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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 18, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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WEBSIDESTORY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7389 33-0727173
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
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10182 TELESIS COURT, 6TH FLOOR
SAN DIEGO, CA 92121
(858) 546-0040
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
TERANCE A. KINNINGER
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
WEBSIDESTORY, INC.
10182 TELESIS COURT, 6TH FLOOR
SAN DIEGO, CA 92121
(858) 546-0040
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
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CAMERON JAY RAINS, ESQ. BRUCE R. HALLETT, ESQ.
JEFFREY T. BAGLIO, ESQ. SCOTT R. SANTAGATA, ESQ.
JOHN J. GILLULY III, ESQ. KANDY L. WILLIAMS, ESQ.
DECEMBER GREENE, ESQ. AMY J. HANSEN, ESQ.
GRAY CARY WARE & FREIDENRICH LLP BROBECK, PHLEGER & HARRISON LLP
4365 EXECUTIVE DRIVE, SUITE 1600 38 TECHNOLOGY
SAN DIEGO, CA 92121-2189 IRVINE, CA 92618
(858) 677-1400 (949) 790-6300
</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, as amended (the "Securities Act") check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF SECURITIES PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
<S> <C> <C>
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Common Stock ($0.001 par value).......................... $57,500,000 $15,180
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</TABLE>
(1) Includes shares that the Underwriters will have the option to purchase
solely to cover over-allotments, if any.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(o) promulgated under the Securities Act.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT 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.
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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 SECURITIES, AND WE ARE NOT SOLICITING
OFFERS TO BUY THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS
NOT PERMITTED.
SUBJECT TO COMPLETION, DATED APRIL 18, 2000
[WEBSIDESTORY LOGO]
SHARES
COMMON STOCK
WebSideStory, Inc. is offering shares of its common stock. This
is our initial public offering and no public market currently exists for our
shares. We have applied for approval for quotation of our common stock on the
Nasdaq National Market under the symbol "WSSI." We anticipate that the initial
public offering price will be between $ and $ per share.
------------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
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<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to WebSideStory, Inc............................... $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
WebSideStory, Inc. has granted the underwriters a 30-day option to purchase
up to an additional shares of common stock to cover over-allotments.
------------------------------
ROBERTSON STEPHENS
U.S. BANCORP PIPER JAFFRAY
WILLIAM BLAIR & COMPANY
THE DATE OF THIS PROSPECTUS IS , 2000.
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[INSIDE FRONT COVER]
[ARTWORK]
<PAGE> 4
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. INFORMATION CONTAINED IN OUR WEB
SITES IS NOT A PART OF THIS PROSPECTUS.
------------------------------
TABLE OF CONTENTS
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PAGE
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Summary..................................................... 1
Risk Factors................................................ 5
Special Note Regarding Forward-Looking Statements........... 16
Use of Proceeds............................................. 17
Dividend Policy............................................. 17
Capitalization.............................................. 18
Dilution.................................................... 19
Selected Consolidated Financial Data........................ 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 22
Business.................................................... 30
Management.................................................. 45
Certain Transactions........................................ 52
Principal Stockholders...................................... 53
Description of Capital Stock................................ 55
Shares Eligible for Future Sale............................. 57
Underwriting................................................ 59
Legal Matters............................................... 61
Experts..................................................... 61
Where You Can Find More Information......................... 62
Index to Consolidated Financial Statements.................. F-1
</TABLE>
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ABOUT THIS PROSPECTUS
This preliminary prospectus is subject to completion prior to this
offering. Among other things, this preliminary prospectus describes our company
as we currently expect it to exist at the time of this offering. Except as
otherwise indicated, all information in this prospectus:
- assumes no exercise of the underwriters' over-allotment option;
- has been adjusted to give effect to a 6-for-1 reverse split of our common
stock that will be completed prior to this offering;
- assumes that we have reincorporated in the state of Delaware;
- assumes that all outstanding convertible redeemable preferred stock has
been converted into 7,064,850 shares of common stock; and
- assumes an initial public offering price of $ per share.
