned from Advertisers by DoubleClick less (i) actual rate card and
volume discounts and agency commissions, and (ii) a bad debt allowance of four
percent (4.0%) of said gross billings. "Service" is defined as the DoubleClick
service that delivers Advertising to the Web Site. "Spot" is defined as the
specific place on the Web Site where Advertising may appear through the Service.
"Web Site" is defined as the Company's "Viewbar" technology.
3
<PAGE>
EXHIBIT A
Minimum Inventory Levels
11/99 [*] (as pro-rated for the portion of the month after the Web Site
has received the HTML Modifications)
12/99 [*]
1/00 [*]
2/00 [*]
3/00 [*]
4/00 [*]
5/00 [*]
6/00 [*]
7/00 [*]
8/00 [*]
9/00 [*]
10/00 [*]
11/00 [*]
12/00 [*]
The parties agree to negotiate in good faith additional Minimum Inventory Levels
for the Year 2001, if necessary because an Advance balance remains outstanding,
at least thirty (30) days prior to December 31, 2000.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED FROM THE PUBLIC FILING
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTIONS.
<PAGE>
Exhibit 10.08
[LETTERHEAD OF DOUBLECLICK APPEARS HERE]
DART(TM) SERVICE AGREEMENT FOR PUBLISHERS
- --------------------------------------------------------------------------------
You agree to pay DoubleClick Inc. all of the fees and other charges specified
below and DoubleClick Inc. agrees to provide the DART Service to You, all in
accordance with the attached Terms and Conditions. Both You and DoubleClick Inc.
agree that this Cover Page and the attached Terms and Conditions (collectively,
the "DART Service Agreement" or "Agreement"), may be updated from time to time
by replacing or adding further signed attachments to this Agreement.
- --------------------------------------------------------------------------------
Your Company All Advantage.com___________ Contact: Johannes Pohle__________
Name 25954 Eden Landing Road_____ Phone: (510) 670-0575 x170_____
and Hayward, CA 94545___________ Fax: (510) 293-6001__________
Address: ____________________________ E-Mail:
[email protected]
Web Site(s): the All Advantage Viewbar Technology
Fees: [*] US$ N/A (Renewal)
------------------
Monthly Service Fee per 1000 ad banner impressions (CPM): (see chart below)
-----------------
Ad Size Limit: 17 Kbytes (Note: You will not be charged an additional fee
(as set forth in Section 6) for Your Ads which are over the Ad Size Limit,
if such Ads are not served by DoubleClick, but instead redirected to
another non-DoubleClick server.) If during the Term, DoubleClick offers
another DART for Publishers client an Ad Size Limit that is greater than 17
Kbytes, DoubleClick agrees to promptly offer You such higher Ad Size Limit
to apply to this Agreement.
Minimum Monthly Service Fee: US$ [*]
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Custom FIRST YEAR MONTHLY SERVICE FEE _ Beginning Contract Effective Date
Arrangements
1.) Number of Standard Paying Ad Impressions (468x60)
Delivered by DART Service Per Month Cost Per Thousand
-----------------------------------------------------------------------------
<S> <C> <C>
[*] " [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion and higher $ [*]
2.) Number of Standard Paying Ad Impressions (120x60)
Delivered by DART Service Per Month Cost Per Thousand
-----------------------------------------------------------------------------
[*] - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion and higher $ [*]
-----------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DOUBLECLICK(R) and DART(TM) are trademarks of DoubleClick Inc. (C)1998
DoubleClick Inc.
All rights reserved.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED FROM THE PUBLIC FILING
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTIONS.
<PAGE>
---------------------------------------------------------------------------
3.) Number of Standard Paying Ads Redirected and Served
Through the All Advantage and/or other 3/rd/ Party Ad
Delivery Systems Cost Per Thousand
---------------------------------------------------------------------------
[*] - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion and higher $ [*]
4.) Number of "House"* ads Redirected to serve off
the All Advantage and/or Other Third-Party Ad Servers
& bandwidth Cost Per Thousand
---------------------------------------------------------------------------
[*] $ [*]
SECOND YEAR MONTHLY SERVICE FEE _ ([*] from 1/st/ Year)
1.) Number of Standard Paying Ad Impressions (Any size)
Delivered by DART Service Per Month Cost Per Thousand
---------------------------------------------------------------------------
[*] - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion and higher $ [*]
2.) Number of Standard Paying Ad Impressions (120x60)
Delivered by DART Service Per Month Cost Per Thousand
---------------------------------------------------------------------------
[*] - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion and higher $ [*]
---------------------------------------------------------------------------
3.) Number of Standard Paying Ads Redirected and
Served Through the All Advantage and/or other 3/rd/
Party Ad Delivery Systems Cost Per Thousand
---------------------------------------------------------------------------
[*] - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion and higher $ [*]
4.) Number of "House"* ads Redirected to serve off the
All Advantage and/or Other Third-Party Ad Servers &
bandwidth Cost Per Thousand
---------------------------------------------------------------------------
[*] $ [*]
THIRD YEAR MONTHLY SERVICE FEE - (prices discounted from 1/st/ & 2/nd/
Year)
1.) Number of Standard Paying Ad Impressions (Any size)
Delivered by DART Service Per Month Cost Per Thousand
---------------------------------------------------------------------------
[*] - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
---------------------------------------------------------------------------
DOUBLECLICK(R) and DART(TM) are trademarks of DoubleClick Inc. (C)1998
DoubleClick Inc.
All rights reserved.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED FROM THE PUBLIC FILING
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTIONS.
<PAGE>
---------------------------------------------------------------------------
[*] Billion - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion and higher $ [*]
2.) Number of Standard Paying Ad Impressions (120x60)
Delivered by DART Service Per Month Cost Per Thousand
---------------------------------------------------------------------------
[*] - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion and higher $ [*]
3.) Number of Standard Paying Ads Redirected and Served
Through the All Advantage and/or other 3/rd/ Party Ad
Delivery Systems Cost Per Thousand
---------------------------------------------------------------------------
[*] - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion - [*] Billion $ [*]
[*] Billion and higher $ [*]
4.) Number of "House"* ads Redirected to serve off the
All Advantage and/or Other Third-Party Ad Servers &
Bandwidth Cost Per Thousand
---------------------------------------------------------------------------
[*] $ [*]
* "House" ads are a specific order type, specified in the DART system, for
which impression levels cannot be specified.
The parties agree that all ads served by DoubleClick pursuant to this
Agreement shall be served from North American based servers.
---------------------------------------------------------------------------
Ad Delivery Service Availability: DoubleClick shall use commercially
reasonable efforts to ensure that the Service delivers advertisements
requested for the AllAdvantage Viewbar at least [*] percent ([*]%) of the
time, calculated on a calendar monthly basis; it being understood that
Service advertising delivery "down" time (calculated as the difference
between 100% and the actual percentage delivery of ads) shall exclude
time (i) required for routine system maintenance not to exceed thirty
(30) minutes in any calendar month that is performed by DoubleClick so
long as such maintenance is performed during low volume time periods, and
(ii) resulting from technical malfunctions in the Target Sites" systems,
or any other circumstances beyond DoubleClick"s reasonable control
(including without limitation, Internet delays, network congestion and
ISP malfunctions). In the event that unscheduled down time exceeds [*]
percent ([*]%) in any month, then You will receive a reduction in fees,
credited to the next month"s invoice, calculated by multiplying (i) the
Average Impressions Per Hour, by (ii) the down time (rounded to the
nearest hour), by (iii) the CPM rate applicable at the time of the
outage. The Average Impressions shall be determined by dividing the total
adds served in the previous month by the total number of hours in that
month.
---------------------------------------------------------------------------
Ad Management System Availability: DoubleClick shall use commercially
reasonable efforts to ensure that the Ad Management System is available for
Your use at least [*] percent ([*]%) of the time calculated on a calendar
monthly basis; it being understood that Ad Management System "down" time
shall exclude time (i) required for routine system maintenance not to
exceed
---------------------------------------------------------------------------
DOUBLECLICK(R) and DART(TM) are trademarks of DoubleClick Inc. (C)1998
DoubleClick Inc.
All rights reserved.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED FROM THE PUBLIC FILING
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTIONS.
<PAGE>
-----------------------------------------------------------------
twenty-four (24) hours in any calendar month that is performed by
DoubleClick so long as You are notified at least one (1) business
day in advance (it being understood that (x) the Ad Management
System is "down" for routine scheduled maintenance for up to four
(4) hours each Saturday morning between the hours of 10 AM to 2
PM Eastern standard time and (y) advance notice shall not be
required for such routine scheduled maintenance) and (ii)
resulting from technical malfunctions in Your Web site's systems,
or any other circumstances reasonably beyond DoubleClick's
control (including without limitation, Internet delays, network
congestion and ISP malfunctions). Notwithstanding Section 10 of
the Agreement, if the Ad Management System is unavailable for any
reason for more than seven (7) days during any one month of the
term of this Agreement, You may terminate this Agreement
immediately upon notice to DoubleClick.
Reporting Availability: DoubleClick shall be obligated to deliver
full and complete daily reports through the reporting
functionality of the Ad Management System within forty-eight (48)
hours after the day of the subject of the report. In addition, if
the reporting functionality of the Ad Management System is
unavailable for any reason for the applicable number of days
(measured as consecutive twenty-four (24) hour periods) set forth
in the chart below, You shall be entitled to the percentage
discounts (also set forth below) from Your Monthly Service Fee
for the month in which the unavailability occurred:
[*] to [*] day unavailability [*] discount
[*] to [*] day unavailability [*] discount
[*] to [*] day unavailability [*] discount
[*] day and above unavailability [*] discount
Termination Right: In addition to the termination rights set
forth in Section 10 below, You shall have the right to terminate
this Agreement on six (6) months prior written notice to
DoubleClick pursuant to Section III (Term/Termination) of the
Advertising Sales/Inventory Agreement, between the parties,
dated November 11, 1999.
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- --------------------------------------------------------------------------------
The undersigned confirm their mutual agreement to these arrangements
as of the Effective Date.
- --------------------------------------------------------------------------------
DOUBLECLICK INC. YOUR COMPANY NAME: All Advantage.com
-----------------
Signature: /S/ JEFF EPSTEIN Signature: /S/ CARL ANDERSON
-------------------------- -------------------------
Printed Name: Jeff Epstein Printed Name: Carl Anderson
---------------------- ----------------------
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED FROM THE PUBLIC FILING
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTIONS.
<PAGE>
Title: Executive Vice-President Title: Vice-President, Business
------------------------------ ---------------------------
Development
----------------
Effective Date: November 11, 1999
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED FROM THE PUBLIC FILING
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTIONS.
<PAGE>
[LETTER HEAD OF DOUBLECLICK APPEARS HERE]
DART(TM) SERVICE AGREEMENT FOR PUBLISHERS
TERMS AND CONDITIONS
1. Agreement. DoubleClick Inc. ("DoubleClick") and You hereby enter into the
agreement set forth in these Terms and Conditions and in the Cover Page
(collectively, this "DART Service Agreement" or "Agreement"), as of the
Effective Date set forth on the Cover Page. All capitalized terms not otherwise
defined in these Terms and Conditions shall have the meanings as defined on the
Cover Page. "Advertiser" shall mean any entity or person that desires to
advertise their own products or services. "Publisher" shall mean any entity or
person that desires to use the DART Service to target and measure advertisements
for Advertisers on their own Web site.
2. DART Service. The DART Service (the "Service") is a service provided by
DoubleClick to Publishers for targeted and measured delivery of ad banners from
DoubleClick's servers to the Web Sites set forth on the cover page of this
Agreement ("Target Sites"). The ad banners are displayed to visitors
("Visitors") to the Target Sites based on criteria selected by You and Your
Advertisers.
3. Ad Management System. You and DoubleClick understand that You are required
to use DoubleClick's proprietary Ad Management System software technology (the
"System") in order to receive the Service. Accordingly, DoubleClick grants to
You the non-exclusive and non-transferable right to access and use the System,
which You can access and use only on DoubleClick's Web servers by means of a
unique password chosen by You, and only for the purposes of: (i) performing
projections of ad banner impression inventories that might be available through
the Service, (ii) uploading and storing ad banners for delivery by the Service,
(iii) selecting trafficking criteria for the delivery of ad banners to Target
Sites and Visitors, and (iv) receiving reports of ad banner impressions and
other data related to the delivery of ad banners by the Service. Provided that
DoubleClick does not materially breach its obligations set forth in this
Agreement, You agree that DoubleClick shall be Your advertising management
solution throughout the Term for at least [*] percent ([*]) of the North
American advertising on the Web Site.
4. Your Obligations. You shall be solely responsible for soliciting all
Advertisers, trafficking of ad banners (which shall include the input of ad
banners into the System) and handling all inquiries of any type or nature. You
shall obtain all necessary rights, licenses, consents, waivers and permissions
from Advertisers, Visitors and others, to allow DoubleClick to store and deliver
ad banners and otherwise operate the Service on Your behalf, and to use any data
provided to or collected by the System only for the purposes of providing the
Service to You. You further agree that advertisements provided to DoubleClick
and/or delivered on behalf of You, and Your other promotional and marketing
activities in connection with the use of the Service, including the Target
Sites, shall not be deceptive, misleading, obscene, defamatory, illegal or
unethical.
5. DoubleClick's Obligations. DoubleClick's sole obligations hereunder shall
be (i) to make the System available to You, (ii) to deliver ad banners through
the Service according to the trafficking criteria selected by You using the
System, (iii) to make customer service personnel available by telephone for
support twenty-four hours per day, seven days per week, and (iv) to comply with
the Ad Delivery Service Availability and Ad Management System Availability
obligations set forth on the Cover Page. DoubleClick will hold one free training
session per calendar quarter applicable to All Advantage employees at the
headquarters of All Advantage, Hayward California, following sign-off on this
Agreement. All Advantage must provide computer terminals, monitors and internet
access to each trainee. If You require additional training or training on Your
site, DoubleClick shall provide such training to You at DoubleClick's standard
published rates for such training. For training on Your site (other than the
quarterly training described above), You agree to reimburse DoubleClick for its
actual travel and lodging expenses. You shall not permit any of Your employees
to access and use the Service or the System unless any such employee has
successfully completed the training session and has been so certified by
DoubleClick.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED FROM THE PUBLIC FILING
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTIONS.
<PAGE>
Senior business operation personnel of both parties agree to meet on a quarterly
basis throughout the Term to discuss
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED FROM THE PUBLIC FILING
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTIONS.
<PAGE>
the current architecture, current capacity, and scaling plans for DoubleClick's
System and Your technology. In addition, the parties agree that their respective
Chief Technology Officers shall meet every six (6) months throughout the Term to
discuss the strategic plans for each company and explore mutually advantageous
initiatives. DoubleClick ensures that it shall scale its DART System such that
throughout the Term, DoubleClick shall be able to serve all of Your
advertisements. DoubleClick agrees that its Senior Technical Support personnel
shall provide You with DoubleClick's highest level of support to address
technical issues that may arise with Your use of the Service.
Per All Advantage's approval, DoubleClick will provide All Advantage with access
to Keynote reporting. Keynote is a third party service that measures ad matching
and delivery.
DoubleClick agrees to provide documentation to all its Customer Support and
Engineering staff that explains the All Advantage set-up and usage of the DART
System. This will serve as a reference to handle customer questions and
requests.
Please see Appendix B for Special Reporting Queries
6. Fees. You shall pay DoubleClick the fees set forth on the Cover Page to
this Agreement. The fees include the Monthly Service Fees. The Monthly Service
Fees are recurring, non-refundable, non-creditable fees, payable within thirty
(30) days after receipt of an invoice from DoubleClick for such fees. The
Monthly Service Fee shall be based on the number of ad banner impressions
delivered through the Service on behalf of You each month, divided by one
thousand (1,000) and multiplied by the Monthly Service Fee CPM rate set forth on
the Cover Page to this Agreement. If Your Monthly Service Fee is less than the
Minimum Monthly Service Fee in any given month, You shall owe DoubleClick the
Minimum Monthly Service Fee for that month. To the extent that the average file
size of all ad banners delivered via the Service in a given month ("Average Ad
Size") exceeds the Ad Size Limit set forth on the Cover Page, the Monthly
Service Fee payable for that month shall be increased by an amount that shall be
calculated by subtracting the Ad Size Limit from the Average Ad Size, dividing
that difference by the Ad Size Limit, and multiplying the quotient by the
Monthly Service Fee CPM rate set forth on the Cover Page of this Agreement. All
fees hereunder shall be denominated in U.S. dollars and paid by wire transfer to
an account to be designated by DoubleClick, or by other means expressly agreed
to in writing by DoubleClick. You shall also be responsible for and shall pay
any applicable sales, use or other taxes or duties, tariffs or the like
applicable to Your unique use of the Service (excluding, for example, taxes on
DoubleClick"s income). Late payments will be subject to late fees at the rate of
one and one half percent (1.5%) per month, or, if lower, the maximum rate
allowed by law. If You fail to pay fees correctly invoiced by DoubleClick within
thirty (30) days following the payment due date, DoubleClick shall have the
right to suspend performance of the Services without notice to You; such Service
not to be reinstated until You pay all such overdue amounts and an additional
reinstatement fee of $1,000.
7. Proprietary Rights and Restrictions. DoubleClick is the exclusive supplier
of the Service and the exclusive owner of all right, title and interest in and
to the System, all software, databases and other aspects and technologies
incorporated in the System and Service, including the System, any enhancements
thereto and any materials provided to You by DoubleClick through the System or
otherwise. You may not use the System except pursuant to the limited rights
expressly granted in this Agreement. You shall use the System only in accordance
with reference manuals to be supplied by DoubleClick and only in accordance with
DoubleClick's standard security procedures, as posted on the DoubleClick Web
site or otherwise notified to You.
8. Data. You have the sole and exclusive ownership and right to use all data
derived from Your use of the Service ("Data"); provided that DoubleClick may use
and disclose only the aggregate number of ads delivered throughout the System
(other than personally-identifiable information) derived from Your use of the
Service only (i) for DoubleClick"s reporting purposes, consisting of compilation
of aggregated statistics about the Service such that You are not identifiable
that may be provided to customers, potential customers and the general public;
(ii) and if required by court order, law or governmental agency. DoubleClick may
not sell, lease or use the Data for commercial gain or profiling of user
behavior, except that DoubleClick may use "IP Address" data of Your Users (all
of which is non-personably identifiable) for DART targeting purposes.
DoubleClick agrees that in no event shall any information by which individual
users accessing Your advertising through the Service can be identified,
contacted or grouped by name, e-mail address or other personal or individual
characteristics (including, but not limited to, user registration information
collected by You) ("User Info") be used or disclosed by DoubleClick or used by
any third party without Your prior written consent. In addition, in no event
shall DoubleClick disclose Your Confidential Information (as defined in Section
14) to any third parties. DoubleClick may collect the following Data and User
Info through the Service for the sole and exclusive purpose of providing You
with the Service: Browser Type, Browser Version, Browser Language, Operating
System, Time of Day, Date, User IP, Geographic Location, Area code, Zip code,
Country, SIC Code, Domain, Domain type, and Ad Frequency. Should DoubleClick
desire to collect additional User Info or Data through the Service, DoubleClick
shall obtain Your prior written consent and the parties shall mutually agree on
DoubleClick"s permitted use of such information.
<PAGE>
DoubleClick shall not collect or use User clickstream behavior data.
The parties agree that the terms of this Section 8 shall survive termination of
this Agreement.
Audit of the System. On a monthly basis, the System is independently audited by
ABC Interactive, a third-party auditor. Upon request, DoubleClick agrees to
provide You with a copy of the reports prepared by ABC Interactive relating to
the System. In addition, You shall have the rights to (i) have "spotcheck"
audits performed for specific ad campaigns served pursuant to this Agreement for
a fee of $650.00 per audit.
9. Term- This Agreement shall be for a term of three (3) years from the
Effective Date, unless terminated earlier in accordance with the terms set forth
below or until the end of the notice period required by Section 10.2 or 10.3 (
the "Term"). The Term shall be automatically renewed for additional 12 month
periods unless there is a notice pursuant to Section 10.2 below.
10.0: Notice of Non-Renewal: In the event either party decides not to renew
this Agreement at the expiration of 3 years from the Effective Date, or at the
expiration of any renewal period, the party that desires to terminate shall
provide the other with notice of such decision no earlier than the commencement
of Year 3 and no later than (i) 90 days prior to the expiration of Year 3, for
termination at the end of Year 3 and (ii) 60 days prior to the expiration of any
renewal term; provided, however, that if You fail to give the notice required by
this section, the Term and this Agreement shall continue until DoubleClick has
received the applicable period of days advance written notice of Your decision
not to renew.
10.1: Termination for Breach: In the event of a material breach of a material
provision on this Agreement, the non-breaching party may give written notice of
such breach to the breaching party and if the breaching party fails to cure such
breach within 90 days of receipt of such notice, the non-breaching party may
terminate this Agreement once the cure period has expired.
10.2: Termination for Certain Changes: In addition to its right to terminate
specified above, You shall also have the right to terminate this Agreement if
any of the following events occur:
(a) DoubleClick is found by reputable independent sources on the basis of
verifiable data based on an analysis of a period of not less than 180 days,
to no longer be one of the top 3 Centralized Internet Ad Delivery Companies
measured on the basis of the aggregate number of Impressions served by each
Centralized Internet Ad Delivery Companies in such period (the "Top Three");
(b) DoubleClick ceases to operate or provide technical support for the DART
Service for a period in excess of 5 business days;
(c) DoubleClick is adjudged insolvent or bankrupt;
(d) Institution of any proceeding by DoubleClick seeking relief,
reorganization or arrangement under any laws relating to insolvency;
(e) Institution of any proceeding against DoubleClick seeking relief,
reorganization or arrangement under any laws relating to insolvency that is
not dismissed within 60 days;
(f) The making of any assignment for the benefit of creditors;
(g) Upon the appointment of a receiver, liquidator or trustee of any of
DoubleClick's property or assets, or upon liquidation, dissolution or
winding up of the DoubleClick's business; or
(h) In the event that a Person who owns, either directly or indirectly, a
Web site that is widely regarded by recognized Internet industry analysts as
a direct competitor of You acquires (i) DoubleClick through a merger or
consolidation pursuant to which the stockholders of DoubleClick immediately
prior to such merger or consolidation will not own, immediately after such
merger or consolidation, at least 40% of the voting power of the surviving
Person's voting securities, whether or not such Person is DoubleClick; (ii)
securities representing a majority of DoubleClick's voting securities as a
result of a tender or exchange offer, open market purchase, privately
negotiated purchases, share exchange, extraordinary dividend, acquisition,
disposition or recapitalization (or series of related transactions of such
nature) (other than a merger or consolidation), and (iii) all or
substantially all of DoubleClick's assets.
10.3: Termination for Convenience: You shall have the right to terminate this
Agreement without cause by providing DoubleClick with six (6) month prior
written notice of such termination; provided, however, such notice may only be
provided on the first anniversary of the Effective Date and on the last day of
each quarter thereafter.
11. Indemnification. You agree to indemnify and hold DoubleClick and its
officers, directors, employees and agents (each a "DoubleClick Indemnitee")
harmless from and against any and all third party claims, actions, losses,
damages, liability, costs and expenses (including, without limitation,
reasonable attorneys" fees and disbursements incurred by a DoubleClick
Indemnitee in any action between You and the DoubleClick Indemnitee, or between
<PAGE>
the DoubleClick Indemnitee and any third party or otherwise) arising out of or
in connection with (i) the breach of any of Your representations, warranties or
obligations set forth in this Agreement, (ii) Your use of the Service or the
System other than as permitted herein, or (iii) or any third party claim arising
from the serving of advertisements or other content to the All Advantage
viewbar. DoubleClick agrees to indemnify and hold You and Your officers,
directors, employees and agents (each "Your Indemnitee") harmless from and
against any and all third party claims, actions, losses, damages, liability,
costs and expenses (including, without limitation, reasonable attorneys" fees
and disbursements incurred by Your Indemnitee in any action between DoubleClick
and Your Indemnitee, or between Your Indemnitee and any third party or
otherwise) arising out of or in connection with (i) the breach of any of
DoubleClick"s representations, warranties or obligations set forth in this
Agreement, or (ii) Your use of the Service or the System as permitted herein.
12. WARRANTIES AND DISCLAIMER. DoubleClick represents and warrants that the
System was developed by DoubleClick without infringement or misappropriation of
any third party"s copyrights or trade secrets. You acknowledge and DoubleClick
represents that the Service and the System can be used to target, measure and
traffic advertisements in many different ways and based on many different types
of data. You represent and warrant that You will not use the Service or the
System in a way or for any purpose that infringes or misappropriates any third
party"s intellectual property or personal rights. EXCEPT AS SET FORTH IN THIS
AGREEMENT, DOUBLECLICK MAKES NO WARRANTIES OF ANY KIND TO ANY PERSON WITH
RESPECT TO THE SERVICE, THE SYSTEM OR ANY AD BANNER OR OTHER DATA SUPPLIED
THEREBY, WHETHER EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT.
13. Limitation and Exclusion of Liability. Except as otherwise set forth
herein, DoubleClick shall not be liable to You or any other third party for any
loss, cost, damage or expense incurred in connection with the availability,
operation or use of the Service, the System or any ad banner or other data
supplied thereby, including, without limitation, for any unavailability or
inoperability of the System or the Internet, technical malfunction, computer
error or loss or corruption of data, or other injury, damage or disruption of
any kind related thereto. DoubleClick shall not be liable for any indirect,
incidental, consequential, special or exemplary damages, including, but not
limited to, loss of profits, or loss of business opportunity, even if such
damages are foreseeable and whether or not DoubleClick has been advised of the
possibility thereof. DoubleClick"s maximum aggregate liability shall not exceed
the total amount paid by You to DoubleClick under this Agreement during the
twelve (12) month period prior to the first date the liability arose. In Your
agreements with Advertisers, You will include a provision to the effect that
DoubleClick is a third party beneficiary of any disclaimers and limitations or
exclusions of liability You agree with the Your Advertisers.
14. Confidentiality. The terms of this Agreement and information and data that
one party (the "Receiving Party") has received or will receive from the other
party (the "Disclosing Party") about matters governed by this Agreement are
proprietary and confidential information to said party ("Confidential
Information"), including without limitation any information that is marked as
"confidential" or should be reasonably understood to be confidential or
proprietary to the Disclosing Party and any reference manuals or data
compilations compiled or provided hereunder. The Receiving Party agrees that for
the Term and for two (2) years thereafter, the Receiving Party will not disclose
any Confidential Information to any third party other than the Receiving Party"s
legal and financial advisors as appropriate, nor use the Confidential
Information for any purpose not permitted under this Agreement. The
nondisclosure obligations set forth in this Section shall not apply to
information that the Receiving Party can document is generally available to the
public (other than through breach of this Agreement) or was already lawfully in
the Receiving Party"s possession at the time of receipt of the information from
the Disclosing Party.
15. Independent Contractor Status. Each party shall be and act as an
independent contractor and not as partner, joint venturer or agent of the other.
16. Modifications and Waivers. This Agreement represents the entire
understanding between DoubleClick and You and supersedes all prior agreements
relating to the subject matter of this Agreement. No failure or delay on the
part of either party in exercising any right, power or remedy under this
Agreement shall operate as a waiver, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise or the
exercise of any other right, power or remedy. Unless otherwise specified, any
amendment, supplement or modification of or to any provision of this Agreement,
any waiver of any provision of this Agreement and any consent to any departure
by the parties from the terms of this Agreement, shall be effective only if it
is made or given in writing and signed by both parties.
17. Assignment. This Agreement and the rights hereunder are not transferable
or assignable without prior written consent of the non-assigning party;
provided, however, that this Agreement may be assigned by either party to a
person or entity who acquires substantially all of the assigning party"s assets,
stock or business by sale, merger or otherwise.
<PAGE>
18. Applicable Law. This Agreement shall be governed by the law of New York,
without reference to its conflict of laws rules or principles, and the United
States.
19. General. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the minimum extent necessary without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provisions in any other jurisdiction. No failure or omission by either party in
the performance of any obligation under this Agreement shall be deemed a breach
of this Agreement nor create any liability if the same shall arise from any
cause or causes beyond the reasonable control of such party, including but not
limited to the following: acts of God, acts or omissions of any government or
any rules, regulations or orders of any governmental authority or any officer,
department, agency or instrument thereof; fire, storm, flood, earthquake, acts
of the public enemy, war, rebellion, Internet brown out, insurrection, riot,
invasion, strikes, or lockouts. All notices, demands and other communications
provided for or permitted under this Agreement shall be made in writing to the
parties" at the addresses on the Cover Page and shall be sent by registered or
certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery and shall be deemed received upon delivery.
<PAGE>
Appendix A - SUPPORT ESCALATION PROCEDURES
------------------------------------------
Objective
The purpose of this document is to outline the escalation process of all client
related incidents within the DoubleClick Client Services team and other
DoubleClick business units. DoubleClick Client Services has 2 call centers
globally located in New York and in Dublin, Ireland. The call centers are fully
staffed 24 hours, 5 days a week, with 24 hour weekend support on a remote basis.
The teams are broken into standard Customer Support and Strategic Support
divisions, with all incidents being handled with the same escalation process and
response times.
DoubleClick Client Services has direct lines of communications to all
DoubleClick business units 24 hours a day, 7 days a week.
Escalation Process
Within DoubleClick Client Services
All issues that are escalated within DoubleClick Client Services are tracked
within SupportLogix (SPLX), our chosen incident tracking application and
database. Items are entered into SPLX and are either:
(a) opened and closed on the first call
(b) opened and escalated through the appropriate chains
(c) opened, escalated, and eventually closed
Below outlines the process for all escalated issues:
1/st/ Time Resolution (Resolution Time: Immediate)
- --------------------------------------------------
. Client calls with inquiry
. DoubleClick analyst enters inquiry into SPLX and assigns the issue a
tracking number
. DoubleClick analyst answers inquiry and closes the ticket
1/st/ Time Resolution (Resolution Time: Immediate)
- --------------------------------------------------
. Client calls with inquiry
. DoubleClick analyst enters inquiry into SPLX and assigns the issue a
tracking number
. DoubleClick analyst cannot answer inquiry and places client on hold (if
appropriate) and escalates to supervisor for assistance
. Analyst receives answer to inquiry and closes the ticket
Escalation: 1 Level
. Client calls with inquiry
. DoubleClick analyst enters inquiry into SPLX and assigns the issue a
tracking number
. DoubleClick analyst cannot answer inquiry and places client on hold (if
appropriate) and escalates to supervisor for assistance
. Supervisor does not have immediate answer, but is aware of a similar
problem and needs to call client back
. Supervisor, or analyst, depending on issue type, calls client back within 1
-
hour with resolution and closes the ticket
----
<PAGE>
Outside of Client Services
Escalation: 2 Level (DoubleClick Engineering)
. Client calls with inquiry (AdManage related)
. DoubleClick analyst enters inquiry into SPLX and assigns the issue a
tracking number
. DoubleClick analyst cannot answer inquiry and places client on hold (if
appropriate) and escalates to supervisor for assistance
. Supervisor recognizes the issue to be a research related issue or software
defect and needs to call client back
. Supervisor immediately takes ownership of the issue and researches problem
with the analyst
. If proven to be a software defect, item is immediately categorized with a
priority and escalated to DoubleClick Engineering. DoubleClick Client
Services has 5 dedicated engineers assigned to working with Support on all
escalated issues. The below table describes the escalated priorities and
response times from Engineering to Support:
---------------------------------------------------------------------
Priority Response Time from Eng to CS
---------------------------------------------------------------------
Critical Immediate
---------------------------------------------------------------------
High 4 Hours
---------------------------------------------------------------------
Medium 16 Hours
---------------------------------------------------------------------
. Supervisor, or analyst, depending on issue type, calls client back within 1
hour with update and/or resolution
. Should the item be classified as Urgent and remain OPEN, the client will be
called and updated every 30 minutes until a concrete resolution time is
identified, or issue is resolved
. Should the item be classified as High and remain OPEN, the client will be
called and updated every 2 hours until a concrete resolution time is
identified, or issue is resolved
. All "steps" are recorded in SPLX with appropriate time/date stamps
. Once resolution has been achieved, the client is notified and the incident
is closed in SPLX
Escalation: 2 Level (DoubleClick Operations)
. Client calls with inquiry (Ad serving related)
. DoubleClick analyst enters inquiry into SPLX and assigns the issue a
tracking number
. DoubleClick analyst, uses monitoring tools to determine if any internet
factors may be affecting ad serving from any DoubleClick data center
locations
. DoubleClick analyst cannot answer inquiry and places client on hold (if
appropriate) and escalates to supervisor for assistance
. Supervisor recognizes the issue to be a research related issue or software
defect and needs to call client back
. Supervisor immediately takes ownership of the issue and researches problem
with the analyst
. If proven to be an ad serving operational issue (i.e. showing broken images
on client site) the item is immediately categorized with a priority of
URGENT and escalated to DoubleClick Operations. DoubleClick Client Services
has a direct line into DoubleClick Operations, ensuring real-time response
to all critical ad serving items.
---------------------------------------------------------------------
Priority Response Time from Ops to CS
---------------------------------------------------------------------
Critical Immediate
---------------------------------------------------------------------
<PAGE>
. Supervisor, or analyst, depending on issue type, calls client back within
15 minutes with update and/or resolution
. In the meantime, if issue is identified as an ad serving problem (i.e. a
particular data center looses connectivity, or peering point connectivity
gets disrupted) a client notification is immediately distributed to all
DoubleClick clients within the affected region.
. Should the item be classified as Urgent and remain OPEN, the client will be
called and updated every 15 minutes until a concrete resolution time is
identified, or issue is resolved
. All "steps" are recorded in SPLX with appropriate time/date stamps
. Once resolution has been achieved, the client is notified and the incident
is closed in SPLX
SPLX Auto Alert System
All defects that are entered into SPLX are automatically positioned in a
resolution time based queue for updates. Should the resolution time for an
associated item expire, a chain of alerts are automatically triggered. They are
as follows:
- -------------------------------------------------------------------------------
Priority Party Alerted Elapsed Time Contact Type
- -------------------------------------------------------------------------------
Critical Analyst 30 minutes Pager
Supervisor
Manager
- -------------------------------------------------------------------------------
High Analyst 3 hours Email
Supervisor
- -------------------------------------------------------------------------------
High Analyst 4 hours Pager
Supervisor
Manager
- -------------------------------------------------------------------------------
Medium Analyst 8 hours Email
- -------------------------------------------------------------------------------
Medium Analyst 10 hours Email
Supervisor
- -------------------------------------------------------------------------------
Medium Analyst 16 hours Pager
Supervisor
- -------------------------------------------------------------------------------
Weekend Escalation
From Saturday morning to Sunday DoubleClick Support works on a remote coverage
basis. All customer calls are handled on a remote pager basis. Calls are
returned within one hour to the client. Should the client have an urgent ad
serving related issue, they have the option, upon dialing DoubleClick Support,
to be transferred to DoubleClick Operations to speak with an Operations
technician.
Should an item need to be escalated on the weekend, the appropriate Engineering
Manager will be paged, and will be responsible for starting the escalation
process. The client will then be contacted with the appropriate response times
as noted in the above sections.
DART Sales/Sales Engineer Communication
All items are logged into SPLX, allowing the DART team to track the progress of
each incident. For Critical and high items, the DART Sales Engineer called with
an update of the issues.
<PAGE>
Appendix B
DoubleClick agrees to provide All Advantage Custom Reporting on a daily basis
for and limited to the following reports. If additional reports are requested,
DoubleClick must receive a template of such reports from All Advantage and will
notify All Advantage if those reports can or cannot be provided.
1. Insertion Order Summary " includes advertiser order, order id, name of
campaign, start/end date, imps. Requested, impressions delivered, clicks,
click-through rate and average exposure per user
2. Placement Summary " includes date, advertiser, order, order id, name of
campaign, start/end date, impressions requested, impressions delivered,
clicks, click-through rate, unique users, average exposure per user
3. Key-value Banner Summary " Date, Advertiser, order, order id, key-value
(grouped together), banner id, impressions delivered, clicks, average
exposures per user.
4. Country Placement Summary - includes date, advertiser, order, order id,
banner, country, name, status, start/end dates, impressions requested
(cannot be grouped by placement id), impressions delivered (cannot be
broken down by banner), clicks, click-through rate, average exposures per
user.
5. Insertion Order Detail- Date, Advertiser, insertion order, name, start/end
date, impressions requested, impressions delivered, clicks, click-through
rate, average exposures per user
6. Placement Level Detail " Date, Advertiser, order, placement id, name,
status, start/end date, impressions requested, impressions delivered,
clicks, click-through date, average exposures per user, cumulative unique
users (not by date)
7. Key-value Banner Detail " Date, Advertiser, order, placement id, key-value,
banner id, impressions delivered, clicks, average exposures per user.
<PAGE>
Exhibit 10.09
24/7 MEDIA INC.
NETWORK AFFILIATION
AGREEMENT
This Network Affiliate Agreement is entered into and effective as of the 26th
day of August, 1999 ("Effective Date") by and between 24/7 Media Inc. and
AllAdvantage.com Inc.
WHEREAS, AllAdvantage.com (hereinafter the "Network Affiliate") is the
operator and owner of the AllAdvantage.com Viewbar software program distributed
to residents of the United States and Canada through which advertising banners
can be served over the Internet (the "Web Site");
WHEREAS, 24/7 Media, Inc. ("24/7"), a Delaware corporation with an address
at 1250 Broadway, 27th floor, New York, NY 10001, operates a network of large,
high-profile internet web sites (the "24/7 Network") for which it solicits
advertisers, advertising agencies, buying services or others ("Advertisers")
regarding the placement of advertising banners and similar devices for display
on pages, screens, and other segments or spaces on web sites reasonably suitable
for the display of advertising;
WHEREAS, Network Affiliate wishes to subscribe to include the Web Site in
the 24/7 Network, and 24/7 wishes to accept such subscription;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is agreed as
follows:
1. Affiliation.
-----------
A. The Network Affiliate hereby grants to 24/7 the right to sell banner
advertising for display on the central banner window of the Web Site
("Advertising") according to the terms of this Agreement. 24/7 may sell the
Advertising on a "run of network" basis without identifying the name of the
Network Affiliate to Advertisers.
2. Obligations of 24/7.
-------------------
In furtherance of the foregoing, 24/7 covenants and agrees to:
A. provide the Network Affiliate, during the term of this Agreement
and only for use in the performance of this Agreement, with unique Tags
(delivered with a targeting description) in HTML/Java or other appropriate
languages that shall be affixed appropriately by Network Affiliate to the Web
Site to enable 24/7 to serve Advertising to that Web Site or for the Network
Affiliate to redirect Advertising;
B. utilize its best efforts to sell Advertising on the Web Site to
Advertisers through a package of web sites in appropriate groups and/or through
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED FROM THE PUBLIC
FILING AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
4
<PAGE>
C. serve or cause to be served Advertising to the Web Site, directly
or, at the option of Network Affiliate, through Network Affiliate's third-party
advertising serving service;
D. provide the Network Affiliate with notice, via on-line posting, of
new Advertising that has been solicited by 24/7 to be displayed on the Web Site
and provide Network Affiliate with a targeting description of such Advertising,
and to use its best efforts to honor any decision by Network Affiliate to
decline any Advertising, in accordance with the provisions in 3(D) below. 24/7
agrees that it will provide the Network Affiliate with the necessary software to
enable Network Affiliate to screen potential Advertising to be displayed on the
Web Site in order to decline such Advertising in accordance with the provisions
in 3(D) below;
E. provide the Network Affiliate with real-time access to records
that will allow it to monitor the volume of paid Advertising delivered to the
Web Site and the revenue produced (subject to billing corrections and reasonable
accounting adjustments) thereby. All such records produced or provided by 24/7
(i) shall govern and be the controlling documents in connection with all
payments due Network Affiliate under Section 4 hereof, and (ii) shall be the
joint property of 24/7 and Network Affiliate.
F. refrain from delivering "cookie" files to users of the Web Site
through the advertising served to the Web Site except in the limited
circumstances that such cookies are technically required in order to serve the
advertising. Nothing in this Agreement shall restrict 24/7's ability to use
cookies that were not placed on a users machine by way of the Web Site. Any and
all data regarding individual users of the Web Site collected by 24/7
("Collected Data") in the provision and delivery of Advertising to the Web Site
shall be the property of Network Affiliate. 24/7 agrees to use the Collected
Data only as required to provide the services hereunder. Notwithstanding the
foregoing, 24/7 may use and disclose, without the permission of Network
Affiliate, the aggregate numbers of Advertising delivered to the Web Site (i)
for 24/7's reporting purposes, consisting of compilation of aggregated
statistics about the service that may be provided to advertisers, potential
advertisers and the general public; (ii) and if required by court order, law or
governmental agency;
G. 24/7 agrees to deliver to the Network Affiliate, (i) a monthly
statement showing revenues earned from Advertising served to the Web Site during
the calendar month and any sum(s) due the Network Affiliate on account thereof,
and (ii) within 30 days of collection or such revenue by 24/7, payment
representing the Network Affiliate's portion of such revenues. 24/7 will
maintain, for at least two years after termination of this Agreement, its
records, contracts and accounts relating to Advertising sold on the Web Site
under this Agreement and will permit, upon prior written notice and no more than
two times per year, reasonable examination thereof at the offices of 24/7 by
authorized representatives of Network Affiliate; and
H. maintain suitable and qualified personnel in administrative, sales
and technical positions necessary for 24/7 to perform effectively the terms of
this Agreement.
3. Obligations of Network Affiliate.
--------------------------------
The Network Affiliate covenants and agrees:
2
<PAGE>
A. that during the Term, it shall use reasonable efforts to continue
and maintain the Web Site in a manner consistent with the intent and purpose of
the Web Site on the date first written above;
3
<PAGE>
B. to insert the Tags on the Web Site in such a manner as to assure
that the Advertising to be affixed to said Tag, once served, is fully and
clearly visible on the Web Site when viewed at a 640 x 480 pixel resolution; and
Network Affiliate shall be responsible for utilizing such Tags, in conjunction
with the Advertising delivered by 24/7 pursuant to Section 2(D), to serve those
Advertisements to the Web Site as deemed appropriate by Network Affiliate.
C. that, on a monthly basis, not less than 20 million total ad
impressions (the "Inventory") will be available for the sale of Advertising by
24/7. Upon thirty (30) days written notice to 24/7, Network Affiliate may
increase this minimum Inventory number at its sole discretion.
D. to notify 24/7 within one business day from the time 24/7 provides
Network Affiliate with notice of any new Advertising, of the Network Affiliate's
rejection of any new Advertising. Failure to provide timely notice of rejection
of the new Advertising shall be deemed acceptance thereof, until such time as
Network Affiliate notifies 24/7 of Network Affiliate's rejection thereof at
which time 24/7 will use its best efforts to remove the Advertising; and
E. to furnish 24/7 with statistical and other information regarding
the Web Site as is reasonably available to the Network Affiliate and which is,
in the opinion of the Network Affiliate, appropriate, in light of Network
Affiliate's privacy policy, for use by 24/7 for the sale of Advertising on the
Web Site ("Descriptive Information"). All such Descriptive Information provided
by Network Affiliate shall remain the property of Network Affiliate. 24/7 shall
have a limited right to use the Descriptive Information for the term of this
Agreement and only for the purpose of providing the services hereunder. The
Descriptive Information shall be considered Confidential Information under
Section 6 of this Agreement.
4. Payments.
--------
A. (i) Advertisers shall be directed by 24/7 to promptly pay all cash
and other consideration (the "Payment") generated from the sale of Advertising
by 24/7 during the term of this agreement.
(ii) 24/7 shall retain the percentage of the Net Payment (as defined
below) in accordance with Section 4(A)(iii) below, and shall pay to the Network
Affiliate the remaining percentage of the Net Payment. As used herein, the
term "Net Payment" is defined as the Payment, less those advertising agency
commissions actually retained by agencies or paid by 24/7 to agencies with
respect to the sale of Advertising on the Web Site.
(iii) Subject to verification by 24/7 of monthly Advertising
impressions on the Web Site, the initial commission rate to 24/7 Media is [*]
percent ([*])% of the Net Payment (the "24/7 Rate"). The 24/7 Rate shall be
reduced to [*]% for those calendar months during which the click-through rate
for Advertising on the Web Site is higher than the average affiliate click-
through rate for the 24/7 Network for that month.
B. In the event any Advertiser remits any payment for Advertising
sold by 24/7 directly to the Network Affiliate rather than to 24/7, the Network
Affiliate agrees to make prompt payment to 24/7 of any and all such payments.
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED FROM THE PUBLIC
FILING AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
4
<PAGE>
C. Each party will be obligated to comply with its obligations under
this Agreement in respect of Advertising sold by 24/7 Media prior to the date
of termination of this Agreement.
5. Intellectual Property. Each party shall retain ownership of that party's
---------------------
hardware, software, programs, codes, trade names, technology, intellectual
property, licenses, patents, trademarks, copyrights, trade secrets, know-how,
and processes (collectively a "Party's technology") used by the parties under
this Agreement. Neither party shall have any right, title or interest in the
other Party's technology. Upon the expiration or termination of this Agreement,
each party shall promptly return all information, documents, manuals and other
materials belonging to the other party except as otherwise provided in this
Agreement.
6. Confidentiality. 24/7 and Network Affiliate covenant to each other that
---------------
neither party shall disclose to any third party (other than its employees and
directors, in their capacity as such on a need to know basis so long as they are
bound by the terms of this Agreement) or use, except as required to fulfill the
obligations of this Agreement, any information regarding the terms and
provisions of this Agreement or any non-public confidential information which
has been identified as such by the other party hereto except (i) to the extent
necessary to comply with any law or valid order of a court of competent
jurisdiction (or any regulatory or administrative tribunal), in which event the
party so complying shall so notify the others as promptly as practicable (and,
if possible, prior to making any disclosure) and shall seek confidential
treatment of such information, if available; (ii) as part of its normal
reporting or review procedure to its auditors or its attorneys, as the case may
be, so long as they are notified of the provisions of this Agreement; (iii) in
order to enforce its rights pursuant to this Agreement; (iv) in connection with
any filing with any governmental body or as otherwise required by law, including
the federal securities laws and any applicable rules and regulations of any
stock exchange or quotation system; (v) as authorized by the other party; and
(vi) in a confidential disclosure made in connection with a contemplated
financing, merger, consolidation or sale of capital stock of 24/7 or the Network
Affiliate. Information which is or should be reasonably understood to be
confidential or proprietary includes, but is not limited to, information about
either party's sales, cost and other unpublished financial information, product
and business plans, projections, marketing data, and sponsors but shall not
include information (a) already lawfully known to or independently developed by
a party, (b) disclosed in published materials, (c) generally known to the
public, (d) lawfully obtained from any third party or (e) required to be
disclosed by law.
7. Term and Termination.
--------------------
A. The Term of this Agreement will commence on the date first written
above (the "Effective Date") and will continue for one year from the Effective
Date, and will renew automatically for additional periods of one year, unless
otherwise terminated pursuant to the terms of this Agreement. Either party may
terminate the Agreement by giving written notice to the other party no earlier
than four months after the effective date. Termination will be effective four
(4) months after the date on which written notice is given to the other party.
B. Notwithstanding Section 7.A. above, this Agreement may be terminated by
either party on 60 days' prior written notice to the other party upon the
occurrence of a material breach by the other party of any covenant, duty or
undertaking herein, which material breach continues without cure for a
5
<PAGE>
period of 30 days after written notice of such breach is received by the
breaching party from the non-breaching party.
C. Notwithstanding Section 7.A. or 7.B. above, this Agreement may be
terminated by 24/7 on written notice to the Network Affiliate upon the
occurrence of a material breach by Affiliate of its covenants under Section 8(i)
of this Agreement, which material breach continues without cure for a period of
more than 48 hours after written notice of such breach is received by Network
Affiliate from 24/7 of such breach, or which material breach occurs on more than
two occasions.
D. Notwithstanding Section 7(A) or 7(B) of this Agreement, the Agreement
may be terminated by 24/7 on 30 days' prior written notice to the Network
Affiliate if the number of impressions in any two consecutive months is less
than one million average per month or if the average click-through rate for the
Advertising served on the Web Site for any three-month period is less than
0.25%.
E. Notwithstanding Section 7(A) or 7(B) above, this Agreement may be
terminated by Network Affiliate on written notice to 24/7 upon the occurrence of
a material breach by 24/7 of its covenants under Section 2(F) of this Agreement,
which material breach continues without cure for a period of more than 48 hours
after written notice of such breach is received by 24/7 from Network Affiliate
of such breach, or which material breach occurs on more than two occasions.
8. Content of Web Site. Each party covenants and agrees not to include or
-------------------
provide via the Web Site any material that is or may be considered: (i)
libelous, pornographic, obscene, or defamatory under any federal or state law;
(ii) an infringement of any third party's intellectual property rights
(including copyright, patent, trademark, trade secret or other proprietary
rights); or (iii) an infringement on any third party's rights of publicity or
privacy. Each party further covenants and agrees, with respect to performance of
its obligations hereunder, to comply with all laws, statutes, ordinances, and
regulations.
9. Indemnification. (A) Network Affiliate shall indemnify and hold harmless
---------------
24/7, its advertisers and other suppliers and any related third parties, against
and in respect of any and all claims, suits, actions, proceedings (formal and
informal), investigations, judgments, deficiencies, damages, settlements,
liabilities, and legal and other expenses (including reasonable legal fees and
expenses of attorneys chosen by 24/7) as and when incurred, arising out of or
based upon any act or omission or alleged act or alleged omission by Network
Affiliate in connection with the acceptance of, or the performance or non-
performance by Network Affiliate of, any of its duties under this Agreement or
arising from the breach by Network Affiliate of its warranties, representations
or covenants contained in this Agreement.
(B) 24/7 shall indemnify and hold harmless the Network Affiliate, its
suppliers and any related third parties, against and in respect of any and all
claims, suits, actions, proceedings (formal and informal), investigations,
judgments, deficiencies, damages, settlements, liabilities, and legal and other
expenses (including reasonable legal fees and expenses of attorneys chosen by
Network Affiliate) as and when incurred, arising out of or based upon any act or
omission or alleged act or alleged omission by 24/7 in connection with the
acceptance of, or the performance or non-performance by 24/7 of, any of its
duties under this Agreement or arising from the breach by 24/7 of its
warranties, representations or covenants contained in this Agreement.
6
<PAGE>
10. No Poaching. Both parties agree that, for a period of one year from the end
-----------
of the Term, neither it nor its affiliates will solicit or recruit the services
of any employees of the other party, or hire any such employees.
11. No Waiver. This Agreement shall not be waived, modified, assigned or
---------
transferred without the other party's written consent, except that either party
may assign this Agreement without the other's consent in the case of a
reorganization, merger, consolidation, or sale of all or substantially all of
its assets. Each party agrees that if it assigns or transfers this Agreement, it
shall cause such successor, assignee, or transferee to assume all of the it's
obligations hereunder. Any assignment, transfer, or assumption shall not
relieve the either party of liability hereunder.
12. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York applicable to contracts made
and performed therein, without regard to principles of conflicts of laws.
13. Notices. All notices required or permitted to be given hereunder shall be
-------
in writing and either hand-delivered, telecopied, mailed by certified first
class mail, postage prepaid, or sent via electronic mail to the other party or
parties hereto at the address(es) set forth below. A notice shall be deemed
given when delivered personally, when the telecopied notice is transmitted by
the sender, three business days after mailing by certified first class mail, or
on the delivery date if delivered by electronic mail.
14. Entire Agreement. This Agreement, including the Additional Terms attached
----------------
hereto, constitutes the entire agreement and supersedes all prior agreements of
the Parties with respect to the transactions set forth herein and, except as
otherwise expressly provided herein, is not intended to confer upon any other
person any rights or remedies hereunder.
15. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original and all of which together shall constitute one
and the same document.
16. Force Majeure. Neither party shall be held liable or responsible to the
-------------
other party nor be deemed to have defaulted under or breached this Agreement for
failure or delay in fulfilling or performing any term of this Agreement when
such failure or delay is caused by or results from causes beyond the reasonable
control of the affected party, including but not limited to fire, floods,
failure of communications systems or networks, embargoes, war, acts of war
(whether war is declared or not), insurrections, riots, civil commotion,
strikes, lockouts or other labor disturbances, acts of God or acts, omissions or
delays in acting by any governmental authority or the other party; provided,
however, that the party so affected shall use reasonable commercial efforts to
avoid or remove such causes of nonperformance, and shall continue performance
hereunder with reasonable dispatch whenever such causes are removed. Either
party shall provide the other party with prompt written notice of any delay or
failure to perform that occurs by reason of force majeure. The parties shall
mutually seek a resolution of the delay or the failure to perform as noted
above.
17. Severability. Should one or more provisions of this Agreement be or become
-------------
invalid, the parties hereto shall substitute, by mutual consent, valid
provisions for such invalid provisions which valid provisions in their economic
effect are sufficiently similar to the invalid provisions that it can be
reasonably assumed that the parties would have entered into this Agreement with
such valid provisions. In case such valid provisions cannot be agreed upon, the
invalidity of one or several provisions of this
7
<PAGE>
Agreement shall not affect the validity of this Agreement as a whole, unless the
invalid provisions are of such essential importance to this Agreement that it is
to be reasonably assumed that the parties would not have entered into this
Agreement without the invalid provisions.
18. Year 2000 Readiness. Network Affiliate and 24/7 each represents and
-------------------
warrants that its Affiliate Technology and the 24/7 Technology, respectively,
when used independently and in conjunction with other software interfaces to or
from other intellectual property or other hardware or software, will have no
material Year 2000-related: (i) problems with the accuracy of any component of
such Affiliate Technology or 24/7 Technology, respectively, that creates,
accepts, displays, stores, retrieves, accesses, recognizes, distinguishes,
compares, sorts, manipulates, processes, calculates, converts or otherwise uses
dates or date-related data, (ii) operating defects (including generating
incorrect values with respect to date dependent data), or (iii) losses of
functionality or degradation in performance or volume capacity. As used herein
"Year 2000" means the advent of the year 2000 and into the 21st century, and the
ability to recognize dates after December 31, 1999 and leap years.
19. Press Releases. The parties hereof agree to obtain the prior written
--------------
approval of the other parties hereto before issuing any press release or making
any other public statement regarding the other party or the transaction.
20. Independent Contractors. 24/7 and Network Affiliate shall each act as
------------------------
independent contractors. Neither party shall exercise control over the
activities and operations of the other party. 24/7 and Network Affiliate shall
each conduct all of its business in its own name and as it deems fit, provided
it is not in derogation of the other's interests. Neither party shall engage in
any conduct inconsistent with its status as an independent contractor, have
authority to bind the other with respect to any agreement or other commitment
with any third party, nor enter into any commitment on behalf of the other,
except as expressly provided for by this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
this 26th day of August, 1999 (the "Effective Date").
24/7 MEDIA, INC.
By: /S/ THOMAS EATON
------------------------
Name: Thomas Eaton
Title: Vice President -- Business Development
E-mail address: [email protected]
NETWORK AFFILIATE:
Name of Web Site: The AllAdvantage Viewbar at www.alladvantage.com
--------------------
Corporate Name: AllAdvantage.com
----------------
Address: 25954 Eden Landing Rd.
----------------------
Address: Hayward, CA 94545
------------------
By: /S/ JIM JORGENSEN
-----------------
Name: Jim Jorensen
Title: CEO
E-mail address: [email protected]
-------------------------------------
9
<PAGE>
EXHIBIT 10.10
LEASE
-----
Landlord: Hayward Point Eden I Limited Partnership
Tenant: AllAdvantage.com
Date: December 22, 1999
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page #
------
<S> <C>
1. PREMISES............................................................ 1
1.1 Premises...................................................... 1
1.2 Landlord's Reserved Rights.................................... 1
2. TERM .............................................................. 1
2.1 Term.......................................................... 1
2.2 Early Possession.............................................. 2
2.3 Delay in Possession........................................... 2
2.4 Construction.................................................. 2
2.5 Acknowledgement Of Lease Commencement......................... 3
2.6 Holding Over.................................................. 3
2.7 Termination Right............................................. 3
3. RENTAL.............................................................. 4
3.1 Minimum Rental................................................ 4
3.2 Late Charge................................................... 4
4. TAXES .............................................................. 5
4.1 Personal Property............................................. 5
4.2 Real Property................................................. 5
5. OPERATING EXPENSES.................................................. 5
5.1 Payment Of Operating Expenses................................. 5
5.2 Definition Of Operating Expenses.............................. 6
5.3 Determination of Operating Expenses........................... 6
5.4. Final Accounting For Lease Year............................... 7
5.5. Proration..................................................... 7
6. UTILITIES........................................................... 7
6.1. Payment....................................................... 7
6.2. Interruption.................................................. 7
7. ALTERATIONS......................................................... 7
7.1. Right To Make Alterations..................................... 7
7.2. Title To Alterations.......................................... 8
7.3. Tenant Fixtures............................................... 8
7.4. No Liens...................................................... 8
8. MAINTENANCE AND REPAIRS............................................. 8
8.1. Landlord's Work............................................... 8
8.2. Tenant's Obligation For Maintenance........................... 9
(a) Good Order, Condition And Repair........................... 9
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(b) Landlord's Remedy......................................... 9
(c) Condition Upon Surrender.................................. 9
9. USE OF PREMISES................................................. 9
9.1. Permitted Use............................................. 10
9.2. Requirement Of Continued Use.............................. 10
9.3. No Nuisance............................................... 10
9.4. Compliance With Laws...................................... 10
9.5. Liquidation Sales......................................... 11
9.6. Environmental Matters..................................... 11
10. INSURANCE AND INDEMNITY.......................................... 11
10.1. Liability Insurance....................................... 11
10.2. Quality Of Policies And Certificates...................... 12
10.3. Workers' Compensation..................................... 12
10.4. Waiver Of Subrogation..................................... 12
10.5. Increase In Premiums...................................... 12
10.6. Indemnification........................................... 13
10.7. Blanket Policy............................................ 13
11. SUBLEASE AND ASSIGNMENT.......................................... 13
11.1. Assignment And Sublease Of Premises....................... 13
11.2. Rights Of Landlord........................................ 14
12. RIGHT OF ENTRY AND QUIET ENJOYMENT............................... 14
12.1. Right Of Entry............................................ 14
12.2. Quiet Enjoyment........................................... 15
13. CASUALTY AND TAKING.............................................. 15
13.1. Termination Or Reconstruction............................. 15
13.2. Tenant's Rights........................................... 15
13.3. Lease To Remain In Effect................................. 15
13.4. Reservation Of Compensation............................... 15
13.5. Restoration Of Fixtures................................... 16
14. DEFAULT.......................................................... 16
14.1. Events Of Default......................................... 16
(a) Abandonment............................................... 16
(b) NonPayment................................................ 16
(c) Other Obligations......................................... 16
(d) General Assignment........................................ 16
(e) Bankruptcy................................................ 17
(f) Receivership.............................................. 17
(g) Attachment................................................ 17
(h) Insolvency................................................ 17
14.2. Remedies Upon Tenant's Default............................ 17
14.3. Remedies Cumulative....................................... 18
15. SUBORDINATION, ATTORNMENT AND SALE............................... 18
15.1. Subordination To Mortgage................................. 18
15.2. Sale Of Landlord's Interest............................... 19
15.3. Estoppel Certificates..................................... 19
15.4. Subordination to CC&Rs.................................... 20
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
16. SECURITY.......................................................... 20
16.1. Deposit................................................... 20
17. MISCELLANEOUS..................................................... 20
17.1. Notices................................................... 20
17.2. Successors And Assigns.................................... 21
17.3. No Waiver................................................. 21
17.4. Severability.............................................. 22
17.5. Litigation Between Parties................................ 22
17.6. Surrender................................................. 22
17.7. Interpretation............................................ 22
17.8. Entire Agreement.......................................... 22
17.9. Governing Law............................................. 22
17.10. No Partnership............................................ 22
17.11. Financial Information..................................... 23
17.12. Costs..................................................... 23
17.13. Time...................................................... 23
17.14. Rules And Regulations..................................... 23
17.15. Brokers................................................... 24
17.16. Memorandum Of Lease....................................... 24
17.17. Corporate Authority....................................... 24
17.18. Execution and Delivery.................................... 24
17.19. Exercise of Option........................................ 24
</TABLE>
-iii-
<PAGE>
LEASE
-----
THIS LEASE is made and entered into as of the 22nd day of December, 1999,
by and between Hayward Point Eden I Limited Partnership, a Delaware limited
partnership ("Landlord") and AllAdvantage.com a California corporation
--------
("Tenant").
------
THE PARTIES AGREE AS FOLLOWS:
1. PREMISES
--------
1.1 Premises. Landlord leases to Tenant and Tenant hires and leases
--------
from Landlord, on the terms, covenants and conditions hereinafter set forth, the
premises (the "Premises") designated in Exhibit A attached hereto and
-------- ---------
incorporated herein by this reference, consisting of approximately 45,000 square
feet of space located within Building K (the "Building") in the Britannia Point
--------
Eden Business Park (the "Center") in the City of Hayward, County of Alameda,
------
State of California, commonly known as 4010 Point Eden Way, Hayward, California
94945, and located on the real property (the "Property") described in Exhibit B
-------- ---------
attached hereto and incorporated herein by this reference, together with the
nonexclusive right to use any common areas designated from time to time in any
Declaration of Covenants, Conditions and Restrictions or similar document
affecting the Center.
1.2 Landlord's Reserved Rights. Landlord reserves the right from time
--------------------------
to time to (i) install, use, maintain, repair and replace pipes, ducts,
conduits, wires and appurtenant meters and equipment for service to other parts
of the Building above the ceiling surfaces, below the floor surfaces, within the
walls or leading through the Premises in locations which will not materially
interfere with Tenant's use thereof, (ii) relocate any pipes, ducts, conduits,
wires and appurtenant meters and equipment included in the Premises which are so
located or located elsewhere outside the Premises, (iii) make alterations or
additions to the Building, (iv) construct, alter or add to other buildings or
improvements on the Property, (v) build adjoining to the Property, and (vi)
lease any part of the Property for the construction of improvements or
buildings. Landlord may modify or enlarge the common area, alter or relocate
accesses to the Premises, or alter or relocate any common facility. For any
work within the Building performed pursuant to this Section 1.2, Landlord shall
provide prior written notice of such work to Tenant before performing such work,
except in the event of an emergency. Landlord shall not exercise rights
reserved to it pursuant to this Section 1.2 in such a manner as to materially
impair Tenant's ability to conduct its activities in the normal manner;
provided, however, that the foregoing shall not limit or restrict Landlord's
- --------
right to undertake reasonable construction activity and Tenant's use of the
Premises shall be subject to reasonable temporary disruption incidental to such
activity diligently prosecuted.
2. TERM
----
2.1 Term. The term of this Lease shall commence on the earlier to occur
----
of (i) the date which is five (5) days after the date Landlord notifies Tenant
that Landlord's work pursuant to Section 2.4 is substantially complete, or (ii)
the date Tenant takes occupancy of the Premises, the earlier of such dates being
herein called the "Commencement Date," and shall end on the day immediately
-----------------
preceding the date thirty-six (36) months thereafter, unless sooner terminated
or
<PAGE>
extended (if applicable) as hereinafter provided. Landlord presently estimates
that the Commencement Date will be January 1, 2000.
2.2 Early Possession. If Landlord permits Tenant to occupy, use or take
----------------
possession of the Premises prior to the Commencement Date determined under
Section 2.1, such occupancy, use or possession shall be subject to and upon all
of the terms and conditions of this Lease, including the obligation to pay rent
and other charges, unless Landlord and Tenant agrees otherwise; provided,
--------
however, that such early possession shall not advance or otherwise affect the
Commencement Date or termination date determined under Section 2.1; and provided
--------
further, that Tenant shall not interfere with or delay Landlord's contractors by
- -------
such early possession and shall indemnify, defend and hold harmless Landlord and
its agents and employees from and against any and all claims, demands,
liabilities, actions, losses, costs and expenses, including (but not limited to)
reasonable attorneys' fees, arising out of or in connection with Tenant's early
entry upon the Premises hereunder.
2.3 Delay in Possession. Landlord agrees to use its best efforts to
-------------------
complete promptly the work described in Section 2.4; provided, however, Landlord
--------
shall not be liable for any damages caused by any delay in the completion of
such work, nor shall any such delay affect the validity of this Lease or the
obligations of Tenant hereunder.
2.4 Construction. (a) The obligation of Landlord to perform work to
------------
improve the Premises for occupancy by Tenant is limited to the following, all of
which work shall be performed promptly, diligently and prior to the Commencement
Date (subject to delays for causes beyond Landlord's reasonable control), in a
neat and workmanlike manner, in compliance with all applicable governmental
codes, laws and regulations in force at the time such work is completed, and at
no expense to Tenant: (i) Landlord shall install carpeting in the manufacturing
area of the Premises, the area of which is approximately 10,736 square feet and
(ii) Landlord shall remove the chain link fencing in the manufacturing area of
the Premises. Except as specifically set forth in this Section 2.4(a), Landlord
shall have no responsibilities or obligations with respect to preparation of the
Premises for Tenant's occupancy and Tenant shall take possession of the Premises
in their presently existing condition "AS IS," in all respects. Acceptance by
Tenant of possession of the Premises after performance of such work by Landlord
shall constitute acceptance by Tenant of such work in its then completed
condition and Landlord shall have no further responsibility of any kind or
character for improvement of the Premises or in connection with such work;
provided, however, that within fifteen (15) days after the Commencement Date,
- --------
Tenant may furnish to Landlord a "punch list" identifying any items or matters
in the Premises which are not in the condition required hereunder and Landlord
shall promptly and diligently correct all such matters at its sole cost and
expense. Upon request by Tenant, Landlord shall conduct a "walk-through" of the
Premises with Tenant prior to the Commencement Date in order to identify work
required to be performed in accordance with this Section 2.4.
(b) Tenant may make alterations to the Premises to prepare the
Premises for Tenant's occupancy, provided that such alterations are made in
accordance with Article 7 of this Lease and provided that Landlord has approved
the contractors performing the work. Landlord will pay the cost of Fifty
Thousand Dollars ($50,000) of such alterations. Landlord will make
-2-
<PAGE>
the payment for such alterations (up to $50,000) directly to the contractors
performing such alterations promptly after Landlord receives invoices from such
contractors for work completed.
2.5 Acknowledgement Of Lease Commencement. Upon commencement of the term
-------------------------------------
of this Lease, Landlord and Tenant shall execute a written acknowledgement of
the Commencement Date, date of termination, square footage of the Premises and
related matters, substantially in the form attached hereto as Exhibit C
---------
(with appropriate insertions), which acknowledgement shall be deemed to be
incorporated herein by this reference. Notwithstanding the foregoing
requirement, the failure of one or both parties to execute such a written
acknowledgement shall not affect the determination of the Commencement Date,
date of termination, square footage of the Premises and related matters in
accordance with the provisions of this Lease.
2.6 Holding Over. If Tenant holds possession of the Premises after the
------------
term of this Lease with Landlord's written consent, then except as otherwise
specified in such consent, Tenant shall become a tenant from month to month at
one hundred twenty-five percent (125%) of the rental and otherwise upon the
terms herein specified for the period immediately prior to such holding over and
shall continue in such status until the tenancy is terminated by either party
upon not less than thirty (30) days prior written notice. If Tenant holds
possession of the Premises after the term of this Lease without Landlord's
written consent, then Landlord in its sole discretion may elect (by written
notice to Tenant) to have Tenant become a tenant either from month to month or
at will, at one hundred fifty percent (150%) of the rental (prorated on a daily
basis for an at-will tenancy, if applicable) and otherwise upon the terms herein
specified for the period immediately prior to such holding over, or may elect to
pursue any and all legal remedies available to Landlord under applicable law
with respect to such unconsented holding over by Tenant. Tenant shall indemnify
and hold Landlord harmless from any loss, damage, claim, liability, cost or
expense (including reasonable attorneys' fees) resulting from any delay by
Tenant in surrendering the Premises (except with Landlord's prior written
consent), including but not limited to any claims made by a succeeding tenant by
reason of such delay. Acceptance of rent by Landlord following expiration or
termination of this Lease shall not constitute a renewal of this Lease.
2.7 Termination Right. Tenant may terminate the term of this Lease as
-----------------
of any date after the eighteen (18) month anniversary of the Commencement Date,
provided that: (a) Tenant gives Landlord written notice of Tenant's election to
terminate (which notice must specify the termination date) on or before March
30, 2001 and (b) Tenant pays Landlord the unamortized portion of the sum of (x)
---
Fifty Thousand Dollars ($50,000) plus (y) Landlord's costs to improve the
Premises for Tenant under Section 2.4(a). The amortization referred to in
clause (b) of the preceding sentence will be calculated over a thirty-six (36)
month period with an eleven percent (11%) interest component. Tenant shall
receive a credit against Tenant's payment to Landlord pursuant to clause (b) of
the preceding sentence if Tenant has reimbursed Landlord for the cost of
replacement for the HVAC equipment or related mechanical systems pursuant to the
last sentence of Section 8.2(a); the amount of such credit shall equal the
amount paid to Landlord for such replacement multiplied by a fraction, the
numerator of which is the number of months between the date the termination
becomes effective and the thirty-six (36) month anniversary of the Commencement
Date and the denominator of which is the number of months between the date of
such replacement and the thirty-six (36) month anniversary of the Commencement
Date.
-3-
<PAGE>
3. RENTAL
------
3.1 Minimum Rental.
--------------
(a) Tenant shall pay to Landlord as minimum rental for the Premises,
in advance, without deduction, offset, notice or demand, on or before the
Commencement Date and on or before the first day of each subsequent calendar
month of the term of this Lease, the following amounts per month:
<TABLE>
<CAPTION>
Months Minimum Rental
------ --------------
<S> <C>
1 - 12 $57,887.08
13 - 24 60,137.08
25 - 36 62,447.08
</TABLE>
If the obligation to pay minimum rental hereunder commences on other than the
first day of a calendar month or if the term of this Lease terminates on other
than the last day of a calendar month, the minimum rental for such first or last
month of the term of this Lease, as the case may be, shall be prorated based on
the number of days the term of this Lease is in effect during such month. If an
increase in minimum rental becomes effective on a day other than the first day
of a calendar month, the minimum rental for that month shall be the sum of the
two applicable rates, each prorated for the portion of the month during which
such rate is in effect.
(b) The minimum rental amounts specified in this Section 3.1 are
based upon an estimated area of 45,000 square feet for the Premises. If the
actual area of the Premises, when completed, is greater or less than such
estimated area, then the minimum rentals specified in this Section 3.1 shall be
adjusted proportionately to the change in the area of the Premises, as
determined in good faith by Landlord's architect on a basis consistent with that
used in measuring other leased premises within the Center.
3.2 Late Charge. If Tenant fails to pay when due rental or other amounts
-----------
due Landlord hereunder, such unpaid amounts shall bear interest for the benefit
of Landlord at a rate equal to the lesser of fifteen percent (15%) per annum or
the maximum rate permitted by law, from the date due to the date of payment. In
addition to such interest, Tenant shall pay to Landlord a late charge in an
amount equal to ten percent (10%) of any installment of minimum rental and any
other amounts due Landlord if not paid in full on or before the fifth (5th) day
after such rental or other amount is due. Tenant acknowledges that late payment
by Tenant to Landlord of rental or other amounts due hereunder will cause
Landlord to incur costs not contemplated by this Lease, including, without
limitation, processing and accounting charges and late charges which may be
imposed on Landlord by the terms of any loan relating to the Property. Tenant
further acknowledges that it is extremely difficult and impractical to fix the
exact amount of such costs and that the late charge set forth in this Section
3.2 represents a fair and reasonable estimate thereof. Acceptance of any late
charge by Landlord shall not constitute a waiver of Tenant's default with
respect to overdue rental or other amounts, nor shall such acceptance prevent
Landlord from exercising any other rights and remedies available to it.
Acceptance of rent or other payments by Landlord shall not constitute a waiver
of late charges or interest accrued with respect to such rent or other payments
or any prior installments thereof, nor
-4-
<PAGE>
of any other defaults by Tenant, whether monetary or non-monetary in nature,
remaining uncured at the time of such acceptance of rent or other payments.
4. TAXES
-----
4.1 Personal Property. Tenant shall be responsible for and shall pay
-----------------
prior to delinquency all taxes and assessments levied against or by reason of
all alterations and additions and all other items installed or paid for by
Tenant under this Lease, and the personal property, trade fixtures and other
property placed by Tenant in or about the Premises. Upon request by Landlord,
Tenant shall furnish Landlord with satisfactory evidence of payment thereof. If
at any time during the term of this Lease any of said alterations, additions or
personal property, whether or not belonging to Tenant, shall be taxed or
assessed as part of the Property, then such tax or assessment shall be paid by
Tenant to Landlord immediately upon presentation by Landlord of copies of the
tax bills in which such taxes and assessments are included and shall, for the
purposes of this Lease, be deemed to be personal property taxes or assessments
under this Section 4.1.
4.2 Real Property. To the extent the real property taxes and assessments
-------------
on the Premises are assessed separately from the remainder of the Property,
Tenant shall be responsible for and shall pay prior to delinquency all such
taxes and assessments levied against the Premises. Upon request by Landlord,
Tenant shall furnish Landlord with satisfactory evidence of payment thereof. To
the extent the Premises are taxed or assessed as part of the Property, such real
property taxes and assessments shall constitute Operating Expenses (as that term
is defined in Section 5.2 of this Lease) and shall be paid in accordance with
the provisions of Article 5 of this Lease.
5. OPERATING EXPENSES
------------------
5.1 Payment Of Operating Expenses.
-----------------------------
(a) Tenant shall pay to Landlord, at the time and in the manner
hereinafter set forth, as additional rental, an amount equal to sixty percent
(60%) ("Tenant's Operating Cost Share") of the Operating Expenses defined in
-----------------------------
Section 5.2.
(b) Tenant's Operating Cost Share as specified in paragraph (a) of
this Section is based upon an estimated area of 45,000 square feet for the
Premises and upon an aggregate area of 75,000 square feet for the buildings
owned by Landlord on the Property. If the actual area of the Premises (when
completed) or of the buildings owned by Landlord on the Property, as determined
in good faith by Landlord's architect on a basis consistent with that used in
measuring other leased premises within the Center, differs from the assumed
numbers set forth above, then Tenant's Operating Cost Share shall be adjusted to
reflect the actual areas so determined.
(c) If Landlord constructs additional buildings on the Property (or
on any adjacent property owned by Landlord and operated, for common area
purposes, on an integrated basis with the Property) from time to time, Tenant's
Operating Cost Share shall be adjusted to be equal to the percentage determined
by dividing the gross square footage of the Premises as they then exist by the
gross square footage of all buildings located on portions of the Property owned
-5-
<PAGE>
by Landlord (or on any applicable adjacent property owned by Landlord as
described above). In determining said percentage, a building shall be taken into
account from and after the date on which a tenant first enters into possession
of the building or a portion thereof, and the good faith determination of the
gross square footage of any such building by Landlord's architects shall be
final and binding upon the parties.
5.2 Definition Of Operating Expenses. Subject to the exclusions and
--------------------------------
provisions hereinafter contained, the term "Operating Expenses" shall mean the
------------------
total costs and expenses incurred by or allocable to Landlord for management,
operation and maintenance of the Building and the Property, including, without
limitation, costs and expenses of (i) insurance, property management,
landscaping and operations, repairs and maintenance of buildings and common
areas; (ii) all utilities and services; (iii) real and personal property taxes
and assessments or substitutes therefor, including (but not limited to) any
possessory interest, use, business, license or other taxes or fees, any taxes
imposed directly on rents or services, and assessments or charges for police or
fire protection, housing, transit, open space, street or sidewalk construction
or maintenance or other similar services from time to time by any governmental
or quasi-governmental entity, and any other new taxes on landlords in addition
to taxes now in effect; (iv) supplies, equipment, utilities and tools used in
management, operation and maintenance of the Property; (v) capital improvements
to the Property or the Building amortized over a reasonable period, (aa) which
reduce or will cause future reduction of other items of Operating Expenses for
which Tenant is otherwise required to contribute or (bb) which are required by
law, ordinance, regulation or order of any governmental authority or (cc) of
which Tenant has use or which benefit Tenant; and (vi) any other costs
(including, but not limited to, any parking or utilities fees or surcharges)
allocable to or paid by Landlord, as owner of the Property or Building, pursuant
to any applicable laws, ordinances, regulations or orders of any governmental or
quasi-governmental authority or pursuant to the terms of any declarations of
covenants, conditions and restrictions now or hereafter affecting the Property
(or any applicable adjacent property owned by Landlord as described above).
Operating Expenses shall not include any costs attributable to increasing the
size of or otherwise expanding the Building or the cost of the work for which
Landlord is required to pay under Section 2.4. The distinction between items of
ordinary operating maintenance and repair and items of a capital nature shall be
made in accordance with generally accepted accounting principles applied on a
consistent basis.
5.3 Determination of Operating Expenses. On or before the Commencement
-----------------------------------
Date and during the last month of each calendar year of the term of this Lease
("Lease Year"), or as soon thereafter as practical, Landlord shall provide
----------
Tenant notice of Landlord's estimate of the Operating Expenses for the ensuing
Lease Year or applicable portion thereof. On or before the first day of each
month during the ensuing Lease Year or applicable portion thereof, beginning on
the Commencement Date, Tenant shall pay to Landlord Tenant's Operating Cost
Share of the portion of such estimated Operating Expenses allocable (on a
prorata basis) to such month; provided, however, that if such notice is not
--------
given in the last month of a Lease Year, Tenant shall continue to pay on the
basis of the prior year's estimate, if any, until the month after such notice is
given. If at any time or times it appears to Landlord that the actual Operating
Expenses will vary from Landlord's estimate by more than five percent (5%),
Landlord may, by notice to Tenant, revise its estimate for such year and
subsequent payments by Tenant for such year shall be based upon such revised
estimate.
-6-
<PAGE>
5.4. Final Accounting For Lease Year. Within ninety (90) days after the
-------------------------------
close of each Lease Year, or as soon after such 90-day period as practicable,
Landlord shall deliver to Tenant a statement of Tenant's Operating Cost Share of
the Operating Expenses for such Lease Year prepared by Landlord from Landlord's
books and records, which statement shall be final and binding on Landlord and
Tenant. If on the basis of such statement Tenant owes an amount that is more or
less than the estimated payments for such calendar year previously made by
Tenant, Tenant or Landlord, as the case may be, shall pay the deficiency to the
other party within thirty (30) days after delivery of the statement. Failure or
inability of Landlord to deliver the annual statement within such ninety (90)
day period shall not impair or constitute a waiver of Tenant's obligation to pay
Operating Expenses, or cause Landlord to incur any liability for damages.
5.5. Proration. If the Commencement Date falls on a day other than the
---------
first day of a Lease Year or if this Lease terminates on a day other than the
last day of a Lease Year, the amount of Tenant's Operating Cost Share payable by
Tenant applicable to such first and last partial Lease Year shall be prorated on
the basis which the number of days during such Lease Year in which this Lease is
in effect bears to 365. The termination of this Lease shall not affect the
obligations of Landlord and Tenant pursuant to Section 5.4 to be performed after
such termination.
6. UTILITIES
---------
6.1. Payment. Commencing with the Commencement Date and thereafter
-------
throughout the term of this Lease, Tenant shall pay, before delinquency, all
charges for water, gas, heat, light, electricity, power, sewer, telephone, alarm
system, janitorial and other services or utilities supplied to or consumed in or
upon the Premises, including any taxes on such services and utilities. It is the
intention of the parties that all such services shall be separately metered to
the Premises. In the event that any of such services supplied to the Premises
are not separately metered, then the amount thereof shall be an item of
Operating Expenses and shall be paid as provided in Article 5.
6.2. Interruption. There shall be no abatement of rent or other charges
------------
required to be paid hereunder and Landlord shall not be liable in damages or
otherwise for interruption or failure of any service or utility furnished to or
used in the Premises because of accident, making of repairs, alterations or
improvements, severe weather, difficulty or inability in obtaining services or
supplies, labor difficulties or any other cause.
7. ALTERATIONS
-----------
7.1. Right To Make Alterations. Tenant shall make no alterations, additions
-------------------------
or improvements to the Premises, other than interior non-structural alterations
costing less than Ten Thousand Dollars ($10,000.00) in each instance, without
the prior written consent of Landlord. All such alterations, additions and
improvements shall be completed with due diligence in a first-class workmanlike
manner and in material compliance with plans and specifications approved in
writing by Landlord and all applicable laws, ordinances, rules and regulations.
7.2. Title To Alterations. All alterations, additions and improvements
--------------------
installed in, on or about the Premises shall be part of the Building and the
property of Landlord, unless Landlord
-7-
<PAGE>
elects to require Tenant to remove the same upon the termination of this Lease;
provided, however, that the foregoing shall not apply to Tenant's movable
- --------
furniture and trade fixtures.
7.3. Tenant Fixtures. Notwithstanding the provisions of Sections 7.1 and
---------------
7.2, Tenant may install, remove and reinstall trade fixtures without Landlord's
prior written consent, except that any fixtures which are affixed to the
Premises or which affect the exterior or structural portions of the Building
shall require Landlord's written approval. The foregoing shall apply to Tenant's
signs, logos and insignia, all of which Tenant shall have the right to place and
remove and replace solely with Landlord's prior written consent as to location,
size and composition. Tenant shall immediately repair any damage caused by
installation and removal of fixtures under this Section 7.3.
7.4. No Liens. Tenant shall at all times keep the Premises free from all
--------
liens and claims of any contractors, subcontractors &, materialmen, suppliers or
any other parties employed either directly or indirectly by Tenant in
construction work on the Premises. Tenant may contest any claim of lien, but
only if, prior to such contest, Tenant either (i) posts security in the amount
of the claim, plus estimated costs and interest, or (ii) records a bond of a
responsible corporate surety in such amount as may be required to release the
lien from the Premises. Tenant shall indemnify, defend and hold Landlord
harmless against any and all liability, loss, damage, cost and other expenses,
including, without limitation, reasonable attorneys' fees, arising out of claims
of any lien for work performed or materials or supplies furnished at the request
of Tenant or persons claiming under Tenant.
8. MAINTENANCE AND REPAIRS
-----------------------
8.1. Landlord's Work. Landlord shall repair and maintain or cause to
----------------
be repaired and maintained those portions of the Building outside of the
Premises, the common areas of the Property, and the roof, exterior walls and
other structural portions of the Building. The cost of all work performed by
Landlord under this Section 8.1 shall be an Operating Expense hereunder, except
to the extent such work (i) is required due to the negligence of Landlord or any
other tenant of the Building, (ii) is a service to a specific tenant or tenants,
other than Tenant, for which Landlord has received or has the right to receive
full reimbursement, (iii) is a capital expense not includible as an Operating
Expense under Section 5.2 hereof, or (iv) is required due to the negligence or
willful misconduct of Tenant or its agents, employees or invitees (in which
event Tenant shall bear the full cost of such work pursuant to the
indemnification provided in Section 10.6 hereof). Tenant knowingly and
voluntarily waives the right to make repairs at Landlord's expense, or to offset
the cost thereof against rent, under any law, statute, regulation or ordinance
now or hereafter in effect.
8.2. Tenant's Obligation For Maintenance.
------------------------------------
(a) Good Order, Condition And Repair. By accepting possession of
--------------------------------
the Premises, Tenant acknowledges that the Premises are in good and sanitary
order, condition and repair. Except as provided in Section 8.1 hereof, Tenant
at its sole cost and expense shall keep and maintain in good and sanitary order,
condition and repair the Premises and every part thereof, wherever located,
including but not limited to the signs, interior, the face of the ceiling over
Tenant's floor space, HVAC equipment and related mechanical systems serving the
-8-
<PAGE>
Premises (for which equipment and systems Tenant shall enter into a service
contract with a person or entity designated or approved by Landlord), all doors,
door checks, windows, plate glass, door fronts, exposed plumbing and sewage and
other utility facilities, fixtures, lighting, wall surfaces, floor surfaces and
ceiling surfaces and all other interior repairs, foreseen and unforeseen, as
required. If (i) Tenant would otherwise be required to replace HVAC equipment
or related mechanical systems serving the Premises because such equipment or
systems are not functioning and (ii) the cost of such replacement would be
---
considered a capital cost under generally accepted accounting principles, then
Landlord shall replace such HVAC equipment or related mechanical systems and
Tenant shall reimburse Landlord for a fraction of the cost of such replacement;
the numerator of such fraction shall equal the number of months remaining during
the term of this Lease and the denominator of such fraction shall equal the
useful life of the equipment or systems (as determined in accordance with
generally accepted accounting principles).
(b) Landlord's Remedy. If Tenant, after written notice from Landlord,
------------------
fails to make or perform promptly any repairs or maintenance which are the
obligation of Tenant hereunder, Landlord shall have the right, but shall not be
required, to enter the Premises and make the repairs or perform the maintenance
necessary to restore the Premises to good and sanitary order, condition and
repair. Immediately on demand from Landlord, the cost of such repairs shall be
due and payable by Tenant to Landlord.
(c) Condition Upon Surrender. At the expiration or sooner termination
------------------------
of this Lease, Tenant shall surrender the Premises, including any additions,
alterations and improvements thereto, broom clean, in good and sanitary order,
condition and repair, ordinary wear and tear excepted, first, however, removing
all goods and effects of Tenant and any and all fixtures and items required to
be removed or specified to be removed at Landlord's election pursuant to this
Lease, and repairing any damage caused by such removal. Tenant shall not have
the right to remove fixtures or equipment if Tenant is in default hereunder
unless Landlord specifically waives this provision in writing. Tenant expressly
waives any and all interest in any personal property and trade fixtures not
removed from the Premises by Tenant at the expiration or termination of this
Lease, agrees that any such personal property and trade fixtures may, at
Landlord's election, be deemed to have been abandoned by Tenant, and authorizes
Landlord (at its election and without prejudice to any other remedies under this
Lease or under applicable law) to remove and either retain, store or dispose of
such property at Tenant's cost and expense, and Tenant waives all claims against
Landlord for any damages resulting from any such removal, storage, retention or
disposal.
9. USE OF PREMISES
---------------
9.1. Permitted Use. Tenant shall use the Premises solely for general office
-------------
and administrative purposes, and for no other purpose.
9.2. Requirement Of Continued Use. Tenant shall not at any time leave the
----------------------------
Premises unoccupied or vacant, and shall continuously during the term of this
Lease (except during any period when the Premises are unusable by reason of
events described in Article 13 hereof) conduct and carry on in the Premises the
use permitted hereunder.
-9-
<PAGE>
9.3. No Nuisance. Tenant shall not use the Premises for or carry on or
-----------
permit upon the Premises or any part thereof any offensive, noisy or dangerous
trade, business, manufacture, occupation, odor or fumes, or any nuisance or
anything against public policy, nor interfere with the rights or business of any
other tenants or of Landlord in the Building or the Property, nor commit or
allow to be committed any waste in, on or about the Premises, nor make any other
unreasonable use of the Premises. Tenant shall not do or permit anything to be
done in or about the Premises, nor bring nor keep anything therein, which will
in any way cause the Premises to be uninsurable with respect to the insurance
required by this Lease or with respect to standard fire and extended coverage
insurance with vandalism, malicious mischief and riot endorsements.
9.4. Compliance With Laws. Tenant shall not knowingly use the Premises or
--------------------
permit the Premises to be used in whole or in part for any purpose or use that
is in violation of any applicable laws, ordinances, regulations or rules of any
governmental agency or public authority. Tenant shall keep the Premises equipped
with all safety appliances required by law, ordinance or insurance on the
Premises, or any order or regulation of any public authority because of Tenant's
particular use of the Premises. Tenant shall procure all licenses and permits
required for use of the Premises. Tenant shall use the Premises in strict
accordance with all applicable ordinances, rules, laws and regulations and shall
comply with all requirements of all governmental authorities now in force or
which may hereafter be in force pertaining to the use of the Premises by Tenant,
including, without limitation, regulations applicable to noise, water, soil and
air pollution, and making such nonstructural alterations and additions thereto
as may be required from time to time by such laws, ordinances, rules,
regulations and requirements of governmental authorities or insurers of the
Premises (collectively, "Requirements") because of Tenant's construction of
------------
improvements in or other particular use of the Premises. Any structural
alterations or additions required from time to time by applicable Requirements
because of Tenant's construction of improvements in or other particular use of
the Premises shall, at Landlord's election, either (i) be made by Tenant, at
Tenant's sole cost and expense, in accordance with the procedures and standards
set forth in Section 7.1 for alterations by Tenant, or (ii) be made by Landlord
at Tenant's sole cost and expense, in which event Tenant shall pay to Landlord
as additional rent, within ten (10) days after demand by Landlord, an amount
equal to all costs incurred by Landlord in connection with such alterations or
additions. The judgment of any court, or the admission by Tenant in any
proceeding against Tenant, that Tenant has violated any law, statute, ordinance
or governmental rule, regulation or requirement shall be conclusive of such
violation as between Landlord and Tenant.
9.5. Liquidation Sales. Tenant shall not conduct or permit to be conducted
-----------------
any auction, bankruptcy sale, liquidation sale, or going out of business sale,
in, upon or about the Premises or the Property, whether said auction or sale be
voluntary, involuntary or pursuant to any assignment for the benefit of
creditors, or pursuant to any bankruptcy or other insolvency proceeding.
9.6. Environmental Matters. Without limiting the generality of Tenant's
---------------------
obligations set forth in Section 9.4 of this Lease:
(a) Tenant shall not cause or permit any hazardous or toxic substance
or hazardous waste (as defined in any federal, state or local law, ordinance or
regulation applicable
-10-
<PAGE>
to such substances or wastes) to be brought upon, kept, stored or used on or
about the Property without the prior written consent of Landlord.
(b) Tenant shall comply with all applicable laws, rules,
regulations, orders, permits, licenses and operating plans of any governmental
authority with respect to the receipt, use, handling, generation,
transportation, storage, treatment release and/or disposal of hazardous or toxic
substances or wastes in the course of or in connection with the conduct of
Tenant's business on the Property, and shall provide Landlord with copies of any
and all permits, licenses, registrations and other similar documents that
authorize Tenant to conduct any such activities in connection with Tenant's use
of the Property.
(c) Tenant shall indemnify, defend and hold Landlord harmless from
and against any and all claims, losses, damages, liabilities, costs, legal fees
and expenses of any sort arising out of or relating to (i) any failure by Tenant
to comply with any provisions of subparagraph (a) or (b) above, or (ii) any
receipt, use, handling, generation, transportation, storage, treatment, release
and/or disposal of any hazardous or toxic substances or wastes on or about the
Property in connection with Tenant's use or occupancy of the Property or as a
result of any intentional or negligent acts or omissions of Tenant or of any
agent or employee of Tenant.
(d) Landlord shall indemnify, defend and hold Tenant harmless from
and against any and all claims, losses, damages, liabilities, costs, legal fees
and expenses of any sort arising out of or relating to (i) the presence on the
Property of any hazardous or toxic substances or wastes present on the Property
as of the Commencement Date (except to the extent their presence is the result
of any intentional or negligent acts or omissions of Tenant or of any agent or
employee of Tenant), and/or (ii) any unauthorized release into the environment
of hazardous or toxic substances or wastes to the extent they result from the
negligence of or willful misconduct or omission by Landlord or its agents or
employees.
(e) The provisions of this Section 9.6 shall survive the termination
of this Lease.
10. INSURANCE AND INDEMNITY
-----------------------
10.1. Liability Insurance. Tenant shall procure and maintain in full
-------------------
force and effect at all times during the term of this Lease, at Tenant's cost
and expense, comprehensive public liability and property damage insurance to
protect against any liability to the public, or to any invitee of Tenant or
Landlord, arising out of or related to the use of or resulting from any accident
occurring in, upon or about the Premises, with limits of liability of not less
than (i) One Million Dollars ($1,000,000.00) for injury to or death of one
person, (ii) Three Million Dollars ($3,000,000.00) for personal injury or death,
per occurrence, and (iii) Five Hundred Thousand Dollars ($500,000.00) for
property damage, or a combined single limit of public liability and property
damage insurance of not less than Five Million Dollars ($5,000,000.00). Such
insurance shall name Landlord and its general partners and Managing Agent as
additional insureds thereunder. The amount of such insurance shall not be
construed to limit any liability or obligation of Tenant under this Lease.
-11-
<PAGE>
10.2. Quality Of Policies And Certificates. All policies of insurance
------------------------------------
required hereunder shall be issued by responsible insurers and shall be written
as primary policies not contributing with and not in excess of any coverage that
Landlord may carry. Tenant shall deliver to Landlord copies of policies or
certificates of insurance showing that said policies are in effect. The
coverage provided by such policies shall include the clause or endorsement
referred to in Section 10.4. If Tenant fails to acquire, maintain or renew any
insurance required to be maintained by it under this Article 10 or to pay the
premium therefor, then Landlord, at its option and in addition to its other
remedies, but without obligation so to do, may procure such insurance, and any
sums expended by it to procure any such insurance shall be repaid upon demand,
with interest as provided in Section 3.2 hereof. Tenant shall obtain written
undertakings from each insurer under policies required to be maintained by it to
notify all insureds thereunder at least thirty (30) days prior to cancellation,
amendment or revision of coverage.
10.3. Workers' Compensation. Tenant shall maintain in full force and
---------------------
effect during the term of this Lease workers' compensation insurance covering
all of Tenant's employees working on the Premises.
10.4. Waiver Of Subrogation. To the extent permitted by law and without
---------------------
affecting the coverage provided by insurance required to be maintained
hereunder, Landlord and Tenant each waive any right to recover against the other
(i) damages for injury to or death of persons, (ii) damage to property, (iii)
damage to the Premises or any part thereof, or (iv) claims arising by reason of
any of the foregoing, but only to the extent that any of the foregoing damages
and claims under subparts (i)-(iv) hereof are covered, and only to the extent of
such coverage, by casualty insurance actually carried or required to be carried
hereunder by either Landlord or Tenant. This provision is intended to waive
fully, and for the benefit of each party, any rights and claims which might give
rise to a right of subrogation in any casualty insurance carrier. Each party
shall procure a clause or endorsement on any casualty insurance policy required
under this Article 10 denying to the insurer rights of subrogation against the
other party to the extent rights have been waived by the insured prior to the
occurrence of injury or loss. Coverage provided by insurance maintained by
Tenant under this Article 10 shall not be limited, reduced or diminished by
virtue of the subrogation waiver herein contained.
10.5. Increase In Premiums. Tenant shall do all acts and pay all expenses
--------------------
necessary to insure that the Premises are not used for purposes prohibited by
any applicable fire insurance, and that Tenant's use of the Premises complies
with all requirements necessary to obtain any such insurance. If Tenant uses or
permits the Premises to be used in a manner which increases the existing rate of
any insurance on the Premises carried by Landlord, Tenant shall pay the amount
of the increase in premium caused thereby, and Landlord's costs of obtaining
other replacement insurance policies, including any increase in premium, within
ten (10) days after demand therefor by Landlord.
10.6. Indemnification.
---------------
(a) Tenant shall indemnify, defend and hold Landlord, its partners,
shareholders, officers, directors, affiliates, agents, employees and
contractors, harmless from any and all liability for injury to or death of any
person, or loss of or damage to the property of any
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<PAGE>
person, and all actions, claims, demands, costs (including, without limitation,
reasonable attorneys' fees), damages or expenses of any kind arising therefrom
which may be brought or made against Landlord or which Landlord may pay or incur
by reason of the use, occupancy and enjoyment of the Premises by Tenant or any
invitees, sublessees, licensees, assignees, employees, agents or contractors of
Tenant or holding under Tenant from any cause whatsoever other than negligence
or willful misconduct or omission by Landlord, its agents or employees.
Landlord, its partners, shareholders, officers, directors, affiliates, agents,
employees and contractors shall not be liable for, and Tenant hereby waives all
claims against such persons for, damages to goods, wares and merchandise in or
upon the Premises, or for injuries to Tenant, its agents or third persons in or
upon the Premises, from any cause whatsoever other than negligence or willful
misconduct or omission by Landlord, its agents or employees. Tenant shall give
prompt notice to Landlord of any casualty or accident in, on or about the
Premises.
(b) Landlord shall indemnify, defend and hold Tenant, its partners,
shareholders, officers, directors, affiliates, agents, employees and
contractors, harmless from any and all liability for injury to or death of any
person or loss of or damage to the property of any person, and all actions,
claims, demands, costs (including, without limitation, reasonable attorneys'
fees), damages or expenses of any kind arising therefrom which may be brought or
made against Tenant or which Tenant may pay or incur, to the extent such
liabilities, claims or other matters arise by reason of any negligence or
willful misconduct or omission by Landlord, its agents or employees.
10.7. Blanket Policy. Any policy required to be maintained hereunder may
--------------
be maintained under a so-called "blanket policy" insuring other parties and
other locations so long as the amount of insurance required to be provided
hereunder is not thereby diminished.