WebSideStory(R), HitBox(R) and StatMarket(R) are our U.S. registered
service marks. We have applied to register The Pulse of the Internet, Traffic,
Yep and Yep.com as our service marks. HitBox is also registered in the European
Union. Our "W" logo is also a service mark. This prospectus also contains
trademarks and trade names of other companies. All trademarks and trade names
appearing in this prospectus are the property of their respective holders.
Until , 2000, all dealers selling shares of common stock, whether
or not participating in this offering, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to unsold allotments or subscriptions.
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SUMMARY
You should read the following summary together with the more detailed
information in this prospectus, including risk factors, regarding our company
and the common stock being sold in this offering.
OUR COMPANY
WebSideStory, Inc. is a leading application service provider, or ASP,
focused on delivering detailed, real-time web site analysis and user behavior
information to customers who operate web sites that are important to their
businesses. As an ASP, we sell subscription services such as HitBox Enterprise,
HitBox Pro, StatMarket and HitBox Wireless that provide businesses the
advantages of an outsource solution. Our proprietary Internet-based technology
provides vital business intelligence to our customers while eliminating
traditionally large up-front hardware and software expenses and implementation
delay. Businesses use our services to analyze anonymously Internet users' online
activity, behavior and purchasing patterns, in order to gain valuable, timely
insights and respond quickly to customer preferences. Businesses that take
advantage of our services can increase customer loyalty and eBusiness
effectiveness while protecting user privacy. Our technology is highly scalable
and is currently used to monitor over 150,000 web sites and 100 million page
views per day. Our customers include both large enterprises and emerging
Internet companies, including Cisco-EMEA, Conseco Inc., Ewanted.com Corporation,
Hewlett-Packard Company, Lucent Technologies, Inc., Paymybills.com, Inc.,
Proflowers, Inc., Skechers USA, Inc. and SkyDesk, Inc.
Business strategists, marketeers and webmasters compete in new and rapidly
evolving eCommerce environments. As businesses develop more comprehensive online
capabilities to address large and growing markets, they require more
sophisticated means of analyzing customer behavior. Growth of the Internet
creates both opportunities and challenges for these businesses. Millions of
users continue to access the Internet through desktop computers and,
increasingly, mobile and wireless devices such as Palm VII Connected Organizers
and web-enabled phones. According to International Data Corporation, or IDC, the
total value of eCommerce revenue is expected to increase from approximately $268
billion in 2000 to approximately $1.6 trillion in 2003.
The ability to capitalize on this market opportunity depends, in part, upon
business strategists', marketeers' and webmasters' abilities to competitively
analyze and respond to the massive volumes of data generated by electronic
commerce. Forrester Research estimates that spending on software and services to
support eCommerce alone exceeded $5.6 billion in 1998 and will grow to $35
billion by 2002. Traditional methods of data collection and analysis based upon
server activity fail to fully and accurately measure Internet user behavior in
the distributed network infrastructure. Accurate and timely analysis requires
the ability to capture critical user information from sources beyond the file
server such as browsers, proxy servers, distributed hosting networks and
wireless gateways. Internet businesses will increasingly need useful information
that enables timely decisions in this competitive environment.
Our Internet user behavior measurement and analysis services provide our
customers with platform-independent solutions that report detailed statistics
about Internet users accessing web content through both wireline and wireless
browsers. Our services are designed to enable businesses to develop clear
insights and make informed decisions based upon more accurate and timely
mission-critical data than data provided by competing approaches. Our
distinctive ASP model provides for rapid customer implementation, is easy to use
and can be adapted to the rapidly changing configurations and demands of our
customers' web sites.
We intend to enhance our position as a leading ASP by refining our core
proprietary technology and increasing the depth of our Internet intelligence
capabilities. As new devices, operating systems, protocols, platforms and
browsers emerge, we plan to continue to provide leading-edge Internet user
intelligence to our enterprise customers, helping them to compete most
effectively. We plan to capitalize on what we believe to be our first-mover
advantage in measuring user behavior on the wireless Internet. By executing
these strategies, we intend to pursue our objective to become the leading source
of Internet business intelligence in the evolving online economy.
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We were formed as a California corporation in September 1996, and we intend
to reincorporate in Delaware prior to the completion of this offering.