11. SUBLEASE AND ASSIGNMENT
-----------------------
11.1. Assignment And Sublease Of Premises. Tenant shall not have the right
-----------------------------------
or power to assign its interest in this Lease, or make any sublease, nor shall
any interest of Tenant under this Lease be assignable involuntarily or by
operation of law, without on each occasion obtaining the prior written consent
of Landlord, which consent shall not be unreasonably withheld. Any purported
sublease or assignment of Tenant's interest in this Lease requiring but not
having received Landlord's consent thereto shall be void. Any dissolution,
consolidation, merger or other reorganization of Tenant, or any sale or transfer
of the stock of or other interest in Tenant, or any series of one or more of
such events, involving in the aggregate a change of fifty percent (50%) or more
in the beneficial ownership of Tenant or its assets shall be deemed to be an
assignment hereunder and shall be void without the prior written consent of
Landlord as required above. Notwithstanding anything to the contrary in this
paragraph, a transfer of Tenant's assets to a newly formed Delaware corporation
for the sole purpose of enabling that successor entity to Tenant to make an
initial public offering of shares will not require Landlord's consent.
11.2. Rights Of Landlord. Consent by Landlord to one or more assignments
------------------
of this Lease, or to one or more sublettings of the Premises, or collection of
rent by Landlord from any assignee or sublessee, shall not operate to exhaust
Landlord's rights under this Article 11, nor constitute consent to any
subsequent assignment or subletting. No assignment of Tenant's interest in this
Lease and no sublease shall relieve Tenant of its obligations hereunder,
-13-
<PAGE>
notwithstanding any waiver or extension of time granted by Landlord to any
assignee or sublessee, or the failure of Landlord to assert its rights against
any assignee or sublessee, and regardless of whether Landlord's consent thereto
is given or required to be given hereunder. In the event of a default by any
assignee, sublessee or other successor of Tenant in the performance of any of
the terms or obligations of Tenant under this Lease, Landlord may proceed
directly against Tenant without the necessity of exhausting remedies against any
such assignee, sublessee or other successor. In addition, Tenant immediately
and irrevocably assigns to Landlord, as security for Tenant's obligations under
this Lease, all rent from any subletting of all or a part of the Premises as
permitted under this Lease, and Landlord, as Tenant's assignee and as attorney-
in-fact for Tenant, or any receiver for Tenant appointed on Landlord's
application, may collect such rent and apply it toward Tenant's obligations
under this Lease; except that, until the occurrence of an act of default by
Tenant, Tenant shall have the right to collect such rent; any amounts of such
rent collected by Landlord may not exceed the total rents due from Tenant during
the term of this Lease.
12. RIGHT OF ENTRY AND QUIET ENJOYMENT
----------------------------------
12.1. Right Of Entry. Landlord and its authorized representatives shall
--------------
have the right to enter the Premises at any time during the term of this Lease
during normal business hours and upon not less than twenty-four (24) hours prior
notice, except in the case of emergency (in which event no notice shall be
required and entry may be made at any time), for the purpose of inspecting and
determining the condition of the Premises or for any other proper purpose
including, without limitation, to make repairs, replacements or improvements
which Landlord may deem necessary, to show the Premises to prospective
purchasers, to show the Premises to prospective tenants, and to post notices of
nonresponsibility. Landlord shall not be liable for inconvenience, annoyance,
disturbance, loss of business, quiet enjoyment or other damage or loss to Tenant
by reason of making any repairs or performing any work upon the Premises, the
Building or the Property, and the obligations of Tenant under this Lease shall
not thereby be affected in any manner whatsoever, provided, however, Landlord
--------
shall use reasonable efforts to minimize the inconvenience to Tenant's normal
business operations caused thereby.
12.2. Quiet Enjoyment. Landlord covenants that Tenant, upon paying the
---------------
rent and performing its obligations hereunder and subject to all the terms and
conditions of this Lease, shall peacefully and quietly have, hold and enjoy the
Premises throughout the term of this Lease, or until this Lease is terminated as
provided by this Lease.
13. CASUALTY AND TAKING
-------------------
13.1. Termination Or Reconstruction. If during the term of this Lease the
-----------------------------
Premises or Building, or any substantial part of either, (i) is damaged
materially by fire or other casualty or by action of public or other authority
in consequence thereof, (ii) is taken by eminent domain or by reason of any
public improvement or condemnation proceeding, or in any manner by exercise of
the right of eminent domain (including any transfer in avoidance of an exercise
of the power of eminent domain), or (iii) receives irreparable damage by reason
of anything lawfully done under color of public or other authority, this Lease
shall terminate as to the entire Premises at Landlord's election by written
notice given to Tenant within sixty (60) days after the damage or taking has
occurred. If Landlord does not elect to terminate this Lease as hereinabove
provided,
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<PAGE>
Landlord shall repair any such damage and restore the Premises (to the extent of
Landlord's work therein under Section 2.4) and the Building as nearly as
reasonably possible to the condition existing before the damage or taking.
13.2. Tenant's Rights. If any portion of the Premises is so taken by
---------------
condemnation, Tenant may elect to terminate this Lease if the portion of the
Premises taken is of such extent and nature as substantially to handicap, impede
or permanently impair Tenant's use of the balance of the Premises. Tenant must
exercise its right to terminate by giving notice to Landlord within thirty (30)
days after the nature and extent of the taking have been finally determined. If
Tenant elects to terminate this Lease, Tenant shall also notify Landlord of the
date of termination, which date shall not be earlier than thirty (30) days nor
later than ninety (90) days after Tenant has notified Landlord of its election
to terminate, except that this Lease shall terminate on the date of taking if
the date of taking falls on any date before the date of termination designated
by Tenant.
13.3. Lease To Remain In Effect. If neither Landlord nor Tenant terminates
-------------------------
this Lease as hereinabove provided, this Lease shall continue in full force and
effect, except that minimum monthly rental and Tenant's Operating Cost Share
shall abate to the extent Tenant's use of the Premises is impaired for any
period that any portion of the Premises is unusable or inaccessible because of a
casualty or taking hereinabove described. Each party waives the provisions of
Code of Civil Procedure Section 1265.130, allowing either party to petition the
Superior Court to terminate this Lease in the event of a partial condemnation of
the Premises.
13.4. Reservation Of Compensation. Landlord reserves, and Tenant waives
---------------------------
and assigns to Landlord, all rights to any award or compensation for damage to
the Premises, Building, Property and the leasehold estate created hereby,
accruing by reason of any taking in any public improvement, condemnation or
eminent domain proceeding or in any other manner by exercise of the right of
eminent domain or of anything lawfully done by public authority, except that
Tenant shall be entitled to any and all compensation or damages paid for or on
account of Tenant's moving expenses, trade fixtures, equipment and any leasehold
improvements in the Premises, the cost of which was borne by Tenant, but only to
the extent of the then remaining unamortized value of such improvements computed
on a straight-line basis over the term of this Lease. Tenant covenants to
deliver such further assignments of the foregoing as Landlord may from time to
time request.
13.5. Restoration Of Fixtures. If Landlord repairs or causes repair of the
-----------------------
Premises after such damage or taking, Tenant at its sole expense shall repair
and replace promptly all fixtures, equipment and other property of Tenant
located at, in or upon the Premises and all additions, alterations and
improvements and all other items installed or paid for by Tenant under this
Lease that were damaged or taken, so as to restore the same to a condition
substantially equal to that which existed immediately prior to the damage or
taking. Tenant shall have the right to make modifications to the Premises,
fixtures and improvements, subject to the prior written approval of Landlord. In
its review of Tenant's plans and specifications, Landlord may take into
consideration the effect of the proposed modifications on the exterior
appearance, the structural integrity and the mechanical and other operating
systems of the Building.
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<PAGE>
14. DEFAULT
-------
14.1. Events Of Default. The occurrence of any of the following shall
-----------------
constitute an event of default on the part of Tenant:
(a) Abandonment. Abandonment of the Premises. Tenant waives any
-----------
right Tenant may have to notice under Section 1951.3 of the California Civil
Code, the terms of this subsection (a) being deemed such notice to Tenant as
required by said Section 1951.3;
(b) NonPayment. Failure to pay, when due, any amount payable to
----------
Landlord hereunder, such failure continuing for a period of five (5) days after
written notice of such failure; provided, however, that any such notice shall be
--------
in lieu of, and not in addition to, any notice required under California Code of
Civil Procedure Section 1161 et seq., as amended from time to time;
-- ---
(c) Other Obligations. Failure to perform any obligation, agreement
-----------------
or covenant under this Lease other than those matters specified in subsection
(b) hereof, such failure continuing for fifteen (15) days after written notice
of such failure, or, if it is not possible to cure such default within fifteen
(15) days, failure to commence cure within said fifteen (15) day period and
thereafter to proceed diligently to complete cure; provided, however, that any
--------
such notice shall be in lieu of, and not in addition to, any notice required
under California Code of Civil Procedure Section 1161 et seq., as amended from
-- ---
time to time;
(d) General Assignment. A general assignment by Tenant for the
------------------
benefit of creditors;
(e) Bankruptcy. The filing of any voluntary petition in bankruptcy
----------
by Tenant, or the filing of an involuntary petition by Tenant's creditors, which
involuntary petition remains undischarged for a period of thirty (30) days. In
the event that under applicable law the trustee in bankruptcy or Tenant has the
right to affirm this Lease and continue to perform the obligations of Tenant
hereunder, such trustee or Tenant shall, in such time period as may be permitted
by the bankruptcy court having jurisdiction, cure all defaults of Tenant
hereunder outstanding as of the date of the affirmance of this Lease and provide
to Landlord such adequate assurances as may be necessary to ensure Landlord of
the continued performance of Tenant's obligations under this Lease.
Specifically, but without limiting the generality of the foregoing, such
adequate assurances must include assurances that the Premises continue to be
operated only for the use permitted hereunder. The provisions hereof are to
assure that the basic understandings between Landlord and Tenant with respect to
Tenant's use of the Premises and the benefits to Landlord therefrom are
preserved, consistent with the purpose and intent of applicable bankruptcy laws;
(f) Receivership. The employment of a receiver appointed by court
------------
order to take possession of substantially all of Tenant's assets or the
Premises, if such receivership remains undissolved for a period of thirty (30)
days;
(g) Attachment. The attachment, execution or other judicial seizure
----------
of all or substantially all of Tenant's assets or the Premises, if such
attachment or other seizure remains undismissed or undischarged for a period of
thirty (30) days after the levy thereof, or
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<PAGE>
(h) Insolvency. The admission by Tenant in writing of its inability
----------
to pay its debts as they become due, the filing by Tenant of a petition seeking
any reorganization or arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, the filing by Tenant of an answer admitting or failing timely to
contest a material allegation of a petition filed against Tenant in any such
proceeding or, if within thirty (30) days after the commencement of any
proceeding against Tenant seeking any reorganization or arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such proceeding shall not have
been dismissed.
14.2. Remedies Upon Tenant's Default.
------------------------------
(a) Upon the occurrence of any event of default described in Section
14.1 hereof (meaning that the applicable cure period, if any, has lapsed),
Landlord, in addition to and without prejudice to any other rights or remedies
it may have, shall have the immediate right to re-enter the Premises or any part
thereof and repossess the same, expelling and removing therefrom all persons and
property (which property may be stored in a public warehouse or elsewhere at the
cost and risk of and for the account of Tenant), using such force as may be
necessary to do so (as to which Tenant hereby waives any claim for loss or
damage that may thereby occur). In addition to or in lieu of such re-entry, and
without prejudice to any other rights or remedies it may have, Landlord shall
have the right either (i) to terminate this Lease and recover from Tenant all
damages incurred by Landlord as a result of Tenant's default, as hereinafter
provided, or (ii) to continue this Lease in effect and recover rent and other
charges and amounts as they become due.
(b) Even if Tenant has breached this Lease or abandoned the Premises,
this Lease shall continue in effect for so long as Landlord does not terminate
Tenant's right to possession under subsection (a) hereof and Landlord may
enforce all of its rights and remedies under this Lease, including the right to
recover rent as it becomes due, and Landlord, without terminating this Lease,
may exercise all of the rights and remedies of a lessor under California Civil
Code Section 1951.4 (lessor may continue lease in effect after lessee's breach
and abandonment and recover rent as it becomes due, if lessee has right to
sublet or assign, subject only to reasonable limitations), or any successor Code
section. Acts of maintenance, preservation or efforts to relet the Premises or
the appointment of a receiver upon application of Landlord to protect Landlord's
interests under this Lease shall not constitute a termination of Tenant's right
to possession.
(c) If Landlord terminates this Lease pursuant to this Section 14.2,
Landlord shall have all of the rights and remedies of a landlord provided by
Section 1951.2 of the Civil Code of the State of California, or any successor
Code section, which remedies include Landlord's right to recover from Tenant (i)
the worth at the time of award of the unpaid rent and additional 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 and additional rent which would have been
earned after termination until the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided, (iii) the
worth at the time of award of the amount by which the unpaid rent and additional
rent for the balance of the term after the time of award exceeds the amount of
such rental loss that Tenant proves could be reasonably avoided, and (iv)
-17-
<PAGE>
any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under this
Lease or which in the ordinary course 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 repair, renovation and
alteration of the Premises, reasonable attorneys' fees, and other reasonable
costs. The "worth at the time of award" of the amounts referred to in clauses
(i) and (ii) above shall be computed by allowing interest at ten percent (10%)
per annum from the date such amounts accrued to Landlord. The "worth at the time
of award" of the amounts referred to in clause (iii) above shall be computed by
discounting such amount at one percentage point above the discount rate of the
Federal Reserve Bank of San Francisco at the time of award.
14.3. Remedies Cumulative. All rights, privileges and elections or
-------------------
remedies of Landlord contained in this Article 14 are cumulative and not
alternative to the extent permitted by law and except as otherwise provided
herein.
15. SUBORDINATION, ATTORNMENT AND SALE
----------------------------------
15.1. Subordination To Mortgage. This Lease, and any sublease entered
-------------------------
into by Tenant under the provisions of this Lease, shall be subject and
subordinate to any ground lease, mortgage, deed of trust, sale/leaseback
transaction or any other hypothecation for security now or hereafter placed upon
the Building, the Property, or both, and the rights of any assignee of Landlord
or of any ground lessor, mortgagee, trustee, beneficiary or leaseback lessor
under any of the foregoing, and to any and all advances made on the security
thereof and to all renewals, modifications, consolidations, replacements and
extensions thereof. If any mortgagee, trustee, beneficiary, ground lessor,
sale/leaseback lessor or assignee elects to have this Lease be an encumbrance
upon the Property prior to the lien of its mortgage, deed of trust, ground lease
or leaseback lease or other security arrangement and gives notice thereof to
Tenant, this Lease shall be deemed prior thereto, whether this Lease is dated
prior or subsequent to the date thereof or the date of recording thereof.
Tenant, and any sublessee, shall execute such documents as may reasonably be
requested by any mortgagee, trustee, beneficiary, ground lessor, sale/leaseback
lessor or assignee to evidence the subordination herein set forth or to make
this Lease prior to the lien of any mortgage, deed of trust, ground lease,
leaseback lease or other security arrangement, as the case may be, and if Tenant
fails to do so within ten (10) days after demand from Landlord, Tenant
constitutes and appoints Landlord as Tenant's attorney-in-fact and in Tenant's
name, place and stead to do so. Upon any default by Landlord in the performance
of its obligations under any mortgage, deed of trust, ground lease, leaseback
lease or assignment, Tenant (and any sublessee) shall, notwithstanding any
subordination hereunder, attorn to the mortgagee, trustee, beneficiary, ground
lessor, leaseback lessor or assignee thereunder upon demand and become the
tenant of the successor in interest to Landlord, at the option of such successor
in interest, and shall execute and deliver any instrument or instruments
confirming the attornment herein provided for.
15.2. Sale Of Landlord's Interest. Upon sale, transfer or assignment of
---------------------------
Landlord's entire interest in the Building and Property, Landlord shall be
relieved of its obligations hereunder with respect to liabilities accruing from
and after the date of such sale, transfer or assignment.
-18-
<PAGE>
15.3. Estoppel Certificates. Tenant shall at any time and from time to
---------------------
time, within ten (10) days after written request by Landlord, execute,
acknowledge and deliver to Landlord a certificate in writing stating: (i) that
this Lease is unmodified and in full force and effect, or if there have been any
modifications, that this Lease is in full force and effect as modified and
stating the date and the nature of each modification (ii) the date to which
rental and all other sums payable hereunder have been paid; (iii) that Landlord
is not in default in the performance of any of its obligations under this Lease,
that Tenant has given no notice of default to Landlord and that no event has
occurred which, but for the expiration of the applicable time period, would
constitute an event of default hereunder, or if Tenant alleges that any such
default, notice or event has occurred, specifying the same in reasonable detail;
and (iv) such other matters as may reasonably be requested by Landlord or any
institutional lender, mortgagee, trustee, beneficiary, ground lessor,
sale/leaseback lessor or prospective purchaser of the Property. Any such
certificate provided under this Section 15.3 may be relied upon by any lender,
mortgagee, trustee, beneficiary, assignee or successor in interest to Landlord,
by any prospective purchaser, by any purchaser on foreclosure or sale, by any
grantee under a deed in lieu of foreclosure of any mortgage or deed of trust on
the Property or Premises, or by any other third party. Failure to execute and
return within the required time any estoppel certificate requested hereunder
shall be deemed to be an admission of the truth of the matters set forth in the
form of certificate submitted to Tenant for execution.
15.4. Subordination to CC&Rs. This Lease, and any permitted sublease
----------------------
entered into by Tenant under the provisions of this Lease, shall be subject and
subordinate (a) to any declarations of covenants, conditions and restrictions
affecting the Property from time to time, provided that the terms of such
declarations are reasonable and do not discriminate against Tenant relative to
other similarly situated tenants occupying portions of the Property, and (b) to
the Declaration of Covenants, Conditions and Restrictions dated June 20, 1979
and recorded on July 5, 1979 as Instrument No.79-130777, Alameda County Records,
as amended from time to time (the "Master Declaration"), the provisions of which
------------------
Master Declaration are an integral part of this Lease. Tenant agrees to
execute, upon request by Landlord, any documents reasonably required from time
to time to evidence such subordination.
16. SECURITY
--------
16.1. Deposit. Concurrently with Tenant's execution of this Lease,
-------
Tenant shall deposit with Landlord the sum of Fifty-Six Thousand Two Hundred
Fifty Dollars ($56,250), which sum (the "Security Deposit") shall be held by
----------------
Landlord as security for the faithful performance of all of the terms,
covenants, and conditions of this Lease to be kept and performed by Tenant
during the term hereof. If Tenant defaults with respect to any provision of
this Lease, including, without limitation, the provisions relating to the
payment of rental and other sums due hereunder, Landlord shall have the right,
but shall not be required, to use, apply or retain all or any part of the
Security Deposit for the payment of rental or any other amount which Landlord
may spend or become obligated to spend by reason of Tenant's default or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default. If any portion of the Security Deposit is so used
or applied, Tenant shall, within ten (10) days after written demand therefor,
deposit cash with Landlord in an amount sufficient to restore the Security
Deposit to its original amount and Tenant's failure to do so shall be a material
breach of this Lease. Landlord shall not be required to keep any deposit under
this Section separate from
-19-
<PAGE>
Landlord's general funds, and Tenant shall not be entitled to interest thereon.
If Tenant fully and faithfully performs every provision of this Lease to be
performed by it, the Security Deposit, or any balance thereof, shall be returned
to Tenant or, at Landlord's option, to the last assignee of Tenant's interest
hereunder, at the expiration of the term of this Lease and after Tenant has
vacated the Premises. In the event of termination of Landlord's interest in this
Lease, Landlord shall transfer all deposits then held by Landlord under this
Section to Landlord's successor in interest, whereupon Tenant agrees to release
Landlord from all liability for the return of such deposit or the accounting
thereof.
17. MISCELLANEOUS
-------------
17.1. Notices. All notices, consents, waivers and other communications
-------
which this Lease requires or permits either party to give to the other shall be
in writing and shall be deemed given when delivered personally (including
delivery by private courier or express delivery service) or four (4) days after
deposit in the United States mail, registered or certified mail, postage
prepaid, addressed to the parties at their respective addresses as follows:
To Tenant: (until Commencement Date)
AllAdvantage.com
25954 Eden Landing Road
Hayward, CA 94545
Attn: Jamin Seid
(after Commencement Date)
AllAdvantage.com
4010 Point Eden Way
Hayward, CA 94545
Attn: Jamin Seid
To Landlord: Hayward Point Eden I Limited Partnership
c/o Britannia Developments, Inc.
1939 Harrison Street, Suite 715
Park Plaza Building
Oakland, CA 9461.2
Attn: T. J. Bristow
with copy to: Folger Levin & Kahn LLP
Embarcadero Center West
275 Battery Street, 23rd Floor
San Francisco, CA 94111
Attn: Donald E. Kelley, Jr.
or to such other address as may be contained in a notice at least fifteen (l5)
days prior to the address change from either party to the other given pursuant
to this Section. Rental payments and other sums required by this Lease to be
paid by Tenant shall be delivered to Landlord at
-20-
<PAGE>
Landlord's address provided in this Section, or to such other address as
Landlord may from time to time specify in writing to Tenant, and shall be deemed
to be paid only upon actual receipt.
17.2. Successors And Assigns. The obligations of this Lease shall run
----------------------
with the land, and this Lease shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that the
original Landlord named herein and each successive Landlord under this Lease
shall be liable only for obligations accruing during the period of its ownership
of the Property, said liability terminating upon termination of such ownership
and passing to the successor lessor.
17.3. No Waiver. The failure of Landlord to seek redress for violation,
---------
or to insist upon the strict performance, of any covenant or condition of this
Lease shall not be deemed a waiver of such violation, or prevent a subsequent
act which would originally have constituted a violation from having all the
force and effect of an original violation.
17.4. Severability. If any provision of this Lease or the application
------------
thereof is held to be invalid or unenforceable, the remainder of this Lease or
the application of such provision to persons or circumstances other than those
as to which it is invalid or unenforceable shall not be affected thereby, and
each of the provisions of this Lease shall be valid and enforceable, unless
enforcement of this Lease as so invalidated would be unreasonable or grossly
inequitable under all the circumstances or would materially frustrate the
purposes of this Lease.
17.5. Litigation Between Parties. In the event of any litigation or
--------------------------
other dispute resolution proceedings between the parties hereto arising out of
or in connection with this Lease, the prevailing party shall be reimbursed for
all reasonable costs, including, but not limited to, reasonable accountants'
fees and attorneys' fees, incurred in connection with such proceedings
(including, but not limited to, any appellate proceedings relating thereto) or
in connection with the enforcement of any judgment or award rendered in such
proceedings. "Prevailing party" within the meaning of this Section shall
----------------
include, without limitation, a party who dismisses an action for recovery
hereunder in exchange for payment of the sums allegedly due, performance of
covenants allegedly breached or consideration substantially equal to the relief
sought in the action.
17.6. Surrender. A voluntary or other surrender of this Lease by
---------
Tenant, or a mutual termination thereof between Landlord and Tenant, shall not
result in a merger but shall, at the option of Landlord, operate either as an
assignment to Landlord of any and all existing subleases and subtenancies, or a
termination of all or any existing subleases and subtenancies. This provision
shall be contained in any and all assignments or subleases made pursuant to this
Lease.
17.7. Interpretation. The provisions of this Lease shall be construed
--------------
as a whole, according to their common meaning, and not strictly for or against
Landlord or Tenant. The captions preceding the text of each Section and
subsection hereof are included only for convenience of reference and shall be
disregarded in the construction or interpretation of this Lease.
17.8. Entire Agreement. This written Lease, together with the exhibits
----------------
hereto, contains all the representations and the entire understanding between
the parties hereto with respect to the
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<PAGE>
subject matter hereof. Any prior correspondence, memoranda or agreements are
replaced in total by this Lease and the exhibits hereto. This Lease may be
modified only by an agreement in writing signed by each of the parties.
17.9. Governing Law. This Lease and all exhibits hereto shall be
-------------
construed and interpreted in accordance with and be governed by all the
provisions of the laws of the State of California.
17.10. No Partnership. The relationship between Landlord and Tenant is
--------------
solely that of a lessor and lessee. Nothing contained in this Lease shall be
construed as creating any type or manner of partnership, joint venture or joint
enterprise with or between Landlord and Tenant.
17.11. Financial Information. From time to time Tenant shall promptly
---------------------
provide directly to prospective lenders and purchasers of the Property
designated by Landlord such financial information pertaining to the financial
status of Tenant as Landlord may reasonably request; provided, Tenant shall be
--------
permitted to provide such financial information in a manner which Tenant deems
reasonably necessary to protect the confidentiality of such information. In
addition, from time to time, Tenant shall provide Landlord with such financial
information pertaining to the financial status of Tenant as Landlord may
reasonably request. Landlord agrees that all financial information supplied to
Landlord by Tenant shall be treated as confidential material, and shall not be
disseminated to any person or entity without Tenant's prior written consent,
except that Landlord shall be entitled to provide such information, subject to
reasonable precautions to protect the confidential nature thereof, (i) to
Landlord's partners and professional advisors, solely for use in connection with
Landlord's execution and enforcement of this Lease, and (ii) to prospective
lenders and/or purchasers of the Property, solely for use in connection with
their bona fide consideration of a proposed financing or purchase of the
Property, provided that such prospective lenders and/or purchasers are not
---------
engaged in businesses directly competitive with the business then being
conducted by Tenant. For purposes of this Section, without limiting the
generality of the obligations provided herein, it shall be deemed reasonable for
Landlord to request copies of Tenant's most recent audited annual financial
statements, or, if audited statements have not been prepared, unaudited
financial statements for Tenant's most recent fiscal year, accompanied by a
certificate of Tenant's chief financial officer that such financial statements
fairly present Tenant's financial condition as of the date(s) indicated.
Landlord and Tenant recognize the need of Tenant to maintain the
confidentiality of information regarding its financial status and the need of
Landlord to be informed of, and to provide to its partners and to prospective
lenders and purchasers of the Property financial information pertaining to,
Tenant's financial status. Landlord and Tenant agree to cooperate with each
other in achieving these needs within the context of the obligations set forth
in this Section.
17.12. Costs. If Tenant requests the consent of Landlord under any
-----
provision of this Lease for any act that Tenant proposes to do hereunder,
including, without limitation, assignment or subletting of the Premises, Tenant
shall, as a condition to doing any such act and the receipt of such consent,
reimburse Landlord promptly for any and all reasonable costs and expenses
incurred by Landlord in connection therewith, including, without limitation,
reasonable attorneys' fees.
-22-
<PAGE>
17.13. Time. Time is of the essence of this Lease, and of every term and
----
condition hereof.
17.14. Rules And Regulations. Tenant shall observe, comply with and
---------------------
obey, and shall cause its employees, agents and, to the best of Tenant's
ability, invitees to observe, comply with and obey such rules and regulations as
Landlord may promulgate from time to time for the safety, care, cleanliness,
order and use of the Premises, the Building and the Property.
17.15. Brokers. Landlord agrees to pay a brokerage commission to Cornish
-------
& Carey Commercial in connection with the consummation of this Lease in
accordance with a separate agreement. Tenant represents and warrants that no
other broker participated in the consummation of this Lease and agrees to
indemnify, defend and hold Landlord harmless against any liability, cost or
expense, including, without limitation, reasonable attorneys' fees, arising out
of any claims for brokerage commissions or other similar compensation in
connection with any conversations, prior negotiations or other dealings by
Tenant with any other broker.
17.16. Memorandum Of Lease. At any time during the term of this Lease,
-------------------
either party, at its sole expense, shall be entitled to record a memorandum of
this Lease and, if either party so elects, both parties agree to cooperate in
the preparation, execution, acknowledgement and recordation of such document in
reasonable form.
17.17. Corporate Authority. The person signing this Lease on behalf of
-------------------
Tenant warrants that he or she is fully authorized to do so and, by so doing, to
bind Tenant.
17.18. Execution and Delivery. Submission of this Lease for examination
----------------------
or signature by Tenant does not constitute an agreement or reservation of or
option for lease of the Premises. This instrument shall not be effective or
binding upon either party, as a lease or otherwise, until executed and delivered
by both Landlord and Tenant. This Lease may be executed in one or more
counterparts and by separate parties on separate counterparts, but each such
counterpart shall constitute an original and all such counterparts together
shall constitute one and the same instrument.
17.19. Exercise of Option. The effectiveness of this Lease is conditioned
------------------
on Tenant's proper exercise, on or before the effective date of this Lease, of
its option to lease from Landlord premises it is currently subleasing from
Worldcom, pursuant to that certain Option Agreement between Landlord and Tenant
dated September ___, 1999.
-23-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first set forth above.
"Landlord" "Tenant"
Hayward Point Eden I Limited AllAdvantage.com,
Partnership, a Delaware limited a California corporation
partnership
By: Britannia Developments, Inc.,
a California corporation, Its By: /S/ JAMIN SEID
--------------
General Partner Its: Director of Real Estate.
By: /S/T.J. BRISTOW
---------------
T.J. Bristow By:_______________________________
President Its:___________________________
-24-
<PAGE>
EXHIBITS
--------
EXHIBIT A Location of Premises
EXHIBIT B Real Property Description
EXHIBIT C Acknowledgement of Lease Commencement
-25-
<PAGE>
LOCATION OF PREMISES
--------------------
[LOCATION OF PREMISES MAP]
EXHIBIT A
---------
<PAGE>
REAL PROPERTY DESCRIPTION
-------------------------
THE PROPERTY
Improved real property located in the City of Hayward, County of Alameda, State
of California more particularly described as follows:
Lot 7, Tract 4019, filed June 28, 1979, Map Book 100, Pages 97, 98 and 99,
Alameda County Records.
Subject to easements, restrictions and other matters of record affecting title.
THE CENTER
Improved real property located in the City of Hayward, County of Alameda, State
of California, more particularly described as follows:
Lots 1,2,3,4,5 and 7, Tract 4019, filed June 28, 1979, Map Book 100, Pages
97,98 and 99, Alameda County Records.
Subject to easements, restrictions and other matters of record affecting title.
EXHIBIT B
---------
<PAGE>
ACKNOWLEDGEMENT OF LEASE COMMENCEMENT
-------------------------------------
This Acknowledgement is executed as of January 11, 2000, by Hayward Point
Eden I Limited Partnership, a Delaware limited partnership ("Landlord"), and
--------
AllAdvantage.com, a California corporation ("Tenant"), pursuant to Section 2.5
------
of the Lease dated December 22, 1999 between Landlord and Tenant (the "Lease")
-----
covering premises located at 4010 Point Eden Road, Hayward, CA 94545 (the
"Premises").
- ---------
Landlord and Tenant hereby acknowledge and agrees as follows:
1. The Commencement Date under the Lease is January, 2000.
2. The termination date under the Lease shall be December 31, 2000,
subject to any applicable provisions of the Lease for extension or early
termination thereof.
3. The agreed square footage of the Premises, as built, is 45,000 square
feet.
4. Tenant accepts the Premises and acknowledges the satisfactory
completion of all improvements therein (if any) required to be made by Landlord,
subject only to any applicable "punch list" or similar procedures specifically
provided under the Lease.
EXECUTED as of the date first set forth above.
"Landlord" "Tenant"
Hayward Point Eden I Limited AllAdvantage.com,
Partnership, a Delaware limited a California corporation
partnership
By: Britannia Developments, Inc.,
a California corporation, Its By: /S/ JAMIN SEID
---------------
General Partner Its: Director of Real Estate.
By: /S/ T.J. BRISTOW
----------------
T.J. Bristow By:________________________________
President Its:____________________________
EXHIBIT C
---------
<PAGE>
EXHIBIT 10.11
Basic Lease Information
Date: January 21, 2000
Tenant: AllAdvantage.com
Address: Prior to Lease Commencement Date:
25954 Eden Landing Road
Hayward, California 94545
From and after Lease Commencement Date:
801 Gateway Boulevard
South San Francisco, California 94080
Landlord: HMS Gateway Office, L.P.
Address: c/o Hines Interests Limited Partnership
651 Gateway Boulevard, Suite 1140
South San Francisco, California 94080
Leased Premises: Building commonly known as 801 Gateway
Boulevard, South San Francisco, California
94080
Net Rentable Area: One Hundred Thirty Five Thousand (135,000)
square feet
Scheduled Term Commencement Date: September 15, 2000
Rent Commencement Date: December 15, 2000
Term: Ten (10) years, commencing on the Rent
Commencement Date and expiring on the day
immediately preceding the tenth (10th)
anniversary of the Rent Commencement Date
<PAGE>
<TABLE>
<CAPTION>
Base Rent: Monthly Amount/
Year Square Foot Amount/Month
<S> <C> <C> <C>
1 $2.50 $337,500.00
2 $2.58 $348,300.00
3 $2.65 $357,750.00
4 $2.73 $368,550.00
5 $2.81 $379,350.00
6 $2.90 $391,500.00
7 $2.99 $403,650.00
8 $3.07 $414,450.00
9 $3.17 $427,950.00
10 $3.26 $440,100.00
</TABLE>
Tenant Improvements Allowance: Four Million Fifty Thousand Dollars
($4,050,000.00) (viz., $30.00 per rentable square
foot)
Tenant Improvements Loan: Six Hundred Seventy Five Thousand Dollars
($675,000.00) (viz., $5.00 per rentable square
foot)
Tenant's Milestone Dates: Conceptual/Space Plans Submittal Date:
March 15, 2000
Construction Documents Submittal Date:
July 15, 2000
Letter of Credit: Letter of Credit in the amount of Six Million
Three Hundred Thousand Dollars ($6,300,000),
which Letter of Credit shall be subject to
reduction in accordance with Section 5.13(b) of
the Lease.
Parking: Four Hundred Five (405) parking spaces
Broker: Grubb & Ellis Company (Tenant's Broker)
<PAGE>
======================================================
Office Building Lease
by and between
HMS Gateway Office, L.P.,
a Delaware limited partnership
and
AllAdvantage.com,
a California corporation
=======================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article 1 Definitions................................................... 1
1.01 "801 Gateway Preliminary Specifications"...................... 1
1.02 "Additional Rent"............................................. 1
1.03 "Additional Sublease Information"............................. 1
1.04 "Adjacent Parcels"............................................ 1
1.05 "Alterations"................................................. 1
1.06 "Alternate Parking Spaces".................................... 1
1.07 "Applicable Requirements"..................................... 2
1.08 "Arbitration Notice".......................................... 2
1.09 "Assumption Agreement"........................................ 2
1.10 "Availability Notice"......................................... 2
1.11 "Bank"........................................................ 2
1.12 "Base Building Improvements".................................. 2
1.13 "Base Building Improvements Construction Commencement Date"... 2
1.14 "Base Rent"................................................... 2
1.15 "Basic Operating Cost"........................................ 2
1.16 "Basic Operating Cost Adjustment"............................. 2
1.17 "Basic Operating Cost Statement".............................. 2
1.18 "Basic Services".............................................. 3
1.19 "Building".................................................... 3
1.20 "Building Standard Improvements".............................. 3
1.21 "Business Day"................................................ 3
1.22 "Business Hours".............................................. 3
1.23 "Claims"...................................................... 3
1.24 "Common Areas"................................................ 3
1.25 "Conceptual/Space Plans"...................................... 3
1.26 "Conceptual/Space Plans Submittal Date"....................... 3
1.27 "Condemnation"................................................ 4
1.28 "Construction Documents"...................................... 4
1.29 "Construction Documents Submittal Date"....................... 4
1.30 "Designated Parking Areas".................................... 4
1.31 "Election Notice"............................................. 4
1.32 "Electronic Payment Arrangement".............................. 4
1.33 "Estimated Basic Operating Cost".............................. 4
1.34 "Event of Default"............................................ 4
1.35 "Existing Tenants"............................................ 4
1.36 "Expansion Transaction"....................................... 4
1.37 "Expenses".................................................... 4
1.38 "Fair Market Rent"............................................ 4
1.39 "First Renewal Option"........................................ 5
1.40 "First Renewal Term".......................................... 5
1.41 "FMR Notice".................................................. 5
1.42 "GAAP"........................................................ 5
</TABLE>
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<TABLE>
<S> <C>
1.43 "Governmental Agency"......................................... 5
1.44 "Gross Rent".................................................. 5
1.45 "Guarantor"................................................... 5
1.46 "Hazardous Material".......................................... 5
1.47 "Hazardous Materials Claims".................................. 6
1.48 "Hazardous Materials Laws".................................... 6
1.49 "Landlord Parties"............................................ 6
1.50 "Landlord's Architect"........................................ 6
1.51 "Landlord's Contamination".................................... 6
1.52 "Landlord's Review Period".................................... 7
1.53 "Laws"........................................................ 7
1.54 "LC Face Amount".............................................. 7
1.55 "LC Termination Date"......................................... 7
1.56 "Leased Premises"............................................. 7
1.57 "Letter of Credit"............................................ 7
1.58 "Letter of Credit Early Cancellation Date".................... 7
1.59 "Letter of Credit Proceeds"................................... 7
1.60 "Limited Sublease"............................................ 7
1.61 "Major Tenant"................................................ 8
1.62 "Major Vertical Penetrations"................................. 8
1.63 "Market Capitalization"....................................... 8
1.64 "Mortgage Lender"............................................. 8
1.65 "Negotiation Notice".......................................... 8
1.66 "Net Profits"................................................. 8
1.67 "Net Rentable Area"........................................... 9
1.68 "Nondisturbance Agreement".................................... 9
1.69 "Off-Site Conditions"......................................... 9
1.70 "Permitted Alterations"....................................... 9
1.71 "Permitted Hazardous Materials"............................... 9
1.72 "Permitted Use"............................................... 9
1.73 "Post Clause (ii) Reduction Face Amount"...................... 10
1.74 "Pre-Existing Contamination".................................. 10
1.75 "Prime"....................................................... 10
1.76 "Project"..................................................... 10
1.77 "REAs"........................................................ 10
1.78 "Renewal Options"............................................. 10
1.79 "Renewal Terms"............................................... 10
1.80 "Rent"........................................................ 11
1.81 "Rent Commencement Date"...................................... 11
1.82 "Rescission Notice"........................................... 11
1.83 "Satellite Dish".............................................. 11
1.84 "Second Renewal Option"....................................... 11
1.85 "Second Renewal Term"......................................... 11
1.86 "Security Deposit"............................................ 11
1.87 "Specified Contamination"..................................... 11
1.88 "Specified Percentage"........................................ 11
</TABLE>
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<TABLE>
<S> <C>
1.89 "Sublease/Assignment Costs"................................... 11
1.90 "Subordination Agreement"..................................... 12
1.91 "Subtenant Interview"......................................... 12
1.92 "Tenant Affiliate"............................................ 12
1.93 "Tenant Extra Improvements"................................... 12
1.94 "Tenant Improvements"......................................... 12
1.95 "Tenant Improvements Allowance"............................... 12
1.96 "Tenant Improvements Construction Commencement Date".......... 12
1.97 "Tenant Improvements Cost".................................... 13
1.98 "Tenant Improvements Loan".................................... 13
1.99 "Tenant Improvements Substantial Completion Date"............. 13
1.100 "Tenant Parties".............................................. 13
1.101 "Tenant's Architect".......................................... 13
1.102 "Tenant's Construction Manager"............................... 13
1.103 "Tenant Delay"................................................ 13
1.104 "Tenant's Initial Tenant Improvements Contribution"........... 13
1.105 "Tenant's Personal Property".................................. 13
1.106 "Tenant's Proportionate Share"................................ 13
1.107 "Term"........................................................ 14
1.108 "Term Commencement Date"...................................... 14
1.109 "Term Expiration Date"........................................ 14
Article 2 Leased Premises............................................... 14
2.01 Lease......................................................... 14
2.02 Landlord's Reserved Rights.................................... 14
2.03 Construction of Base Building Improvements and Tenant
Improvements.................................................. 15
Article 3 Rent, Term, Use and Basic Operating Costs..................... 15
3.01 Term.......................................................... 15
3.02 Options to Extend Term........................................ 16
3.03 Use........................................................... 19
3.04 Payment of Base Rent and Tenant's Proportionate Share(s) of
Estimated Basic Operating Cost................................ 19
3.05 Net Lease..................................................... 19
3.06 Basic Operating Cost.......................................... 20
3.07 Adjustment For Variation Between Estimated and Actual......... 24
3.08 Computation of Basic Operating Cost Adjustment................ 24
3.09 Tenant's Right to Audit Basic Operating Cost.................. 24
Article 4 Landlord Covenants............................................ 25
4.01 Basic Services................................................ 25
4.02 Extra Services................................................ 26
4.03 Graphics and Signage.......................................... 27
4.04 Repair Obligation............................................. 27
4.05 Peaceful Enjoyment............................................ 28
</TABLE>
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<TABLE>
<S> <C>
Article 5 Tenant's Covenants............................................ 28
5.01 Payments By Tenant............................................ 28
5.02 Taxes On Personal Property and Tenant Extra Improvements...... 28
5.03 Repairs By Tenant............................................. 28
5.04 Waste......................................................... 29
5.05 Assignment or Sublease........................................ 29
5.06 Alterations, Additions or Improvements........................ 31
5.07 Liens......................................................... 33
5.08 Compliance With Laws, Insurance Standards and Non-
Discrimination................................................ 33
5.09 Entry For Repairs, Inspection, Posting Notices, Etc........... 34
5.10 No Nuisance................................................... 34
5.11 Subordination; Mortgagee Protection; Reciprocal Easement
Agreements.................................................... 34
5.12 Estoppel Certificate.......................................... 36
5.13 Letter of Credit.............................................. 36
5.14 Security Deposit.............................................. 40
5.15 Tenant's Remedies............................................. 41
5.16 Rules and Regulations......................................... 41
5.17 Prohibition and Indemnity With Respect To Hazardous Material.. 41
5.18 Surrender of Premises On Termination.......................... 42
5.19 Window Coverings.............................................. 43
Article 6 Condition and Operation of the Building....................... 43
6.01 Exhibit B Controls............................................ 43
6.02 Alteration.................................................... 43
Article 7 Casualty, Eminent Domain and Miscellaneous Matters............ 44
7.01 Landlord's Casualty Insurance................................. 44
7.02 Liability Insurance........................................... 44
7.03 Tenant's Casualty Insurance and Additional Tenant Insurance
Requirements.................................................. 45
7.04 Indemnity and Exoneration..................................... 45
7.05 Waiver of Subrogation Rights.................................. 46
7.06 Condemnation and Loss or Damage............................... 46
7.07 Damage and Destruction........................................ 47
7.08 Default By Tenant............................................. 48
7.09 No Waiver..................................................... 52
7.10 Statutory Waivers............................................. 52
7.11 Holding Over.................................................. 52
7.12 Attorneys' Fees............................................... 53
7.13 Amendments.................................................... 53
7.14 Transfers By Landlord......................................... 53
7.15 Severability.................................................. 53
7.16 Notices....................................................... 53
7.17 No Option..................................................... 54
7.18 Integration and Interpretation................................ 54
7.19 Quitclaim..................................................... 54
</TABLE>
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<TABLE>
<S> <C>
7.20 No Easement For Light, Air and View........................... 54
7.21 No Merger..................................................... 54
7.22 Memorandum of Lease........................................... 55
7.23 Survival...................................................... 55
7.24 Financial Statements.......................................... 55
7.25 No Joint Venture.............................................. 55
7.26 Successors and Assigns........................................ 55
7.27 Applicable Law................................................ 55
7.28 Time of the Essence........................................... 56
7.29 Interpretation................................................ 56
7.30 Parking....................................................... 56
7.31 Brokers....................................................... 57
7.32 Security...................................................... 57
7.33 Satellite Dish................................................ 58
7.34 Right of First Negotiation.................................... 58
7.35 Delivery of Alternate Security................................ 59
7.36 Counterparts.................................................. 59
</TABLE>
Exhibit
A-1 Site Plan
A-2 Project
B Base Building Improvements Construction Agreement
B-1 Preliminary Specifications for Base Building Improvements
C Tenant Improvements Construction Agreement
C-1 Definition of Building Standard Improvements
D Building Rules and Regulations
E Sample Form of Lease Commencement Certificate
F Tenant Improvements Loan Amortization Memorandum
v
<PAGE>
801 Gateway Lease
This Lease is made and entered into as of the date specified in the Basic
Lease Information Sheet attached hereto and incorporated herein by this
reference, by and between HMS GATEWAY OFFICE, L.P., a Delaware limited
partnership ("Landlord"), and the Tenant identified in the Basic Lease
Information Sheet.
In consideration of the mutual covenants and agreements contained in this
Lease, the parties agree as follows:
ARTICLE 1
Definitions
-----------
Certain terms used in this Lease and the Exhibits hereto shall have the
meaning set forth below for each such term. Certain other terms shall have the
meaning set forth elsewhere in this Lease and the Exhibits hereto.
1.01 "801 Gateway Preliminary Specifications" shall mean those
--------------------------------------
preliminary specifications for construction of the Base Building Improvements
described on Exhibit B-1.
1.02 "Additional Rent" shall mean all obligations of Tenant hereunder
---------------
other than the obligation for payment of Gross Rent.
1.03 "Additional Sublease Information" shall have the meaning set forth
-------------------------------
in Section 5.05(b).
1.04 "Adjacent Parcels" shall have the meaning set forth in Section 7.34.
----------------
1.05 "Alterations" shall have the meaning set forth in Section 5.06(a).
-----------
1.06 "Alternate Parking Spaces" shall have the meaning set forth in
------------------------
Section 7.30(b).
1.07 "Applicable Requirements" shall have the meaning set forth in
-----------------------
Section 7.33.
1.08 "Arbitration Notice" shall have the meaning set forth in Section
------------------
3.02(b).
1.09 "Assumption Agreement" shall have the meaning set forth in Section
--------------------
7.14.
1.10 "Availability Notice" shall have the meaning set forth in Section
-------------------
7.34.
1.11 "Bank" shall have the meaning set forth in Section 5.13(c).
----
1.12 "Base Building Improvements" shall mean those improvements of the
--------------------------
Leased Premises that are described on Exhibit B-1.
1
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1.13 "Base Building Improvements Construction Commencement Date" shall
---------------------------------------------------------
mean the date Landlord commences construction of the Base Building Improvements
pursuant to Exhibit B.
1.14 "Base Rent" shall mean the basic rent payable by Tenant to Landlord
---------
in the amounts shown on the Basic Lease Information sheet and in the manner
provided in Section 3.04.
1.15 "Basic Operating Cost" shall have the meaning set forth in Section
--------------------
3.06.
1.16 "Basic Operating Cost Adjustment" for any calendar year shall mean
-------------------------------
the difference, if any, between Estimated Basic Operating Cost and Basic
Operating Cost for that calendar year.
1.17 "Basic Operating Cost Statement" shall have the meaning set forth in
------------------------------
Section 3.08.
1.18 "Basic Services" shall mean the services provided pursuant to
--------------
Section 4.01.
1.19 "Building" shall mean the five (5) story building to be constructed
--------
by Landlord on the Project and to be commonly known as 801 Gateway Boulevard,
South San Francisco, California.
1.20 "Building Standard Improvements" shall mean those improvements of
------------------------------
the Leased Premises that are described on Exhibit C-1.
1.21 "Business Day" shall mean Monday through Friday, except holidays;
------------
"holiday" means those holidays specified by the laws of the United States or the
State of California and all holidays to which maintenance employees of the
Building are entitled from time to time under their union contract or other
agreement.
1.22 "Business Hours" shall mean the Building hours of operation set
--------------
forth in the Building Rules and Regulations attached hereto as Exhibit D.
1.23 "Claims" shall have the meaning set forth in Section 5.17(a).
------
1.24 "Common Areas" shall mean (i) with respect to the Building, the
------------
total square footage of areas of the Building devoted to non-exclusive uses such
as lobbies, fire vestibules, rest rooms, mechanical areas, loading areas, trash
areas, tenant and ground floor corridors, elevator foyers, electrical and
janitorial closets, ground floor lobbies, telephone and equipment rooms, and
other similar facilities maintained for the benefit of Building tenants and
invitees, but shall not mean Major Vertical Penetrations and (ii) with respect
to the Project (excluding the Building), all walkways, roadways, sidewalks,
parkways, driveways, landscaped areas or other similar facilities maintained for
the benefit of Project Tenants and invitees.
1.25 "Conceptual/Space Plans" shall have the meaning set forth in Exhibit
----------------------
C.
2
<PAGE>
1.26 "Conceptual/Space Plans Submittal Date" shall mean the date stated
-------------------------------------
on the Basic Lease Information Sheet for delivery of Conceptual/Space Plans
pursuant to Exhibit C.
1.27 "Condemnation" shall have the meaning set forth in Section 7.06(a).