OUR ADDRESS
Our principal executive offices are located at 10182 Telesis Court, 6th
Floor, San Diego, California 92121, and our telephone number at that address is
(858) 546-0040. Our principal web site is located at www.websidestory.com.
Information contained in our web site is not part of this prospectus.
THE OFFERING
Common stock offered by
WebSideStory..................... shares
Common stock to be outstanding
after the offering............... shares
Use of proceeds.................. A portion of the proceeds will be used to
redeem shares of our redeemable preferred
stock and the remaining for working capital
and general corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market
symbol........................... "WSSI"
In addition to the shares of common stock outstanding after this
offering, as of the completion of this offering and based on the number of
shares issued and options granted as of December 31, 1999, we expect to have
additional shares of common stock available for issuance under the following
plans and arrangements:
- 3,973,964 shares issuable under our stock option plans, consisting of:
- 2,259,655 shares underlying options outstanding at a weighted average
exercise price of $1.64 per share, of which 105,214 shares were
exercisable; and
- 1,714,309 shares available for future issuance;
- 500,000 shares available for issuance under our 2000 Employee Stock
Purchase Plan; and
- 13,333 shares issuable upon exercise of a warrant held by Imperial Bank.
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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following financial information should be read together with the
"Selected Consolidated Financial Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
prospectus. For more information regarding the calculation of the number of
shares used in per share computations, see Note 2 to the consolidated financial
statements included elsewhere in this prospectus. Unaudited pro forma net loss
per share attributable to common stockholders reflects the conversion of our
convertible redeemable preferred stock into common stock as of the date of
issuance, June 18, 1999.
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<CAPTION>
YEAR ENDED DECEMBER 31,
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1997 1998 1999
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CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Total revenue.......................................... $ 1,620 $ 5,505 $ 9,600
Stock-based compensation............................... -- -- 1,998
Total operating expenses............................... 1,122 4,039 11,523
Income (loss) from operations.......................... 498 1,466 (1,923)
Net income (loss)...................................... 304 837 (1,185)
Net income (loss) attributable to common
stockholders......................................... 304 837 (1,417)
Net income (loss) per share attributable to common
stockholders:
Basic................................................ $ 0.01 $ 0.05 $ (0.09)
========== ========== ==========
Diluted.............................................. $ 0.01 $ 0.04 $ (0.09)
========== ========== ==========
Shares used in computing net income (loss) per share
attributable to common stockholders:
Basic................................................ 30,303,030 18,011,623 15,595,899
========== ========== ==========
Diluted.............................................. 30,303,030 18,760,557 15,595,899
========== ========== ==========
Unaudited pro forma net loss per share attributable to
common stockholders, basic and diluted............... $ (0.08)
==========
Shares used in computing unaudited pro forma net loss
per share attributable to common stockholders, basic
and diluted.......................................... 17,098,224
==========
</TABLE>
The decrease in basic and diluted shares used in computing net income per
share attributable to common stockholders from 1997 to 1998 is due primarily to
the repurchase of stock from one of our founding stockholders during 1998 (see
Note 3 to our audited consolidated financial statements included elsewhere in
this prospectus). The decrease in basic and diluted shares used in computing net
income (loss) per share attributable to common stockholders from 1998 to 1999 is
due primarily to our repurchase of common stock in conjunction with the
preferred stock transaction in June 1999 (see Note 5 to our audited consolidated
financial statements included elsewhere in this prospectus), and the exclusion
of loss year antidilutive potential common shares in the calculation for 1999.
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The following table provides a summary of our consolidated balance sheet as
of December 31, 1999. The as adjusted column reflects: (a) the automatic
conversion of all outstanding shares of our convertible redeemable preferred
stock into 7,064,850 shares of common stock at the closing of this offering, (b)
the automatic redemption of our redeemable preferred stock in the amount of
$15,000, (c) the repayment of our note payable to a former stockholder in the
amount of $215 plus the related unamortized discount of $25, (d) the sale of
shares of our common stock in this offering at an assumed initial
public offering price of $ per share, after deducting the underwriting
discounts and commissions and estimated offering expenses, and (e) the receipt
and application of the net proceeds from this offering. See "Use of Proceeds"
for a discussion about how we intend to use the proceeds from this offering.