------------
1.28 "Construction Documents" shall have the meaning set forth in Exhibit
----------------------
C.
1.29 "Construction Documents Submittal Date" shall mean the date stated
-------------------------------------
on the Basic Lease Information Sheet for delivery of Construction Documents
pursuant to Exhibit C.
1.30 "Designated Parking Areas" shall have the meaning set forth in
------------------------
Section 7.30(a).
1.31 "Election Notice" shall have the meaning set forth in Section
---------------
3.02(a).
1.32 "Electronic Payment Arrangement" shall have the meaning set forth in
------------------------------
Section 7.08(a)(ii).
1.33 "Estimated Basic Operating Cost" for any calendar month shall mean
------------------------------
Landlord's estimate of Basic Operating Cost for the calendar year within which
such month falls divided by twelve (12) equal monthly installments.
1.34 "Event of Default" shall have the meaning set forth in Section
----------------
7.08(a).
1.35 "Existing Tenants" shall have the meaning set forth in Section 7.34.
----------------
1.36 "Expansion Transaction" shall have the meaning set forth in Section
---------------------
7.34.
1.37 "Expenses" shall have the meaning set forth in Section 3.06(a).
--------
1.38 "Fair Market Rent" shall mean the rate being charged for comparable
----------------
space in class "A" properties similar to the Building in northern San Mateo
County (which shall include, but not be limited to, South San Francisco,
Brisbane and San Bruno), taking into consideration: the location of the
comparable space within the relevant buildings, tenant improvements or
allowances existing or to be provided, rental abatements, lease
takeovers/assumptions, moving expenses and other forms of rental concessions,
proposed term of lease, extent of service provided or to be provided, whether or
not the transaction is a sublease, the time the particular rate under
consideration became or is to become effective and any other relevant terms or
conditions.
1.39 "First Renewal Option" shall have the meaning set forth in Section
--------------------
3.02(a).
1.40 "First Renewal Term" shall have the meaning set forth in Section
------------------
3.02(a).
1.41 "FMR Notice" shall have the meaning set forth in Section 3.02(b).
----------
1.42 "GAAP" shall mean generally accepted accounting principles,
----
consistently applied.
3
<PAGE>
1.43 "Governmental Agency" has the meaning specified within the
-------------------
definition of "Permitted Use."
1.44 "Gross Rent" shall mean the total of Base Rent and Tenant's
----------
Proportionate Share(s) of Estimated Basic Operating Cost.
1.45 "Guarantor" shall mean any guarantor of any of Tenant's obligations
---------
under this Lease.
1.46 "Hazardous Material" shall mean any: (a) oil, flammable substances,
------------------
explosives, radioactive materials, hazardous wastes or substances, toxic wastes
or substances or any other wastes, materials or pollutants which (i) pose a
hazard to the Project or to persons on or about the Project or (ii) cause the
Project to be in violation of any Hazardous Materials Laws; (b) asbestos in any
form, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls, or
radon gas; (c) chemical, material or substance defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous waste", "restricted hazardous waste", or "toxic substances"
or words of similar import under any applicable local, state or federal law or
under the regulations adopted or publications promulgated pursuant thereto,
including, but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. (S).9601, et seq.;
the Hazardous Materials Transportation Act, as amended, 49 U.S.C. (S).1801, et
seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. (S).1251,
et seq.; Sections 25115, 25117, 25122.7, 25140, 25249.8, 25281, 25316, and 25501
of the California Health and Safety Code; (d) other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
governmental authority or may or could pose a hazard to the health and safety of
the occupants of the Project or the owners and/or occupants of property adjacent
to or surrounding the Project, or any other Person coming upon the Project or
adjacent property; and (e) other chemicals, materials or substances which may or
could pose a hazard to the environment.
1.47 "Hazardous Materials Claims" shall mean any enforcement, cleanup,
--------------------------
removal, remedial or other governmental or regulatory actions, agreements or
orders instituted pursuant to any Hazardous Materials Laws; and any claims made
by any third party against Landlord, Tenant or the Project relating to damage,
contribution, cost recovery, compensation, loss or injury resulting from the
presence, release or discharge of any Hazardous Materials.
1.48 "Hazardous Materials Laws" shall mean any federal, state or local
------------------------
laws, ordinances, orders, rules, regulations or policies, now or hereafter in
force, as amended from time to time, in any way relating to the environment,
health and safety, and Hazardous Materials (including, without limitation, the
use, handling, transportation, production, disposal, discharge or storage
thereof) or to industrial hygiene or the environmental conditions on, under or
about the Project, including, without limitation, soil, groundwater and indoor
and ambient air conditions. Landlord hereby notifies Tenant in accordance with
California Health & Safety Code Section 25359.7 that in 1981-82, the Project was
the subject of a state-supervised cleanup of hazardous waste disposed of on the
site by prior occupants. As part of the cleanup approved by the applicable
agencies, some soils containing heavy metals were left in place, covered by
clean
4
<PAGE>
fill. These soils are managed in accordance with the requirements of the
applicable agencies and a Declaration of Covenants, Conditions and Restrictions
imposed by Homart Development Co.
1.49 "Landlord Parties" means the employees, agents, contractors,
----------------
officers, directors, partners, licensees, invitees and guests of Landlord,
Landlord's affiliates, Landlord's general partners and limited partners.
1.50 "Landlord's Architect" shall have the meaning set forth in Exhibit
--------------------
B.
1.51 "Landlord's Contamination" shall have the meaning set forth in
------------------------
Section 5.17(a).
1.52 "Landlord's Review Period" shall mean (A) in the case of a proposed
------------------------
assignment or subletting affecting not more than one floor of the Building, a
period of fifteen (15) days following the Subtenant Interview and receipt of the
Additional Sublease Information (or twenty-five (25) days from the date of
Tenant's original notice if Landlord does not request Additional Sublease
Information or a Subtenant Interview), and (B) in the case of a proposed
assignment or subletting affecting more than one floor of the Building, a period
of twenty (20) days following the Subtenant Interview and receipt of the
Additional Sublease Information (or thirty (30) days from the date of Tenant's
original notice if Landlord does not request Additional Sublease Information or
a Subtenant Interview).
1.53 "Laws" shall have the meaning set forth in Section 5.08(a).
----
1.54 "LC Face Amount" shall have the meaning set forth in Section
--------------
5.13(a).
1.55 "LC Termination Date" shall have the meaning set forth in Section
-------------------
5.13(a).
1.56 "Leased Premises" shall mean the Building (expressly excluding,
---------------
however, any Common Areas therein), which Building shall contain the Net
Rentable Area specified on the Basic Lease Information sheet (which Net Rentable
Area shall be subject to confirmation on or about the Term Commencement Date as
contemplated under Section 1.108 below). The Leased Premises shall be situated
substantially in the area indicated on the site plan attached hereto as Exhibit
A-1. If at any time during the Term, Tenant is leasing, in accordance with the
terms and conditions of this Lease, less than the entire Building, the "Leased
Premises" shall be deemed to include only that portion of the Building then
leased by Tenant pursuant to this Lease.
1.57 "Letter of Credit" shall have the meaning set forth in Section
----------------
5.13(c).
1.58 "Letter of Credit Early Cancellation Date" shall have the meaning
----------------------------------------
set forth in Section 5.13(b)(iv).
1.59 "Letter of Credit Proceeds" shall have the meaning set forth in
-------------------------
Section 5.13(a).
1.60 "Limited Sublease" shall mean a sublease affecting sixty percent
----------------
(60%) or more of the Net Rentable Area of the Building for a term not exceeding
thirty (30) months and expiring not less than twenty-four (24) months prior to
the Term Expiration Date.
5
<PAGE>
1.61 "Major Tenant" shall have the meaning set forth in Section 4.03.
------------
1.62 "Major Vertical Penetrations" shall mean the area or areas within
---------------------------
Building stairs (excluding the landing at each floor), elevator shafts, flues,
vents, stacks, pipe shafts and vertical ducts and the like, that service more
than one floor of the Building. The area with Major Vertical Penetrations shall
be bounded and defined by the interior surface of the perimeter walls thereof
(or the extended plane of such walls over areas that are not enclosed). Major
Vertical Penetrations shall exclude, however, areas for the specific use of
Tenant or installed at the request of Tenant, such as special stairs or
elevators.
1.63 "Market Capitalization" shall mean Tenant's equity market
---------------------
capitalization, calculated as the total number of fully diluted shares of common
stock and common stock equivalents outstanding, as derived from the latest
corporate document on file with the Securities and Exchange Commission ("SEC"),
on an as-converted basis, at the closing price (averaged over a ten (10) day
period prior to the date of calculation) on the public market on which the
common stock is traded. Common stock equivalents include, but are not limited,
to preferred stock, convertible preferred stock, convertible debt, warrants and
options issued, outstanding and in-the-money.
1.64 "Mortgage Lender" shall have the meaning set forth in Section
---------------
5.11(a).
1.65 "Negotiation Notice" shall have the meaning set forth in Section
------------------
7.34.
1.66 "Net Profits" shall mean, if Tenant is a public company, the
-----------
positive net income of Tenant for the applicable calendar quarter, calculated in
accordance with GAAP, as reported on Tenant's most recent Form 10-K or 10-Q
filed with the SEC, and, if Tenant is not a public company, the positive net
income of Tenant for the applicable calendar quarter, as reflected on the
financial statements of Tenant for such quarter, which financial statements
shall be certified by the Chief Financial Officer of Tenant and shall be
accompanied by an unqualified opinion of an independent, qualified certified
public accounting firm of national standing reasonably satisfactory to Landlord,
which opinion shall state that such financial statements fairly present the
financial condition of Tenant for the applicable period and were prepared in
accordance with GAAP.
1.67 "Net Rentable Area" shall mean the area or areas of space within the
-----------------
Project determined pursuant to the Standard Method for Measuring Floor Area in
Office Buildings, ANSI Z65.1-1996 (the "BOMA Standard"). The parties acknowledge
that, as of the date of this Lease, the Net Rentable Area of the Leased Premises
set forth on the Basic Lease Information Sheet is an approximation only and the
actual Net Rentable Area shall be subject to confirmation by measurement by
Landlord's Architect, based on the BOMA Standard, on or about the Term
Commencement Date. Landlord's Architect shall consult with Tenant's Architect in
performing such measurement; provided, however, that in the event of any
disagreement between such professionals, the determination of Landlord's
Architect shall prevail. Any such changes to the Net Rentable Area in the Leased
Premises shall be reflected in the Lease Commencement Certificate, a sample form
of which is attached hereto as Exhibit E to be executed by Tenant promptly after
the Term Commencement Date. In the event of any such change in the Net Rentable
Area, all amounts, percentages and figures appearing or referred to in this
Lease based
6
<PAGE>
upon such Net Rentable Area (including, without limitation, the amounts of the
Base Rent, Tenant Improvements Allowance, Tenant Improvements Loan and Review
Fee, and Tenant's Proportionate Share(s)) shall be modified in accordance with
such determination. The Net Rentable Area and/or the aforesaid amounts,
percentages and figures shall be subject to further adjustment by Landlord from
time to time for a remeasurement of or changes in the physical size of the
Leased Premises, the Building or the Project, whether such changes in size are
due to an addition to or a sale or conveyance of a portion of the Building or
the Project or otherwise.
1.68 "Nondisturbance Agreement" shall have the meaning set forth in
------------------------
Section 5.11(a).
1.69 "Off-Site Conditions" shall have the meaning set forth in Section
-------------------
4.01(b).
1.70 "Permitted Alterations" shall have the meaning set forth in Section
---------------------
5.06(a).
1.71 "Permitted Hazardous Materials" shall mean Hazardous Materials which
-----------------------------
are contained in ordinary office supplies of a type and in quantities typically
used in the ordinary course of business within general offices of similar size
and location, but only if and to the extent that such supplies are transported,
stored and used in full compliance with all Hazardous Materials Laws and
otherwise in a safe and prudent manner. Hazardous Materials which are contained
in ordinary office supplies but which are transported, stored and used in a
manner which is not in full compliance with all Hazardous Materials Laws or
which is not in any respect safe and prudent shall not be deemed to be
"Permitted Hazardous Materials" for the purposes of this Lease.
1.72 "Permitted Use" shall mean general office uses in the Leased
-------------
Premises of a kind appropriate in a building of the type and quality of the
Building; provided, however, that for the purpose of limiting the type of use
permitted by Tenant, or an assignee of Tenant, but without limiting Landlord's
right to lease any portion of the Building to a tenant of Landlord's choice,
"Permitted Use" shall not include (i) offices of any agency or bureau of the
United States or any state or political subdivision thereof (a "Governmental
Agency"), (ii) offices or agencies of any foreign government or political
subdivision thereof, (iii) offices of any health care professionals or service
organization, except for administrative offices where no diagnostic, treatment
or laboratory services are performed, (iv) schools or other training facilities
(excluding facilities for the training of Tenant's employees in connection with
the operation of Tenant's business in the Leased Premises), (v) retail or
restaurant uses, (vi) broadcast studios or other broadcast production
facilities, such as radio and/or television stations, (vii) product display or
demonstration facilities, (viii) offices at which deposits or bills are
regularly paid in person by customers, and (ix) personnel agencies, except
offices of executive search firms.
1.73 "Post Clause (ii) Reduction Face Amount" shall have the meaning set
--------------------------------------
forth in Section 5.13(b)(ii).
1.74 "Pre-Existing Contamination" shall have the meaning set forth in
--------------------------
Section 5.17(a).
1.75 "Prime" means the "prime" or "reference" rate announced by Bank of
-----
America from time to time at its main branch in San Francisco, California.
7
<PAGE>
1.76 "Project" shall mean the real property (including, without
-------
limitation, the Building, the Common Areas and any other present or hereafter
existing improvements), as such real property may be reduced or expanded from
time to time by Landlord in accordance with Section 2.02 below, situated in the
City of South San Francisco, County of San Mateo and more particularly described
on Exhibit A-2.
1.77 "REAs" shall have the meaning set forth in Section 5.11(e).
----
1.78 "Renewal Options" shall have the meaning set forth in Section
---------------
3.02(a).
1.79 "Renewal Terms" shall have the meaning set forth in Section 3.02(a).
-------------
1.80 "Rent" shall mean Gross Rent, Additional Rent and any and all other
----
charges of any nature payable by Tenant to Landlord under this Lease.
1.81 "Rent Commencement Date" shall mean the date that is the earlier of
----------------------
(i) December 15, 2000, or (ii) the Tenant Improvements Substantial Completion
Date.
1.82 "Rescission Notice" shall have the meaning set forth in Section
-----------------
3.02(b).
1.83 "Satellite Dish" shall have the meaning set forth in Section 7.33.
--------------
1.84 "Second Renewal Option" shall have the meaning set forth in Section
---------------------
3.02(a).
1.85 "Second Renewal Term" shall have the meaning set forth in Section
-------------------
3.02(a).
1.86 "Security Deposit" shall have the meaning set forth in Section 5.14.
----------------
1.87 "Specified Contamination" shall have the meaning set forth in
-----------------------
Section 3.06(a)(xiii).
1.88 "Specified Percentage" shall have the meaning set forth in Section
--------------------
3.06(a)(vii).
1.89 "Sublease/Assignment Costs" shall mean the sum of (i) the following
-------------------------
costs and expenses, but solely to the extent actually paid by Tenant in
connection with such sublease or assignment transaction: (A) reasonable and
customary market-based leasing commissions, (B) reasonable legal fees, and (C)
reasonable costs of Alterations required to be made by Tenant to the Leased
Premises in connection with such sublease or assignment, which commissions, fees
and costs shall, for purposes of the calculation contemplated under Section
5.05(e), be amortized on a straight-line basis over the term of the applicable
assignment or sublease, and (ii) the then-unamortized portion of Tenant's
Initial Tenant Improvements Contribution (calculated as of the commencement of
the proposed sublease or assignment) allocable to the space subject to the
sublease or assignment transaction. For purposes of the aforesaid clause (ii),
Tenant's Initial Tenant Improvements Contribution shall be (1) amortized on a
straight-line basis over the period commencing on the Rent Commencement Date and
ending on the Term Expiration Date (including any extension thereof pursuant to
a Renewal Option theretofore exercised by Tenant), together with interest
thereon at the rate of Prime plus two percent (2%) per annum, and (2) allocated
to the entire Leased Premises on an equal amount per square foot. By way of
8
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example only, if the Net Rentable Area of the Leased Premises is 135,000 square
feet and Tenant's Initial Tenant Improvements Contribution equals $1,350,000.00,
then Tenant's Initial Tenant Improvements Contribution shall be allocated to the
Leased Premises at the rate of $10.00 per square foot.
1.90 "Subordination Agreement" shall have the meaning set forth in
-----------------------
Section 5.11(a).
1.91 "Subtenant Interview" shall have the meaning set forth in Section
-------------------
5.05(b).
1.92 "Tenant Affiliate" shall mean any legal entity (i) which shall be
----------------
controlled by, under the control of, or under common control with, Tenant, (ii)
which results from a merger of, reorganization of, or consolidation with,
Tenant, or (iii) which acquires all or substantially all of the stock or assets
of Tenant; and a party shall be deemed to "control" another party for purposes
of clause (i) above only if the first party owns fifty percent (50%) or more of
the outstanding shares, partnership or limited liability company membership
interests, or other beneficial interests of, the second party.
1.93 "Tenant Extra Improvements" shall mean the extent to which the
-------------------------
Tenant Improvements in the Leased Premises would exceed in quality or quantity
the Building Standard Improvements. In instances where this Lease refers to
Tenant Extra Improvements as a standard for the provision of services,
maintenance, repair or replacement by Tenant or Landlord, such reference shall
be to the difference in required services, maintenance, repairs or replacements
between the Tenant Improvements as constructed in the Leased Premises and the
Building Standard Improvements had the Building Standard Improvements been
constructed in the Leased Premises.
1.94 "Tenant Improvements" shall have the meaning set forth in Exhibit C.
-------------------
1.95 "Tenant Improvements Allowance" shall have the meaning set forth in
-----------------------------
Exhibit C.
1.96 "Tenant Improvements Construction Commencement Date" shall mean the
--------------------------------------------------
date Tenant commences construction of the Tenant Improvements pursuant to
Exhibit C.
1.97 "Tenant Improvements Cost" shall have the meaning set forth in
------------------------
Exhibit C.
1.98 "Tenant Improvements Loan" shall have the meaning set forth in
------------------------
Exhibit C.
1.99 "Tenant Improvements Substantial Completion Date" shall have the
-----------------------------------------------
meaning set forth in Exhibit C.
1.100 "Tenant Parties" shall mean the employees, agents, contractors,
--------------
officers, directors, partners, licensees, invitees and guests of Tenant.
1.101 "Tenant's Architect" shall have the meaning set forth in Exhibit C.
------------------
1.102 "Tenant's Construction Manager" shall have the meaning set forth in
-----------------------------
Exhibit C.
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1.103 "Tenant Delay" shall have the meaning set forth in Exhibit C.
------------
1.104 "Tenant's Initial Tenant Improvements Contribution" shall mean the
-------------------------------------------------
aggregate cost expended by Tenant out of its own funds (specifically excluding
the Tenant Improvements Allowance and the proceeds of the Tenant Improvements
Loan) toward the Tenant Improvements Cost.
1.105 "Tenant's Personal Property" shall have the meaning set forth in
--------------------------
Section 7.01.
1.106 "Tenant's Proportionate Share" shall mean (i) with respect to
----------------------------
Expenses which Landlord allocates to the Building, the percentage that the Net
Rentable Area of the Leased Premises bears to ninety-five percent (95%) of the
total Net Rentable Area of the Building or to the total Net Rentable Area leased
in the Building (if such total is greater than ninety-five percent (95%) of the
total Net Rentable Area) as calculated for each calendar year of the Term, and
(ii) with respect to Expenses which Landlord allocates to the Project as a whole
or to only a portion of the Project, a percentage calculated by Landlord from
time to time in its reasonable discretion and furnished to Tenant in writing.
Notwithstanding the foregoing, Landlord may equitably adjust Tenant's
Proportionate Share(s) for all or part of any item of expense or cost
reimbursable by Tenant that relates to a repair, replacement, or service that
benefits only the Leased Premises or only a portion of the Building and/or the
Project or that varies with the occupancy of the Building and/or the Project.
1.107 "Term" shall mean the period from the Term Commencement Date and
----
ending on the Term Expiration Date. The Scheduled Term Commencement Date stated
on the Basic Lease Information sheet represents merely the parties' estimate of
the Term Commencement Date.
1.108 "Term Commencement Date" shall have the meaning set forth in Section
----------------------
3.01.
1.109 "Term Expiration Date" shall mean the date that is the number of
--------------------
years set forth on the Basic Lease Information after the Rent Commencement Date
or such earlier date upon which this Lease is terminated pursuant to the terms
hereof.
ARTICLE 2
Leased Premises
---------------
2.01 Lease. Landlord leases to Tenant and Tenant leases from Landlord the
-----
Leased Premises upon all of the terms, covenants and conditions set forth
herein.
2.02 Landlord's Reserved Rights. Landlord reserves from the leasehold
--------------------------
estate hereunder, in addition to all other rights reserved by Landlord under
this Lease: (i) all exterior walls and windows bounding the Leased Premises, and
all space located within the Leased Premises for Major Vertical Penetrations,
conduits, electric and all other utilities, air-conditioning, sinks or other
Building facilities that do not constitute Tenant Extra Improvements, the use
thereof and access thereto through the Leased Premises for operation,
maintenance, repair or replacement thereof, and (ii) the right from time to
time, without unreasonable
10
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interference with Tenant's use, (A) to install, remove or relocate any of the
foregoing for service to any part of the Building to locations that will not
materially interfere with Tenant's use of the Leased Premises, to alter or
relocate any portion of the Common Areas or any other common facility; (B) to
close temporarily any of the Common Areas for maintenance or construction
purposes so long as reasonable access to the Leased Premises remains available;
(C) to add additional buildings and improvements to the Common Areas or remove
existing buildings or improvements therefrom; (D) to use the Common Areas while
engaged in making additional improvements, repairs or alterations to the Project
or any portion thereof so long as reasonable access to the Leased Premises and
the loading area serving the Leased Premises remains available; and (E) to make
changes or alterations or additions to the Project or any portion thereof.
Notwithstanding the foregoing, without the prior written consent of Tenant,
Landlord shall not alter any portion of the Common Areas in a manner that causes
the Common Areas to materially deviate from the depiction thereof shown on the
site plan attached hereto as Exhibit A-1; provided, however, that Tenant shall
not withhold its consent to any such alteration that does not materially
interfere with Tenant's use and occupancy of the Leased Premises or enjoyment of
the Common Areas. Landlord shall have the right from time to time to expand or
to reduce the parcels of real property constituting the Project; provided,
however, that Tenant shall have the right to approve any such reduction or
expansion that materially interferes with Tenant's use and occupancy of the
Leased Premises. Subject to the rights of Tenant specified in this Lease as to
the non-exclusive use of certain portions of the Common Areas, Landlord shall
have the sole and exclusive right to possession and control of the Common Areas
and all other areas of the Project outside the Leased Premises.
2.03 Construction of Base Building Improvements and Tenant Improvements.
------------------------------------------------------------------
Landlord shall cause the construction of the Base Building Improvements in
accordance with the terms and conditions of the Base Building Improvements
Construction Agreement attached hereto as Exhibit B. The Base Building
Improvements are generally described on Exhibit B-1 hereto. Additionally, Tenant
shall cause the construction of certain tenant improvements in the interior of
the Leased Premises in accordance with the terms and conditions of the Tenant
Improvement Construction Agreement attached hereto as Exhibit C. Landlord and
Tenant agree to and shall be bound by the terms and provisions of said Exhibits
B and C.
ARTICLE 3
Rent, Term, Use and Basic Operating Costs
-----------------------------------------
3.01 Term. Except as otherwise provided herein, the Term shall commence
----
on the date (the "Term Commencement Date") Landlord delivers possession of the
Leased Premises to Tenant for the construction of the Tenant Improvements and
shall continue in full force for the Term. Subject to Paragraphs 4(b)(iii) and
4(b)(iv) of Exhibit B hereto, if the actual Term Commencement Date does not
occur on or before by the Scheduled Term Commencement Date for any reason, this
Lease shall not be void or voidable, nor shall Landlord be liable for any
claims, damages or liabilities by reason thereof. Should the Term Commencement
Date be a date other than the Scheduled Term Commencement Date, either Landlord
or Tenant, at the request of the other, shall promptly execute a declaration
specifying the Term Commencement Date. Tenant's obligations under this Lease
shall commence upon the Term Commencement
11
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Date, excluding only the obligation to pay Gross Rent, which shall commence upon
the Rent Commencement Date.
3.02 Options to Extend Term.
----------------------
(a) Subject to the terms of this Section 3.02, Tenant shall have two (2)
options (the "First Renewal Option" and the "Second Renewal Option,"
respectively, and collectively, the "Renewal Options") to extend the Term of
this Lease, with respect to three (3) or more full floors of the Building, for
successive periods of five (5) years each beyond the Term Expiration Date (the
"First Renewal Term" and the "Second Renewal Term," respectively, and
collectively, the "Renewal Terms"). Tenant understands and acknowledges that if
it exercises a Renewal Option with respect to less than the entire Building, it
shall have the right only to renew in full floor increments, and, in any event,
shall not have the right to renew with respect to less than three (3) full
floors. The Renewal Options are personal to Tenant and may not be exercised by
or on behalf of any sublessee or assignee, or by or on behalf of any other
successor or assign of Tenant, except for a Tenant Affiliate to whom Tenant
assigns its entire right, title and interest in and to this Lease pursuant to
Section 5.05 below. The Renewal Options shall be effective only if (i) no Event
of Default is occurring under this Lease, nor is any event then occurring which
with the giving of notice or the passage of time, or both, would constitute an
Event of Default hereunder, either at the time of exercise of the respective
Renewal Option or the time of commencement of the respective Renewal Term, and
(ii) Tenant has a Market Capitalization equal to or greater than One Billion
Dollars ($1,000,000,000.00) at the time of exercise of the respective Renewal
Option and at the time of commencement of the respective Renewal Term. The
Second Renewal Option shall be effective only if Tenant has validly exercised
the First Renewal Option and occupied the Leased Premises (or the portion
thereof actually leased by Tenant during the First Renewal Term) throughout the
First Renewal Term. If Tenant leases less than the entire Leased Premises during
the First Renewal Term, then the Second Renewal Option shall be available only
with respect to the portion of the Leased Premises actually leased by Tenant
during the First Renewal Term. The Renewal Options must be exercised, if at all,
by written notice (each, an "Election Notice") from Tenant to Landlord given not
more than twelve (12) months nor less than nine (9) months prior to the
expiration of the initial Term or the First Renewal Term, as the case may be.
Any such Election Notice must specify the number of floors in the Building
Tenant elects to lease during the applicable Renewal Term. In the event Tenant
exercises a Renewal Option with respect to less than the entire Building, then
Landlord shall have the right to approve the actual floors leased by Tenant
during the applicable Renewal Term. Any such Election Notice given by Tenant to
Landlord shall be irrevocable. If Tenant fails to exercise a Renewal Option in a
timely manner as provided for above, the Renewal Option shall be void. The
Renewal Terms shall be upon the same terms and conditions as the initial Term,
except that the annual Base Rent during each Renewal Term shall be equal to the
Fair Market Rent as of the commencement of such Renewal Term.
(b) Fair Market Rent for each Renewal Term shall be determined by
Landlord with written notice (a "FMR Notice") given to Tenant prior to the
commencement of the applicable Renewal Term, subject to Tenant's rights of
termination pursuant to this Section 3.02(b) and arbitration pursuant to Section
3.02(c) below. In the event Tenant disagrees with Landlord's determination of
Fair Market Rent, then Tenant shall have the right to either (i) rescind its
Election Notice by written notice of rescission (a "Rescission Notice")
delivered to Landlord
12
<PAGE>
within ten (10) days of Tenant's receipt of the applicable FMR Notice, in which
case this Lease shall expire upon the original Term Expiration Date and Tenant
shall have no further rights under this Section 3.02, or (ii) elect to submit
the dispute to arbitration pursuant to Section 3.02(c) below by delivering
written notice (an "Arbitration Notice") to Landlord within thirty (30) days of
Tenant's receipt of the applicable FMR Notice. Tenant's Arbitration Notice shall
include Tenant's determination of Fair Market Rent. Failure on the part of
Tenant to deliver a Rescission Notice or an Arbitration Notice to Landlord in a
timely manner as provided above, time being of the essence, shall bind Tenant to
the Fair Market Rent as determined by Landlord. Should Tenant elect to arbitrate
and should the arbitration not have been concluded prior to the commencement of
the applicable Renewal Term, Tenant shall pay Gross Rent to Landlord during the
Renewal Term, including Base Rent adjusted to reflect Fair Market Rent as
Landlord has so determined. If the amount of Fair Market Rent as determined by
arbitration is greater than or less than Landlord's determination, then any
adjustment required to correct the amount previously paid shall be made by
payment by the appropriate party within ten (10) days after such determination
of Fair Market Rent.
(c) If Tenant disputes the amount claimed by Landlord as Fair Market Rent
and delivers an Arbitration Notice to Landlord in a timely manner as provided
above, and if Landlord and Tenant are not otherwise able to agree upon the Fair
Market Rent (Landlord reserving the right to resubmit its determination of Fair
Market Rent to Tenant), the dispute shall be submitted to arbitration. The award
rendered in any such arbitration may be entered in any court having jurisdiction
and shall be final and binding between the parties. The arbitration shall be
conducted and determined in the San Francisco Bay Area in accordance with the
then-prevailing commercial arbitration rules of the American Arbitration
Association or its successor for arbitration of commercial disputes except to
the extent that the procedures mandated by said rules shall be modified as
follows:
(i) Tenant shall deliver an Arbitration Notice to Landlord within
thirty (30) days after Tenant's receipt of the FMR Notice, specifying therein
the name and address of the person to act as the arbitrator on its behalf. The
arbitrator shall be a real estate broker with not less than five (5) years
experience negotiating commercial lease transactions in northern San Mateo
County who would qualify as an expert witness over objection to give testimony
addressed to the issue in a court of competent jurisdiction. Failure on the part
of Tenant to make a timely and proper demand for such arbitration shall
constitute a waiver of the right thereto. Within ten (10) Business Days after
the service of Tenant's demand for arbitration, Landlord shall have the right to
give notice in writing to Tenant of Landlord's adjusted determination of Fair
Market Rent. Within ten (10) Business Days following Tenant's receipt of such
notice, if Tenant and Landlord have not agreed upon Fair Market Rent, Tenant
shall notify Landlord in writing that Tenant desires to renew its demand for
arbitration. Failure on the part of Tenant to give such notice shall constitute
a waiver of the right to such arbitration, and Tenant shall be deemed to have
accepted Landlord's adjusted determination of Fair Market Rent. Within ten (10)
Business Days after the receipt of such notice, Landlord shall give notice to
Tenant, specifying the name and address of the person designated by Landlord to
act as arbitrator on its behalf who shall be similarly qualified. If Landlord
fails to notify Tenant of the appointment of its arbitrator, within or by the
time above specified, then the arbitrator appointed by Tenant shall be the
arbitrator to determine the issue.
13
<PAGE>
(ii) If two (2) arbitrators are chosen pursuant to Section
3.02(c)(i) above, the arbitrators so chosen shall meet within ten (10) Business
Days after the second arbitrator is appointed and, if within ten (10) Business
Days after such first meeting the two arbitrators shall be unable to agree
promptly upon a determination of Fair Market Rent, they shall appoint a third
arbitrator, who shall be a competent and impartial person with qualifications
similar to those required of the first two arbitrators pursuant to Section
3.02(c)(i) above. If they are unable to agree upon such appointment within five
(5) Business Days after expiration of said ten (10) day period, the third
arbitrator shall be selected by the parties themselves, if they can agree
thereon, within a further period of ten (10) Business Days. If the parties do
not so agree, then either party, on behalf of both, may request appointment of
such a qualified person by the then Chief Judge of the United States District
Court having jurisdiction over the City of South San Francisco, acting in his
private non-judicial capacity. Request for appointment shall be made in writing
with a copy given to the other party. Each party agrees that said Judge shall
have the power to make the appointment; provided, however, that if the Chief
Judge does not make a determination within ten (10) days of request by either
party for the appointment of a third arbitrator, appointment of such third
arbitrator shall be made in accordance with the selection procedure of the
commercial arbitration rules of the American Arbitration Association or its
successor for arbitration of commercial disputes. The three (3) arbitrators
shall decide the dispute, if it has not previously been resolved, by following
the procedure set forth in Section 3.02(c)(iii) below.
(iii) Where the issue cannot be resolved by agreement between the two
arbitrators selected by Landlord and Tenant or settlement between the parties
during the course of arbitration, the issue shall be resolved by the three
arbitrators in accordance with the following procedure. The arbitrators selected
by each of the parties shall state in writing his determination of the Fair
Market Rent, supported by the reasons therefor with counterpart copies to each
party. The arbitrators shall arrange for a simultaneous exchange of such
proposed resolutions. The role of the third arbitrator shall be to select which
of the two proposed resolutions most closely approximates his determination of
Fair Market Rent. The third arbitrator shall have no right to propose a middle
ground or any modification of either of the two proposed resolutions. The
resolution he chooses as most closely approximating his determination shall
constitute the decision of the arbitrators and be final and binding upon the
parties.
(iv) If any arbitrator fails, refuses or is unable to act, his
successor shall be appointed by the party who originally appointed him, but in
the case of the third arbitrator, his successor shall be appointed in the same
manner as provided for appointment of the third arbitrator. The arbitrators
shall attempt to decide the issue within ten (10) Business Days after the
appointment of the third arbitrator. Any decision in which the arbitrator
appointed by Landlord and the arbitrator appointed by Tenant concur shall be
binding and conclusive upon the parties. Each party shall pay the fees and costs
of its own counsel. The party not prevailing shall pay the fees and costs of the
arbitrators. For purposes hereof, the "prevailing party" shall be that party
whose selected arbitrator's statement of Fair Market Rent was selected by the
third arbitrator or, if a decision is reached by the two arbitrators selected by
the parties and a third arbitrator is not chosen, the party whose original
determination of Fair Market Rent (as specified in Landlord's FMR Notice or
Tenant's Arbitration Notice, as applicable) is closest in amount to the Fair
Market Rent ultimately determined by the arbitrators.
14
<PAGE>
(v) The arbitrators shall render their decision and award in writing
with counterpart copies to each party. The arbitrators shall have no power to
modify the provisions of this Lease.
3.03 Use. Tenant shall use the Leased Premises solely for the Permitted Use
---
and for no other use or purpose. Nothing contained herein shall be deemed to
limit or restrict Landlord from leasing any portion of the Building to any
tenant for any use whatsoever, including, without limitation, any of the uses
described in clauses (i) through (ix) of Section 1.72, provided only that
Landlord shall not lease any portion of the Building to any Governmental Agency
for a use that would include offices which members of the public would regularly
visit and would likely lead to a substantially greater number of people entering
and exiting the Building on a daily basis than would be the case with general
office uses.
3.04 Payment of Base Rent and Tenant's Proportionate Share(s) of Estimated
---------------------------------------------------------------------
Basic Operating Cost. Tenant shall pay the Base Rent with adjustments and in the
- --------------------
manner hereinafter set forth.
Commencing on the Rent Commencement Date, Base Rent shall be payable in
advance on or before the first day of each calendar month during the Term and
any extensions or renewals thereof; provided, however, that Base Rent for the
first full calendar month following the Rent Commencement Date shall be paid in
advance on or before the Tenant Improvements Construction Commencement Date.
Commencing on the Rent Commencement Date, Tenant's Proportionate Share(s) of
Estimated Basic Operating Cost shall be payable in advance on or before the
first day of each calendar month during the Term and any extensions or renewals
thereof. If the Rent Commencement Date occurs on other than the first day of a
calendar month, then Gross Rent (consisting of Base Rent plus Tenant's
Proportionate Share(s) of Estimated Basic Operating Cost) provided for such
partial calendar month shall be prorated and the prorated amount shall be paid
on the first day of the calendar month following the Rent Commencement Date
together with any other amounts payable on that day. If the Term terminates on
other than the last day of a calendar month, then Gross Rent provided for such
partial calendar month shall be prorated and the prorated installment shall be
paid on the first day of the calendar month preceding the Term Expiration Date.
All payments due under this paragraph shall be payable in advance, without
demand and without reduction, abatement, counterclaim or setoff, at the address
specified on the Basic Lease Information or at such other address as may be
designated by Landlord in the manner provided for giving notice under Section
7.16.
3.05 Net Lease. Except as otherwise provided herein, this is a Net Lease
---------
and Base Rent shall be paid to Landlord absolutely net of all costs and
expenses. The provisions for payment of Basic Operating Cost by means of
periodic payment of Tenant's Proportionate Share(s) of Estimated Basic Operating
Cost and the Basic Operating Cost Adjustment are intended to pass on to Tenant
and reimburse Landlord for Tenant's Proportionate Share(s) of all costs and
expenses of the nature described in Section 3.06.
15
<PAGE>
3.06 Basic Operating Cost.
--------------------
(a) Basic Operating Cost shall mean all expenses and costs (but not
specific costs that are separately billed to and paid by specific tenants) of
every kind and nature that Landlord shall pay or incur or become obligated to
pay or incur (including, without limitation, costs incurred by managers and
agents that are reimbursed by Landlord) because of or in connection with the
management, maintenance, preservation and operation of the Project and its
supporting facilities directly servicing the Project (as allocated to the
Project in accordance with generally accepted accounting principles,
consistently applied) including, but not limited to, the following
(collectively, "Expenses"):
(i) Wages, salaries and reimbursable expenses and benefits of all
on-site and off-site personnel engaged in the operation and maintenance of the
Project and the direct costs of training such employees limiting such charges
only to amounts directly allocable to services rendered by the employees and
personnel for the benefit of the Project.
(ii) Costs of the property management office and office operation.
(iii) All supplies, materials and rental equipment used in the
operation and maintenance of the Project, including, without limitation,
temporary lobby displays and events, the cost of erecting, maintaining and
dismantling art work and similar decorative displays commensurate with operation
of a class "A" office building; provided, however, that so long as Tenant is the
sole tenant of the Building, Landlord shall not provide such lobby displays or
artwork in the Building unless requested by Tenant.
(iv) Utilities, including, without limitation, water, power, gas,
sewer, waste disposal, communication and cable TV facilities, heating, cooling,
lighting and ventilation of the Project.
(v) Assessments, fees or other charges levied by the Gateway
Owners' Association or other similar body with respect to the maintenance,
repair and operation of the Gateway development.
(vi) All maintenance, janitorial and service agreements for the
Project and the equipment therein, including, but not limited to, alarm service,
window cleaning, elevator maintenance, and maintenance and repair of sidewalks,
landscaping, Building exterior and service areas.
(vii) A management cost recovery equal to the Specified Percentage
(as hereinafter defined) of all revenue (excluding such management cost
recovery) derived from the Project, without limitation, all Rent hereunder, all
rent and other payments derived from other tenants in the Building, parking
revenues from the Project and other revenues derived from licensees of any other
part of or right in the Building. As used herein, "Specified Percentage" means
(A) so long as Tenant is the sole tenant of the Building, two percent (2%), and
(B) at all other times, three percent (3%).
(viii) Legal and accounting services for the Project, including, but
not limited to, the costs of audits by certified public accountants of Basic
Operating Cost records; provided,
16
<PAGE>
however, that legal expense shall not include the cost of (A) negotiating lease
terms for prospective tenants, (B) negotiating termination or extension of
leases with existing tenants, (C) proceedings against any other specific tenant
relating solely to the collection of rent or other sums due to Landlord from
such tenant, or (D) legal costs incurred in connection with development and/or
construction of the Project.
(ix) All insurance premiums and costs, including, but not limited
to, the premiums and costs of fire, casualty, liability, rental abatement and
earthquake insurance applicable to the Project and Landlord's personal property
used in connection therewith (and all amounts paid as a result of loss sustained
that would be covered by such policies but for "deductible" or self-insurance
provisions); provided, however, that Landlord may, but shall not be obligated
to, carry earthquake insurance. Notwithstanding the foregoing, (A) in the event
Landlord maintains fire and casualty insurance coverage (specifically excluding
earthquake coverage) for the Building through a policy of insurance covering
only the Building (and specifically excluding a blanket policy covering
additional properties), Landlord shall not carry a deductible greater than Fifty
Thousand Dollars ($50,000.00) on such policy, and (B) in the event Landlord
makes a claim on its policy of earthquake insurance, if any, during the Term,
the deductible under such policy shall be amortized over a period of ten (10)
years, irrespective of when such claim is made, and Tenant shall be required to
pay only the pro rata share of such deductible falling due within the Term
(including any Renewal Term) based upon the aforesaid amortization of such
deductible; provided, however, that in no event shall the portion of the
earthquake deductible payable by Tenant hereunder during any calendar year
exceed ten percent (10%) of the aggregate Basic Operating Cost for such year;
and provided, further, that, notwithstanding the aforesaid ten-year amortization
period, any portion of such deductible which is excluded from Basic Operating
Cost pursuant to the foregoing proviso shall be deferred and added to Basic
Operating Cost during succeeding calendar years, subject to the limitation for
such succeeding calendar years pursuant to the foregoing proviso, until the full
amount so deferred has been included in Basic Operating Cost in succeeding
calendar years.
(x) Repairs, replacements and general maintenance (except for
repairs and replacements (A) which are capital in nature and are covered by
Section 3.06(a)(xii) below, (B) paid for from the proceeds of insurance, (C)
paid for directly by Tenant, other tenants or any third party, or (D) for the
benefit solely of tenants of the Project other than Tenant to the extent that
Tenant could not obtain similar services from Landlord without an obligation to
reimburse Landlord for the entire cost thereof under the provisions of this
Lease).
(xi) All real estate or personal property taxes, possessory interest
taxes, business or license taxes or fees, service payments in lieu of such taxes
or fees, annual or periodic license or use fees, including, but not limited to,
all of the following: (A) all real estate taxes and assessments, and all other
taxes relating to, or levied, assessed or imposed on, the Project, or any
portion thereof, or interest therein; (B) all taxes, assessments, charges,
levies, fees, excises or penalties, general and special, ordinary and
extraordinary, unforeseen as well as foreseen, of any kind and nature imposed,
levied upon, measured by or attributable to Landlord's equipment, furniture,
fixtures and other property located in, or used in connection with, the Project,
or levied upon, measured by or reasonably attributable to the cost or value of
any of the foregoing; (C) all other taxes (including, without limitation, value
added taxes), assessments, charges, levies, fees, or penalties, general and
special, ordinary and extraordinary, unforeseen as
17
<PAGE>
well as foreseen, of any kind and nature imposed, levied, assessed, charged or
collected by any governmental authority or other entity either directly or
indirectly (1) for or in connection with public improvements, user, maintenance
or development fees, transit, parking, housing, employment, police, fire, open
space, streets, sidewalks, utilities, job training, child care or other
governmental services or benefits, (2) upon or with respect to the development,
possession, leasing, operation, management, maintenance, alteration, repair, use
or occupancy of, or business operations in, the Project, (3) upon, against or
measured by the area of the Project, or uses made thereof, or leases made to
tenants thereof, or all or any part of the rents collected or collectible from
tenants thereof, and (4) for environmental matters (other than Pre-Existing
Contamination and Landlord's Contamination) or as a result of the imposition of
mitigation measures, including parking taxes, employer parking regulations, or
fees, charges or assessments as a result of the treatment of the Project, or any
portion thereof or interest therein, as a source of pollution or storm water
runoff; (D) any tax or excise, however described, imposed in addition to, or in
substitution partially or totally of, any or all of the foregoing taxes,
assessments, charges or fees; and (E) any and all costs, expenses and attorneys'
fees paid or incurred by Landlord in connection with any proceeding or action to
contest in whole or in part, formally or informally, the imposition, collection
or validity of any of the foregoing taxes, assessments, charges or fees. If by
law any Real Property Taxes may be paid in installments at the option of the
taxpayer, then Landlord shall include within Real Property Taxes only those
installments (including interest, if any) which would become due by exercise of
such option. Real estate taxes shall not include (1) inheritance or estate taxes
imposed upon or assessed against the Project, or any part thereof or interest
therein, or (2) taxes computed upon the basis of the net income derived from the
Project by Landlord or the owner of any interest therein.
(xii) Amortization (together with reasonable financing charges) of
capital improvements made to the Project (A) to comply with the requirements of
law, ordinance, rule or regulation, (B) to replace items which Landlord would be
obligated to maintain under this Lease, or (C) to improve the operating
efficiency of the Project. As used in this Section 3.06(a)(xii), "amortization"
shall mean allocation of the cost equally to each year of useful life of the
items being amortized or a shorter period equal to the number of years required
to recover the cost of said item of capital improvement out of the savings in
operating efficiency derived therefrom. Notwithstanding the foregoing, however,
Landlord may treat as expenses (chargeable in the year incurred) and not as
capital costs items that are less than two percent (2%) of Estimated Basic
Operating Cost for the year in question.
(xiii) All costs and expenses incurred in connection with any
investigation of site conditions or any clean-up, remedial, removal or
restoration work required by any federal, state or local governmental agency or
political subdivision or any other remediation undertaken by Landlord because of
Hazardous Materials that migrate into the soil or groundwater on or under the
Leased Premises or the Project during the Term from off-site sources or
otherwise become present in, on or about the Leased Premises or the Project
during the Term other than as the result of the actions or activities of
Landlord, Tenant or any Tenant Parties (collectively, "Specified
Contamination").
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(b) Notwithstanding anything to the contrary contained in Section 3.06(a)
above, "Basic Operating Costs" shall not include:
(i) costs of alterations of tenant premises;
(ii) costs of capital improvements other than capital improvements
identified in Section 3.06(a)(xii);
(iii) interest and principal payments on mortgages or any other debt
costs, or rental payments on any ground lease affecting the Project;
(iv) real estate brokers' leasing commissions;
(v) legal fees, space planner fees and advertising expenses
incurred with regard to leasing the Building or portions thereof;
(vi) any cost or expenditure for which Landlord is actually
reimbursed by others (e.g., insurance proceeds or recoveries under warranties);
(vii) the cost of any service furnished exclusively to and paid for
by any tenant of the Project, which service Landlord does not make available to
Tenant and which does not benefit Tenant in any manner;
(viii) depreciation, amortization and other "non-cash" items;
(ix) expense reserves;
(x) franchise or income taxes imposed upon Landlord;
(xi) legal and auditing fees incurred by Landlord in collecting
delinquent rents and preparing tax returns, but specifically excluding any legal
or auditing fees incurred by Landlord in connection with the management,
maintenance, preservation and operation of the Project, including, without
limitation, any fees incurred by Landlord in connection with the preparation of
operating statements, management reports and Basic Cost Operating Statements;
(xii) a reasonable allocation of the wages of any employee whose
duties include work on other buildings or projects;
(xiii) fines, penalties and interest imposed upon Landlord, other than
due to the late payment of Rent by Tenant hereunder;
(c) Notwithstanding any other provision herein to the contrary, if the
Project is not fully occupied during any year of the Term, an adjustment shall
be made in computing Basic Operating Cost for such year so that Basic Operating
Cost shall be computed as though ninety-five percent (95%) of the Net Rentable
Area had been occupied during such year; provided, however, that in no event
shall Landlord collect in total, from Tenant and all other tenants of the
Project, an amount greater than one hundred percent (100%) of the actual Basic
Operating Cost during any year of the Term. Tenant acknowledges that the Basic
Operating Costs shall include
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expenses and costs associated with the management, maintenance, preservation and
operation of the Common Areas that are, from time to time, allocated by
Landlord, in its sole but reasonable discretion, between the Building and other
buildings, presently or hereafter existing at the Project, and Tenant agrees to
pay as Additional Rent, Tenant's share, as reasonably determined by Landlord, of
such Basic Operating Cost as so allocated by Landlord.
3.07 Adjustment For Variation Between Estimated and Actual. If the Basic
-----------------------------------------------------
Operating Cost Adjustment for any calendar year is a positive number (i.e.,
actual cost exceeds estimated cost) Tenant shall pay to Landlord, pursuant to
Landlord's billing therefor (submitted pursuant to Section 3.08), Tenant's
Proportionate Share(s) of the Basic Operating Cost Adjustment within thirty (30)
days after presentation of Landlord's statement. If the Basic Operating Cost
Adjustment for any calendar year is a negative number (i.e., estimated cost
exceeds actual cost), then Landlord at Landlord's option shall pay Tenant's
Proportionate Share(s) of the Basic Operating Cost Adjustment to Tenant in cash,
within ten (10) days after the Basic Operating Cost Adjustment is finally
determined, or credit said amount against future installments of Estimated Basic
Operating Cost payable by Tenant hereunder. Should the Term commence or
terminate at any time other than the first day of a calendar year, Tenant's
Proportionate Share(s) of the Basic Operating Cost Adjustment shall be prorated
for the exact number of calendar days during such calendar year that fall within
the Term.
3.08 Computation of Basic Operating Cost Adjustment. Landlord shall,
----------------------------------------------
within a reasonable period of time after the end of any calendar year for which
Estimated Basic Operating Cost differs from Basic Operating Cost, give written
notice thereof to Tenant. The notice shall contain or be accompanied by a
statement (the "Basic Operating Cost Statement") of the Basic Operating Cost
during such calendar year (prepared by a certified public accountant), and a
computation of Basic Operating Cost Adjustment. Landlord's failure to give such
notice and Basic Operating Cost Statement within a reasonable period of time
after the end of any calendar year for which a Basic Operating Cost Adjustment
is due shall not release either party from the obligation to make the adjustment
provided for in Section 3.07.
3.09 Tenant's Right to Audit Basic Operating Cost. Provided that no Event
--------------------------------------------
of Default is then occurring hereunder (nor is any event occurring which with
the giving of notice or the passage of time, or both, would constitute an Event
of Default hereunder), Tenant, at its sole expense, shall have the right within
one hundred eighty (180) days after the delivery of each Basic Operating Cost
Statement to review and audit Landlord's books and records regarding such Basic
Operating Cost Statement for the sole purpose of determining the accuracy
thereof. Such review or audit shall be performed by a nationally recognized
accounting firm that calculates its fees with respect to hours actually worked
and that does not discount its time or rate (as opposed to a calculation based
upon percentage of recoveries or other incentive arrangement), shall take place
during Business Hours in the office of Landlord or Landlord's property manager
and shall be completed within ten (10) days after the commencement thereof. If
Tenant does not so review or audit Landlord's books and records, Landlord's
Basic Operating Cost Statement shall be final and binding upon Tenant. In the
event that Tenant determines on the basis of its review of Landlord's books and
records that the amount of Basic Operating Cost paid by Tenant pursuant to
Section 3.06 above for the period covered by such Basic Operating Cost Statement
is less than or greater than the actual amount properly payable by Tenant under
the terms of this Lease, Tenant shall promptly pay any deficiency to Landlord
or, if Landlord
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concurs with the results of such audit, Landlord shall promptly refund any
excess payment to Tenant, as the case may be.
ARTICLE 4
Landlord Covenants
------------------
4.01 Basic Services. Landlord shall:
---------------
(a) Furnish Tenant during Tenant's occupancy of the Leased Premises:
(i) Hot and cold water at those points of supply provided for
general use of other tenants in the Project; central heat and air conditioning
in season during Business Hours at such temperatures and in such amounts as are
required for comfortable occupancy of the Leased Premises, as reasonably
determined by Landlord, or as may be permitted or controlled by applicable laws,
ordinances, rules and regulations.
(ii) Routine maintenance, repairs, structural and exterior
maintenance (including exterior glass and glazing), painting and electric
lighting service for all public areas and special service areas of the Project
in the manner and to the extent deemed by Landlord to be standard, subject to
the limitation contained in Section 4.05.
(iii) Janitorial service on a five (5) day week basis, excluding
holidays.
(iv) An electrical system to convey power delivered by public
utility or other providers selected by Landlord, in its sole and absolute
discretion (and Tenant hereby acknowledges and agrees not to obtain any
electrical or other utility services from vendors other than those so selected
or approved by Landlord in writing) in amounts sufficient for normal office
operations as provided in similar office buildings, but not to exceed a total
allowance of five (5) watts per square foot of Net Rentable Area (which includes
an allowance for lighting of the Leased Premises at the maximum wattage per
square foot of Net Rentable Area permitted under applicable laws, ordinances,
orders, rules and regulations). If Tenant's electrical requirements, as
estimated by Landlord based upon rated capacity (or based upon metered
consumption, at Landlord's option and at Tenant's expense), exceed such amounts,
Tenant shall pay the full amount of such excess together with any additional
cost necessary to provide such excess capacity; and provided that, if the
installation and operation of said electrical equipment requires additional air
conditioning capacity above that provided by the Building Standard Improvements,
then the additional air conditioning installation and operating costs shall be
paid by Tenant.
(v) Initial lamps, bulbs and ballasts used in the Leased Premises
(but solely to the extent such lamps, bulbs and ballasts conform to
Exhibit C-1).
(vi) Public elevator service on a 24-hour a day, 7-day a week basis,
and a freight elevator serving the floors on which the Leased Premises are
situated during hours designated by Landlord; provided, however, that so long as
Tenant is the sole tenant of the
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Building, Tenant shall have the right to use the freight elevator on a 24-hour a
day, 7-day a week basis.
(b) Landlord shall not be liable for damages to either person or property,
nor shall Landlord be deemed to have evicted Tenant, nor shall there be any
abatement of Rent, nor shall Tenant be relieved from performance of any covenant
on its part to be performed hereunder by reason of (i) deficiency in the
provision of Basic Services, (ii) breakdown or malfunction of lines, cables,
wires, pipes, equipment or machinery utilized in supplying or permitting Basic
Services or telecommunications, or (iii) curtailment or cessation of Basic
Services due to causes or circumstances beyond the reasonable control of
Landlord. Landlord shall use reasonable diligence to make such repairs as may be
required to lines, cables, wires, pipes, equipment or machinery within the
Project to provide restoration of Basic Services and, where the cessation or
interruption of Basic Service has occurred due to circumstances or conditions
beyond Project boundaries (collectively, "Off-Site Conditions"), to cause the
same to be restored, by diligent application or request to the provider thereof.
Notwithstanding the initial sentence of this Section 4.01(b), in the event
Tenant is precluded from operating its business in the Leased Premises at any
time during the Term as the result of the cessation of Basic Service due to Off-
Site Conditions, then Gross Rent shall abate hereunder during the period that
Tenant is so precluded from operating its business in the Leased Premises, but
solely to the extent of proceeds actually collected by Landlord under any policy
of off-premises services interruption insurance maintained by Landlord with
respect to the Leased Premises. In no event shall any mortgagee or the
beneficiary under any deed of trust referred to in Section 5.11 be or become
liable for any default of Landlord under this Section 4.01(b).
4.02 Extra Services.
--------------
(a) In addition to the Basic Services described in Section 4.01(a) above,
Landlord shall provide to Tenant at Tenant's sole cost and expense (and subject
to the limitations hereinafter set forth) the following extra services:
(i) Such extra cleaning and janitorial services required by reason
of any Tenant Improvements in excess of that which would be required for
Building Standard Improvements;
(ii) Additional air conditioning and ventilating capacity required
by reason of any electrical, data processing or other equipment or facilities or
services required to support the same, in excess of that which would be required
for Building Standard Improvements;
(iii) Maintaining and replacing lamps, bulbs, and ballasts after
initial installation;
(iv) Heating, ventilation, air conditioning or extra electrical
service provided by Landlord to Tenant (i) during hours other than Business
Hours, (ii) on Saturdays, Sundays, or holidays, said heating, ventilation and
air conditioning or extra service to be furnished solely upon the prior written
request of Tenant given with such advance notice as Landlord may reasonably
require;
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(v) Repair and maintenance service which is the obligation of
Tenant hereunder;
(vi) Any Basic Service in amounts determined by Landlord to exceed
the amounts required to be provided under Section 4.01(a), but only if Landlord
elects to provide such additional or excess service.
(b) Provided that Tenant is the sole tenant of the Building, the costs of
furnishing the extra services described in Section 4.02(a) above shall be
charged to Tenant as part of the Basic Operating Cost. If at any time during the
Term (including any Renewal Term) Tenant is not the sole tenant of the Building,
then the costs of furnishing such extra services shall not be included within
Basic Operating Cost and Tenant shall pay Landlord the costs thereof, together
with an administration fee equal to ten percent (10%) of such costs, within ten
(10) days following presentation of an invoice therefor by Landlord to Tenant.
The cost, if any, chargeable to Tenant for all extra services under this Section
4.02 shall constitute Additional Rent.
4.03 Graphics and Signage. For so long as Tenant is the Major Tenant,
--------------------
Tenant shall have the exclusive right to maintain an identification sign on the
exterior of the Building, subject to Landlord's written approval of the
location, size, style and design of such sign, and further subject to the
obtaining by Tenant of a signage permit from the City of South San Francisco and
compliance by Tenant with all applicable Laws. All signs, notices and graphics
of every kind or character, visible in or from public corridors, the Common Area
or the exterior of the Leased Premises shall be subject to Landlord's prior
written approval which Landlord shall have the right to withhold in its absolute
and sole discretion. For purposes of this Section 4.03, Tenant shall be deemed
to be the "Major Tenant" so long as Tenant personally (and specifically
excluding any assignees or sublessees of Tenant, other than a Tenant Affiliate
to whom Tenant assigns its entire right, title and interest in and to this Lease
pursuant to Section 5.05(d) below) leases and occupies sixty percent (60%) or
more of the Net Rentable Area of the Building.
4.04 Repair Obligation. Landlord's obligation with respect to repair as
-----------------
part of Basic Services shall be limited to (i) the structural portions of the
Building, (ii) the exterior wall of the Building, including glass and glazing,
(iii) the roof, (iv) mechanical, electrical, plumbing and life safety systems
that are considered Base Building Improvements, and (v) Common Areas. Landlord
shall have the right but not the obligation to undertake work of repair that
Tenant is required to perform under this Lease and that Tenant fails or refuses
to perform in a timely and efficient manner; provided, however, that except in
the case of an emergency, Landlord shall afford Tenant the cure period provided
in Section 7.08(a)(iii) below prior to undertaking any such repairs on Tenant's
behalf. All costs incurred by Landlord in performing any such repair for the
account of Tenant shall be repaid by Tenant to Landlord upon demand, together
with an administration fee equal to fifteen percent (15%) of such costs;
provided, however, that administration fees shall not be included in "income"
for purposes of calculating Landlord's management cost recovery under Section
3.06(a)(vii).
4.05 Peaceful Enjoyment. Tenant shall peacefully have, hold and enjoy the
------------------
Leased Premises, subject to the other terms hereof, provided that Tenant pays
the Rent and performs all of Tenant's covenants and agreements herein contained.
This covenant and the other covenants of Landlord contained in this Lease shall
be binding upon Landlord and its successors only with
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respect to breaches occurring during its and their respective ownership of
Landlord's interest hereunder.
Article 5
Tenant's Covenants
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5.01 Payments By Tenant. Tenant shall pay Rent at the times and in the
------------------
manner herein provided. All obligations of Tenant hereunder to make payments to
Landlord shall constitute Rent and failure to pay the same when due shall give
rise to the rights and remedies provided for in Section 7.08.
5.02 Taxes On Personal Property and Tenant Extra Improvements. In
--------------------------------------------------------
addition to, and wholly apart from its obligation to pay Tenant's Proportionate
Share(s) of Basic Operating Costs, Tenant shall be responsible for and shall pay
prior to delinquency taxes or governmental service fees, possessory interest
taxes, fees or charges in lieu of any such taxes, capital levies, or other
charges imposed upon, levied with respect to or assessed against its personal
property, on the value of its Tenant Extra Improvements, on its interest
pursuant to this Lease or on any use made of the Leased Premises or the Common
Areas by Tenant in accordance with this Lease. To the extent that any such taxes
are not separately assessed or billed to Tenant, Tenant shall pay the amount
thereof as invoiced to Tenant by Landlord. Landlord may require by written
notice to Tenant that Tenant shall install and maintain all required
intrabuilding network cable and other communications wires and cables necessary
to serve the Leased Premises from the point of presence in the Building from a
telecommunications provider selected by Tenant and approved by Landlord in its
reasonable discretion.
5.03 Repairs By Tenant. Tenant shall maintain and repair the Leased
-----------------
Premises and keep the same in good condition. Tenant's obligation shall include,
without limitation, the obligation to maintain and repair all walls, floors,
ceilings and fixtures and to repair all damage caused by Tenant or Tenant
Parties to the utility outlets and other installations in the Leased Premises or
anywhere in the Project, whatever the scope of the work of maintenance or repair
required. Tenant shall repair all damage caused by removal of Tenant's movable
equipment or furniture or the removal of any Tenant Extra Improvements or
Alterations (hereinafter defined) permitted or required by Landlord, all as
provided in Section 5.18. At the request of Tenant, Landlord shall perform the
work of maintenance and repair constituting Tenant's obligation pursuant to this
Section 5.03 and as an "extra service" to be rendered pursuant to Section
4.02(a)(v) at Tenant's sole cost and expense including the administration fee
referred to therein. Any work of repair and maintenance performed by or for the
account of Tenant by persons other than Landlord shall be performed by
contractors approved by Landlord prior to commencement of the work and in
accordance with procedures Landlord shall from time to time establish. All such
work shall be performed in compliance with all applicable laws, ordinances,
rules and regulations and Tenant shall provide to Landlord copies of all permits
and records of inspection issued or obtained by Tenant in connection therewith
to establish such compliance. Nothing herein contained, however, shall be deemed
to impose upon Tenant the obligation to perform work of maintenance or repair
required by reason of Landlord's negligence or wrongful acts or those of
Landlord Parties. In performing the obligations under this Section, Tenant shall
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notify Landlord of any repairs that could affect the mechanical, electrical,
HVAC, life safety or other systems of the Building.
5.04 Waste. Tenant shall not commit or allow any waste or damage to be
------
committed in any portion of the Leased Premises.
5.05 Assignment or Sublease.
-----------------------
(a) If Tenant intends to assign this Lease or sublet the Leased Premises
or any part thereof, Tenant shall give Landlord written notice of such intent.
Tenant's notice shall set forth the name and address of the proposed assignee or
subtenant, the nature and character of the business of the proposed assignee or
subtenant and the proposed date such assignment or sublease shall commence, and
shall be accompanied by current and prior financial statements for the proposed
assignee or subtenant prepared in accordance with GAAP. Tenant shall further
provide Landlord with (i) any additional information or documents reasonably
requested by Landlord (collectively, "Additional Sublease Information") within
ten (10) days after receiving Tenant's notice, and (ii) an opportunity to meet
and interview the proposed assignee or subtenant (collectively, a "Subtenant
Interview"), if requested by Landlord.
(b) Landlord shall have the right during Landlord's Review Period to
notify Tenant in writing that Landlord elects either (i) to terminate this Lease
as to the space so affected as of the date so specified by Tenant in its notice
under Section 5.05(a) above, in which event Tenant will be relieved of all
further obligations hereunder as to such space, or (ii) to provisionally permit
Tenant to assign this Lease or sublet such space, subject, however, to further
written approval by Landlord in accordance with Section 5.05(c) below.
Notwithstanding the foregoing, Landlord shall not have the right to terminate
this Lease under the aforesaid clause (i) if (A) following the completion of the
purported assignment or sublease, Tenant personally (and specifically excluding
any assignees or sublessees of Tenant, other than a Tenant Affiliate to whom
Tenant assigns its entire right, title and interest in and to this Lease
pursuant to Section 5.05(d) below) leases and occupies forty percent (40%) or
more of the Net Rentable Area of the Building, or (B) Tenant proposes to enter
into a Limited Sublease. If Landlord fails to notify Tenant in writing of its
election within Landlord's Review Period, Landlord shall be deemed to have
waived option (i) above (to the extent applicable), but written approval by
Landlord of the proposed assignee or sublessee shall be required. Failure by
Landlord to approve a proposed subtenant or assignee shall not cause a
termination of this Lease, and the sole remedy of Tenant shall be an action for
injunctive or declaratory relief.
(c) In the event Landlord provisionally permits Tenant to assign this
Lease or sublet the all or a portion of the Leased Premises in accordance with
clause (ii) of Section 5.05(b) above, then Tenant shall negotiate the terms of
the assignment or sublease transaction with the proposed assignee or sublessee
and, when such negotiations have been concluded, deliver to Landlord an exact
copy of the proposed agreements between Tenant and the proposed assignee or
subtenant, together with any additional information or documents requested by
Landlord. Landlord shall have a period of ten (10) days following its receipt of
the aforesaid documentation to notify Tenant in writing that Landlord either
approves or disapproves the proposed transaction; provided, however, that
Landlord shall not unreasonably withhold its approval of such transaction; and
provided, further, that Landlord shall not disapprove such transaction on
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the basis of information that was furnished to Landlord prior to the granting of
provisional approval under clause (ii) of Section 5.05(b) above. Without
otherwise limiting the criteria upon which Landlord may withhold its consent to
a proposed assignment or sublease under Section 5.05(b) above or this Section
5.05(c), Landlord shall be entitled to consider all reasonable criteria
including, but not limited to, the following: (i) whether the use of the Leased
Premises by such proposed assignee or sublessee would be a Permitted Use; (ii)
whether the proposed assignee or sublessee is of sound financial condition as
determined by Landlord; (iii) whether the proposed assignee's or sublessee's use
will involve the storage, use, treatment or disposal of any Hazardous Material
(except for Permitted Hazardous Materials transported, stored and used in
accordance with the provisions of this Lease); (iv) whether the proposed use or
the proposed assignee or sublessee would cause the violation of any covenant or
agreement of Landlord to any third party or would permit any other tenant to
terminate its lease; and (v) whether the proposed subtenant or assignee does
then lease or occupy any other space in the Building.
(d) Notwithstanding the terms of Sections 5.05(a) through (c) above, but
subject to compliance with the requirements of Sections 5.05(e) through (l)
below, Tenant shall have the right to assign this Lease or to sublease the
Leased Premises with prior written notice to, but without the consent of,
Landlord to a Tenant Affiliate.
(e) Except in the case of a sublease or assignment to a Tenant Affiliate,
any rent or other consideration realized by Tenant under any sublease and
assignment in excess of the Rent payable hereunder, after amortization of
Tenant's Sublease/Assignment Costs, shall be divided and paid fifty percent
(50%) to Tenant and fifty percent (50%) to Landlord; provided, however, that in
the case of a Limited Sublease, one hundred percent (100%) of any rent or other
consideration realized by Tenant under such Limited Sublease in excess of the
Rent payable hereunder, after amortization of Tenant's Sublease/Assignment
Costs, shall be paid to Landlord.
(f) In any subletting undertaken by Tenant, Tenant shall diligently seek
to obtain not less than Fair Market Rent for the space so sublet. In any
assignment of this Lease in whole or in part, Tenant shall seek to obtain from
the assignee consideration reflecting a value of not less than Fair Market Rent
for the space subject to such assignment. Tenant shall provide to Landlord, upon
Landlord's demand, true and correct executed copies of the documents
constituting such sublease or assignment and any amendments thereof during the
Term.
(g) No assignment or subletting by Tenant shall relieve Tenant of any
obligation under this Lease. Any assignment or subletting that conflicts with
the provisions hereof shall be void. No consent by Landlord to any subletting or
assignment shall constitute a consent to any other assignment or subletting nor
shall it constitute a waiver of any of the provisions of this Section 5.05 as
they apply to any such future sublettings or assignments.
(h) Any assignee shall assume in writing, for the express benefit of
Landlord, all of the obligations of Tenant under this Lease, provided that no
such assumption shall be deemed a novation or other release of the prior Tenant.
Following any assignment, the obligations for which the prior Tenant remains
liable under this Lease shall include, without limitation, any obligations
arising in connection with any amendments to this Lease executed by Landlord and
26
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the assignee, whether or not such amendments are made with knowledge or consent
of the prior Tenant.
(i) Tenant shall not enter into any subletting or assignment of this
Lease until after the Rent Commencement Date has occurred; provided, however,
that subject to compliance with the terms and provisions of this Section 5.05,
Tenant shall have the right prior to the Rent Commencement Date to enter into a
sublease affecting not more than one (1) floor of the Building and for a term
not exceeding eighteen (18) months from the Rent Commencement Date.
(j) Any improvements, additions, or alterations to the Building or the
Project that are required by any law, ordinance, rule or regulation, or are
deemed necessary or appropriate by Landlord as a result of any subletting or
assignment hereunder, shall be installed and provided without cost or expense to
Landlord. Landlord may condition its consent to any proposed sublessee or
assignee on the construction of improvements deemed necessary or appropriate by
Landlord by reason of the subletting or assignment.
(k) Landlord may hire outside consultants to review all assignment and
subletting documents and information. Tenant shall reimburse Landlord for the
cost thereof, including reasonable attorneys' fees, on demand. Such costs
actually paid by Tenant under this Section 5.05(j) shall not be deemed
"Expenses" for purposes of Section 3.06 above.
(l) Without liability to Tenant, Landlord shall have the right to offer
and to lease space in the Building, or in any other property, to any party,
including, without limitation, parties with whom Tenant is negotiating, or with
whom Tenant desires to negotiate, concerning assignment or subletting the Leased
Premises, or any portion thereof.
5.06 Alterations, Additions or Improvements.
---------------------------------------
(a) Tenant shall not make or allow to be made any alterations, additions
or improvements in or to the Leased Premises (collectively, "Alterations")
without obtaining the prior written consent of Landlord. Landlord's consent
shall not be unreasonably withheld with respect to proposed Alterations that (i)
comply with all applicable laws, ordinances, rules and regulations, (ii) are
compatible with the Building and its mechanical, electrical, HVAC and life
safety systems, (iii) will not interfere with the use and occupancy of any other
portion of the Building by any other tenant or their invitees, (iv) do not
affect the structural portions of the Building, and (v) do not and will not,
whether alone or taken together with other improvements, require the
construction of any other improvements or alterations within the Building.
Notwithstanding the foregoing, Tenant shall have the right to make Alterations
to the Leased Premises with prior notice to but without the consent of Landlord,
provided that such Alterations (A) satisfy the criteria set forth in the
foregoing clauses (i) through (v) and are constructed and performed in full
compliance with all Laws and the terms of Section 5.06(b) below (including,
without limitation, the delivery of the documentation and information required
under said Section 5.06(b)), (B) do not require work to be performed inside the
walls or above the ceiling of the Leased Premises, (C) do not require the
issuance of building permits or approvals from any governmental agency, and (D)
do not exceed twenty five thousand dollars ($25,000) in cost individually or in
the aggregate during any twelve (12) month period or two hundred fifty thousand
dollars ($250,000) in cost in the aggregate over the Term (collectively,
"Permitted
27
<PAGE>
Alterations"). For purposes of the foregoing clause (D), "costs" shall refer
only to "hard" costs and shall exclude architectural fees, permitting costs and
other "soft" costs.
(b) In determining whether or not to consent to proposed Alterations under
Section 5.06(a) above, Landlord shall have the right (without limitation) to
review plans and specifications for proposed Alterations, construction means and
methods, the identity of any contractor or subcontractor to be employed on the
work of Alterations, and the time for performance of such work. Tenant shall
supply to Landlord any documents and information requested by Landlord in
connection with the exercise of its rights hereunder. Landlord may hire outside
consultants to review such documents and information and Tenant shall reimburse
Landlord for the cost thereof, including reasonable attorneys' fees, upon
demand. All Alterations permitted hereunder shall be made and performed by
Tenant or, at Landlord's election, may be performed by Landlord, without cost or
expense to Landlord. Tenant shall pay Landlord, upon completion of any
Alteration, a reasonable fee for Landlord's supervision and administration of
the installation thereof; provided, however, that such fee shall not be deemed
to be "income" for purposes of calculating management cost recovery under
Section 3.06(a)(vii). All additions to or improvements of the Leased Premises,
whether of Building Standard Improvements, Tenant Extra Improvements or
Alterations, shall be and become the property of Landlord upon installation and
shall, subject to Section 5.06(c) below, be surrendered to Landlord upon
termination of this Lease by lapse of time or otherwise. Although Tenant Extra
Improvements become the property of Landlord upon installation, they are
intended to be for the convenience of Tenant and are not intended to be a
substitute for Rent or any part thereof. The obligations of the parties with
respect to removal of Alterations shall be controlled by Section 5.18.
(c) In the event Landlord consents to a proposed Alteration, such consent
shall include Landlord's advice whether or not such proposed Alteration shall be
required to be removed at the expiration or termination of the Term; provided,
however, that in no event shall Tenant be required to remove any Alterations
that are consistent with general office uses commonly found in class "A" office
properties owned by Landlord, as reasonably determined by Landlord. If Landlord
fails to so advise Tenant regarding whether or not a proposed Alteration must be
removed at the expiration or termination of this Lease, then Tenant shall be
required to remove such Alteration upon such expiration or termination date.
5.07 Liens. Tenant shall keep the Leased Premises and the Project free from
------
any liens arising out of any (i) work performed or material furnished to or for
the Leased Premises, and (ii) obligations incurred by or for Tenant or any
person claiming through or under Tenant. Tenant shall, within ten (10) days of
obtaining knowledge of the imposition of any such lien, cause such lien to be
released of record by payment or posting of a bond fully satisfactory to
Landlord in form and substance. Landlord shall have the right at all times to
post and keep posted on the Leased Premises any notices permitted or required by
law, or that Landlord shall deem proper for the protection of Landlord, the
Leased Premises, the Project and any other party having an interest therein,
from mechanics', materialmen's and other liens. Landlord may cause such liens to
be released by any means it deems proper, including, without limitation, payment
of any such lien, at Tenant's sole cost and expense. All costs and expenses
incurred by Landlord in causing such liens to be released shall be repaid by
Tenant to Landlord immediately upon demand, together with an administration fee
equal to twenty percent (20%) of such costs and
28
<PAGE>
expenses. In addition to all other requirements contained in this Lease, Tenant
shall give to Landlord at least ten (10) Business Days prior written notice
before commencement of any construction on the Leased Premises including,
without limitation, any Permitted Alterations.
5.08 Compliance With Laws, Insurance Standards and Non-Discrimination.
-----------------------------------------------------------------
(a) Tenant shall comply with all federal, state and local laws,
ordinances, orders, rules, regulations and policies (collectively, "Laws"), now
or hereafter in force, as amended from time to time, in any way related to the
use, condition or occupancy of the Leased Premises, regardless of when they
become effective, including, without limitation, all applicable Hazardous
Materials Laws and the Americans with Disabilities Act of 1990, as amended, but
excluding any Laws relating to the original construction of the Base Building
Improvements, which shall be the responsibility of Landlord. Tenant shall
immediately deliver to Landlord a copy of any notices received from any
governmental agency in connection with the Leased Premises. It is the intention
of Tenant and Landlord that the obligations of Tenant under this Section 5.08
shall apply irrespective of the scope of work required to achieve such
compliance. Tenant shall promptly cure and satisfy all Hazardous Materials
Claims arising out of or by reason of the activities or businesses of Tenant,
its sub-tenants, or Tenant Parties or any employees, agents, contractors,
officers, directors, partners, licensees, invitees and guests of Tenant's sub-
tenant. Nothing done by Tenant in its use or occupancy of the Leased Premises
shall create, require or cause imposition of any requirement by any governmental
authority for structural or other upgrading of or improvement to the Project.
(b) Tenant shall not occupy or use, or permit any portion of the Leased
Premises to be occupied or used, for any business or purpose that is
disreputable or productive of fire hazard, or permit anything to be done that
would increase the rate of fire or other insurance coverage on the Project
and/or its contents. If Tenant does or permits anything to be done that shall
increase the cost of any insurance policy required to be carried hereunder, then
Tenant, at Landlord's option, shall not be in default under this Lease, but
shall reimburse Landlord, upon demand, for any such additional premiums.
Landlord shall deliver to Tenant a written statement setting forth the amount of
any such insurance cost increase and showing in reasonable detail the manner in
which it has been computed.
(c) Landlord and Tenant herein each covenant by and for itself and its
successors and assigns, and all persons claiming under or through it, and this
Lease is made and accepted upon and subject to the following conditions: That
there shall be no discrimination against, or segregation of, any person or group
of persons on account of race, color creed, religion, sex, marital status,
national origin or ancestry in the leasing, subleasing, transferring, use'
occupancy, tenure or enjoyment of the Leased Premises herein leased, nor shall
Landlord or Tenant, or any person claiming under or through it, establish or
permit any such practice or practices of discrimination or segregation with
reference to the selection, location, number, use or occupancy of tenants,
lessees, subtenants, sublessees or vendees in the Leased Premises herein leased.
29
<PAGE>
5.09 Entry For Repairs, Inspection, Posting Notices, Etc. After
--------------------------------------------------------
reasonable notice (except in emergencies where no such notice shall be
required), Landlord or Landlord Parties shall have the right to enter the Leased
Premises to inspect the same, to clean, to perform such work as may be permitted
or required hereunder, to make repairs to or alterations of the Project or other
tenant spaces therein, to deal with emergencies, to post such notices as may be
permitted or required by law to prevent the perfection of liens against
Landlord's interest in the Project or to exhibit the Leased Premises to
prospective tenants, purchasers, encumbrancers or others, or for any other
purpose as Landlord may deem necessary or desirable; provided, however, that
Landlord shall not unreasonably interfere with Tenant's business operations.
Tenant shall not be entitled to any abatement of Rent by reason of the exercise
of any such right of entry.
5.10 No Nuisance. Tenant shall conduct its business and control Tenant
------------
Parties without creating any nuisance, or interfering with, annoying,
endangering or disturbing any other tenant or Landlord in its operation of the
Project. Tenant shall not place any loads upon the floor, walls or ceiling of
the Leased Premises that endanger the structure nor place any harmful liquids or
Hazardous Material in the drainage system of the Building. Tenant shall not
permit any vibration, noise or odor to escape from the Leased Premises and shall
not do or permit anything to be done within the Leased Premises which would
adversely affect the quality of the air in the Building.
5.11 Subordination; Mortgagee Protection; Reciprocal Easement Agreements.
--------------------------------------------------------------------
(a) Tenant agrees that this Lease and the rights of Tenant hereunder are
subject and subordinate to the holder of or beneficiary under any mortgage or
deed of trust whether now or in the future encumbering the Project (the
"Mortgage Lender") and to any and all advances made thereunder, and interest
thereon, and all modifications, renewals, supplements, consolidations and
replacements thereof; provided only, and as a condition precedent to any such
subordination of this Lease to a mortgage or deed of trust hereafter executed
covering the Project, the applicable Mortgage Lender shall agree in writing
(such writing being herein referred to as a "Nondisturbance Agreement") to
recognize Tenant's rights under this Lease upon the foreclosure of such mortgage
or deed of trust as long as Tenant shall pay the Rent and observe and perform
all the provisions of this Lease to be observed and performed by Tenant.
Notwithstanding the foregoing, Tenant agrees that the Mortgage Lender may at its
option, unilaterally elect to subordinate, in whole or in part, by an instrument
in form and substance satisfactory to such Lender, the lien of such mortgage or
deed of trust to this Lease. Tenant agrees to execute promptly and to deliver to
Landlord or any Mortgage Lender any subordination instrument or instruments
(collectively, a "Subordination Agreement") requested by such Mortgage Lender,
provided that, if such Subordination Agreement purports to make this Lease
subject and subordinate to the lien of the Mortgage Lender's mortgage or deed of
trust, the Mortgage Lender shall execute a commercially reasonable
Nondisturbance Agreement consistent with the terms of this Section 5.11(a) and
otherwise reasonably acceptable to Landlord, Tenant and such Mortgage Lender.
Tenant agrees that if it fails or refuses to execute a Subordination Agreement
or a Nondisturbance Agreement, as applicable, within fifteen (15) days after
written request therefor by Landlord or such Mortgage Lender, such failure or
refusal shall constitute a default by Tenant under this Lease, but such failure
or refusal shall in no way affect the validity or enforceability of any such
subordination made by such Mortgage Lender.
30
<PAGE>
(b) In the event a Mortgage Lender requires Tenant to execute a
Subordination Agreement or a Nondisturbance Agreement which provides by its
terms that, following the foreclosure of the lien of the applicable mortgage or
deed of trust, the Mortgage Lender shall be liable to Tenant for the return of
the Letter of Credit only if the Mortgage Lender has actually taken possession
of the Letter of Credit, then concurrently with or prior to the execution by
Tenant of such Subordination Agreement or Nondisturbance Agreement, as the case
may be, Landlord shall deliver the Letter of credit to such Mortgage Lender, and
Landlord shall thereafter permit the Mortgage Lender to retain possession of the
Letter of Credit and any Letter of Credit Proceeds not applied in accordance
with the terms of Section 5.13 below until the obligations secured by the
applicable mortgage or deed of trust have been fully satisfied. In the event
Tenant provides a Security Deposit to Landlord pursuant to Section 5.14 below,
then for purposes of this Section 5.11(b), the term "Letter of Credit" shall
include such Security Deposit.
(c) Any successor in interest to any Mortgage Lender shall not be bound by
(i) any payment of Gross Rent for more than one (1) month in advance, or (ii)
any amendment or modification of this Lease made without the written consent of
the Mortgage Lender. Nothing herein contained shall be deemed to impose upon the
person or party succeeding to the interest of Landlord as a result of the
enforcement of such mortgage or first deed of trust by any Mortgage Lender, any
obligation for defaults on the part of Landlord, and any person or party
succeeding to possession of the Project as a successor to Landlord shall be
subject to Landlord's obligations hereunder only during the period of such
persons' or party's ownership.
(d) Tenant shall not sue, seek any remedy or enforce any right against
Landlord until (i) Tenant gives written notice to any Mortgage Lender, and (ii)
a reasonable time for such Mortgage Lender, at its option, to remedy the act or
omission has elapsed following the giving of notice by Tenant to Mortgage Lender
required hereunder, including, without limitation, time to obtain possession
from Landlord by power of sale or judicial foreclosure, it being agreed that the
Mortgage Lender shall have no obligation to Tenant to cure or remedy any act or
omission of Landlord.
(e) Tenant agrees that this Lease and the rights of Tenant hereunder are
subject and subordinate to any reciprocal easement agreements whether now or in
the future affecting the Project (the "REAs"); provided, however, that any
future REAs shall not materially adversely affect any specific rights granted to
Tenant hereunder with respect to parking or access. Tenant agrees to execute
promptly and to deliver to Landlord any subordination instrument or instruments
requested by Landlord and agrees that if it fails or refuses to do so within
fifteen (15) days after written request therefor by Landlord, such failure or
refusal shall constitute a default by Tenant under this Lease, but such failure
or refusal shall in no way affect the validity or enforceability of any such
subordination.
5.12 Estoppel Certificate. Within fifteen (15) days of a written request
---------------------
from Landlord, Tenant shall execute estoppel certificates addressed to (i) any
mortgagee or prospective mortgagee of Landlord or, (ii) any purchaser or
prospective purchaser of all or any portion of, or interest in, the Project, on
a form specified by Landlord, certifying as to such facts (if true) and agreeing
to such notice provisions and other matters as such mortgagee(s) or purchaser(s)
may reasonably require; provided, however, that in no event shall any such
estoppel certificate require an amendment of the provisions hereof, although
Tenant shall be bound by the
31
<PAGE>
statements made in such certificate. In the event that Tenant fails or refuses
to deliver such an estoppel certificate to Landlord within fifteen (15) days of
a written request from Landlord, then Landlord may give to Tenant a second
notice, reiterating the request that Tenant execute an estoppel certificate in
the form specified by Landlord and stating that, if Tenant fails to do so within
five (5) days of the receipt by Tenant of such second notice from Landlord,
Tenant shall be deemed to be bound by the statements set forth in the form of
certificate which Landlord requested that Tenant deliver. In the event that
Tenant fails to deliver an estoppel certificate in the form specified by
Landlord within five (5) days of the receipt by Tenant of such second notice
from Landlord, Tenant shall conclusively be deemed, without exception, to have
acknowledged the correctness of the statements set forth in the form of
certificate which Landlord requested that Tenant deliver, and Tenant shall be
estopped from denying the correctness of each such statement, such that a
mortgage or purchaser may rely on the correctness of the statements in such form
of certificate, as if made and certified by Tenant. A failure by Tenant to
deliver an estoppel certificate in the form specified by Landlord within fifteen
(15) days of the receipt by Tenant of an initial request from Landlord for such
certificate shall also constitute a material breach of this Lease by Tenant.
5.13 Letter of Credit.
-----------------
(a) Within seven (7) Business Days after the full execution of this Lease,
Tenant shall deliver to Landlord, at Tenant's sole cost and expense, the Letter
of Credit described below in the initial amount of Two Million Dollars
($2,000,000.00) (the "LC Face Amount") as security for Tenant's performance of
all of Tenant's covenants and obligations under this Lease. Tenant shall
thereafter cause the Bank (as defined below) to increase the LC Face Amount to
the sum of Four Million Dollars ($4,000,000.00) on or before the Base Building
Improvements Construction Commencement Date, and to the sum of Six Million Three
Hundred Thousand Dollars ($6,300,000.00) on or before the Tenant Improvements
Construction Commencement Date. Tenant understands and agrees that neither the
Letter of Credit nor any Letter of Credit Proceeds (as defined below) shall be
deemed an advance rent deposit or an advance payment of any other kind, or a
measure of Landlord's damages upon a default on the part of Tenant. Subject to
Section 5.13(b) below, the Letter of Credit shall be maintained in effect from
the date hereof through the date that is sixty (60) days after the Term
Expiration Date (the "LC Termination Date"). On the LC Termination Date,
Landlord shall return to Tenant the Letter of Credit and any Letter of Credit
Proceeds then held by Landlord (other than those Letter of Credit Proceeds
Landlord is entitled to retain under the terms of this Section 5.13(a));
provided, however, that in no event shall any such return be construed as an
admission by Landlord that Tenant has performed all of its obligations
hereunder. Landlord shall not be required to segregate the Letter of Credit
Proceeds from its other funds and no interest shall accrue or be payable to
Tenant with respect thereto. Landlord may (but shall not be required to) draw
upon the Letter of Credit and use the proceeds therefrom (the "Letter of Credit
Proceeds") or any portion thereof as may be reasonably necessary (i) to cure a
default by Tenant under this Lease and to compensate Landlord for any loss or
damage Landlord incurs as a result of Tenant's failure to perform any of its
covenants or obligations hereunder, (ii) to repair damage to the Leased Premises
caused by Tenant, (iii) to clean the Leased Premises upon termination of this
Lease, and (iv) to reimburse Landlord for the payment of any amount which
Landlord may for any other purpose spend or be required to spend by reason of a
default on the part of Tenant, it being understood that any use of the Letter of
Credit Proceeds shall not constitute a bar or defense to any of Landlord's
remedies
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<PAGE>
under this Lease, at law or in equity. In such event and upon written
notice from Landlord to Tenant specifying the amount of the Letter of Credit
Proceeds so utilized by Landlord and the particular purpose for which such
amount was applied, Tenant shall immediately deliver to Landlord an amendment to
the Letter of Credit or a replacement Letter of Credit in an amount equal to the
then-full LC Face Amount. Tenant's failure to deliver such replacement Letter of
Credit to Landlord within ten (10) days of Landlord's notice shall constitute an
immediate Event of Default hereunder. In the event Landlord transfers its
interest in this Lease, Landlord shall transfer the Letter of Credit and any
Letter of Credit Proceeds then held by Landlord to Landlord's successor in
interest, and thereafter Landlord shall have no further liability to Tenant with
respect to such Letter of Credit or Letter of Credit Proceeds.
(b) Notwithstanding the terms of Section 5.13(a) above, Tenant shall be
eligible to reduce the LC Face Amount on the terms and subject to the conditions
set forth in subsections (i) through (iv) below:
(i) In the event Tenant has a Market Capitalization of less than Five
Hundred Million Dollars ($500,000,000) on the first (1st) anniversary of the
Rent Commencement Date, then the Face Amount shall not be reduced on said first
(1st) anniversary and shall remain at Six Million Three Hundred Thousand Dollars
($6,300,000) until the second (2nd) anniversary of the Rent Commencement Date.
Thereafter, commencing on the second (2nd) anniversary of the Rent Commencement
Date and continuing on each successive anniversary date through and including
the sixth (6th) anniversary of the Rent Commencement Date, Tenant shall have the
right to reduce the then-Face Amount on each anniversary date by the applicable
amount specified below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
PERCENTAGE REDUCTION
(expressed as a percentage of
the initial Face Amount of
ANNIVERSARY DATE $6,300,000.00) ACTUAL PERMITTED REDUCTION
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Second (2nd) anniversary of
Rent Commencement Date 15% $ 945,000.00
- ----------------------------------------------------------------------------------------------------------------------
Third (3rd) anniversary of
Rent Commencement Date 18% 1,134,000.00
- ----------------------------------------------------------------------------------------------------------------------
Fourth (4th) anniversary of
Rent Commencement Date 20% 1,260,000.00
- ----------------------------------------------------------------------------------------------------------------------
Fifth (5th) anniversary of
Rent Commencement Date 22% 1,386,000.00
- ----------------------------------------------------------------------------------------------------------------------
Sixth (6th) anniversary of
Rent Commencement Date 25% 1,575,000.00
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(ii) If Tenant has a Market Capitalization equal to or greater than Five
Hundred Million Dollars ($500,000,000) on the first (1st) anniversary of the
Rent
33
<PAGE>
Commencement Date, then Tenant shall be entitled to reduce the Face Amount
on said first (1st) anniversary by the applicable amount specified below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
MARKET CAPITALIZATION PERCENTAGE REDUCTION ACTUAL PERMITTED REDUCTION
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Equal to or greater than $500 million 5% $ 315,000.00
- ----------------------------------------------------------------------------------------------------------------------
Equal to or greater than $1 billion 10% 630,000.00
- ----------------------------------------------------------------------------------------------------------------------
Equal to or greater than $1.5 billion 15% 945,000.00
- ----------------------------------------------------------------------------------------------------------------------
Equal to or greater than $2 billion 20% 1,260,000.00
- ----------------------------------------------------------------------------------------------------------------------
Equal to or greater than $2.5 billion 25% 1,575,000.00
- ----------------------------------------------------------------------------------------------------------------------
Equal to or greater than $3 billion 30% 1,890,000.00
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Notwithstanding the foregoing, Tenant shall be
entitled to a percentage reduction greater than twenty percent (20%) under this
subsection (ii) only if Tenant has exhibited Net Profits for a minimum of two
(2) consecutive calendar quarters ending on or before the first (1st)
anniversary of the Rent Commencement Date.
The Face Amount of the Letter of Credit, after
reduction in accordance with this clause (ii), shall be referred to herein as
the "Post Clause (ii) Reduction Face Amount."
(iii) In the event Tenant is entitled to reduce the Face
Amount on the first (1st) anniversary of the Rent Commencement Date in
accordance with subsection (ii) above, then Tenant shall have the further right,
commencing on the first (1st) anniversary of the Rent Commencement Date and
continuing on each successive anniversary date through and including the fifth
(5th) anniversary of the Rent Commencement Date, to reduce the then-Face Amount
on each anniversary date by the applicable percentage of the Post Clause (ii)
Reduction Face Amount specified below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PERCENTAGE REDUCTION
(expressed as a percentage of the Post Clause (ii)
ANNIVERSARY DATE Reduction Face Amount)
- --------------------------------------------------------------------------------
<S> <C>
First (1st) anniversary of
Rent Commencement Date 15%
- --------------------------------------------------------------------------------
Second (2nd) anniversary of
Rent Commencement Date 18%
- --------------------------------------------------------------------------------
Third (3rd) anniversary of
Rent Commencement Date 20%
- --------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PERCENTAGE REDUCTION
(expressed as a percentage of the Post Clause (ii)
ANNIVERSARY DATE Reduction Face Amount)
- --------------------------------------------------------------------------------
<S> <C>
Fourth (4th) anniversary of
Rent Commencement Date 22%
- --------------------------------------------------------------------------------
Fifth (5th) anniversary of
Rent Commencement Date 25%
- --------------------------------------------------------------------------------
</TABLE>
By way of example only, if Tenant has a Market
Capitalization of One Billion Dollars ($1,000,000,000.00) on the first (1st)
anniversary of the Rent Commencement Date and is therefore entitled to a
reduction in the Face Amount of $630,000.00 pursuant to clause (ii) above, then
the Face Amount shall be further reduced pursuant to this clause (iii) by the
amounts of $850,500.00, $1,020,600.00, $1,134,000.00, $1,247,400.00 and
$1,417,500.00, respectively, on the first (1st), second (2nd), third (3rd),
fourth (4th) and fifth (5th) anniversaries of the Rent Commencement Date.
(iv) Tenant shall have the right to cancel the Letter of
Credit in its entirety on or after the third (3rd) anniversary of the Rent
Commencement Date, provided that (A) at the time Tenant seeks to cancel the
Letter of Credit (the "Letter of Credit Early Cancellation Date"), Tenant has a
Market Capitalization equal to or greater than Five Billion Dollars
($5,000,000,000), (B) Tenant has exhibited Net Profits for a minimum of four (4)
consecutive calendar quarters ending on or before the Letter of Credit Early
Cancellation Date, and (C) no Event of Default (or event or condition which with
the giving of notice or the passage of time, or both, would constitute an Event
of Default hereunder) shall be occurring on the Letter of Credit Early
Cancellation Date.
(c) As used herein, Letter of Credit shall mean an unconditional,
standby irrevocable letter of credit (herein referred to as the "Letter of
Credit") issued by the San Francisco office of Bank of America, Wells Fargo Bank
or another major national bank insured by the Federal Deposit Insurance
Corporation and otherwise satisfactory to Landlord (the "Bank"), naming Landlord
as beneficiary, in the amount of the LC Face Amount, and otherwise in form and
substance satisfactory to Landlord. The Letter of Credit shall be for a one-year
term and shall provide: (i) that Landlord may make partial and multiple draws
thereunder, up to the face amount thereof, (ii) that Landlord may draw upon the
Letter of Credit up to the full amount thereof and the Bank will pay to Landlord
the amount of such draw upon receipt by the Bank of a sight draft signed by
Landlord and accompanied by a written certification from Landlord to the Bank
stating either that: (A) an Event of Default has occurred and is continuing
under this Lease and any applicable grace period has expired, or Landlord is
otherwise entitled to draw upon the Letter of Credit pursuant to the terms of
this Lease, or (B) Landlord has not received notice from the Bank at least
thirty (30) days prior to the then current expiry date of the Letter of Credit
that the Letter of Credit will be renewed by the Bank for at least one (1) year
beyond the relevant annual expiration date or, in the case of the last year of
the Term, sixty (60) days after the Term Expiration Date, together with a
replacement Letter of Credit or a modification to the existing Letter of Credit
effectuating such renewal, and Tenant has not otherwise furnished Landlord with
35
<PAGE>
a replacement Letter of Credit as hereinafter provided; and (iii) that, in the
event of Landlord's assignment or other transfer of its interest in this Lease,
the Letter of Credit shall be freely transferable by Landlord, without recourse
and without the payment of any fee or consideration in excess of one quarter
(1/4) of one percent (1%) of the then LC Face Amount, to the assignee or
transferee of such interest and the Bank shall confirm the same to Landlord and
such assignee or transferee. Landlord shall be responsible for the payment of
the aforesaid fee in connection with any such transfer of the Letter of Credit.
In the event that the Bank shall fail to (y) notify Landlord that the Letter of
Credit will be renewed for at least one (1) year beyond the then applicable
expiration date (or, in the case of the last year of the Term, sixty (60) days
after the Term Expiration Date), and (z) deliver to Landlord a replacement
Letter of Credit or a modification to the existing Letter of Credit effectuating
such renewal, and Tenant shall not have otherwise delivered to Landlord, at
least thirty (30) days prior to the relevant annual expiration date, a
replacement Letter of Credit in the amount required hereunder and otherwise
meeting the requirements set forth above, then Landlord shall be entitled to
draw on the Letter of Credit as provided above, and shall hold the proceeds of
such draw as Letter of Credit Proceeds pursuant to Section 5.13(a) above;
provided, however, that in and only in such event, Landlord shall deposit such
Letter of Credit Proceeds in an interest-bearing account at a bank selected by
Landlord and all interest accrued thereon shall be added to and deemed a part of
the Letter of Credit Proceeds for all purposes of this Section 5.13.