<TABLE>
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DECEMBER 31, 1999
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ACTUAL AS ADJUSTED
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CONSOLIDATED BALANCE SHEETS DATA:
Cash and cash equivalents................................... $ 3,254 $
Working capital............................................. 4,209
Total assets................................................ 8,798
Note payable to former stockholder (current and long-term
portion).................................................. 215
Redeemable preferred stock.................................. 29,465
Total stockholders' deficit*................................ (22,793)
</TABLE>
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* Stockholders' deficit is due primarily to our repurchase of common stock
in conjunction with the preferred stock transaction in June 1999 (see Note 5 to
our audited consolidated financial statements included elsewhere in this
prospectus), resulting in an increase in stockholders' deficit of $24,996.
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RISK FACTORS
You should carefully consider the risks described below before making a
decision to buy our common stock. If any of the events referred to below
actually occurs, our business, results of operations and financial condition
could suffer. In that case, the trading price of our common stock could decline,
and you may lose all or part of your investment. You should also refer to the
other information in this prospectus, including our consolidated financial
statements and the related notes, before making a decision to invest.
This prospectus includes statistical and empirical data regarding the
Internet. The data is taken or derived from information published by several
sources, including International Data Corporation and Forrester Research.
Although we believe that the data is generally indicative of the matters
reflected in those reports and elsewhere, the data is inherently imprecise, and
we caution you to read the data in connection with the rest of the disclosure in
this document, particularly this "Risk Factors" section.
RISKS RELATED TO OUR BUSINESS
WE HAVE A LIMITED RELEVANT OPERATING HISTORY, WHICH MAKES IT DIFFICULT TO
EVALUATE OUR CURRENT BUSINESS PERFORMANCE AND FUTURE PROSPECTS.
We were formed in September 1996. Until August 1999, we provided our basic
HitBox service solely in exchange for links to our web sites on which we sold
advertising. However, we recently began to focus on selling our fee-based
subscription services, HitBox Enterprise, HitBox Wireless, HitBox Pro and
StatMarket. Our growth is dependent upon our ability to sell these services in
the future. There is a significant number of risks and uncertainties inherent in
our business especially in light of our limited relevant operating history and
our limited experience selling our fee-based services. These risks and
uncertainties are particularly significant for companies such as ours that are
in rapidly evolving markets for Internet products and services.
In particular, our limited relevant operating history and limited
experience selling our fee-based services make it difficult to evaluate our
ability to:
- market our services to online businesses and thereby increase our ability
to collect data regarding Internet users in the aggregate;
- maintain current and attract new advertiser relationships;
- continue to develop and upgrade our services to keep pace with the growth
of the Internet and changes in its technology and regulatory environment;
- manage the internal growth of our business; and
- develop new relationships with strategic business partners, resellers and
marketing partners that we anticipate will be important to our future
success.
If online businesses are not willing to subscribe to our services or we are
unable to perform these items identified above and elsewhere in this prospectus,
then our revenue will not grow and our operating results will suffer. As a
result, our stock price may decline.
WE EXPECT OPERATING EXPENSES TO INCREASE SIGNIFICANTLY AND THAT WE WILL INCUR
LOSSES IN THE FUTURE.
Although we have had profitable operations in the past, we incurred a net
loss of $1.2 million in 1999. We expect our operating expenses to increase
significantly, which may render us unable to generate sufficient revenues to be
profitable in the future. In particular, we expect to incur additional costs and
expenses related to the:
- expansion of our sales force and distribution channels;
- development of our brand through marketing and other promotional
activities;
- enhancement of our existing services and development of new services;
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- development of relationships with strategic business partners, resellers
and marketing partners;
- expansion of our management team and the internal infrastructure
necessary to support our growth; and
- expansion into international markets and of our international presence.
Unprofitable operations may have an adverse effect on the price of our
common stock and consequently your investment in our company. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a more detailed discussion of our operating expenses.
BECAUSE OUR FEE-BASED SERVICES AND OUR WEB PROPERTIES ARE RELATIVELY NEW, IT IS
UNCERTAIN THAT THEY WILL ACHIEVE WIDESPREAD CUSTOMER ACCEPTANCE.