5.14 Security Deposit.(a) Upon the written request of Tenant, Landlord
-----------------
shall permit Tenant to deliver to Landlord a cash security deposit (the
"Security Deposit") equal to the amount of the Letter of Credit then required to
be maintained pursuant to Section 5.13 above, whereupon Landlord shall return
the Letter of Credit to Tenant for cancellation. Tenant understands and agrees
that the Security Deposit shall not be deemed an advance rent deposit or an
advance payment of any other kind, or a measure of Landlord's damages upon a
default on the part of Tenant. Tenant shall have the right from time to time to
reduce the amount of the Security Deposit on the terms and subject to the
conditions set forth in Section 5.13 above for the reduction of the LC Face
Amount. The Security Deposit shall serve as security for the full and faithful
performance of Tenant's obligations under this Lease. Landlord may (but shall
not be required to) use the Security Deposit or any portion thereof for any
purpose for which Landlord is entitled to use the Letter of Credit or any Letter
of Credit Proceeds pursuant to Section 5.13 above, it being understood that any
use of the Security Deposit shall not constitute a bar or defense to any of
Landlord's remedies under this Lease, at law or in equity. In such event, and
upon written notice from Landlord to Tenant specifying the amount of the
Security Deposit so utilized by Landlord and the particular purpose for which
such amount was applied, Tenant shall immediately deposit with Landlord an
amount sufficient to return the Security Deposit to the amount that would then
be required under Section 5.13 above if Tenant had not delivered the Security
Deposit to Landlord and the Letter of Credit was still in place. Tenant's
failure to deliver such amount to Landlord within ten (10) days of Landlord's
notice shall constitute an immediate Event of Default hereunder. Landlord shall
deposit the Security Deposit in an interest-bearing account at a bank selected
by Landlord and all interest accrued thereon shall be added to and deemed a part
of the Security Deposit for all purposes of this Section 5.14. Not later than
sixty (60) days after the Term Expiration Date, Landlord shall return to Tenant
the Security Deposit (other than those portions of the Security Deposit Landlord
is entitled to apply under the terms of this Section 5.14); provided, however,
that in no event shall any such return be construed as an admission by Landlord
that Tenant has performed all of its obligations
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hereunder. If Landlord conveys or transfers its interest in this Lease, the
Security Deposit shall be transferred to Landlord's successor and Landlord shall
be released and discharged from any further liability to Tenant with respect to
such Security Deposit.
5.15 Tenant's Remedies. Tenant shall look solely to Landlord's interest
-----------------
in the Project for recovery of any judgment from Landlord. Landlord and Landlord
Parties shall not be personally liable for any such judgment. Any lien obtained
to enforce any such judgment and any levy of execution thereon shall be subject
and subordinate to any lien, mortgage or deed of trust to which Section 5.11
applies or may apply.
5.16 Rules and Regulations. Tenant shall comply with the Rules and
----------------------
Regulations for the Project attached as Exhibit D and such amendments thereto as
Landlord may adopt from time to time with prior notice to Tenant. Landlord shall
not be liable to Tenant for or in connection with the failure of any other
tenant of the Project to comply with any rules and regulations applicable to
such other tenant under its lease.
5.17 Prohibition and Indemnity With Respect To Hazardous Material.
------------------------------------------------------------
(a) Tenant shall not cause or permit any Hazardous Material to be brought
upon, kept or used in or about the Leased Premises by Tenant or Tenant Parties
without the prior written consent of Landlord, save and except only for
Permitted Hazardous Materials, which Tenant may bring, store and use in
reasonable quantities for their intended use in the Leased Premises, but only in
full compliance with all Hazardous Materials Laws and otherwise in a safe and
prudent manner. If (i) Tenant breaches the obligations stated in the preceding
sentence, or (ii) contamination of the Leased Premises by Hazardous Material
occurs for which Tenant is or Tenant Parties are found to be responsible, or
(iii) Tenant's activities or those of Tenant Parties (or those of its
subtenants) result in or cause a Hazardous Materials Claim, then Tenant shall
indemnify, defend, protect and hold Landlord and Landlord Parties harmless from
and against any and all claims, judgments, damages, penalties, fines, costs,
expenses, liabilities or losses (including, without limitation, diminution in
value of the Leased Premises, damages for the loss or restriction on use of
rentable or usable space or of any amenity of the Leased Premises, damages
arising from any adverse impact on marketing of space, and sums paid in
settlement of claims, attorneys' fees, consultants' fees and experts' fees)
(collectively, "Claims") which arise during or after the Term as a result of
such contamination. This indemnification of Landlord by Tenant includes, without
limitation, costs incurred in connection with any investigation of site
conditions or any clean-up, remedial, removal or restoration work required by
any federal, state or local governmental agency or political subdivision because
of Hazardous Material present in the soil or ground water on or under the Leased
Premises. The foregoing indemnity shall survive the expiration or earlier
termination of this Lease.
(b) Notwithstanding anything to the contrary contained in Section 5.17(a)
above, Tenant shall not be responsible under this Section 5.17 for any costs
incurred in cleaning up or remediating (i) contamination by Hazardous Materials
existing in the soil or groundwater on or under the Leased Premises prior to the
Term Commencement Date ("Pre-Existing Contamination"), (ii) contamination by
Hazardous Materials placed, stored or disposed of by Landlord or the Landlord
Parties on or about the Project at any time ("Landlord's Contamination"), or
(iii) Specified Contamination, except, in any of the foregoing instances, to
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the extent that Tenant or the Tenant Parties have contributed to or exacerbated
the presence of or contamination caused by such Hazardous Materials.
5.18 Surrender of Premises On Termination. On or before the ninetieth
------------------------------------
(90th) day preceding the Term Expiration Date, Tenant shall notify Landlord in
writing of the precise date upon which Tenant plans to surrender the Leased
Premises to Landlord. On expiration of the Term, Tenant shall quit and surrender
the Leased Premises to Landlord, broom clean, in good order, condition and
repair as required by Section 5.03, with all of Tenant's movable equipment,
furniture, trade fixtures and other personal property removed therefrom. Subject
to Section 5.06(c) above and Paragraph 3(c)(ii) of Exhibit C hereto, all
Alterations and Tenant Improvements shall be surrendered with the Leased
Premises in good condition and repair, reasonable wear and tear (but only to an
extent consistent with the Leased Premises remaining in good condition and
repair) and casualty damage excepted. Any property of Tenant not removed
hereunder shall be deemed, at Landlord's option, to be abandoned by Tenant and
Landlord may store such property in Tenant's name at Tenant's expense, and/or
dispose of the same in any manner permitted by law. Tenant shall repair at its
sole cost and expense, all damage caused to the Leased Premises or the Project
by removal of Tenant's movable equipment or furniture and such Tenant
Improvements and Alterations as Tenant shall be allowed or required to remove
from the Leased Premises by Landlord. If the Leased Premises are not surrendered
as of the end of the Term in the manner and condition herein specified, Tenant
shall indemnify, defend, protect and hold Landlord and Landlord Parties harmless
from and against any and all Claims resulting from or caused by Tenant Delays or
failure in so surrendering the Leased Premises, including, without limitation,
any Claims made by any succeeding tenant due to such delay or failure. Tenant
acknowledges that Landlord will be attempting to lease the Leased Premises with
any such lease to be effective upon expiration of the Term, and failure to
surrender the Leased Premises could cause Landlord to incur liability to such
successor tenant for which Tenant shall be responsible hereunder to the full
extent thereof.
5.19 Window Coverings. All window coverings shall be provided by Tenant,
----------------
at its sole cost and expense (except for window coverings installed in
connection with the Tenant Improvements, which may be paid for with the Tenant
Improvements Allowance and the proceeds of the Tenant Improvements Loan), and
shall comply with Landlord's standard Building window covering. Tenant shall not
place or maintain any window coverings, blinds or drapes on any exterior window,
other than those in compliance with Landlord's standards, without Landlord's
prior written approval which Landlord shall have the right to grant or withhold
in its absolute and sole discretion. Tenant acknowledges that breach of this
covenant will directly and adversely affect the exterior appearance of the
Project or the operation of the heating, ventilation or air conditioning
systems.
ARTICLE 6
Condition and Operation of the Building
---------------------------------------
6.01 Exhibit B Controls. Landlord's entire obligation with respect to the
------------------
condition of the Leased Premises, its suitability for Tenant's uses and the
improvement requirements with respect thereto shall be as stated in Exhibit B.
Landlord shall have no other obligation of any kind
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or character, express or implied, with respect to the condition of the Leased
Premises, Building or Project or the suitability thereof for Tenant's purposes,
and Tenant acknowledges that it has neither received nor relied upon any
representation or warranty made by or on behalf of Landlord with respect to such
matters.
6.02 Alteration. Subject to any contrary provisions of Section 2.02
----------
above, Landlord may, at any time and from time to time: (i) make structural or
seismic modifications to the Building; (ii) change, add to, eliminate or reduce
the extent, size, shape or configuration of any aspect of or improvement
(including the Building) within the Project or its operations; provided,
however, that Landlord shall not alter any of the Common Areas within the
Project in a manner that is inconsistent with a class "A" office project; (iii)
change the arrangement, character, use or location of corridors, stairs,
toilets, mechanical, plumbing, electrical or other operating systems or any
other parts of the Building; and (iv) change the name, number or designation by
which the Building or the Project is commonly known. None of the foregoing acts
shall be deemed an actual or constructive eviction of Tenant, shall entitle
Tenant to any reduction of Rent or shall result in any liability of Landlord to
Tenant. Landlord shall have the exclusive rights to the airspace above and
around, and the subsurface below, the Leased Premises and other portions of the
Building, including, without limitation, the exclusive right to use all exterior
walls, roofs and other portions of the Building for signs, notices and other
promotional purposes.
ARTICLE 7
Casualty, Eminent Domain and Miscellaneous Matters
--------------------------------------------------
7.01 Landlord's Casualty Insurance. Landlord shall maintain, or cause to
-----------------------------
be maintained, a policy or policies of "all-risk" insurance with the premiums
thereon fully paid in advance, issued by and binding upon an insurance company
of good financial standing, insuring the Base Building Improvements and the
Tenant Improvements (including any Tenant Extra Improvements) against loss or
damage by fire or other insurable hazards (that may include earthquake loss if
Landlord elects to maintain such coverage) and contingencies for the full
insurable value thereof, exclusive of excavations and foundations; provided,
however, that Landlord shall not be obligated to insure any of Tenant's
furniture, equipment, machinery, trade-fixtures, goods or supplies ("Tenant's
Personal Property"), or Alterations that Tenant may make upon the Leased
Premises. If the annual premiums charged Landlord for such casualty insurance
exceed the standard premium rates because the nature of Tenant's operations
result in extra-hazardous or higher than normal risk exposure, then Tenant
shall, upon receipt of appropriate premium invoices, reimburse Landlord for such
increases in premium. All insurance proceeds payable under Landlord's insurance
carried hereunder shall be payable solely to Landlord, and Tenant shall have no
interest therein. Tenant shall from time to time provide Landlord with such
information as may be requested by Landlord or its insurers concerning the value
of the Tenant Improvements (including any Tenant Extra Improvements).
7.02 Liability Insurance. Landlord (with respect to the Project) and
-------------------
Tenant (with respect to the Leased Premises and Project) shall each maintain or
cause to be maintained a policy or policies of commercial general liability
insurance with the premiums thereon fully paid in advance, issued by and binding
upon an insurance company of good financial standing, such
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insurance to afford minimum protection of not less than Five Million Dollars
($5,000,000.00) combined single limit for bodily injury, death and property
damage in any one occurrence. The coverages required to be carried shall be
extended to include, but not to be limited to, blanket contractual liability,
personal injury liability (libel, slander, false arrest and wrongful eviction),
and broad form property damage liability. Tenant's contractual liability
insurance shall apply, without limitation, to all of Tenant's indemnity
obligations under this Lease. The certificate evidencing Tenant's insurance
coverage required hereunder shall state that the insurance includes the
liability assumed by Tenant under this Lease and that Tenant's insurance is
primary with any other insurance available to Landlord or any other named
insured being excess. Upon request of Tenant, Landlord shall provide Tenant
reasonable evidence that the insurance required to be maintained hereunder by
Landlord is in full force and effect.
7.03 Tenant's Casualty Insurance and Additional Tenant Insurance
-----------------------------------------------------------
Requirements.
- ------------
(a) Tenant shall provide insurance coverage during the Term against loss
or damage by fire and such other risks as are from time to time included in an
"all risk" policy (including, without limitation, sprinkler leakage and water
damage), insuring the full insurable value of any Alterations, Tenant's trade
fixtures, furnishings, equipment, and all other items of personal property of
Tenant, insuring the full replacement cost thereof.
(b) All policies required to be carried by Tenant under this Article 7
shall be written with financially responsible companies with a Best & Company
rating of "A-:X" or better, and all evidence of insurance provided to Landlord
shall contain an endorsement showing that Landlord and Mortgage Lender are
included as an additional insured and an endorsement whereby the insurer agrees
not to cancel or alter the policy without at least thirty (30) days' prior
written notice to Landlord and all named and additional insureds. Any deductible
or self-insurance provisions under any insurance policies maintained by Tenant
shall be subject to Landlord's prior written approval which shall not be
unreasonably withheld.
(c) Prior to the Term Commencement Date and thereafter, from time to
time, promptly upon request by Landlord, Tenant shall furnish Landlord and any
additional insureds with copies of policies or certificates of insurance,
evidencing Tenant's maintenance and renewal of the required coverages. If Tenant
fails to provide such evidence of insurance required hereunder, Landlord shall
be authorized (but not required) to procure such coverage in the amounts stated
with all costs thereof to be charged to Tenant and paid upon written invoice
therefor as Additional Rent together with an administrative fee equal to twenty
percent (20%) of such costs.
7.04 Indemnity and Exoneration.
-------------------------
(a) Tenant shall indemnify and hold harmless Landlord and the Landlord
Parties against and from any and all claims, liabilities, judgments, costs,
demands, causes of action and expenses (including, without limitation,
reasonable attorneys' fees) arising from (i) the use of the Leased Premises, the
Building or the Project by Tenant or the Tenant Parties, or from any activity
done, permitted or suffered by Tenant or the Tenant Parties in or about the
Leased Premises, the Building or the Project, and (ii) any act, neglect, fault,
willful misconduct or
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omission of Tenant or the Tenant Parties, or from any breach or default in the
terms of this Lease by Tenant or the Tenant Parties, and (iii) any action or
proceeding brought on account of any matter in items (i) or (ii). If any action
or proceeding is brought against Landlord by reason of any such claim, upon
notice from Landlord, Tenant shall defend the same at Tenant's expense by
counsel reasonably satisfactory to Landlord. As a material part of the
consideration to Landlord, Tenant hereby releases Landlord and the Landlord
Parties from responsibility for, waives its entire claim of recovery for and
assumes all risk of (A) damage to property or injury to persons in or about the
Leased Premises, the Building or the Project from any cause whatsoever (except
that which is caused by the negligence or willful misconduct of Landlord or the
Landlord Parties or by the failure of Landlord to observe any of the terms and
conditions of this Lease, if such failure has persisted for an unreasonable
period of time after written notice of such failure), or (B) loss resulting from
business interruption or loss of income at the Leased Premises. The obligations
of Tenant under this Section 7.04 shall survive any termination of this Lease.
(b) Landlord shall indemnify and hold harmless Tenant against and from any
and all claims, liabilities, judgments, costs, demands, causes of action and
expenses (including, without limitation, reasonable attorneys' fees) arising
from (i) the negligence of Landlord or from any breach or default in the terms
of this Lease by Tenant, and (ii) any action or proceeding brought on account of
any matter in item (i). If any action or proceeding is brought against Tenant by
reason of any such claim, upon notice from Tenant, Landlord shall defend the
same at Landlord's expense by counsel reasonably satisfactory to Tenant. The
obligations of Landlord under this Section 7.04(b) shall survive any termination
of this Lease.
(c) The foregoing indemnities shall not relieve any insurance carrier of
its obligations under any policies required to be carried by either party
pursuant to this Lease, to the extent that such policies cover the peril or
occurrence that results in the claim that is subject to the foregoing indemnity.
7.05 Waiver of Subrogation Rights. Anything in this Lease to the contrary
----------------------------
notwithstanding, Landlord and Tenant each waive all rights of recovery, claim,
action or cause of action, against the other, Tenant Parties or Landlord
Parties, as applicable, for any loss or damage that may occur to the Leased
Premises, or any improvements thereto, or the Project or any personal property
of such party therein, by reason of fire, the elements, or any other cause that
could be insured against under the terms of an "all risk" insurance policy or
other casualty insurance coverages which are required to be obtained pursuant to
this Lease, regardless of cause or origin, including negligence of the other
party, Landlord Parties or Tenant Parties, as applicable; and each party
covenants that no insurer shall hold any right of subrogation against such other
party. Each party hereto shall advise its insurers of the foregoing and such
waiver shall be a part of each policy maintained by Landlord or Tenant that
applies to the Leased Premises, any part of the Project or Tenant's use and
occupancy of any part thereof.
7.06 Condemnation and Loss or Damage.
-------------------------------
(a) If the Leased Premises or any portion of the Project shall be taken or
condemned for any public purpose (herein, a "Condemnation") to such an extent as
to render the Leased Premises untenantable as reasonably determined by Landlord,
this Lease shall, at the option of either party, forthwith cease and terminate
as of the date of taking. All proceeds from any
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Condemnation of the Leased Premises shall belong to and be paid to Landlord
subject to the rights of any Mortgage Lender; provided, however, that Landlord
shall cooperate with Tenant if Tenant seeks to recover at its cost and expense,
proceeds, damages or awards paid to compensate for damage to or taking of
Tenant's Personal Property.
(b) If a temporary Condemnation of all or a portion of the Leased Premises
occurs, there shall be no abatement of Rent and Tenant shall remain fully
obligated for performance of all of the covenants and obligations on its part to
be performed pursuant to the terms of this Lease. All proceeds awarded or paid
with respect thereto shall belong to Tenant.
7.07 Damage and Destruction. If a fire or other casualty in the Leased
----------------------
Premises occurs, Tenant shall immediately give notice thereof to Landlord. The
following provision shall then apply:
(a) If the damage is limited solely to the Leased Premises and the Leased
Premises can, in the reasonable opinion of Landlord, be made tenantable with all
damage repaired within six (6) months from the date of damage or destruction,
then Landlord shall diligently rebuild the same, including any Tenant
Improvements; provided, however, that Landlord shall be required to repair and
restore Tenant Improvements only to the extent that Landlord actually receives
proceeds therefor ("Tenant Improvements Proceeds") under the policy of casualty
insurance maintained by Landlord pursuant to Section 7.01 above ("Landlord's
Casualty Policy"). If Landlord rebuilds the Leased Premises, Tenant shall repair
and restore any Tenant Improvements to the extent that the cost thereof exceed
the Tenant Improvements Proceeds received by Landlord and any Alterations, or,
at Landlord's election, Landlord may repair and rebuild such Tenant Improvements
and Alterations at Tenant's expense.
(b) If portions of the Project outside the boundaries of the Leased
Premises are damaged or destroyed (whether or not the Leased Premises are also
damaged or destroyed) and the Leased Premises and the Project can, in the
reasonable opinion of Landlord, both be made tenantable with all damage repaired
within six (6) months from the date of damage or destruction, and provided that
Landlord determines that such reconstruction is economically feasible, then
Landlord shall be obligated to do so; provided, however, that Landlord shall be
required to repair and restore Tenant Improvements only to the extent that
Landlord actually receives Tenant Improvements Proceeds under Landlord's
Casualty Policy. If Landlord rebuilds the Leased Premises and the Project,
Tenant shall repair and restore any Tenant Improvements to the extent that the
cost thereof exceed the Tenant Improvements Proceeds received by Landlord and
any Alterations, or, at Landlord's election, Landlord may repair and rebuild
such Tenant Improvements and Alterations at Tenant's expense.
(c) If neither Section 7.07(a) nor 7.07(b) above applies, Landlord shall
have the right, but not the obligation, to reconstruct the Project and the
Leased Premises. Within sixty (60) days after the date of such damage and
destruction, Landlord shall notify Tenant in writing of the estimated period of
restoration and whether Landlord elects to reconstruct the Project and the
Leased Premises, in which event this Lease shall remain in full force and
effect, or to terminate this Lease effective as of the date specified in such
notice. If Landlord rebuilds the Project and the Leased Premises, Landlord shall
be required to repair and restore Tenant Improvements only to the extent that
Landlord actually receives Tenant Improvements Proceeds under Landlord's
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Casualty Policy. Tenant shall repair and restore any Tenant Improvements to the
extent that the cost thereof exceed the Tenant Improvements Proceeds received by
Landlord and any Alterations or, at Landlord's election, Landlord may repair and
rebuild such Tenant Improvements and Alterations at Tenant's expense.
Notwithstanding the foregoing, if the Leased Premises is damaged or destroyed to
the extent that the Leased Premises cannot be substantially repaired or restored
by Landlord within three hundred sixty-five (365) days from the date of damage
or destruction, Tenant may terminate this Lease immediately upon notice thereof
to Landlord, which notice shall be given, if at all, not later than ten (10)
days after Landlord notifies Tenant of Landlord's estimate of the period of time
required to repair such damage or destruction.
(d) During any period when Tenant's use of the Leased Premises is
significantly affected by damage or destruction, Gross Rent shall abate
proportionately until such time as the Leased Premises are made tenantable, and
Tenant has had a reasonable period of time to reinstall its trade fixtures,
furnishing and equipment in and to move into the Leased Premises, as reasonably
determined by Landlord, and no portion of the Rent so abated shall be subject to
subsequent recapture; provided, however, that there shall be no such abatement
except to the extent that the amount thereof is compensated for and recoverable
from the proceeds of rental abatement or business interruption insurance
maintained by Landlord with respect to this Lease, the Leased Premises or the
Project.
(e) The proceeds from any insurance paid by reason of damage to or
destruction of the Building or any part thereof, the Tenant Improvements or any
other element, component or property insured by Landlord shall belong to and be
paid to Landlord subject to the rights of any mortgagee of Landlord's interest
in the Project or the beneficiary of any deed of trust that constitutes an
encumbrance thereon. If this Lease is terminated by either party as a
consequence of a casualty in accordance with any of the provisions of this
Section 7.07, all proceeds of insurance required to be maintained either by
Landlord or Tenant shall be paid to Landlord subject to the rights of any
mortgagee of Landlord's interest in the Project or the beneficiary of any deed
of trust that constitutes an encumbrance thereon; provided, however, that Tenant
shall be paid all proceeds of insurance payable in connection with Tenant's
trade fixtures, furnishings, equipment and all other items of personal property
of Tenant.
(f) If the Leased Premises, or any part thereof, or any portion of the
Building necessary for Tenant's use of the Leased Premises, are damaged or
destroyed during the last twelve (12) months of the Term, or any extension
thereof, Landlord or Tenant may terminate this Lease by giving written notice
thereof to the other party within thirty (30) days after the date of the
casualty, in which case this Lease shall terminate as of the date of the
casualty.
7.08 Default By Tenant.
-----------------
(a) Events of Default. The occurrence of any of the following shall
-----------------
constitute an event of default ("Event of Default") on the part of Tenant:
(i) Abandonment. Abandonment of the Leased Premises for a continuous
-----------
period in excess of five (5) Business Days. Notwithstanding the foregoing, in
the event Tenant seeks to assign its interest under this Lease or to sublease
the Leased Premises in accordance with Section 5.05 above, Tenant shall have the
right to vacate the Leased Premises, provided that
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(A) throughout such period, Tenant diligently attempts to procure a suitable
assignee or subtenant and to complete an assignment or sublease transaction, (B)
Tenant takes all actions required by Landlord to secure and safeguard the Leased
Premises during such period, and (C) Tenant reimburses Landlord upon demand for
any additional costs and expenses incurred by Landlord (including, without
limitation, insurance expenses and costs of security) as a result of Tenant's
vacation of the Leased Premises. Tenant waives any right to notice Tenant may
have under Section 1951.3 of the Civil Code of the State of California, the
terms of this Section 7.08(a)(i) being deemed such notice to Tenant as required
by said Section 1951.3;
(ii) Nonpayment of Rent. Failure to pay any installment of Gross Rent
------------------
or items of Additional Rent within three (3) days after the date when payment is
due. Notwithstanding the foregoing, if Tenant establishes and maintains
throughout the Term a direct payment or debit arrangement with a bank or
financial institution pursuant to which the Gross Rent due hereunder is
automatically paid to Landlord by electronic transfer on the first day of each
month (an "Electronic Payment Arrangement"), and if Tenant provides Landlord
with evidence of such Electronic Payment Arrangement, then Landlord shall
provide Tenant with notice of any nonpayment of Gross Rent or Additional Rent
and a three (3) day grace period after the giving of such notice before such
nonpayment constitutes an "Event of Default" hereunder;
(iii) Other Obligations. Failure to perform any obligation, agreement
-----------------
or covenant under this Lease other than those matters specified in Sections
7.08(a)(i) and 7.08(a)(ii), such failure continuing for thirty (30) days after
written notice of such failure (or with respect to non-monetary obligations
only, such longer period as is reasonably necessary to remedy such default,
provided that Tenant shall continuously and diligently pursue such remedy at all
times until such default is cured);
(iv) General Assignment. A general assignment by Tenant or Guarantor
------------------
for the benefit of creditors;
(v) Bankruptcy. The filing of any voluntary petition in bankruptcy
----------
by Tenant or Guarantor, or the filing of an involuntary petition by Tenant's or
Guarantor's creditors, which involuntary petition remains undischarged for a
period of thirty (30) days. If under applicable law the trustee in bankruptcy or
Tenant has the right to affirm this Lease and continue to perform the
obligations of Tenant hereunder, such trustee or Tenant shall, in such time
period as may be permitted by the bankruptcy court having jurisdiction, cure all
defaults of Tenant hereunder outstanding as of the date of the affirmance of
this Lease and provide to Landlord such adequate assurances as may be necessary
to ensure Landlord of the continued performance of Tenant's obligations under
this Lease;
(vi) Receivership. The employment of a receiver to take possession of
------------
substantially all of Tenant's assets or the Leased Premises, if such
receivership remains undissolved for a period of ten (10) Business Days after
creation thereof;
(vii) Attachment. The attachment, execution or other judicial seizure
----------
of all or substantially all of Tenant's assets or the Leased Premises, if such
attachment or other seizure
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remains undismissed or undischarged for a period of ten (10) Business Days after
the levy thereof;
(viii) Insolvency. The admission by Tenant or Guarantor in writing of
----------
its inability to pay its debts as they become due, the filing by Tenant or
Guarantor of a petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, the filing by Tenant or Guarantor of an
answer admitting or failing timely to contest a material allegation of a
petition filed against Tenant or Guarantor in any such proceeding or, if within
thirty (30) days after the commencement of any proceeding against Tenant or
Guarantor seeking any reorganization, or arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, such proceeding shall not have been dismissed; and
(ix) Restoration of Letter of Credit. The failure of Tenant to
-------------------------------
restore the Letter of Credit to the amount and within the time period provided
in Section 5.13(c).
(b) Remedies Upon Default.
---------------------
(i) Termination. If an Event of Default occurs, Landlord shall
-----------
have the right, with or without notice or demand, immediately (after expiration
of the applicable grace periods specified herein) to terminate this Lease, and
at any time thereafter recover possession of the Leased Premises or any part
thereof and expel and remove therefrom Tenant and any other person occupying the
same, by any lawful means, and again repossess and enjoy the Leased Premises
without prejudice to any of the remedies that Landlord may have under this
Lease, or at law or equity by reason of Tenant's default or of such termination.
(ii) Continuation After Default. Even though Tenant has breached
--------------------------
this Lease and/or abandoned the Leased Premises, this Lease shall continue in
effect for so long as Landlord does not terminate Tenant's right to possession
under Section 7.08(b)(i), and Landlord may enforce all of its rights and
remedies under this Lease, including, without limitation, the right to recover
Rent as it becomes due. Landlord has the remedy described in Section 1951.4 of
the Civil Code of the State of California or any successor code section
(Landlord may continue the Lease in effect after Tenant's breach and abandonment
and recover rent as it becomes due, if Tenant has the right to sublet or assign,
subject only to reasonable limitations). Acts of maintenance, preservation or
efforts to lease the Leased Premises or the appointment of receiver upon
application of Landlord to protect Landlord's interest under this Lease shall
not constitute an election to terminate Tenant's right to possession.
(c) Damages Upon Termination. Should Landlord terminate this Lease
------------------------
pursuant to the provisions of Section 7.08(b)(i), Landlord shall have all the
rights and remedies of a landlord provided by Section 1951.2 of the Civil Code
of the State of California, or successor code section. Upon such termination, in
addition to any other rights and remedies to which Landlord may be entitled
under applicable law, Landlord shall be entitled to recover from Tenant: (i) the
worth at the time of award of the unpaid Rent and other amounts 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 Rent loss that the Tenant
proves could have been reasonably avoided; (iii) the worth at the
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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 Rent loss that the Tenant
proves could be reasonably avoided; and (iv) any other amount necessary to
compensate Landlord for all the detriment proximately caused by Tenant's failure
to perform its obligations under this Lease or which, in the ordinary course of
things, would be likely to result therefrom. The "worth at the time of award" of
the amounts referred to in (i) and (ii) shall be computed with interest at
eighteen percent (18%) per annum or the highest lawful rate, whichever is the
lower. The "worth at the time of award" of the amount referred to in (iii) shall
be computed by discounting such amount at the "discount rate" of the Federal
Reserve Bank of San Francisco in effect as of time of award plus one percent
(1%) and, where rental value is a material issue, shall be based upon competent
appraisal evidence.
(d) Computation of Rent For Purposes of Default. For purposes of computing
-------------------------------------------
unpaid Rent that would have accrued and become payable under this Lease pursuant
to the provisions of Section 7.08(c), unpaid Rent shall consist of the sum of:
(i) the total Base Rent for the balance of the Term, plus
(ii) a computation of the Basic Operating Cost for the balance of the
Term, the assumed Basic Operating Cost for the calendar year of the default and
each future calendar year in the Term to be equal to the Basic Operating Cost
for the calendar year prior to the year in which default occurs compounded at a
per annum rate equal to the mean average rate of inflation for the preceding
five (5) calendar years as determined by reference to the Consumer Price Index--
all items for the San Francisco-Oakland-San Jose Area, All Urban Consumers,
published by the Bureau of Labor Statistics of the United States Department of
Labor (Base Year 1982-84=100), or such successor index as may be established to
provide a measure of the current purchasing power of the dollar.
(e) Late Charge. Notwithstanding any other provision of this Lease, Tenant
-----------
hereby acknowledges that late payment to Landlord of Rent or other amounts due
hereunder will cause Landlord to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. If any Rent or
other sums due from Tenant are not received by Landlord or by Landlord's
designated agent within three (3) days after the date the same is due hereunder,
then Tenant shall pay to Landlord a late charge equal to five percent (5%) of
such overdue amount, plus any costs and attorneys' fees incurred by Landlord by
reason of Tenant's failure to pay Rent and/or other charges when due hereunder;
provided, however, that if Tenant establishes and maintains throughout the Term
an Electronic Payment Arrangement as contemplated in Section 7.08(a)(ii) above,
then Landlord shall provide Tenant with notice of any late payment of Rent and a
three (3) day grace period after the giving of such notice prior to the
imposition of a late charge. Landlord and Tenant hereby agree that the late
charges provided for in this Section 7.08(e) represent a fair and reasonable
estimate of the cost that Landlord will incur by reason of Tenant's late payment
and shall not be construed as a penalty. Landlord's acceptance of such late
charges shall not constitute a waiver of Tenant's default with respect to such
overdue amount or estop Landlord from exercising any of the other rights and
remedies granted under this Lease.
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(f) Interest. Notwithstanding any other provision of this Lease, any
--------
installment of Rent and any other sum due from Tenant under this Lease which is
not received by Landlord within five (5) days after the date the same is due
shall bear interest from the date such payment was originally due under this
Lease until paid at an annual rate equal to the maximum rate of interest
permitted by law. Payment of such interest shall not excuse or cure any Event of
Default on the part of Tenant. In addition, Tenant shall pay all costs and
reasonable attorneys' fees incurred by Landlord in collection of such amounts.
(g) Remedies Cumulative. All of the remedies permitted or available to
-------------------
Landlord under this Lease, or at law or in equity, shall be cumulative and not
alternative and invocation of any such right or remedy shall not constitute a
waiver or election of remedies with respect to any other permitted or available
right or remedy.
7.09 No Waiver. Failure of Landlord or Tenant to declare any default
---------
immediately upon occurrence thereof, or delay in taking any action in connection
therewith, shall not waive such default, but Landlord or Tenant, as the case may
be, shall have the right to declare any such default at any time thereafter. No
waiver by Landlord of an Event of Default, or any agreement, term, covenant or
condition contained in this Lease, shall be effective or binding on Landlord
unless made in writing and no such waiver shall be implied from any omission by
Landlord to take action with respect to such Event of Default or other such
matter. No express written waiver by Landlord of any Event of Default, or other
such matter, shall affect or cover any other Event of Default, matter or period
of time, other than the Event of Default, matter and/or period of time specified
in such express waiver. One or more written waivers by Landlord of any Event of
Default, or other matter, shall not be deemed to be a waiver of any subsequent
Event of Default, or other matter, in the performance of the same provision of
this Lease. Acceptance of Rent by Landlord hereunder, or endorsement of any
check, shall not, in and of itself, constitute a waiver of any breach or Event
of Default or of any agreement, term, covenant or condition of this Lease,
except as to the payment of Rent so accepted, regardless of Landlord's knowledge
of any concurrent Event of Default or matter. Landlord may, at its election,
apply any Rent received from Tenant to the oldest obligation outstanding from
Tenant to Landlord, any endorsement or other statement of Tenant to the contrary
notwithstanding. No course of conduct between Landlord and Tenant, and no
acceptance of the keys to or possession of the Leased Premises before the
termination of the Term by Landlord or any employee of Landlord shall constitute
a waiver of any such breach or of any term, covenant or condition of this Lease
or operate as a surrender of this Lease. All of the remedies permitted or
available to Landlord under this Lease, or at law or in equity, shall be
cumulative and not alternative and invocation of any such right or remedy shall
not constitute a waiver or election of remedies with respect to any other
permitted or available right or remedy.
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7.10 Statutory Waivers. Tenant hereby waives the benefits of: (i) Sections
-----------------
1932 and 1933(4) of the California Civil Code (pertaining to the termination of
a hiring); (ii) 1941 and 1942 of the California Civil Code (pertaining to the
obligations of a landlord to maintain premises and the rights of a tenant to
make certain repairs or terminate a lease); (iii) Section 1263.260 of the
California Code of Civil Procedure (pertaining to the removal of improvements
upon condemnation); and (iv) Section 1265.130 of the California Code of Civil
Procedure (pertaining to the termination of a lease upon condemnation).
7.11 Holding Over. If Tenant holds over after expiration or termination of
------------
this Lease without the written consent of Landlord, Tenant shall pay for each
month of hold-over tenancy twice the Gross Rent that Tenant was obligated to pay
for the month immediately preceding the end of the Term for each month or any
part thereof of any such hold-over period together with such other amounts as
may become due hereunder. No holding over by Tenant after the Term shall operate
to extend the Term. If Tenant holds over without consent, Tenant shall
indemnify, defend, protect and hold Landlord and Landlord Parties harmless from
and against any and all claims, judgments, damages, penalties, fines, costs,
expenses, liabilities or losses for damages by any other tenant or third person
to whom Landlord may have leased or offered to lease all or any part of the
Leased Premises covered hereby effective on or after the termination of this
Lease, together with all loss, cost, expense, damages and liabilities in
connection with any such reletting, including, without limitation, attorneys'
fees and Landlord's lost revenues. Any holding over with the consent of Landlord
in writing shall thereafter constitute this Lease a lease from month to month.
7.12 Attorneys' Fees. If either party places the enforcement of this Lease,
---------------
or any part thereof, or the collection of any Rent due, or to become due
hereunder, or recovery of the possession of the Leased Premises in the hands of
an attorney or collection agency, or files suit upon the same, or seeks a
judicial declaration of rights hereunder, the prevailing party shall recover its
reasonable attorneys' fees, court costs and collection agency charges. As used
herein, "prevailing party" shall mean the party who substantially prevails in
the matter at issue, including, without limitation, a party who dismisses an
action for recovery hereunder in exchange for payment of the sums allegedly due,
performance of covenants allegedly breached or consideration substantially equal
to the relief sought in the action.
7.13 Amendments. This Lease may not be altered, changed or amended, except
----------
by an instrument in writing signed by both parties.
7.14 Transfers By Landlord. Landlord shall have the right to transfer and
---------------------
assign, in whole or in part, all of its rights and obligations hereunder and in
the Project. Upon transfer by Landlord of its interest in the Project, and upon
the transferee's written assumption (such writing being hereinafter referred to
as an "Assumption Agreement") of Landlord's obligations accruing hereunder from
and after the date of such transfer, no further liability or obligations shall
thereafter accrue against the transferring or assigning person as Landlord
hereunder. Landlord or such transferee shall provide a copy of the Assumption
Agreement to Tenant upon request.
7.15 Severability. If any term or provision of this Lease, or the
------------
application thereof to any person or circumstances, shall to any extent be
invalid or unenforceable, the remainder of this Lease, or the application of
such provision to persons or circumstances other than those as to
48
<PAGE>
which it is invalid or unenforceable, shall not be affected thereby, and each
provision of this Lease shall be valid and shall be enforceable to the extent
permitted by law.
7.16 Notices. All notices, demands, consents and approvals that may or are
-------
required to be given by either party to the other hereunder shall be in writing
and shall be sent by personal delivery, overnight courier, or United States
mail, certified or registered, postage prepaid, and addressed to the party to be
notified at the address for such party specified on the Basic Lease Information
sheet, or to such other place as the party to be notified may from time to time
designate by at least fifteen (15) days notice to the notifying party. Personal
delivery of notices to Tenant may in all events be made by leaving a copy of the
notice, addressed to Tenant, at the Leased Premises. Tenant appoints as its
agent to receive the service of all default notices and notice of commencement
of unlawful detainer proceedings the person in charge of or apparently in charge
of or occupying the Leased Premises at the time. Notices shall be deemed given
upon actual receipt (or attempted delivery if delivery is refused).
7.17 No Option. Submission of this instrument for examination or signature
---------
by Tenant does not constitute a reservation of or an option for lease, and it is
not effective as a lease or otherwise until execution and delivery by both
Landlord and Tenant.
7.18 Integration and Interpretation. The terms of this Lease are intended
------------------------------
by the parties as a final expression of their agreement with respect to such
terms as are included in this Lease and may not be contradicted by evidence of
any prior or contemporaneous agreement, arrangement, understanding or
negotiation (whether oral or written). The parties further intend that this
Lease constitutes the complete and exclusive statement of its terms, and no
extrinsic evidence whatsoever may be introduced in any judicial proceeding
involving this Lease. The language in all parts of this Lease shall in all cases
be construed as a whole and in accordance with its fair meaning and not
restricted for or against any party, regardless of which party may have drafted
the provision in question, it being agreed that this is a negotiated agreement.
7.19 Quitclaim. Upon expiration or earlier termination of this Lease,
---------
Tenant shall, immediately upon request of Landlord, execute, acknowledge and
deliver to Landlord a recordable deed quit-claiming to Landlord all interest of
Tenant in the Leased Premises, the Project and this Lease.
7.20 No Easement For Light, Air and View. This Lease conveys to Tenant no
-----------------------------------
rights for any light, air or view. No diminution of light, air or view, or any
impairment of the visibility of the Leased Premises from inside or outside the
Building, by any structure or other object that may hereafter be erected
(whether or not by Landlord) shall entitle Tenant to any reduction of Rent under
this Lease, constitute an actual or constructive eviction of Tenant, result in
any liability of Landlord to Tenant, or in any other way affect this Lease or
Tenant's obligations hereunder.
7.21 No Merger. The voluntary or other surrender or termination of this
---------
Lease by Tenant, or a mutual cancellation thereof shall not work a merger, but,
at Landlord's sole option, shall either terminate all existing subleases or
subtenancies or shall operate as an assignment to Landlord of all such subleases
or subtenancies.
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7.22 Memorandum of Lease. Tenant shall, upon request of Landlord, execute,
-------------------
acknowledge and deliver a short form memorandum of this Lease (and any amendment
hereto or consolidation hereof), in form suitable for recording. In no event
shall this Lease or any memorandum thereof be recorded without the prior written
consent of Landlord, and any attempt to do so shall constitute a default by
Tenant.
7.23 Survival. All of Tenant's covenants and obligations contained in this
--------
Lease shall survive the expiration or earlier termination of this Lease. No
provision of this Lease providing for termination in certain events shall be
construed as a limitation or restriction of Landlord's rights and remedies at
law or in equity available upon a breach by Tenant of this Lease.
7.24 Financial Statements. If Landlord intends to sell all or any portion
--------------------
of the Building or Project (or any interest therein), or obtain a loan secured
by the Building or Project (or any interest therein), then Tenant shall, within
fifteen (15) days of Landlord's written request, furnish Landlord with financial
statements, dated no earlier than one (1) year before such request, certified as
accurate by Tenant, or, if available, audited financial statements prepared by
an independent certified public accountant with copies of the auditor's
statement, reflecting Tenant's then current financial condition, or the
financial condition of the individuals comprising Tenant, in such form and
detail as Landlord may reasonably request. In addition, if Landlord finances the
construction of improvements on and to the Building or Project, or otherwise
procures financing secured by the Building or Project, or any portion thereof or
interest therein, then the terms and provisions of this Lease may be subject to
review and approval by the financial source providing such financing.
7.25 No Joint Venture. This Lease shall not be construed to create a
----------------
partnership, joint venture or similar relationship or arrangement between
Landlord and Tenant hereunder.
7.26 Successors and Assigns. This Lease shall be binding upon and inure to
----------------------
the benefit of Landlord, its successors and assigns (subject to the provisions
hereof, including, without limitation, Section 5.15); and shall be binding upon
and inure to the benefit of Tenant, its successors, and to the extent assignment
may be approved by Landlord hereunder, Tenant's assigns.
7.27 Applicable Law. All rights and remedies of Landlord and Tenant under
--------------
this Lease shall be construed and enforced according to the laws of the State of
California. Any actions or proceedings brought under this Lease, or with respect
to any matter arising under or out of this Lease, shall be brought and tried
only in courts located in the County of San Mateo, California (excepting
appellate courts).
7.28 Time of the Essence. Time is of the essence of each and every covenant
-------------------
herein contained.
7.29 Interpretation. Except as specifically provided otherwise in this
--------------
Lease, Landlord may act in its sole and absolute discretion when required to act
hereunder. The term, "including" shall mean "including, without limitation." All
indemnities contained herein shall survive termination of this Lease with
respect to any act, condition or event that is the subject matter of such
indemnity and that occurs prior to the Term Expiration Date. Notwithstanding
anything
50
<PAGE>
herein to the contrary, all provisions of this Lease which require the payment
of money or the delivery of property after the Term Expiration Date shall
survive termination of the Lease.
7.30 Parking.
-------
(a) Subject to the terms of this Section 7.30, unless Tenant is in default
hereunder, Tenant shall be entitled to the non-preferential and non-exclusive
use of the number of parking spaces set forth in the Basic Lease Information in
the areas within the Project designated by Landlord (the "Designated Parking
Areas"), for which right Tenant shall pay the monthly fee per space established
by Landlord from time to time for the applicable type of space, plus any tax or
assessment imposed by any governmental authority in connection with the parking
privileges provided to Tenant pursuant to this Lease. Said monthly fees shall be
paid whether or not Tenant uses said spaces; provided, however, that Landlord
hereby waives its right to collect such parking fees from Tenant for the spaces
during the initial term of this Lease, except to the extent that Landlord is
required to impose a parking fee by any governmental regulation now or hereafter
applicable to any part of all of the Project, or to Landlord or Tenant. Landlord
may assign any unreserved and unassigned parking spaces and/or make all or a
portion of such spaces reserved, if it determines that it is necessary for
orderly and efficient parking. In the event Landlord develops additional
buildings on parcels owned by Landlord in the Gateway Center, Landlord shall
take appropriate measures with respect to parking such that Tenant shall at all
times have the right to use the number of parking spaces set forth in the Basic
Lease Information. Notwithstanding the foregoing provisions of this Section
7.30(a), Landlord shall have the right to relocate Tenant's parking from time to
time to other areas within the Gateway Center, to provide parking spaces to
Tenant in surface parking lots, parking structures, subterranean parking
facilities or other areas within the Gateway Center now or hereafter designated
by Landlord as the Project's parking areas, and to provide parking to Tenant
through tandem-style parking or the use of valets or parking attendants,
provided only that Tenant shall at all times have parking for the number of
automobiles contemplated under this Lease. Landlord shall consult with Tenant in
connection with the relocation of Tenant's parking spaces, but Landlord shall
make the final determination as to the location of such spaces.
(b) Notwithstanding the terms of Section 7.30(a) above, in the event any
of the parking spaces in the Designated Parking Areas are taken or otherwise
eliminated as a result of any Condemnation or casualty event affecting such
Designated Parking Areas, and if as a result thereof Landlord is unable to
provide Tenant with the number of parking spaces specified in the Basic Lease
Information (taking into account Landlord's rights under the penultimate
sentence of Section 7.30(a) above), and if such reduction would materially and
adversely impact Tenant's ability to conduct its business in the Leased
Premises, then Tenant shall have the right to terminate this Lease by written
notice to Landlord given not later than fifteen (15) days after Landlord
notifies Tenant of such reduction in parking spaces; provided, however, that
Tenant shall have no right to terminate this Lease if Landlord is able to
provide Tenant with a sufficient number of parking spaces in an alternate
location (the "Alternate Parking Spaces") such that the sum of the parking
spaces allocated to Tenant in the Gateway Center and the Alternate Parking
Spaces equal or exceed the number of parking spaces specified in the Basic Lease
Information. In the event the Alternate Parking Spaces are not reasonably
proximate to the Gateway Center, then Landlord shall arrange for a shuttle
service or other means of transportation between the Alternate Parking Spaces
and the Gateway Center.
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7.31 Brokers. Tenant and Landlord each represent and warrant to the other
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that it has had no dealing with any broker or agent other than the Broker set
forth on the Basic Lease Information. Tenant and Landlord each indemnify, defend
and hold the other party harmless from and against any and all liabilities for
commissions or other compensation or charges claimed by any other broker or
agent based on dealings with the indemnifying party with respect to this Lease.
The foregoing indemnity shall survive termination or earlier expiration of this
Lease.
7.32 Security.
--------
(a) Tenant acknowledges and agrees that Landlord is not required and does
not intend to provide any security services with respect to the Leased Premises,
the Building or the Project (other than the security systems described on
Exhibit B-1) and that Landlord shall not be liable to Tenant for, and Tenant
waives any claim against Landlord with respect to, any loss by theft or any
other damage suffered or incurred by Tenant in connection with any unauthorized
entry into the Leased Premises or any other breach of security with respect to
the Leased Premises, the Building or the Project. In the event that Landlord
shall at any time elect to provide such security services with respect to the
Leased Premises, the Building and/or the Project, the costs and expenses
incurred by Landlord in connection therewith shall be included within the
definition of "Basic Operating Cost" for all purposes of this Lease.
(b) Tenant hereby agrees to the exercise by Landlord of security measures
such as, but not limited to, the evacuation of the Leased Premises, the Building
or the Project for cause, suspected cause or for drill purposes, the denial of
any access to the Leased Premises, the Building or the Project and other
similarly related actions that Landlord deems necessary, in its sole and
absolute discretion, to prevent any threat of property damage or bodily injury.
The exercise of such security measures by Landlord, and the resulting
interruption of service and cessation of Tenant's business, if any, shall not be
deemed an eviction or disturbance of Tenant's use and possession of the Leased
Premises, or any part thereof, or render Landlord liable to Tenant for any
resulting damages, or relieve Tenant from Tenant's obligations under this Lease.
7.33 Satellite Dish. Subject to Landlord's prior written approval of the
--------------
plans and specifications therefor (including, without limitation, the location,
size, and color of the equipment), during the Term, Tenant may, at its sole cost
and expense, construct and maintain a satellite dish on the roof of the Building
(the "Satellite Dish"); provided, however, that Landlord shall have the right to
withhold its approval of the plans and specifications, in its sole and absolute
discretion, if the Satellite Dish will affect the structural integrity of the
roof. Without limiting the foregoing, the plans and specifications shall
include, and Landlord shall have the right to approve, diagrams showing the
location of all associated cabling and wiring installed by Tenant throughout the
Building. Upon receipt of Landlord's prior written approval of the plans and
specifications as set forth herein, Tenant shall erect the Satellite Dish in
accordance with the approved plans and specifications, in a good and workmanlike
manner, in accordance with all applicable Laws now in force or hereafter enacted
and all other requirements of Landlord, and after Tenant has received all
requisite approvals therefor (the "Applicable Requirements"), and in a manner so
as not to interfere with the use of the Building or any other building by any
other tenant or occupant. Tenant shall at all times maintain the Satellite Dish
and all associated cabling and wiring in a good, clean and safe condition, in
accordance with the Applicable
52
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Requirements, and in a manner so as not to interfere with the use of the
Building or any adjacent building by any other tenant or occupant. Tenant shall
provide Landlord with reasonable advance written notice prior to entering upon
the roof so that Landlord may, if it so desires, have a representative accompany
Tenant onto the roof. Upon the expiration or sooner termination of this Lease or
Tenant's right to possession of the Leased Premises, Tenant shall, at Tenant's
sole cost and expense, promptly remove the Satellite Dish and repair any damage
to the Building resulting therefrom. If Tenant fails to remove the Satellite
Dish on or before the expiration or sooner termination of this Lease or Tenant'
right to possession of the Leased Premises, Landlord may, at Tenant's expense,
remove the Satellite Dish and perform the related restoration and repair work,
and use, dispose of or take such other actions with respect to the Satellite
Dish as Landlord may deem appropriate, all without compensation or payment to
Tenant. Tenant shall defend, indemnify and hold harmless Landlord from all
losses, claims, liabilities, judgments, costs, demands, causes of action and
expenses (including, without limitation, attorneys' fees) arising from or
relating to the construction, installation, maintenance, use or removal of the
Satellite Dish. The rights granted to Tenant pursuant to this Section 7.33 may
not be assigned.
7.34 Right of First Negotiation. Tenant understands that Landlord is the
--------------------------
owner of fee title to certain parcels of real property situated adjacent to the
Project (the "Adjacent Parcels"), as more particularly shown on the site plan
attached hereto as Exhibit G, and that existing tenants (the "Existing Tenants")
have options to lease the Adjacent Parcels on the terms and conditions set forth
in their lease agreements. In the event the Existing Tenants do not exercise
their options to lease either or both of the Adjacent Parcels, then prior to
offering the Adjacent Parcel(s) for lease to third-parties, Landlord shall
provide written notice to Tenant (the "Availability Notice") of the availability
of the applicable Adjacent Parcel(s) and the general economic terms upon which
Landlord would consider entering into a transaction with Tenant pursuant to
which Landlord would lease the Adjacent Parcel(s) to Tenant and thereafter
develop an office building thereon similar to the Building for occupancy by
Tenant (an "Expansion Transaction"). In the event Tenant desires to enter into
such negotiations with Landlord, Tenant shall provide written notice thereof
(the "Negotiation Notice") to Landlord within ten (10) Business Days after
Tenant's receipt of the Availability Notice; provided, however, that Tenant
shall have the right to deliver a Negotiation Notice to Landlord only if (i) no
Event of Default is occurring under this Lease, nor is any event then occurring
which with the giving of notice or the passage of time, or both, would
constitute an Event of Default hereunder, either at the time of Tenant's receipt
of the Availability Notice or Tenant's delivery of the Negotiation Notice, and
(ii) Tenant has a Market Capitalization equal to or greater than One Billion
Dollars ($1,000,000,000.00) (with respect to the first Adjacent Parcel which
Tenant desires to lease) and One Billion Two Hundred Fifty Million Dollars
($1,250,000,000.00) (with respect to the second Adjacent Parcel which Tenant
desires to lease) at the time of Tenant's receipt of the Availability Notice and
Tenant's delivery of the Negotiation Notice. In the event Tenant delivers a
Negotiation Notice to Landlord on a timely basis as provided herein, and subject
to the satisfaction of the foregoing conditions precedent, then Landlord and
Tenant shall promptly meet and attempt to negotiate the definitive terms of an
Expansion Transaction and thereafter enter into a binding lease agreement
encompassing such terms, said terms and said lease agreement to be acceptable to
Landlord and Tenant, each in the exercise of its sole and absolute discretion.
If Tenant fails to deliver a Negotiation Notice to Landlord in a timely manner
as provided above, or if Tenant delivers such a Negotiation Notice and Landlord
at any time thereafter determines that the parties will for any reason be unable
to enter into an Expansion Agreement, then Tenant's rights under this
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Section 7.34 shall lapse and shall thereafter forever be null and void and
Landlord shall have the right to lease the Adjacent Parcels(s) to third parties
on terms deemed acceptable to Landlord in its sole and absolute discretion.
7.35 Delivery of Alternate Security. Tenant shall have the right during the
------------------------------
Term to request that Landlord return the Letter of Credit to Tenant and accept
substitute security for the performance of Tenant's obligations under this
Lease. Notwithstanding the foregoing, Tenant acknowledges that Landlord shall
have the right, in its sole and absolute discretion, to accept or reject any
such substitute security proposed by Tenant. Tenant further acknowledges and
agrees that the delivery of the Letter of Credit to Landlord is a material
component of the consideration to Landlord for the execution of this Lease, that
Landlord would not enter into this Lease but for the delivery of the Letter of
Credit, that Landlord shall have the right, in its unfettered discretion, to
accept or refuse to accept any substitute security for any reason or no reason
at all, and that Landlord shall have no obligation to return the Letter of
Credit or any Letter of Credit Proceeds to Tenant except in accordance with the
terms and provisions of Section 5.13. Nothing contained in this Section 7.35
shall limit the rights of Tenant to deliver a Security Deposit to Landlord
pursuant to Section 5.14 above.
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7.36 Counterparts. This Lease may be signed in multiple counterparts, each
------------
of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
In witness whereof, the parties hereto have executed this Lease as of the
day and year first above written.
Landlord: HMS Gateway Office, L.P.,
a Delaware limited partnership
By: Hines Gateway Office, L.P.,
General Partner
By: Hines Interests Limited Partnership,
General Partner
By: Hines Holdings, Inc.,
General Partner
By: /S/ JAMES C. BUIE
------------------
James C. Buie, Jr.
Executive Vice President
Tenant: AllAdvantage.com,
a California corporation
By: /S/ JIM JORGENSEN
-----------------
Jim Jorgensen
Chief Executive Officer
55
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Exhibit A-1
"Site Plan"
[to come]
A-1-1
<PAGE>
Exhibit A-2
"Project"
Lot 5C as shown on the Tentative Parcel Map filed with the City of South
San Francisco in January, 2000.
A-2-1
<PAGE>
Exhibit B
Base Building Improvements Construction Agreement
This exhibit, entitled "Base Building Improvements Construction Agreement",
is and shall constitute Exhibit B to the Lease Agreement, dated as of January
21, 2000, by and between Landlord and Tenant (the "Lease"). The terms and
conditions of this Exhibit B are hereby incorporated into and are made a part of
the Lease.
Subject to the terms and conditions set forth herein and in the Lease,
Landlord shall cause construction of the Building in accordance with the
procedures set forth below:
1. Definitions
(a) "801 Gateway Preliminary Specifications" shall mean those preliminary
specifications for construction of the Base Building Improvements described on
the attached Exhibit B-1.
(b) "Base Building Improvements" shall mean a five (5) story building,
containing approximately 135,000 square feet, all exterior surfaces, utilities,
landscaping and parking, all in substantial compliance with those items listed
on the 801 Gateway Preliminary Specifications and located substantially in
accordance with the site plan attached to the Lease as Exhibit A-1.
(c) "Base Building Outside Date" is defined in Paragraph 4(b)(vii).
(d) "Base Building Plans and Specifications" is defined in Paragraph 2.
(e) "Base Building Improvements Substantial Completion Date" means the
date on which the Base Building Improvements have been Substantially Completed.
(f) "Base Building Trigger Date" is defined in Paragraph 4(b)(vi).
(g) "Force Majeure Events" means strikes, embargoes, governmental
regulations, acts of God, war, civil commotion or other strife, inability to
obtain required materials (provided that the party who is unable to obtain such
materials has attempted to obtain reasonable substitutes for such unavailable
materials), and other events beyond the reasonable control of the party whose
performance is affected thereby.
(h) "Foundation Termination Date" is defined in Paragraph 4(b)(iii).
(i) "Foundation Termination Notice Date" is defined in Paragraph
4(b)(iii).
(j) "Initial Milestone" shall mean the completion of the Building
foundation.
(k) "Initial Milestone Date" is defined in Paragraph 4(b)(i).
(l) "Landlord's Architect" shall mean Hellmuth, Obata & Kassabaum or
another architect selected by Landlord for the design of the Base Building
Improvements.
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(m) "Landlord's Contractor" shall mean a licensed general contractor
selected by Landlord for the construction of the Base Building Improvements.
(n) "Rent Commencement Date" shall have the meaning set forth in the
Lease.
(o) "Secondary Milestone" shall mean the completion of the Building
structural framing system (specifically excluding the pouring of the slab and
concrete decks within the Building).
(p) "Secondary Milestone Date" is defined in Paragraph 4(b)(i).
(q) "Specified CD-Check Set Sheets" means the following sheets contained
in the 801 Gateway CD-Check Set prepared or assembled by Landlord's Architect,
dated January 17, 2000: Sheet 2.1-0 ("Site Plan"), Sheet 2.1-1 ("Grading Plan -
Area `A'"), Sheet 2.5-1 ("Planting Plan - Area `A'"), Sheet 3.2-2 ("Office
Second Floor Framing Plan"), Sheet 3.2-22 ("Garage Second Level Framing Plan"),
Sheet 4.2-1 ("Floor Plan - Ground Level"), Sheet 4.2-2 ("Floor Plan - Level 2-
5"), Sheet 4.2-3 ("Roof Plan"), Sheet 4.2-20 ("Floor Plan - Garage Lower
Level"), Sheet 4.2-21 ("Floor Plan - Garage Ground Level"), Sheet 4.2-22 ("Floor
Plan -Second Level"), Sheet 4.2-23 ("Floor Plan - Third Level"), Sheet 4.5-1
("North & East Elevations"), Sheet 4.5-2 ("South & West Elevation"), Sheet 4.5-
20 ("South Elevations - Garage"), Sheet 4.5-21 ("North Elevations - Garage"),
Sheet 4.7B-20 ("Building Sections - Garage"), and Sheet 4.7B-21 ("Building
Sections -Garage").
(r) "Structural Termination Date" is defined in Paragraph 4(b)(iv).
(s) "Structural Termination Notice Date" is defined in Paragraph 4(b)(iv).
(t) "Substantial Completion" and "Substantially Completed" shall mean, and
the Base Building Improvements shall be deemed "Substantially Complete" when (i)
Landlord has received electrical, plumbing, mechanical, and fire prevention
final approval from the City of South San Francisco, (ii) Tenant has direct
access to the elevator lobby on the floors where the Leased Premises are
located, and (iii) Basic Services are available to the Leased Premises.
Substantial Completion shall be deemed to have occurred notwithstanding a
requirement to complete "punchlist" or similar corrective work.
(u) "Tenant Improvements Allowance" is defined in Exhibit C.
(v) "Tenant Improvements Loan" is defined in Exhibit C.
(w) "Tenant's Architect" is defined in Exhibit C.
Capitalized terms not otherwise defined in this Exhibit B shall have
the meanings ascribed to them in the Lease.
2. Base Building Plans and Specifications
At Landlord's sole cost and expense, Landlord's Architect shall prepare
plans and specifications for the Base Building Improvements substantially in
accordance with the
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801 Gateway Preliminary Specifications (the "Base Building Plans and
Specifications"). Landlord shall not cause the Base Building Plans and
Specifications to materially deviate from the specifications shown in the
Specified CD-Check Set Sheets without the prior written consent of Tenant, which
consent shall not be unreasonably withheld, conditioned or delayed. In the event
Tenant fails to respond within five (5) days following Landlord's request for
consent of any such material deviation, Tenant shall be conclusively deemed to
have given its consent to the matter submitted by Landlord. Notwithstanding the
foregoing, Landlord may without the written consent of Tenant change the Base
Building Plans and Specifications as may be required by any governmental agency
or as necessary to comply with any governmental requirements or to address
structural or unanticipated field conditions or which, in the reasonable
discretion of Landlord, will not have a material effect on Tenant's use of the
Premises or a material effect on the aesthetic appearance or impression relating
to the Base Building Improvements.
3. Construction
The Base Building Improvements shall be constructed, without cost or
expense to Tenant, by Landlord's Contractor substantially in accordance with the
Base Building Plans and Specifications, as the same may be amended or modified
from time to time by Landlord, subject to the provisions of Paragraph 2 above.
4. General
(a) Failure to Obtain Building Permits. Landlord and Tenant acknowledge
that construction of the Base Building Improvements and all matters relating
thereto are subject to Landlord obtaining all necessary governmental permits,
authorizations and approvals therefor. Landlord shall use commercially
reasonable efforts to obtain such permits; however, if Landlord is unable to
obtain the building permit required for the commencement of construction of Base
Building Improvements by May 15, 2000, either party shall have the right to
terminate the Lease by delivering written notice of termination to the other
party on or before May 25, 2000. If written notice of termination is given in a
timely manner, the Lease shall immediately terminate, except for any obligations
which by their terms survive the termination or earlier expiration of the Lease.
Notwithstanding anything herein to the contrary, Landlord shall not be liable to
Tenant for any loss or damage resulting from any delay in constructing or
developing the Base Building Improvements, nor shall such failure affect the
obligations of Tenant under the Lease, except as otherwise expressly set forth
in Paragraph 4(b) below.
(b) Consequences of Failure to Meet Construction Timetable. In the event
Landlord fails to perform the construction tasks set forth below within the time
periods described in this Section 4(b), then Tenant shall have the rights set
forth in clauses (i) through (v) below, which rights shall be exclusive and
shall be Tenant's sole and absolute rights and remedies for such failure:
(i) In the event Landlord fails to perform the Initial Milestone on
or before July 15, 2000 (the "Initial Milestone Date") and/or the Secondary
Milestone on or before September 18, 2000 (the "Secondary Milestone Date") for
reasons other than Tenant Delays and Force Majeure Events, and if as a result
thereof Tenant's Contractor is prevented from substantially completing the
Tenant Improvements on or before December 15, 2000, then and
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only then the Rent Commencement Date shall be delayed beyond December 15, 2000
by one (1) day for each day of delay caused by Landlord's failure to complete
the applicable Milestone(s) on or before the aforesaid dates (but in no event
longer than the actual number of days Tenant's Contractor is prevented from
substantially completing the Tenant Improvements).
(ii) Notwithstanding the terms of Paragraph 4(b)(i) above, (1) if
Landlord is delayed in completing the Initial Milestone on or before the Initial
Milestone Date and/or the Secondary Milestone on or before the Secondary
Milestone Date due to Tenant Delays, the Initial Milestone Date or the Secondary
Milestone Date, as appropriate, shall be extended for a period equal to the
length of the delay caused by such Tenant Delays, but the Rent Commencement Date
shall not be extended beyond December 15, 2000, and (2) if Landlord is delayed
in completing the Initial Milestone on or before the Initial Milestone Date
and/or the Secondary Milestone on or before the Secondary Milestone Date due to
Force Majeure Events, the Initial Milestone Date or the Secondary Milestone
Date, as appropriate, and the Rent Commencement Date shall each be extended by
one (1) day for each day of delay caused by such Force Majeure Events (but in no
event shall the Rent Commencement Date be delayed longer than the actual number
of days Tenant's Contractor is prevented from substantially completing the
Tenant Improvements). Tenant acknowledges that the length of any Tenant Delay or
Force Majeure Event is to be measured by the duration of the delay in completing
the Initial Milestone and/or the Secondary Milestone, as applicable, caused by
the event or conduct constituting the Tenant Delay or the Force Majeure Event,
which may exceed the duration of such event or conduct due to the necessity of
rescheduling work or other causes.
(iii)In the event Landlord fails to perform the Initial Milestone on
or before the Foundation Termination Date (as hereinafter defined), then Tenant
shall have the right to terminate this Lease by delivering written notice of
termination to Landlord not later than the Foundation Termination Notice Date
(as hereinafter defined). If Tenant fails to deliver a termination notice to
Landlord in a timely manner as provided herein, then Tenant shall be deemed to
have waived its right to terminate this Lease under this Paragraph 4(b)(iii) and
this Lease shall continue in full force and effect. As used herein, "Foundation
Termination Date" means August 23, 2000 and "Foundation Termination Notice Date"
means August 31, 2000; provided, however, that if Landlord is delayed in
completing the Initial Milestone on or before the Foundation Termination Date
due to Tenant Delays or Force Majeure Events, the Foundation Termination Date
and the Foundation Termination Notice Date shall each be extended for a period
equal to the length of such delay. Tenant acknowledges that the length of any
Tenant Delay or Force Majeure Event is to be measured by the duration of the
delay in completing the Initial Milestone caused by the event or conduct
constituting the Tenant Delay or the Force Majeure Event, which may exceed the
duration of such event or conduct due to the necessity of rescheduling work or
other causes.
(iv) In the event Landlord fails to perform the Second Milestone on or
before the Structural Termination Date (as hereinafter defined), then Landlord
and Tenant shall each have the right to terminate this Lease by delivering
written notice of termination to the other party not later than the Structural
Termination Notice Date (as hereinafter defined). If neither party delivers a
termination notice to the other in a timely manner as provided herein, then the
parties shall be deemed to have waived their respective rights to terminate this
Lease under this Paragraph 4(b)(iv) and this Lease shall continue in full force
and effect. As used herein,
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(A) "Structural Termination Date" means April 15, 2001; provided, however, that
if Landlord is delayed in completing the Second Milestone on or before the
Structural Termination Date due to Tenant Delays, then Landlord's right to
terminate this Lease pursuant to this Paragraph 4(b)(iv) shall not be affected
or delayed, but solely with respect to Tenant's right to terminate this Lease
under this Paragraph 4(b)(iv), the Structural Termination Date shall be extended
for a period equal to the length of such delay; and (B) "Structural Termination
Notice Date" shall mean April 25, 2001; provided, however, that if the
Structural Termination Date is extended with respect to Tenant in accordance
with the foregoing proviso, then the Structural Termination Notice Date shall be
extended with respect to Landlord and Tenant to the date that is ten (10) days
after the Structural Termination Date, as so extended. Tenant acknowledges that
the length of any Tenant Delay is to be measured by the duration of the delay in
completing the Second Milestone caused by the event or conduct constituting the
Tenant Delay, which may exceed the duration of such event or conduct due to the
necessity of rescheduling work or other causes.
(v) If Landlord fails to Substantially Complete the Base Building
Improvements on or before the Rent Commencement Date for reasons other than
Tenant Delays, then and only then the Rent Commencement Date shall be delayed by
one (1) day for each day that Landlord so delays in Substantially Completing the
Base Building Improvements. Tenant acknowledges that the length of any Tenant
Delay is to be measured by the duration of the delay in Substantially Completing
the Base Building Improvements caused by the event or conduct constituting the
Tenant Delay, which may exceed the duration of such event or conduct due to the
necessity of rescheduling work or other causes.
(vi) If Landlord fails to Substantially Complete the Base Building
Improvements on or before the Base Building Trigger Date (as hereinafter
defined) for reasons other than Tenant Delays or Force Majeure Events, then and
only then the Rent Commencement Date shall be delayed beyond the Base Building
Trigger Date by one and one-half (1 1/2) days for each day that Landlord so
delays in Substantially Completing the Base Building Improvements beyond the
Base Building Trigger Date. As used herein, "Base Building Trigger Date" means
January 15, 2001; provided, however, that if Landlord is delayed in
Substantially Completing the Base Building Improvements due to Tenant Delays or
Force Majeure Events, the Base Building Trigger Date shall be extended for a
period equal to the length of such delay. Tenant acknowledges that the length of
any Tenant Delay or Force Majeure Event is to be measured by the duration of the
delay in Substantially Completing the Base Building Improvements caused by the
event or conduct constituting the Tenant Delay or the Force Majeure Event, which
may exceed the duration of such event or conduct due to the necessity of
rescheduling work or other causes.
(vii)If Landlord fails to Substantially Complete the Base Building
Improvements on or before the Base Building Outside Date (as hereinafter
defined) for reasons other than Tenant Delays or Force Majeure Events, then and
only then the Rent Commencement Date shall be delayed beyond the Base Building
Outside Date by two (2) days for each day that Landlord so delays in
Substantially Completing the Base Building Improvements beyond the Base Building
Outside Date. As used herein, "Base Building Outside Date" means February 15,
2001; provided, however, that if Landlord is delayed in Substantially Completing
the Base Building Improvements due to Tenant Delays or Force Majeure Events, the
Base Building Outside Date shall be extended for a period equal to the length of
such delay. Tenant
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acknowledges that the length of any Tenant Delay or Force Majeure Event is to be
measured by the duration of the delay in Substantially Completing the Base
Building Improvements caused by the event or conduct constituting the Tenant
Delay or the Force Majeure Event, which may exceed the duration of such event or
conduct due to the necessity of rescheduling work or other causes.
(viii) Notwithstanding anything to the contrary contained in this
Exhibit B, if the Tenant Improvements Substantial Completion Date has not
occurred on or before the Rent Commencement Date solely due to Force Majeure
Events, then and only then the Rent Commencement Date shall be delayed by one
(1) day for each day that the Tenant Improvements Substantial Completion Date is
so delayed; provided, however, that in no event shall the Rent Commencement Date
be delayed pursuant to this Section 4(b)(viii) beyond April 14, 2001, and
Tenant's obligation to pay Rent under the Lease shall commence on April 15, 2001
irrespective of any such Force Majeure Event. Landlord acknowledges that the
length of any such delay is to be measured by the duration of the delay in the
Tenant Improvements Substantial Completion Date caused by the Force Majeure
Event, which may exceed the duration of such Force Majeure Event due to the
necessity of rescheduling work or other causes.
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Exhibit B-1
Preliminary Specifications for
Base Building Improvements
The base building shall be constructed per all governmental codes by
Landlord for Tenant, including, but not limited to, the following:
Structure/Envelope
. Concrete foundation to be reinforced grade beams with spread footings or
other system as specified by geotechnical and engineering consultants.
. Ground floor to be concrete slab on grade, minimum thickness 5, or as
required by geotechnical and engineering consultants.
. Elevated floors to be constructed of vented metal deck with reinforced
concrete that meets fire code requirements.
. Building structural framing to consist of steel "braced frame" with beams
and columns constructed structural rolled shapes.
. Non-bearing exterior facade consisting of EIFS or GFRC with decorative
metal panels. An exterior containing a minimum average of 40% glass of
ribbon or punched opening windows with high performance glass.
. Floor system designed with minimum live load capacity of 50 psf and dead
load capacity of 20 psf. Select central core areas to have increased floor
loading capacity of 100 psf.
. Roof live load to be 20 psf except where mechanical loads are imposed.
. Floor to floor heights to be approximately 15-0.
. Base building roof drains and drain lines with connection to site storm
drain system.
. Surface and/or structured parking adjacent to premises as required to
provide tenant with 3.0 spaces per 1,000 rentable square feet.
. Roof screens up to 11-0 in height above the roof as required by City of
South San Francisco.
. Roofing membrane to be a built-up roof over rigid insulation on top of
metal roof deck construction.
. Two internal fire rated stairways serving all floors. One stairway to
continue to roof via a ship ladder. Security system for access between
floors to be provided by Tenant.
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. One complete and finished base building male and female restroom at each
floor. Finishes to include stone countertops, ceramic tile walls and
floors. Accessible showers located on first floor.
. Fire proofing of building structure, as required, per building code.
. Fire safing between floors to maintain code required separations.
. Perimeter walls and roof insulation per Title 24 requirements.
Electrical
. 4,000 amp 277/480 volt, 3-phase electric service and transformer with
underground electrical to main base building switch and meter section.
. Switchgear as required to service base building systems, parking structure,
site lighting and irrigation.
. Emergency generator for base building life safety systems. Conduit provided
for Tenant exterior generator adjacent to base building generator.
. Vertical electrical service distribution to each floor to be provided via
busways. Horizontal switchgear and distribution by Tenant.
Mechanical
. Rooftop mounted heating, ventilation and air conditioning systems with
vertical distribution provided to each floor but exclusive of horizontal
distribution and control equipment.
. Domestic water, sanitary sewer, plumbing vent and exhaust systems provided
at each floors restroom core.
. Base building domestic water service with meters, backflow preventers and
check assembly located per California Water Service requirements.
. Base building sanitary sewer line under ground floor slab.
. Complete base building light hazard automatic fire sprinkler system to meet
NFPA standards (excluding tenant branch lines and drops to suspended
ceilings).
Miscellaneous
. Two elevators. One passenger car and one "swing" car for passenger and
freight service.
. Base building fire and life safety systems shall meet all applicable codes
and capable of being extended beyond the core to accommodate tenant
improvements.
. Base building security systems to provide for after hours access and
controls at ground floor exterior lobby doors.
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. Two (2), 4 underground telephone/data conduits from Gateway Blvd to base
building main telecommunications room. Two 4 sleeves to be provided in each
telephone room at each elevated floor.
. Loading area to be at grade.
. Landscaping, hardscapes and automatic irrigation systems, including control
systems.
. One (1) monument sign at each main entrance along Gateway Boulevard
identifying The Gateway North Campus and the building address.
. Controlled site lighting to provide a minimum of one (1) foot candle per
square foot.
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Exhibit C
Tenant Improvements Construction Agreement
This exhibit, entitled "Tenant Improvements Construction Agreement", is
and shall constitute Exhibit C to the Lease Agreement, dated as of January 21,
2000, by and between Landlord and Tenant (the "Lease"). The terms and conditions
of this Exhibit C are hereby incorporated into and are made a part of the Lease.
Subject to the terms and conditions set forth herein and in the Lease,
Landlord shall allow the construction or installation of the improvements in the
interior of the Leased Premises in accordance with the procedures set forth
below:
1. Definitions
(a) "Approved Contractors" shall have the meaning set forth within
the definition of "Tenant's Contractor."
(b) "Base Building Improvements" is defined in Exhibit B to the
Lease.
(c) "Construction Payment" is defined in Paragraph 8(a).
(d) "Construction Schedule" is defined in Paragraph 11(a).
(e) "Landlord's Contractor" shall mean the general contractor
retained by Landlord pursuant to Exhibit B to the Lease.
(f) "Preliminary Ground Floor Plans" shall mean Sheet 4.2-1 ("Floor
Plan -Ground Level") contained in the 801 Gateway CD-Check Set prepared or
assembled by Landlord's Architect, dated January 17, 2000.
(g) "Review Fee" is defined in Paragraph 3(e).
(h) "Target Dates" is defined in Paragraph 11(a).
(i) "Tenant Delays" is defined in Paragraph 10.
(j) "Tenant Improvements" shall mean all improvements made to the
Leased Premises other than the Base Building Improvements, which Tenant
Improvements shall be furnished and installed in the Leased Premises in
accordance with the Construction Documents. Without limiting the generality of
the foregoing, the Tenant Improvements shall include and Tenant shall be
responsible for the installation of any upgrades to Base Building Improvements.
(k) "Tenant Improvements Allowance" is defined in Paragraph 9(a).
(l) "Tenant Improvements Cost" shall mean all costs associated with
the design and construction of the Tenant Improvements, including, without
limitation, all building permit fees, payments to design consultants for
services and disbursements, all preparatory work, premiums for insurance and
bonds, general conditions, such inspection fees as Landlord may incur,
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reimbursement to Landlord for permit and other fees Landlord may incur that are
fairly attributable to the Tenant Improvements work and the cost of installing
any additional electrical capacity or telecommunications capacity required by
Tenant.
(m) "Tenant Improvements Loan" is defined in Paragraph 9(b).
(n) "Tenant Improvements Substantial Completion Date" is defined in
Paragraph 6.
(o) "Tenant's Architect" shall mean SMP/SHG Incorporated or another
California licensed architect selected by Tenant and approved by Landlord.
(p) "Tenant's Construction Manager" shall be Grubb & Ellis Management
Services or another construction manager approved by Landlord.
(q) "Tenant's Contractor" shall mean the general contractor retained by
Tenant and approved by Landlord for the construction of the Tenant Improvements.
Landlord hereby approves the following general contractors for the construction
of the Tenant Improvements: Dinwiddie Hathaway; Rudolph & Sletten; South Bay;
Swinerton & Walberg; and Turner Whiting Turner (collectively, the "Approved
Contractors"). Tenant shall have the right to retain any one of the Approved
Contractors as "Tenant's Contractor" without further approval from Landlord.
(r) "Tenant's Representative" is defined in Paragraph 7.
Capitalized terms not otherwise defined in this Exhibit C shall have the
meanings ascribed to them in the Lease.
2. Tenant's Architect, Engineers and Contractors
Tenant shall select architects, engineers and contractors from a list of
approved architects, engineers and contractors to be provided to Tenant by
Landlord. In the event that Tenant desires to use an architect, engineer or
contractor not on the list provided by Landlord, Tenant may request the consent
of Landlord to the use of such architect, engineer or contractor, which consent
may be given or withheld in Landlord's reasonable discretion. Notwithstanding
the foregoing, Tenant shall retain Middlebrook + Louie as the structural
engineer and Flack & Kurtz Consulting Engineers, LLP as the mechanical,
electrical and plumbing engineer for the construction of the Tenant
Improvements. The cost of preparing all plans and specifications for the Tenant
Improvements (including, without limitation, the Conceptual/Space Plans referred
to in Paragraph 3(a) of this Exhibit C and the Construction Documents referred
to in Paragraph 3(c)(i) of this Exhibit C), and the cost of preparing any change
thereto shall be paid by Tenant, although Tenant may apply the Tenant
Improvements Allowance and the Tenant Improvements Loan to the payment of such
costs in accordance with the provisions of Paragraphs 9(a) and (b) of this
Exhibit C.
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3. Submittal of Base Building Improvements Backgrounds, Conceptual/Space Plans
and Construction Documents
(a) Submittal of Base Building Improvements Backgrounds. Not later than
February 10, 2000, Landlord shall provide to Tenant on electronic media
backgrounds of the Base Building Improvements for floors 1 through 5 of the
Building.
(b) Submittal of Conceptual/Space Plans. Not later than March 15, 2000
(the "Conceptual/Space Plans Submittal Date"), Tenant shall submit to Landlord
architectural plans, reflected ceiling plans, furniture layout and power signal
plans (collectively, "Conceptual/Space Plans") prepared by Tenant's Architect
for the Tenant Improvements. Tenant's Conceptual/Space Plans and Construction
Documents for the ground floor of the Building shall be consistent with the
Preliminary Ground Floor Plans. Tenant's Conceptual/Space Plans shall be for the
general information of Landlord, but receipt of such Conceptual/Space Plans by
Landlord shall not constitute an approval by Landlord of the design or
specifications shown thereon. Landlord shall, within five (5) Business Days
following receipt of such plans from Tenant, review, comment on and return the
Conceptual/Space Plans to Tenant, marked "Approved," "Approved as Noted" or
"Disapproved as Noted, Revise and Resubmit." Landlord shall have the right to
review the Conceptual/Space Plans in its reasonable discretion; provided,
however, that Landlord shall have the right to approve, in its sole and absolute
discretion, any improvements proposed by Tenant which affect the structural
components of the Building or the Building's mechanical, electrical, plumbing,
HVAC or life safety systems. If the Conceptual/Space Plans are returned to
Tenant marked "Approved," the Conceptual/Space Plans shall be deemed approved by
Landlord and the procedure set forth in Paragraph 3(c)(i) below shall be
followed. If the Conceptual/Space Plans are returned to Tenant marked "Approved
as Noted," the Conceptual/Space Plans so submitted shall be deemed approved by
Landlord and the procedure set forth in Paragraph 3(c)(i) below shall be
followed; provided, however, that in preparing the Construction Documents,
Tenant shall cause Tenant's Architect to incorporate Landlord's noted items into
the Construction Documents. If the Conceptual/Space Plans are returned to Tenant
marked "Disapproved as Noted, Revise and Resubmit," Tenant shall cause such
plans to be revised, taking into account the reasons for Landlord's disapproval,
and shall resubmit revised plans to Landlord for review within five (5) days
after return of the Conceptual/Space Plans to Tenant by Landlord. The same
procedure shall be repeated until Landlord fully approves the Conceptual/Space
Plans.
(c) Submittal of Construction Documents.
(i) Following the approval by Landlord of the Conceptual/Space Plans,
and in any event not later than July 15, 2000 (the "Construction Documents
Submittal Date"), Tenant shall deliver to Landlord one (1) set of reproducible
sepia and three (3) sets of blue-lined prints wet signed and stamped by Tenant's
Architect of detailed drawings and specifications, including, without
limitation, full architectural plans, full electrical, mechanical and plumbing
plans, furniture plans, life safety plans and additional documents as required
by the City of South San Francisco for permitting and construction of the Tenant
Improvements (collectively, the "Construction Documents"). If the draft of the
Construction Documents was prepared on a computer-assisted design ("CAD")
system, Tenant shall also deliver to Landlord a diskette containing the
Construction Documents in the AutoCAD format. Landlord shall, within ten (10)
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Business Days following receipt of such Construction Documents from Tenant,
return to Tenant one (1) sepia set of the Construction Documents marked
"Approved," "Approved as Noted" or "Disapproved as Noted, Revise and Resubmit."
Landlord shall have the right to review the Construction Documents in its
reasonable discretion; provided, however, that Landlord shall have the right to
approve, in its sole and absolute discretion, any improvements proposed by
Tenant which affect the structural components of the Building or the Building's
mechanical, electrical, plumbing, HVAC or life safety systems. If the
Construction Documents are returned to Tenant marked "Approved," the
Construction Documents, as so submitted, shall be deemed approved by Landlord.
If the Construction Documents are returned to Tenant marked "Approved as Noted,"
the draft of the Construction Documents shall be deemed approved by Landlord;
provided, however, that in preparing the final approved Construction Documents,
Tenant shall cause Tenant's Architect to incorporate Landlord's noted items into
the Construction Documents. If the Construction Documents are returned to Tenant
marked "Disapproved as Noted, Revise and Resubmit," Tenant shall cause such
Construction Documents to be revised, taking into account the reasons for
Landlord's disapproval and shall resubmit revised plans to Landlord for review.
The same procedure shall be repeated until Landlord fully approves the
Construction Documents. The Construction Documents shall be consistent with, and
a logical extension of, the Conceptual/Space Plans approved by Landlord in
accordance with Paragraph 3(a) of this Exhibit C. Tenant shall be solely
responsible for: (A) the completeness of the Construction Documents; (B) the
conformity of the Construction Documents with the physical conditions in the
Building and the Leased Premises; (C) the compatibility of the Construction
Documents with the shell or the core or the mechanical, plumbing, life safety or
electrical systems of the Building (including obtaining, at Tenant's sole cost
and expense, mechanical and electrical drawings from Flack & Kurtz Consulting
ENGINEERS, LLP); and (D) the compliance of the Construction Documents with all
applicable Laws, including, without limitation, the Americans With Disabilities
Act. When the Construction Documents are approved by Landlord and Tenant, they
shall be acknowledged as such by Landlord and Tenant signing each sheet of the
Construction Documents. Tenant shall cause Tenant's Architect to deliver to
Landlord the number of copies of the Construction Documents which Landlord may
request. In addition, if the Construction Documents were prepared on a computer-
assisted design ("CAD") system, Tenant shall also deliver to Landlord a diskette
containing the approved Construction Documents in the AutoCAD format.
(ii) Landlord shall, concurrently with its review and approval of
the Construction Documents, advise Tenant whether or not any or all of the
Tenant Extra Improvements shall be required to be removed at the expiration or
termination of the Term; provided, however, that in no event shall Tenant be
required to remove any Tenant Extra Improvements that are consistent with
general office uses commonly found in class "A" office properties owned by
Landlord, as reasonably determined by Landlord. If Landlord fails to so advise
Tenant regarding whether or not any proposed Tenant Extra Improvements must be
removed at the expiration or termination of this Lease, then Tenant shall be
required to remove such Tenant Extra Improvements upon such expiration or
termination date.
(d) Landlord's Review Responsibilities. Tenant acknowledges and agrees
that Landlord's review and approval, if granted, of all Conceptual/Space Plans
and Construction Documents is solely for the benefit of Landlord and to protect
the interests of Landlord in the Building and the Leased Premises, and Landlord
shall not be the guarantor of, nor in any way or
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to any extent responsible for, the correctness or accuracy of any
Conceptual/Space Plans or Construction Documents or of the compliance of the
Conceptual/Space Plans or Construction Documents with applicable Laws or of the
conformance or compatibility of the Conceptual/Space Plans or Construction
Documents with physical conditions in the Building or Leased Premises or with
the shell or the core or the mechanical, plumbing, life safety or electrical
systems of the Building. Tenant shall require and be solely responsible for
insuring that its architects, engineers and contractors verify all physical
conditions in the Building, insofar as they are relevant to, or may affect, the
design and construction of the Tenant Improvements, and Landlord shall have no
liability to Tenant for any inaccuracy or incorrectness in any of the
information supplied by Landlord with regard to physical conditions. Tenant
shall be solely responsible for, and Landlord specifically reserves the right to
require Tenant to make at any time and from time to time during the construction
of the Tenant Improvements, any changes to the Conceptual/Space Plans and
Construction Documents necessary to obtain any governmental permits,
authorizations and approvals or to comply with all applicable Laws or to achieve
the compatibility, as reasonably determined by Landlord, of the Conceptual/Space
Plans and Construction Documents with the shell and the core and the mechanical,
plumbing, life safety and electrical systems of the Building and any third-party
warranties.
(e) Landlord's Review Fee. Landlord shall receive a fee (the "Review Fee")
of Twenty Seven Thousand Dollars ($27,000.00) (viz., $0.20 per rentable square
foot) for reviewing the Conceptual/Space Plans and the Construction Documents
and assisting with the obtaining of governmental permits, authorizations and
approvals for the Tenant Improvements. Landlord may debit the Tenant
Improvements Allowance and/or the Tenant Improvements Loan to pay such fee.
4. Pricing the Work
(a) Upon completion of the Construction Documents for the Tenant
Improvements, Tenant shall cause Tenant's Contractor to furnish Tenant and
Landlord with an estimate of the cost of the Tenant Improvements as shown on the
Construction Documents.
(b) On or before the Tenant Improvements Construction Date, Tenant shall
deposit the Construction Payment with Landlord for payment in accordance with
Paragraph 8. Landlord shall not authorize construction of the Tenant
Improvements to commence until Landlord has received the Construction Payment.
5. Tenant Improvements Construction
(a) Tenant shall cause Tenant's Contractor to construct and install all
Tenant Improvements in the Leased Premises in accordance with the Construction
Documents and all Laws. Tenant shall engage Tenant's Construction Manager to
coordinate and supervise all aspects of the construction of the Tenant
Improvements. Tenant shall be solely responsible for the fees and costs of
Tenant's Construction Manager. Landlord shall have no obligation to Tenant for
defects in design, workmanship or materials in connection with the Tenant
Improvements. Any changes to the approved Construction Documents shall require
the written approval of Landlord and Tenant. All such changes must be evidenced
by a written change order executed by Landlord and Tenant or their respective
representatives describing the change
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required in the Construction Documents, and the cost of such changes shall be
paid in accordance with the terms of this Exhibit C.
(b) From and after the completion by Landlord of the Second Milestone,
Landlord's Contractor and Tenant's Contractor will jointly occupy the Building
in order to complete the construction of the key components of the Base Building
Improvements and the Tenant Improvements, as the case may be, on or before the
applicable Target Dates set forth in the Construction Schedule. Landlord and
Tenant shall each be responsible for ensuring that their respective contractors
coordinate their efforts in order that Landlord and Tenant may meet their
respective Target Dates contained in the Construction Schedule. Notwithstanding
the foregoing, in the event of any scheduling conflicts between Landlord's
Contractor and Tenant's Contractor, Landlord's Contractor shall have priority
with respect to any work that, in the reasonable discretion of Landlord's
Contractor, needs to be completed prior to the applicable portion of Tenant's
work. Subject to the foregoing, Tenant shall cause Tenant's Contractor to
construct the Tenant Improvements in a manner designed to avoid interference
with the construction of the Base Building Improvements, and Tenant's work of
installation shall be handled in such a manner as to maintain harmonious labor
relations and as not to interfere with or delay the work of Landlord's
contractors. No portion of the work to be performed by Landlord's Contractor
shall be dependent upon completion of any work of construction or installation
to be performed by Tenant. Tenant's contractors, subcontractors and materialmen
shall be subject to prior approval by Landlord and shall be subject to the
administrative supervision of Landlord or Landlord's general contractor and
rules of the site. Contractors, subcontractors and materialmen engaged by Tenant
shall take the necessary steps to insure, so far as may be possible, the
progress of the work without interruption on account of strikes, work stoppage
or similar causes for delay. In the event that Tenant's contractors or
subcontractors do not promptly cause any pickets to be withdrawn and all other
disruptions to the operations of the Building promptly to cease, or in the event
that Landlord notifies Tenant that Landlord has in good faith concluded that
picketing or other disruptive activities are an imminent threat, Tenant shall
immediately cause the withdrawal from the job of all its contractors,
subcontractors or materialmen involved in the dispute. In the event Landlord's
Contractor is delayed by the actions or inaction of Tenant's contractors,
subcontractors or materialmen, Tenant shall be obligated to pay any additional
costs and expenses incurred by Landlord in connection therewith.
(c) Subject to Paragraph 5(b) above, Landlord shall provide access and
entry to the Leased Premises to Tenant's contractors at times consistent with
Landlord's schedule for the work subject to all the terms and conditions of the
Lease and this Exhibit C. Upon and following any entry into the Leased Premises
by Tenant's contractors prior to the commencement of its Term, Tenant's
contractors shall perform all of the obligations of Tenant applicable under the
Lease during the Term (except the obligation to pay Base Rent and Additional
Rent), including, without limitation, obligations pertaining to insurance,
indemnity, compliance with laws, and hazardous materials. In addition to the
indemnity obligations of Tenant under the Lease, Tenant shall indemnify, defend
and protect Landlord and hold Landlord harmless of and from any and all claims,
proceedings, loss, cost, damage, causes of action, liabilities, injury or
expense arising out of or related to claims of injury to or death of persons or
damage to property occurring or resulting directly or indirectly from the
presence in the Leased Premises or the Project of Tenant's contractors or
representatives or the activities of Tenant or its contractors or
representatives in or about the Leased Premises or Project during the
construction period, such
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indemnity to include, but without limitation, the obligation to provide all
costs of defense against any such claims. This indemnity shall survive the
expiration or sooner termination of the Lease.
(d) In addition to and without limitation on the requirements set forth in
the Lease, Tenant shall ensure that Tenant's Contractor and all subcontractors
and materialmen procure and maintain in full force and effect during the course
of construction all worker's compensation insurance required by Law and a "broad
form" commercial general liability and property damage policy of insurance
naming, Landlord, Tenant and Landlord's lenders as additional insureds. The
minimum limit of coverage of the aforesaid commercial general liability policy
shall be in the amount of not less than Five Million Dollars ($5,000,000) for
injury or death of one person in any one accident or occurrence and in the
amount of not less than Five Million Dollars ($5,000,000) for injury or death of
more than one person in any one accident or occurrence, and shall contain a
severability of interest clause or a cross liability endorsement. Such insurance
shall further insure Landlord and Tenant against liability for property damage
of at least Three Million Dollars ($3,000,000).
6. Obligation of Tenant To Provide As-Built Plans
Within thirty (30) day after the Tenant Improvements Substantial Completion
Date, Tenant shall cause Tenant's Architect to provide Landlord with a complete
set of plans on Mylar and specifications reflecting the actual conditions of the
Tenant Improvements as constructed in the Leased Premises, together with a copy
of such plans on diskette in the AutoCAD format or such other format as may then
be in common use for computer assisted design purposes. For purposes of this
Lease, "Tenant Improvements Substantial Completion Date" shall mean the date on
which the Tenant Improvements have been substantially completed in accordance
with the Construction Documents, subject only to items of a "punch-list" nature
which do not affect the use or functionality of the Leased Premises.
7. Designation of Tenant's Representative
Tenant hereby designates Jamin Seid as its representative ("Tenant's
Representative") in connection with the design and construction of the Tenant
Improvements, and Landlord shall be entitled to rely upon the decisions and
agreements made by Tenant's Representative as binding upon Tenant. Tenant shall
have the right from time to time to designate a new or replacement Tenant's
Representative, subject to reasonable advance notice to Landlord.
8. Tenant Payments
(a) On or before the Tenant Improvements Construction Commencement Date,
Tenant shall deposit with Landlord, for payment in accordance with this
Paragraph 8(a), an amount (the "Construction Payment") equal to the difference
between the Tenant Improvements Allowance and the Tenant Improvements Cost.
Landlord shall not authorize construction of the Tenant Improvements to commence
until Landlord has received the Construction Payment. Landlord shall make
progress payments on a pro rata basis from the Tenant Improvements Allowance and
the Construction Payment (in the proportion that the Tenant Improvements
Allowance and the Construction Payment bear to the Tenant Improvements Cost)
from time to time as the Tenant Improvements are constructed, subject to a
reasonable retention as required
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by landlord, Notwithstanding the foregoing, (i) prior to the making of any
disbursement hereunder, Landlord shall have the right to inspect the
improvements for which the applicable disbursement is requested to confirm that
the improvements have been constructed in accordance with the approved
Construction Documents, all Laws and the terms of this Exhibit C; and (ii)
Landlord shall not be required to make any progress payment until such time as
Landlord receives from Tenant an unconditional lien waiver duly executed by
Tenant's Contractor as to the previous progress payment and a conditional lien
waiver for the progress payment then due. All lien waivers shall comply with
California law regarding materialmen's and mechanics' liens. If for any reason
the Construction Payment, together with the Tenant Improvements Allowance, is
not adequate to fully pay the Tenant Improvement Cost, Tenant shall pay to
Landlord within ten (10) days after billing by Landlord such additional amounts
required. Statements or invoices may be rendered by Landlord during the progress
of the work so as to enable Landlord to pay all contractors, subcontractors,
architects and engineers without advancing Landlord's funds (other than the
Tenant Improvements Allowance) to pay the cost of Tenant Improvements. Landlord
shall be entitled to suspend or terminate construction of the Tenant
Improvements and to declare Tenant in default in accordance with the terms of
the Lease if payment by Tenant of any amounts required to be paid by Tenant
under this Paragraph 8(a) are not received when due.
(b) Notwithstanding the terms of Paragraph 8(a) above, Landlord shall
waive Tenant's obligation to deposit the Construction Payment with Landlord
prior to the commencement of Tenant Improvements if Tenant demonstrates to
Landlord's sole and absolute discretion that (i) Tenant is in possession of the
funds required to pay the Tenant Improvements Cost (less the Tenant Improvements
Allowance), and (ii) all amounts required to be paid by Tenant hereunder toward
the Tenant Improvements Cost shall be paid in full when due. Without limiting
the foregoing, Landlord shall have the right to require that Tenant deposit the
aforesaid funds in a bank account requiring dual signatures (including the
signature of Landlord) or take other action to ensure that adequate funds shall
at all times be available to pay all amounts required to be paid by Tenant
hereunder when due. In the event Landlord waives Tenant's obligation to deposit
the Construction Payment with Landlord in accordance with this Paragraph 8(b),
then Landlord and Tenant shall make progress payments on a pro rata basis (in
the proportion that the Tenant Improvements Allowance and the costs payable by
Tenant bear to the Tenant Improvements Cost) from time to time as the Tenant
Improvements are constructed, subject to a reasonable retention as required by
Landlord and the requirements set forth in clauses (i) and (ii) of Paragraph
8(a).
9. Tenant Improvements Allowance and Tenant Improvements Loan
(a) Tenant Improvements Allowance. Landlord shall provide a total of up to
Four Million Fifty Thousand Dollars ($4,050,000.00) (viz., $30.00 per rentable
square foot) (the "Tenant Improvements Allowance"), as provided in this
Paragraph 9(a), toward the payment of the Tenant Improvements Costs; provided,
however, that not more than fifteen cents ($0.15) per square foot of the Tenant
Improvements Allowance may be used to pay the fees of Tenant's Architect for the
preparation of space plans. The Tenant Improvements Allowance shall be subject
to adjustment upon the final determination of the Leased Premises square footage
by Landlord's Architect. The obligation of Landlord to make any one or more
payments pursuant to the provisions of this Paragraph 9(a) or to proceed with
the construction of the Tenant Improvements shall be suspended without further
act of the parties during any such time as there
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exists an event of default under the Lease or any event or condition which, with
the passage of time or the giving of notice or both would constitute such an
event of default. Nothing in this Paragraph 9(a) shall affect the obligations of
Tenant under the Lease with respect to any alterations, additions and
improvements within the Leased Premises, including, without limitation, any
obligation to obtain the prior written consent of Landlord hereto.