We introduced HitBox Pro in August 1999 and HitBox Enterprise in October
1999. In addition, we began to offer StatMarket as a subscription service in
December 1999. As a result, we have realized only limited revenues from sales of
our HitBox Enterprise, HitBox Pro and StatMarket services. We cannot assure you
that these new subscription services will achieve customer acceptance or whether
we will be able to continue to generate or to grow revenues from these services.
We also have a limited history of operating our web properties HitBox.com and
Yep.com, and it is uncertain whether our customers and Internet users will
continue to use them. If businesses are not willing to pay the fees for our
subscription services, or if our web properties do not achieve market
acceptance, our business will be harmed.
OUR SUBSCRIPTION SERVICES REQUIRE RENEWALS, AND WE CANNOT PREDICT WHAT THE
RENEWAL RATES WILL BE.
Businesses subscribe to our HitBox Enterprise, HitBox Pro and StatMarket
services. These subscriptions are for a limited time, after which they must be
renewed. Businesses are under no obligation to renew these subscriptions after
they expire. Because these services are new, we are unable to predict renewal
rates. Our renewal rates may also decline as a result of a consolidation in our
customer base or if a significant number of our customers cease operations. If
our renewal rates are low or decline for any reason, recurring revenue from our
fee-based subscription services will be adversely affected.
IF DEMAND FOR INTERNET USER MEASUREMENT AND ANALYSIS SERVICES DOES NOT EXPAND,
WE MAY NOT SELL OUR SERVICES OR GROW OUR BUSINESS.
The market for Internet user measurement and analysis services is new and
rapidly evolving. In particular, the market for ASP-based services such as ours
is relatively new. We will not be able to sell our services or grow our business
if the market for Internet user measurement and analysis services does not grow
or if ASP-based services are not widely adopted.
OUR FAILURE TO EXPAND OUR SALES OPERATIONS AND DISTRIBUTION CHANNELS MAY LIMIT
OUR GROWTH.
We may be unable to expand our sales operations or establish the
distribution channel relationships necessary for us to grow our business. In
order to increase our market share and revenues, we will need to expand our
direct sales operations and develop indirect sales and distribution channels. We
have limited experience in direct sales and are in the process of expanding our
direct sales force. Our new sales employees will require training and time to
achieve full productivity. In addition, we may not be able to hire enough
qualified individuals when needed, or at all. We currently do not have indirect
sales and distribution channels, and we may not be able to establish
relationships with distributors, vendors, marketers, resellers and other
strategic partners necessary to develop successful indirect sales and
distribution channels. We intend to spend significant amounts of time and money
attempting to develop those relationships. If we are unable to grow our sales
operations or develop successful indirect sales and distribution channels, our
revenue could decline and our stock price could suffer.
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WE OPERATE IN HIGHLY COMPETITIVE MARKETS, WHICH COULD MAKE IT DIFFICULT FOR US
TO ACQUIRE AND RETAIN CUSTOMERS.
The market for Internet user measurement and analysis services is highly
competitive. Our competitors vary in size and in the type of products and
services they offer. Our competitors include Accrue Software, Inc., Engage
Technologies, Inc., NetGenesis Corp., WebTrends Corporation, DoubleClick, Inc.,
LinkExchange, Inc., MediaMetrix, Inc. and NetRatings, Inc. Many of our
competitors have:
- longer operating histories;
- larger sales operations and customer bases;
- greater brand recognition;
- more strategic alliances; and
- significantly greater financial, marketing, technical and other resources
than we do.
We expect competition in the market for Internet user measurement and
analysis services to intensify, especially because there are few barriers to
entry. Some of our existing and future competitors may be able to:
- devote greater resources to sales efforts and marketing and promotional
campaigns;
- charge less for their products and services; and
- devote substantially more resources to technology and systems
development.
If we are not be able to compete successfully against our current and
future competitors, we may experience limited revenue growth, reduced operating
margins, loss of market share and diminished value in our services.
IF A COMPETING INTERNET USER MEASUREMENT AND ANALYSIS SERVICE IS ADOPTED AS THE
INDUSTRY STANDARD, WE MAY LOSE EXISTING CUSTOMERS OR ENCOUNTER DIFFICULTIES IN
ATTRACTING NEW CUSTOMERS.