(b) Tenant Improvements Loan. In addition to the Tenant Improvements
Allowance, Landlord agrees to lend to Tenant in a single-disbursement up to Six
Hundred Seventy Five Thousand Dollars ($675,000.00) (viz., $5.00 per rentable
square foot) (the "Tenant Improvements Loan") to reimburse Tenant for amounts
actually paid by Tenant to Landlord pursuant to Paragraph 8 above, but not to
exceed the amount of the Construction Payment or, if Landlord waives the
obligation of Tenant to make the Construction Payment in accordance with
Paragraph 8(b), the actual amount paid by Tenant out of its own funds toward the
Tenant Improvements Cost. The available principal amount of the Tenant
Improvements Loan shall be subject to adjustment upon the final determination of
the Leased Premises square footage by Landlord's Architect. The Tenant
Improvements Loan shall be disbursed by Landlord following the completion of the
Tenant Improvements and the submission by Tenant to Landlord of invoices,
receipts, lien waivers and other documents requested by Landlord substantiating
the Tenant Improvements Cost and the lien-free completion of the Tenant
Improvements in accordance with all Laws. The Tenant Improvements Loan shall be
repayable by Tenant to Landlord in substantially equal self-amortizing monthly
installments over the initial Term of the Lease, together with interest on the
balance outstanding from time to time from the date of disbursement at the rate
of eleven percent (11%) per annum. Such installments shall be payable on the
first day of each month concurrently with the payment of monthly Base Rent, and
shall be deemed a part of the "Rent" hereunder for all purposes of this Lease.
Promptly following the completion of the Tenant Improvements and the calculation
of the actual Tenant Improvements Loan, Landlord and Tenant shall execute a
Tenant Improvements Loan Amortization Memorandum in the form of Exhibit F
hereto. Notwithstanding anything herein to the contrary, in the event the Lease
shall terminate for any reason prior to the scheduled expiration thereof, the
Tenant Improvements Loan and all accrued and unpaid interest thereon shall
immediately become due and payable in full.
(c) Restrictions on Use of Funds. Tenant understands and agrees that (i)
no portion of the Tenant Improvements Allowance or the Tenant Improvements Loan
shall be available to pay the cost of any Tenant Improvements that constitute
furniture, equipment or trade fixtures or result in changes to the Base Building
Improvements, and (ii) the Tenant Improvements Allowance and the Tenant
Improvements Loan shall be available to pay the costs of Tenant's
telecommunications and data infrastructure only with Landlord's prior written
approval and after all other Tenant Improvements Costs have been fully paid.
(d) Failure to Disburse Tenant Improvements Allowance and/or Tenant
Improvements Loan. In the event Landlord fails to disburse the Tenant
Improvements Allowance and/or the Tenant Improvements Loan when required in
accordance with this Exhibit C, Tenant shall give written notice of such failure
to Landlord and shall provide Landlord with a period of thirty (30) days to cure
such default. If Landlord thereafter fails to make the required disbursement
within such period, Tenant shall have the right to make such disbursement
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out of its own funds and to offset such amount actually paid against the Rent
next coming due under the Lease.
10. Tenant Delays
If Landlord shall be delayed in completing the Base Building Improvements
on or before the Rent Commencement Date as a result of:
(a) Subject to compliance by Landlord with its obligations set forth in
Paragraph 3(a) of Exhibit C, Tenant's failure to submit the initial
Conceptual/Space Plans to Landlord on or before the Conceptual/Space Plans
Submittal Date; or
(b) Tenant's failure to submit the initial Construction Documents to
Landlord on or before the Construction Documents Submittal Date; or
(c) Tenant's change(s) in Construction Documents after approval of the
Construction Documents by Landlord, provided that Tenant shall not change the
Construction Documents without the prior written consent of Landlord, which
consent shall not be unreasonably withheld unless such change could reasonably
be expected to delay the Base Building Improvements Substantial Completion Date;
or
(d) Any changes initiated by reason of the disapproval of any Construction
Documents or bids; or
(e) Tenant's failure to comply with the Construction Schedule; or
(f) An event of default by Tenant under the Lease or the existence of any
event or condition which, with the passage of time or the giving of notice or
both would constitute such an event of default; or
(g) Delays caused by Tenant or Tenant's Contractor, subcontractors or
materialmen in construction,
(all of the foregoing being referred to herein collectively as "Tenant Delays"),
then the Rent Commencement Date shall be the earlier of the Tenant Improvements
Substantial Completion Date or the date that would have been the Tenant
Improvements Substantial Completion Date if there had been no Tenant Delays.
Tenant acknowledges that the length of any Tenant Delay is to be measured by the
duration of the delay in the Base Building Improvements Substantial Completion
Date or the Tenant Improvements Substantial Completion Date, as applicable,
caused by the event or conduct constituting the Tenant Delay, which may exceed
the duration of such event or conduct due to the necessity of rescheduling work
or other causes.
11. Preparation of Construction Schedule
(a) Landlord and Tenant shall cooperate in good faith to prepare, on or
before April 15, 2000, a schedule (the "Construction Schedule") of target dates
(the "Target Dates") for the completion of key components of the Base Building
Improvements and the Tenant Improvements, as agreed-upon by the parties hereto,
each in the exercise of its reasonable
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discretion. In the event Landlord fails to complete any of the key components of
the Base Building Improvements on or before the applicable Target Date(s) set
forth on the Construction Schedule and if, as a result thereof, Tenant is
delayed in completing any affected portion of the Tenant Improvements, then
Landlord shall not be in default hereunder, but such delay by Tenant shall not
be deemed a "Tenant Delay" for purposes of this Lease.
(b) Landlord shall use its best reasonable efforts to complete the
construction of the key components of the Base Building Improvements on or
before the applicable Target Dates set forth in the Construction Schedule;
provided, however, that Landlord shall not be required to pay overtime wages or
expedited delivery costs, or to otherwise expend funds in excess of the amounts
that would be paid by Landlord if the construction of the Base Building
Improvements progressed on a normal basis, without delays or unusual or
unforeseen circumstances, and in accordance with Landlord's original schedule
therefor.
12. General
(a) The Tenant Improvements Allowance and the Tenant Improvements Loan
shall be used by Tenant to construct Tenant Improvements in the entire Premises
and may not be used to improve only a portion or portions of the Leased
Premises.
(b) Any failure by Tenant to pay any amounts due hereunder shall have the
same effect under the Lease as a failure to pay Rent, and any failure by Tenant
to perform any of its other obligations hereunder shall be subject to Section
7.08(b) of the Lease.
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EXHIBIT C-1
DEFINITION OF BUILDING STANDARD IMPROVEMENTS
For the purposes of the definition set forth in Section 1.20 of the Lease,
Building Standard Improvements would consist of:
A. Partitions.
----------
One (1) linear foot of ten (10) foot high partition per twelve (12) square
feet of Net Rentable Area less Common Areas. Partitions to be constructed of 2
1/2 metal studs at 24 on center, gypsum wallboard both sides, level 5 finish
with two coats of latex paint.
B. Doors and Hardware.
------------------
One (1) ten (10) foot high, solid core, plain sliced maple door with a
clear anodized aluminum frame and polished chrome lever handle latch set
hardware per three hundred (300) square feet of Net Rentable Area less Common
Areas.
C. Ceiling.
-------
Suspended metal "T-Bar" ceiling system with 24 x 24 x thick tegular-style
mineral fiber acoustical ceiling throughout the Leased Premises.
D. Lighting.
--------
One (1) 2 x 4 recessed fluorescent lighting fixture with anodized aluminum
parabolic shaped louvers, including initial lamping, per seventy-five (75)
square feet of Net Rentable Area less Common Areas. Common Areas on all office
floors shall have lighting selected by Landlord.
E. Electrical Outlets.
------------------
One (1) duplex wall-mounted convenience outlet mounted at standard
locations with white plastic cover plate for each one hundred twenty (120)
square feet of Net Rentable Area less Common Areas.
F. Telephone Outlets.
-----------------
One (1) telephone wall outlet mounted at standard locations for each two
hundred ten (210) square feet of Net Rentable Area less Common Areas with pull
wire through the partition.
G. Floor Covering.
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Direct glue down Broadloom carpet or a credit of $15.00 per square yard of
carpeted area.
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H. Switch.
------
One (1) dual light switch, rocker type, mounted at standard locations with
white plastic cover plate for each three hundred (300) square feet of Net
Rentable Area less Common Areas.
I. Window Covering.
---------------
Horizontal aluminum one-inch-slat blinds for exterior windows.
J. Life Safety Systems.
-------------------
Rapid Response fire sprinkler heads to conform with typical Tenant
partition layout, utilizing the Building Standard partition and lighting, for
light hazard occupancy design criteria. Manual fire alarm pull stations, exit
lights, and audible fire alarm speakers shall be provided at the Building stair
doors and elevator lobbies.
K. HVAC.
----
The HVAC system for the Leased Premises to suit normal general office space
utilizing the Building Standard lighting fixtures.
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EXHIBIT D
BUILDING RULES AND REGULATIONS
1. Sidewalks, doorways, halls, stairways, vestibules and other similar
areas shall not be obstructed by any Tenant or used by them for purpose other
than ingress to and egress from their respective Leased Premises, and for going
from one part of the Building to another part.
2. Plumbing fixtures shall be used only for their designated purpose, and
no foreign substances of any kind shall be deposited therein. Damage to any such
fixture resulting from misuse by Tenant or any employee or invitee of Tenant
shall be repaired at the expense of Tenant.
3. Nails, screws and other attachments to the Building require prior
written consent from Landlord; provided, however, that Tenant shall have the
right without the consent of Landlord to hang artwork, pictures and other
decorative objects on partition walls in the Leased Premises.
4. All contractors and technicians rendering any installation service to
Tenant shall be subject to Landlord's approval and supervision prior to
performing services. This applies to all work performed in the Building,
including, but not limited to, installation of telephone, telegraph equipment,
and electrical devices, as well as all installation affecting floors, walls,
woodwork, windows, ceilings, and any other physical portion of the Building.
5. Movement in or out of the Building of furniture, office equipment, or
other bulky material which requires the use of elevators, stairways, or Building
entrance and lobby shall be restricted to hours established by Landlord. All
such movement shall be under Landlord's supervision, and the use of an elevator
for such movements shall be made restricted to the Building's freight elevators.
Rearrangements with Landlord shall be made regarding the time, method, and
routing of such movement, and Tenant shall assume all risks of damage and pay
the cost of repairing or providing compensation for damage to the Building, to
articles moved and injury to persons or public resulting from such moves.
Landlord shall not be liable for any acts or damages resulting from any such
activity.
6. Corridor doors, when not in use, shall be kept closed.
7. Tenant shall cooperate with Landlord in maintaining the Leased
Premises. Tenant shall not employ any person for the purpose of cleaning the
Leased Premises other than the Building's cleaning and maintenance personnel.
8. Deliveries of water, soft drinks, newspapers, or other such items to
any Leased Premises shall be restricted to hours established by Landlord and
made by use of the freight elevators if Landlord so directs.
9. Nothing shall be swept or thrown into the corridors, halls, elevator
shafts, or stairways. No birds, fish, or animals of any kind shall be brought
into or kept in, on or about the Leased Premises.
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10. No cooking shall be done in the Leased Premises except in connection
with convenience lunch room or beverage service for employees and guests (on a
non-commercial basis) in a manner which complies with all of the provisions of
the Lease and which does not produce fumes or odors.
11. Food, soft drink or other vending machines shall not be placed within
the Leased Premises without Landlord's prior written consent.
12. Tenant shall not use or keep on its Leased Premises any kerosene,
gasoline, or inflammable or combustible fluid or material other than limited
quantities reasonably necessary for the operation and maintenance of office
equipment.
13. Tenant shall not tamper with or attempt to adjust temperature control
thermostats in the Leased Premises. Landlord shall make adjustments in
thermostats on call from Tenant.
14. Tenant shall comply with all requirements necessary for the security
of the Leased Premises, including the use of service passes issued by Landlord
for after hours movement of office equipment/packages, and signing security
register in Building lobby after hours.
15. Landlord will furnish Tenant with a reasonable number of initial keys
for entrance doors into the Leased Premises and may charge Tenant for additional
keys, thereafter. All such keys shall remain the property of Landlord. No
additional locks are allowed on any door of the Leased Premises without
Landlord's prior written consent and Tenant shall not make any duplicate keys,
except those provided by Landlord. Upon termination of this Lease, Tenant shall
surrender to Landlord all keys to the Leased Premises, and give to Landlord the
combination of all locks for safes and vault doors, if any, in the Leased
Premises.
16. Landlord retains the right, without notice or liability to any tenant,
to change the name and street address of the Building.
17. Canvassing, peddling, soliciting, and distribution of handbills in the
Building are prohibited and each tenant will cooperate to prevent these
activities.
18. The Building hours of operation are (excluding holidays):
7:00 a.m. to 6:00 p.m. Monday through Friday
19. Landlord reserves the right to rescind any of these rules and
regulations and to make future rules and regulations required for the safety,
protection, and maintenance of the Building, the operation and preservation of
good order thereof, and the protection and comfort of the tenants and their
employees and visitors. Such rules and regulations, when made and written notice
given the Tenant, shall be binding as if originally included herein.
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Exhibit E
Sample Form Of
Lease Commencement Certificate
Office Building
Re: The Gateway
801 Gateway Boulevard
South San Francisco, California 94080
This is to certify that AllAdvantage.com has opened/closed on [Date]
BILLING ADDRESS Rentable Area: _______________________
NAME: _______________________ Lease Commencement Date: _____________
ADDRESS: Lease Expiration Date: _______________
_____________________________
CITY, STATE, ZIP: Rental Payment Commencement Date:
_____________________________ ______________________________________
ATTN: _______________________ Final Tenant Construction Overage:
______________________________________
ATTN: _______________________ Payment due from Tenant
Insurance Certificate submitted (Y/N):
______________________________________
Letter of Credit received: ___________
By:__________________________ By:___________________________________
[TENANT or TENANT'S AGENT] Agent for HMS GATEWAY OFFICE, L.P.
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Exhibit F
Tenant Improvements Loan Amortization Memorandum
Landlord: HMS Gateway Office, L.P.
Tenant: AllAdvantage.com
Lease Date: January 21, 2000
Premises: Located at 801 Gateway Boulevard, South San Francisco,
California
Tenant hereby acknowledges that Landlord has provided a Tenant Improvements
Loan to Tenant in the amount of _______________ Dollars ($__________) pursuant
to Paragraph 9(b) of Exhibit C to the Lease. Subject to the terms of the Lease
and said Exhibit C, the Tenant Improvements Loan shall be repayable by Tenant,
together with interest on the principal balance outstanding from time to time at
the rate of eleven percent (11%) per annum, in monthly installments of
_______________ Dollars ($__________) each. Said installments shall be payable
on the first day of each month during the initial Term of the Lease concurrently
with the payment of Base Rent.
Tenant: AllAdvantage.com,
a California corporation
By:___________________________
Name:_________________________
Title:________________________
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Approved and Agreed:
Landlord:
HMS Gateway Office, L.P.,
a Delaware limited partnership
By: Hines Gateway Office, L.P.,
General Partner
By: Hines Interests Limited Partnership,
General Partner
By: Hines Holdings, Inc.,
General Partner
By:____________________________
Name:__________________________
Title:_________________________
F-2
<PAGE>
Exhibit 10.13
Viewbar Agreement
(Revised December 1, 1999)
IMPORTANT Terms, Conditions and Privacy Policy
of the AllAdvantage.com Viewbar Service
AGE RESTRICTION:
----------------
If you are under 18 years old, you need to obtain your parent's consent before
downloading the Viewbar software or using the Viewbar Service. See our
Parental Consent Form for instructions.
IMPORTANT NOTICE: These terms may vary from the terms in place when you
initially expressed interest in the AllAdvantage.com Service. These terms
supersede any prior advertisements, agreements or communications between You and
AllAdvantage.com.
PLEASE READ THE ENTIRE AGREEMENT SET OUT IN THE PAGES BELOW BEFORE PROCEEDING.
Our Goal. AllAdvantage.com is enabling its Members and businesses to interact in
more sophisticated and effective ways while maintaining its members' privacy
intact. To do so, AllAdvantage.com is making available to consumers its
proprietary communications device, the Viewbar(TM) computer program.
AllAdvantage.com wants to reward you, as consumer, for the time you spend
actively surfing the Internet and viewing advertisements. Due to the
evolutionary nature of this business approach, the rates and terms of the
compensation that AllAdvantage.com will be able to pay to Members may vary over
time. Please read these terms and conditions and our Privacy Policy carefully.
You ("You" or "Member") must download and install the Viewbar(TM) software in
order to participate in the Viewbar(TM) Service ("the Service"). In order to
receive the Viewbar software ("Viewbar software" or "Software"), You must
complete the membership form and read and agree to the terms and conditions of
this agreement ("Agreement" or "Viewbar Agreement") by clicking "I Accept."
This is an Agreement between You and AllAdvantage.com, Inc. and its subsidiaries
("AllAdvantage" or "we").
------------
If You do not agree to all the terms of this Agreement including our privacy
policy, AllAdvantage is unwilling to offer You the Service or a License to use
the Viewbar software. You should click on the "I Decline" button to stop the
software download process.
Index to This Agreement:
- ------------------------
A. Our Privacy Policy[link]
<PAGE>
B. Updates to This Agreement [link]
C. Basic Requirements for Membership in the Viewbar Service[link]
D. Your Relationship with AllAdvantage [link]
E. Using the Viewbar Software [link]
F. The Referral Program (includes the SPAM policy) [link]
G. Payment Issues [link]
H. Your Relationship with Advertisers [link]
I. Software License [link]
J. Disclaimer of Warranties [link]
K. Limitation of Liability [link]
L. Force Majeure [link]
M. Governing Law and Other Terms [link]
N. Contacting Us [link]
A. Our Privacy Policy.
- -----------------------
The purpose of AllAdvantage is to take advantage of Internet technology to
enable businesses to interact with consumers in highly personalized ways without
forfeiting the privacy of the consumer. As such, privacy is at the core of
AllAdvantage. This statement outlines our privacy program and its terms are
incorporated into this Agreement. We welcome your input about our policy. Give
us your feedback at [email protected].
. About Us. All information collected as a result of your membership in
AllAdvantage.com will be controlled by AllAdvantage.com, Inc. AllAdvantage
may transfer or share your information within the AllAdvantage group of
international subsidiaries ("AllAdvantage Group") as part of a transfer of
your membership agreement. It will only do this to improve the
administration of the services. At all times the companies that make up the
AllAdvantage Group ("We") will follow this privacy policy.
. Disclosures of Your Information. We do not give, sell, rent, share, or
trade any identifiable personal information regarding our members to any
third party, with the exception of third-party contractors and service
providers who work with AllAdvantage to provide the Viewbar software, and
other services, and who are strictly prohibited from later use of the
information that they may have access to. AllAdvantage may share non-
personal aggregate, or summary, information regarding its members with
partners or other third parties. We can-and you authorize us to - disclose
personal information to local, state, or federal law enforcement officials
when required to do so by public authorities or when we believe in good
faith that the law requires it.
. Information We Collect as Part of General Membership.
Online Registration Form. In our online registration form, we require you
------------------------
to provide us with your full name, full street address, email address and a
password. In addition, we require your city of birth, birth date, and a
password question with its corresponding answer, so that we may identify
you if you ever lose your password. We will process this information to
determine your eligibility for certain services such as the Viewbar,
administer your membership, to provide the Viewbar Service and other
services to you and to provide you with the full benefits of membership as
detailed below.
<PAGE>
Shopping and Promotions. We may ask you for personal information at other
------------------------
times, including, but not limited to, when you enter a sweepstakes, contest
or promotion sponsored by AllAdvantage and/or when you report a problem
with any of our services. Personal information gathered in this way will be
used solely for the transaction itself unless otherwise specifically
explained at the time the information is collected. Express consent to
other uses of this information will be sought that time. AllAdvantage may
retain and reference aggregate information about member preferences
gathered in these ways.
. Information We Collect as Part of the Viewbar Service.
Information Gathered in the Viewbar Service. While you are using the
--------------------------------------------
Viewbar software, we automatically track certain information about your
surfing behavior. This information includes the URL of the page you are
visiting, what browser you are using, and your IP address. YOU CAN CLOSE
THE VIEWBAR WINDOW AT ANY TIME TO STOP THIS TYPE OF INFORMATION GATHERING.
(To completely cancel your membership in AllAdvantage and to have your
personal data deleted from our systems, just notify us at
[email protected]. You will then no longer be able to earn money
--------------------------
as set out in this Agreement.)
Information required for Tax Purposes Related to the Viewbar Service. If
---------------------------------------------------------------------
You join the Viewbar Service and accrue US $250 in your account we may
contact you to request additional information including, for example, the
Social Security number of our U.S. Members or confirmation of country of
residence for non-US members. We will only use this additional information
for legitimate purposes related to complying with applicable tax laws. If
You are contacted and fail to provide us with the information we
legitimately require, we may refuse to pay You until we receive that
information.
Cookies Used in the Viewbar Service. The process we use to serve
------------------------------------
advertisements to the Viewbar window involves use of a "cookie." A cookie
is a piece of text that can be entered into the memory of your computer. It
helps AllAdvantage and our advertising service track the frequency and
placement of advertisements. Many Internet services deliver cookies to
visitors of their Web sites. Cookies store information about your use of
their service on your computer where it can only be retrieved by the same
service at a later time. Cookies are used by Internet services to make
their services much more convenient and personalized. The cookie(s) we use
will not store or identify you directly with personal information but they
do identify you with your membership ID and we reference cookies to
accurately store information relating to your membership and on-line
behavior.
. Our Viewbar software uses cookies to make sure you don't see the
same ad repeatedly. We also use cookies to deliver content
specific to your interests, and to save your password so you
don't have to re-enter it each time you connect to the Internet.
. Most cookies are "session cookies," meaning that they are
automatically deleted at the end of a session. You are always
free to decline our cookies, if your browser permits, or to ask
your browser to indicate when a cookie is being sent. You can
also delete cookie files from your computer at your discretion.
Note that if you decline our cookies or ask for notification each
time a cookie is being sent, your Viewbar window may not function
properly and we may have difficulty rendering service to you. If
you would like more information about cookies, you may wish to do
a search on Yahoo or visit http://www.cookiecentral.com.
----------------------------
<PAGE>
. We use an outside company to display ads in the Viewbar window.
These ads may place cookies on your computer. While we use
cookies in other parts of our Web site, cookies received with
banner ads are monitored by our ad-serving company, and we do not
have access to this information. However, we have contractual
arrangements that restrict our partners, including the ad-serving
company, from using these cookies for anything other than
fulfilling their service to AllAdvantage.
. Our Use of Your Information. In addition to uses of Your information
described above, AllAdvantage may use Your information in the
following ways:
Registration Information. We use your email address to verify your
-------------------------
identity and protect against fraud and to contact you when you are eligible
to download the Viewbar software. In addition, we use it to send you
updates about your account, new products and services, and company updates.
If you participate in the Viewbar Service, we'll use the address
information to mail your check to you and to verify your location for tax
purposes. We use URL information we collect to help direct advertising to
you that is more likely to be of interest to you. We use your IP address to
help diagnose problems with our server and to administer our Web site. Your
IP address is also used to gather broad demographic information.
Information Gathered Through the Viewbar Service. We will process the
-------------------------------------------------
information we gather while You use the Viewbar program to build a profile
of your interests and activities so that we can send you advertisements,
offers, benefits and content targeted at your specific interests, and to
provide you with the full benefits of membership. As we aggregate this type
of information about all of our members, we offer summaries to our
advertisers and other interested parties so that they can learn what
products and services are most popular to consumers, but we do not disclose
our members' names, addresses, email addresses, or other personally
identifiable information to these third parties.
International Transfers. AllAdvantage has centralized its records in the
------------------------
United States but may perform some of its data processing outside of the
United States. To do this, AllAdvantage may transfer your personal data
internationally to other countries. Some of the countries may have laws
that protect personal data, some may not. AllAdvantage will protect your
information no matter where we process or store your data by following this
privacy statement and by complying with the relevant data protection laws
in force in your country. We will also oblige our third party contractors
to comply with those laws. By becoming a Member you give your consent to
this transfer of your personal data.
Transfer of this Agreement. AllAdvantage may transfer or share your
---------------------------
information within the AllAdvantage Group as part of a transfer of your
membership agreement. It will, for example, do this in order to improve the
administration of the AllAdvantage services. At all times the AllAdvantage
Group will follow this privacy policy and ensure the security and
confidentiality of personal data.
. External Links. The Viewbar window contains links to Web sites.
AllAdvantage is not responsible for the privacy practices or the content of
such Web sites.
. Security. This site has security measures in place to protect the loss,
misuse, and alteration of the information under our control. We use
industry standard procedures and processes to safeguard the confidentiality
of your identifiable personal information, such as firewalls, encryption,
token authentication, application proxies, monitoring technology, and
adaptive analysis of network traffic to track abuse of our network and its
data. Unfortunately, when
<PAGE>
you submit information about yourself to AllAdvantage over the Internet the
information may travel over many systems that are not under the control of
AllAdvantage. The Internet is not 100% secure and others may intercept the
information that you are sending. One easy and important way to protect
your personal information is to guard your account password and close your
browser and Viewbar windows when you step away from your computer.
. Consent to Process Personal Data/Choice/Opt-In/Opt-Out. AllAdvantage
------------
members constantly have the option to enter and exit the AllAdvantage
---------------------------------------------------------------------
service at any time and for any length of time. While the Viewbar Service
----------------------------------------------
is active Members consent to it recording data which will be used by
AllAdvantage in accordance with this policy. Members who participate in the
Viewbar Service have the opportunity to opt-in to receive
promotional/marketing information via the Viewbar window from our partners
at any time, simply by opening the Viewbar window. To opt-out, members
simply close the Viewbar window. Members are always free to close their
account by sending an email to [email protected]. In such a case,
your personal data will be destroyed. Furthermore, all members are provided
opportunities to opt-in to marketing and promotional programs provided by
our advertisers through our Web site.
. Updating or Deleting Your Information. To update your contact or address
information, please use the Account Update Form in the Account Center
[link]. To make other updates to Your account, to demand a copy of your
stored personal data, or to have your personal data deleted, contact our
support organization using the form at
http://www.alladvantage.com/supportform.asp.
-------------------------------------------
. A Special Note About Children. AllAdvantage wants to help parents protect
the privacy of children and has taken steps to obtain parental permission
before children may begin the Viewbar Service. For more information, See
the Parental Consent page [link]. AllAdvantage does not consider our Web
Site or the Viewbar Service to be directed at children but some children
have signed up as Members. To remove your child from AllAdvantage
membership or the Viewbar Service, please contact us at
[email protected].
. Contacting the Web Site. If you have any questions about this privacy
policy, the practices of this site, or your dealings with this Web site,
you can contact [email protected].
B. Updates to This Agreement. AllAdvantage may revise these terms from time
- ------------------------------
to time. We will bring to your attention your right to object to the revision.
We will notify you of each revision and you may object to the updated version
within a four-week period. If you do object, we are entitled to cancel your
membership upon six weeks notice. If you do not object, this will be considered
as consent. Your continued use of the benefits of membership after you receive
our note will signify your acceptance of the modified terms.
C. Basic Requirements for Membership. To maintain a Membership in the Viewbar
- --------------------------------------
Service, You must meet the following requirements and AllAdvantage.com reserves
its legal rights to terminate the Membership of anyone who fails to meet these
requirements on an ongoing basis:
. If You are under 18 years of age, You must have the permission of Your
parent or legal guardian to participate in the Viewbar Service. See our
Parental Consent Page [link] to find out how your parent can provide
consent;
. Approved Territories. You must be physically located within an Approved
Territory while using the Viewbar Service, be a legal resident of an
Approved Territory, and have a mailing
<PAGE>
address in an Approved Territory (P.O. Box addresses will not be accepted).
The Viewbar Service is currently available in the following countries and
provinces ("Approved Territories"):
. Australia;
. Canada;
. France;
. Germany;
. New Zealand, and
. United States of America
. One Account Per Member. You may only sign up once and maintain one
Membership in the Service. You may not have multiple Viewbar windows
displayed on one screen simultaneously. AllAdvantage.com reserves the right
to terminate duplicate accounts, resulting in the potential loss of
accumulated credits;
. Provide Accurate Information. You must provide AllAdvantage.com with valid
contact and residence information and promptly update such information
should it change or should additional information be required by
AllAdvantage.com for legitimate tax-related purposes or any other reason
required by applicable law. You may not impersonate or misrepresent Your
identity. AllAdvantage.com reserves its legal rights to terminate any
account, and associated membership, containing untruthful information;
. Accounts are Not Transferable. Your password and account are personal to
You and are not transferable; You may not allow anyone else to use Your
password or account; You may not use anyone else's password or account or
act to accrue earnings for anyone else's account; You are responsible for
keeping Your password secret; AllAdvantage is not liable for any loss or
damage caused by any disclosure of your password or account; You may only
create an account for yourself and may not establish account on behalf of
anyone else;
. Comply with Laws. You agree to comply with all of your local, state,
province, country or regional legal restrictions that may be applicable to
your membership in AllAdvantage;
. Cancel at Anytime. You may cancel Your Membership at anytime by ceasing to
use and destroying the copy of the Viewbar software and notifying
AllAdvantage at [email protected] or using the "Cancel my
Membership" form http://www.alladvantage.com/quit.asp on the
-----------------------------------------
AllAdvantage.com website. If you decide to cancel Your membership and later
wish to re-enroll, You will be assigned a new account number, You may have
to wait for activation of the Viewbar Service all over again along with
other new members, and You will not receive further credit for referrals
made using Your previous account. Notwithstanding our right to terminate
this Agreement without any notice for good cause, we may at any time
terminate your membership by written six weeks prior notice;
. Termination of Accounts. To the full extent allowed by law, AllAdvantage at
its sole discretion and for any or no reason may refuse to accept
applications for membership and requests to use the Viewbar Service; and
may terminate any Members without prior notice for good cause, particularly
including, but not limited to: (a) serious violation of any provision of
this Agreement; (b) aiding in or promoting circumvention of the Viewbar
Service; and (c) acting against the business interests or reputation of
AllAdvantage despite a
<PAGE>
warning letter; (d) otherwise acting in a severely or substantially
unlawful manner in relationship to AllAdvantage, the AllAdvantage.com
website; the AllAdvantage Viewbar Service; or any content provider to the
website or Viewbar Service; (e) material breach of our spamming policy; or
(f) any other reason at the discretion of AllAdvantage. Notwithstanding our
right to terminate this Agreement for good cause without any prior notice,
we, at any time, may terminate your membership by written 6 weeks prior
notice.
. If your account is terminated by AllAdvantage, You may not re-enroll or
join under a new account unless formally invited to do so by AllAdvantage.
(See Payment Issues below for more information about termination of
accounts.)
. Lapsing of Account. If you do not surf with the Viewbar window active for
at least one hour within any 1-year period, your membership will
automatically lapse without notice and any accrued credits in your account
below the equivalent of U.S. $20 will be deemed "unearned" and will be
forfeited.
D. Your Relationship to AllAdvantage.com. By filling out the "Join Now" form
- ------------------------------------------
You are applying to receive a service. Your relationship to AllAdvantage.com is
one of an independent contractor and/or customer. No employee-employer
relationship is created by Your use of the Service. ALLADVANTAGE HAS NO
OBLIGATION TO OFFER THE VIEWBAR SERVICE OR OTHER PROMOTIONS TO YOU.
E. Using the Viewbar Software. Instructions for downloading, installing and
- -------------------------------
operating the Software program are included in the download file. Read the
instructions carefully. You are in sole control of whether the Viewbar software
is "Active" on your screen. You have no obligation to use the Viewbar software.
. Privacy. Please note that while you are using the Viewbar software certain
information will be recorded, such as which web sites you visit (See the
Privacy Policy section [link] for more details). By continuing to use the
Viewbar software in "active" mode you consent to this recording. You may
elect not to have the information recorded by simply closing the Viewbar
window.
. Compensation. Subject to the limitations and conditions of this Agreement,
You can earn money or other compensation for active surfing of the Internet
when the Viewbar window is "Up" on Your screen and not obstructed, meaning
that the entire Viewbar window is visible to You. Compensation will be
"credited" to Your account according to the following limitations:
Active Surfing Only. Only time You spend "Actively Surfing," as reasonably
--------------------
determined by AllAdvantage, will be credited to Your account. "Actively
Surfing" means that You are sitting in front of Your computer and browsing
the Internet (browsing remote web pages and content not stored on your
computer or local network) using one of the supported browsers as evidenced
by, for example, clicking on links, scrolling, typing or other mouse
movement in response to Internet web pages. Inactivity for three minutes or
more may temporarily stop any crediting of Your account until movement is
again detected by the Viewbar software. AllAdvantage.com may amend this
definition at any time by putting notice on its website.
More on Active Surfing. In no event does Active Surfing include time
-----------------------
spent in chat rooms, discussion groups, interactive gaming sites, world-
wide-web enabled email sites, or sites that do not obtain their content
through the World-Wide Web.
<PAGE>
Incompatible Programs. The Viewbar software may be "incompatible" with
----------------------
other software programs, including but not limited to other advertising-
display programs. If the Viewbar software detects an incompatible program
running on Your computer, the Viewbar window may close automatically. If
this occurs, the crediting of Your account will cease until You activate
the Viewbar software again and the incompatible program is no longer
running. AllAdvantage.com is not liable for the effects of any such
incompatibility.
No Tampering. You promise neither to simulate, to "fake", or to falsify
--------------
Active surfing in order to earn money or other compensation from
AllAdvantage, nor to interfere with the visual display of advertising or
with the Viewbar window or with the Service's tracking of your Active
Surfing behavior, nor to assist others in doing any of the above.
Simulating, faking, or falsifying Active Surfing includes, but is not
limited to, creation of, distribution of or use of software or other
devices that simulate Active Surfing. You also promise and agree not to
tamper in any way with the proper functioning or tracking of the Service.
You agree that AllAdvantage may, and You understand that AllAdvantage will
terminate your account, or take legal action against you, if you engage in
any such simulating, faking, falsifying, or tampering. AllAdvantage may
also publicly display your name and a description of your actions if you
engage in such activity. You agree that by accepting compensation from
AllAdvantage for Active Surfing you are representing to AllAdvantage that
you have not engaged in any such activities designed to thwart the purpose
of this Agreement, such as simulation, faking, or falsifying Active Surfing
or otherwise tampering with the Service, or assisting others in doing so;
No Guarantee of Accuracy. YOU AGREE AND UNDERSTAND THAT ALTHOUGH
-------------------------
ALLADVANTAGE.COM WILL MAKE REASONABLE EFFORTS TO MAKE THE ACTIVITY
DETECTION PROCESS FAIR AND CONSISTENT, ALLADVANTAGE.COM DOES NOT GUARANTEE
THE PRECISION OF THE PROCESS. YOU WILL ONLY BE CREDITED AMOUNTS FOR TIME
SPENT ACTIVELY SURFING AS REASONABLY DETERMINED BY ALLADVANTAGE.COM.
Hourly Limits Per Month. The amount of time that will be credited to Your
------------------------
account is limited by hours per calendar month ("Monthly Time Limit") and
AllAdvantage.com reserves the right to change the Monthly Time Limit at any
time by posting the new limit on the Rate Page that can be found at
[link -- need url address]
Hourly Rate May Change. The amount of money that will be credited to Your
-----------------------
account for active surfing by You, or for the active surfing of Your
referrals, may vary. AllAdvantage.com will compensate You according to the
then-current rates for Your time spent viewing the Viewbar window as
tracked by AllAdvantage, subject to the limits herein: You are responsible
for checking the Rate Page at http://www.alladvantage.com/rates.asp to
obtain notice of changes.
. One Account Per Computer. Each computer can only have one AllAdvantage.com
account on it (the software restricts the program to one per machine for
now).
. No Use by International Members While Visiting the U.S. If You live outside
-------------------
the United States but visit the United States, You agree not to (a) use the
---------------------------------------------------------------------------
Viewbar software; or (b) perform any activities related to the Viewbar
----------------------------------------------------------------------
Service, including obtaining referrals, while physically located in the
-----------------------------------------------------------------------
United States (e.g. if You came to the U.S. on vacation or for business.)
-------------
<PAGE>
. Software Updates. Users must upgrade to the new versions of the Viewbar
software as they become available in order to maintain active status with
the Viewbar Service. AllAdvantage.com reserves the right to refuse to
credit accounts for Members using past versions of the Viewbar software.
F. The Referral Program. If You are accepted by AllAdvantage.com as a Member
- -------------------------
of the Viewbar Service and meet all the requirements provided in this Agreement
You may earn credits for some activities of members that You refer to the
Service ("Your Referrals") and some activities of members referred by Your
Referrals. The Referral Program is subject to the following constraints:
. One Referrer Only. Each new Member may only designate one referrer at the
time they become a member of AllAdvantage.
. Referral Levels. You will receive credits only for Viewbar Service
activities of five levels of referrals as shown here:
YOU
R1: Names You as Referrer ("Direct Referral")
R2: Names R1 as Referrer ("Extended Referral")
R3: Names R2 as Referrer ("Extended Referral")
R4: Names R3 as Referrer ("Extended Referral")
R5: Names R4 as Referrer ("Extended Referral")
. Rates May Change. The rates paid for the activities of Your Referrals are
subject to change. The current rates can be found on the Current Rates Page
on http://www.AllAdvantage.com/rates.asp.
. Hourly Limits. You will be credited for the activities of Your Referrals
only up to the then-current Monthly Time Limit and only up to that portion
of the Monthly Time Limit that You have actively surfed using the Viewbar
window during that month. So, for example, if You "actively surf" for only
5 hours in a given month, You can only be credited for up to 5 hours of
active surfing by each of Your Referrals.
. Members may not use Spam to Obtain Referrals. You may not use unsolicited
email, usenet, message board postings or other similar methods of mass
messaging ("spam") to gather referrals. (Usenet and message board spam are
messages sent or posted which are unrelated to the topic of discussion of
the particular news group or message board.) The use of spam to promote the
AllAdvantage service has strict negative consequences. Not only may
AllAdvantage terminate the Membership of any Member who in AllAdvantage's
reasonable opinion has used unsolicited email to gain referrals (a
"Spammer"); AllAdvantage will also sever the branch of the "referral tree"
made up of direct and extended referrals obtained by the Spammer. The
branch accounts (those under the Spammer) will not be terminated, but those
Members above the Spammer on the referral tree may not benefit (e.g.
receive Viewbar credits) from them. In addition, You may be subject to
state and federal penalties or other legal consequences under applicable
law if You send unsolicited email. Our Anti-Spam Policy
(http://www.alladvantage.com/antispam.asp) provides more details and is
----------------------------------------
incorporated into this Agreement.
<PAGE>
. Marketing Claims. You agree not to make any misrepresentations to any of
Your Referrals or potential Referrals with respect to compensation
typically received by AllAdvantage.com members or with respect to
compensation that potential members are likely to receive, and to fully
comply with all applicable laws related to multi-level marketing programs.
. WebMaster Program. AllAdvantage.com grants You a limited license to use the
AllAdvantage trademarks and tradename as described on the Webmaster Program
page [http://www.alladvantage.com/webmaster.asp] solely for the purpose of
seeking legitimate referrals to the AllAdvantage.com site. This license is
subject to the terms and conditions of our Trademark policy set out on the
Webmaster Program page which may be varied by AllAdvantage.com from time to
time. All use of the AllAdvantage.com trademarks and trade names shall be
for the sole benefit of AllAdvantage and You hereby agree to assign and do
all things necessary to ensure that AllAdvantage receives the benefit of
such use or required by AllAdvantage.com to protect its trademarks.
AllAdvantage.com also reserves the right to revoke this license on a
selective basis upon reasonable prior notice. Improper use of the
trademarks and/or tradename of AllAdvantage.com is strictly prohibited and
AllAdvantage.com may terminate the account or cancel the membership of
anyone who violates this policy.
. No benefits are available to members for referrals of advertisers to
AllAdvantage.com.
G. Payment Issues.
- -------------------
. Monitoring Your Account Balance. You may view your account balance and the
number of referrals that you have made at the AllAdvantage.com "Account
Info" web page. At this point, the account information is not updated in
real-time as credits are accrued, but AllAdvantage will try to keep the
amounts updated every few hours. If you have a question about your account
balance, contact [email protected].
. Mailing of Checks. Currently, the only way to receive compensation from
AllAdvantage.com is by check mailed to the mailing address provided by You
in the membership form. In the future, AllAdvantage.com may initiate
alternative methods of payment (e.g. credit to a credit card) and reserves
the right to charge a fee for continued mailing of checks after that time.
Subject to the limitations herein, AllAdvantage.com will mail a check to
You within a reasonable time after You have accumulated at least US $20 in
Your account.
. Taxes. You are fully responsible for filing your local, state, or federal
or any other taxes if applicable on any compensation received as a result
of Your participation in the Service. When/If Your annual earnings through
the AllAdvantage.com Service reaches $250.00, AllAdvantage.com will request
Your Social Security number and/or other appropriate tax-related
information to use to comply with federal and state or other tax
regulations AllAdvantgae.com will not pay out credits earned in excess of
the $250 limit without receiving this information from You.
. If Your Account is Terminated. AllAdvantage.com may refuse to pay some or
all of the amounts credited to the terminated Member's account if such
amounts were earned in violation, or after violation, of this Agreement or
were otherwise unlawfully obtained by the Member. Similarly, AllAdvantage
will have no obligation to pay a Member for amounts credited to the
Member's account that were earned in violation or after violation of this
Agreement by any of the Member's direct or extended referrals.
<PAGE>
H. Your Relationship with Advertisers. Your relationship with merchants or
- --------------------------------------
advertisers found on the Site, including payment for and delivery of related
goods or services, entry into and operation of promotions, discounts or
contests, and any other terms, conditions, warranties or representations
associated with such dealings, are solely between You and such merchant or
advertiser. You agree not to hold AllAdvantage liable for any loss or damage of
any sort incurred as the result of any such dealings or as the result of the
content provided by such merchants or advertisers through the Service. By
clicking through ads in the Viewbar window or taking advantage of discounts and
promotions directed to AllAdvantage members by our advertisers, You are
authorizing the advertiser to share information with AllAdvantage about the
promotion, products or services that You obtained from them. AllAdvantage will
use this information to help improve the promotions and discounts offered to
AllAdvantage members.
I. Software License
- ---------------------
Grant of License. Subject to the terms of this Agreement, AllAdvantage
----------------
hereby grants and You accept a personal, non-exclusive, non-transferable,
terminable license, to install and use the Viewbar software on a single
computer for the purpose, and only during the term, of Your participation
in the AllAdvantage Viewbar Service and subject to the conditions and
limitations of this Viewbar Agreement between You and AllAdvantage.com.
BACKUPS. You may copy the Software only for backup purposes, provided that
-------
You reproduce all copyright and other proprietary notices that are on the
original copy of the Software. The Software is licensed, not sold, to You
for use only under the term of this Agreement. AllAdvantage.com reserves
all rights not expressly granted to You. You may own the media, if any, on
which the Software is recorded, but AllAdvantage retain ownership of all
copies of the Software itself and any intellectual property rights therein.
Restrictions. You may not use, copy, modify, or transfer the Software, or
------------
any copy thereof, in whole or in part, except as expressly provided for in
this Agreement or applicable law. You may not tamper with, modify, reverse
engineer, disassemble, or decompile the Software except to the extent such
restrictions are overridden by other law. Any attempt to transfer any of
the rights, duties or obligations hereunder is void. You may not rent,
lease, loan, resell for profit, or distribute the Software, or any part
hereof.
Support. AllAdvantage.com will provide email support of Your use of this
-------
Software. The initial phone number for this support is 1 (510) 783-6759.
Support questions may also be directed to [email protected]. You
agree to keep this phone number and email address strictly confidential and
to use them only for Your own legitimate support questions. This contact
information is subject to change. Check the AllAdvantage.com website for
notices of such changes.
J. Disclaimer of Warranties. YOU EXPRESSLY AGREE THAT USE OF THE SERVICE AND
- -----------------------------
SOFTWARE IS AT YOUR SOLE RISK. THE SERVICE AND SOFTWARE ARE PROVIDED ON AN "AS
IS" AND "AS AVAILABLE" BASIS. TO THE MAXIMUM EXTENT ALLOWED BY APPLICABLE LAW,
ALLADVANTAGE.COM EXPRESSLY DISCLAIMS ALL WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED BY LAW, CUSTOM OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY WARRANTY
OF MERCHANTABILITY, SATISFACTORY QUALITY, FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT. ALLADVANTAGE.COM MAKES NO WARRANTY REGARDING ANY GOODS OR
SERVICES PURCHASED OR OBTAINED THROUGH THE SERVICE OR ANY TRANSACTIONS ENTERED
INTO THROUGH THE SERVICE.
<PAGE>
K. Limitation of Liability. TO THE MAXIMUM EXTENT ALLOWED BY APPLICABLE LAW,
- ----------------------------
NEITHER ALLADVANTAGE.COM NOR ANY OF ITS PARENTS, MEMBERS, SUBSIDIARIES,
AFFILIATES, SERVICE PROVIDERS, LICENSORS, OFFICERS, DIRECTORS OR EMPLOYEES SHALL
BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES
ARISING OUT OF OR RELATING TO THIS AGREEMENT, RESULTING FROM THE USE OR THE
INABILITY TO USE THE SERVICE OR FOR THE COST OF PROCUREMENT OF SUBSTITUTE GOODS
AND SERVICES OR RESULTING FROM ANY GOODS OR SERVICES PURCHASED OR OBTAINED OR
MESSAGES RECEIVED OR TRANSACTIONS ENTERED INTO THROUGH THE SERVICE OR RESULTING
FROM UNAUTHORIZED ACCESS TO OR ALTERATION OF USER'S TRANSMISSIONS OR DATA,
INCLUDING BUT NOT LIMITED TO, DAMAGES FOR LOSS OF PROFITS, USE, DATA OR OTHER
INTANGIBLE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. IN NO EVENT WILL ALLADVANTAGE.COM'S TOTAL CUMULATIVE LIABILITY TO ANY
MEMBER UNDER THIS AGREEMENT EXCEED AN AMOUNT EQUAL TO: THE NUMBER OF HOURS THAT
THE MEMBER PERSONALLY SPENT ACTIVELY SURFING DURING THE IMMEDIATELY PRECEDING
TWO MONTHS, MULTIPLIED BY THE MAXIMUM HOURLY PAYOUT RATE PUBLISHED BY
ALLADVANTAGE.COM FOR THE VIEWBAR SERVICE DURING THAT SAME PERIOD.
L. Force Majeure. AllAdvantage will not be in default or otherwise liable for
- ------------------
any delay or failure in its performance under this Agreement where such delay or
failure arises by reason of an Act of God, or any government or governmental
body, acts of war, the elements, strikes or labor disputes, power or system
failures, failure of the Internet, computer hacking, or other causes beyond the
control of AllAdvantage.
M. Governing Law and Other Terms. Any action related to this Agreement will be
- ----------------------------------
governed by California law, excluding (1) principles of conflicts of laws, and
(2) the United Nations Convention on Contracts for the International Sale of
Goods. Any action relating to this Agreement shall be brought in the state or
federal courts located in the Northern District of California, and You hereby
submit to the jurisdiction and venue thereof. You agree to comply with the laws
of California and the United States that apply to the use of this Service and
the compensation You may receive. If the law of Your country, state, or
province of residence prohibit or limit Your participation in this Service, then
You are responsible for complying with such laws and you agree to indemnify
AllAdvange.com against any breach by You.
If any part of this Agreement is held to be unenforceable, the unenforceable
part shall be given effect to the greatest extent possible and the remainder
will remain in full force and effect. This Agreement is personal to You and You
may not transfer, delegate, or assign this Agreement, your referral network,
your AllAdvantage account or other benefits you receive as an AllAdvantage
Member to anyone. Any attempt by You to assign or delegate this Agreement shall
be null and void. AllAdvantage.com may assign this Agreement at its sole
discretion.
This Agreement constitutes the entire Agreement between You and AllAdvantage.com
in connection with the Viewbar Service and general membership in
AllAdvantage.com and supersedes all prior agreements between the parties
regarding the subject matter contained herein.
N. Contacting Us. If You have questions about the Viewbar Service or this
- ------------------
Agreement, please contact [email protected].
<PAGE>
Exhibit 21.01
List of Subsidiaries
--------------------
. AllAdvantage.com Limited, a English company
. AllAdvantage.com International Inc., a Delaware corporation.
. AllAdvantage.com Inc., a Delaware corporation.
.
<PAGE>
Exhibit 23.02
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 3, 2000 (except for Note 11, as to which
the date is March , 2000), in the Registration Statement (Form S-1) and
related Prospectus of AllAdvantage.com Inc.
Ernst & Young LLP
Palo Alto, California
March , 2000
- --------------------------------------------------------------------------------
The foregoing consent is in the form that will be signed upon the completion
of the reincorporation and other matters described in Note 11 to the
consolidated financial statements.
/s/ Ernst & Young LLP
Palo Alto, California
February 3, 2000
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