To date, no Internet user measurement and analysis service has been adopted
as the industry standard for measuring Internet user behavior and preferences.
However, if one of our current or potential competitors is successful in
establishing its products and services as the industry standard, it will be
difficult for us to retain current customers or attract additional customers for
our services. As a result, our revenue could decline.
WE MAY NOT BE ABLE TO DEVELOP NEW SERVICES OR IMPROVEMENTS IN OUR EXISTING
SERVICES AT THE RATE REQUIRED BY OUR RAPIDLY CHANGING MARKET.
Our success depends upon our ability to address the rapidly changing needs
of online businesses, by developing high quality services and improvements in
these services on a timely basis. Our services must keep pace with technological
developments and emerging industry standards. The market for our services is
highly competitive, and the pace of technological advancement is fast. We cannot
assure you that we will be able to develop new services to meet evolving needs
or that any new services we develop will achieve market acceptance. If we fail
to develop new or enhanced services, or experience delays or quality problems in
doing so, our revenues may be adversely affected and our operating income may
decline.
THE SUCCESS OF OUR BUSINESS WILL ALSO BE AFFECTED BY OUR ABILITY TO CONTINUE TO
GENERATE ADVERTISING REVENUE.
Historically, advertising revenues have been the majority of our revenue,
and we expect them to be a significant portion of revenue in the future. The
market for Internet advertising is new and rapidly evolving, and there is
significant uncertainty about the demand for and market acceptance of Internet
advertising. In addition, the number of web sites that offer advertising
opportunities continues to increase thereby increasing the competition for
available advertising revenue. We cannot assure you that the market for Internet
advertising will continue to expand, that it will become sustainable or that we
will be able to continue to provide an attractive forum for advertisers. Also,
we have historically earned the majority of our advertising revenue from a
concentrated group of advertisers. We intend to eliminate our revenue from these
advertisers in the near future. As a result, we will be required to secure
additional advertising customers to offset the
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loss of revenue from this group of advertisers. If we are unable to sell our
advertising inventory on favorable terms, or at all, then our revenue may not
grow and may even decline. If we are unable to continue to generate significant
advertising revenue, our business and results of operations will be adversely
affected.
SEASONAL AND OTHER FLUCTUATIONS IN OUR OPERATING RESULTS MAY MAKE IT DIFFICULT
TO PREDICT OUR FUTURE PERFORMANCE AND MAY RESULT IN VOLATILITY IN THE MARKET
PRICE OF OUR COMMON STOCK.
During our short operating history, we have experienced seasonality in our
operating results. We may experience seasonality in our business due to declines
in Internet usage during the summer months and increases during the holiday
months in the fourth quarter. Our revenue declines as Internet usage declines.
In addition to seasonal fluctuations, we may experience significant fluctuations
in our operating results from other causes. These factors all tend to make the
timing and amount of revenue unpredictable and may lead to greater
period-to-period fluctuations in revenues than we have experienced historically.
As a result of the factors described above, we believe that our quarterly
revenue and results from operations are likely to vary significantly in the
future and that quarter to quarter comparisons of our operating results may not
be meaningful. You should not rely on the results of one quarter as an
indication of future performance. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Quarterly Results of
Operations."
ANY DISRUPTION OF SERVICE BY OUR INTERNET SERVICE PROVIDERS COULD AFFECT OUR
ABILITY TO OPERATE OUR SERVICES, WEB PROPERTIES AND THE WEB SITES OF OUR HOSTING
CUSTOMERS.
We depend on access to the Internet through four large Internet service
providers, or ISPs, in order to operate our business. We may in the future use
additional or different ISPs. If we lose the services of one or more of our ISPs
for any reason, we could experience disruption in our service offerings, network
availability and web hosting services. In addition, the loss of one of our ISPs
as the result of consolidation in the ISP industry could delay or prevent us
from retaining the services of a replacement ISP and increase the potential for
disruption of our business. This disruption to our business could damage our
reputation and result in a decrease in our revenue from the loss of current or
potential customers.
A RAPID EXPANSION OF OUR NETWORK AND SYSTEMS COULD CAUSE US TO LOSE INTERNET
USER BEHAVIOR MEASUREMENT INFORMATION OR CAUSE OUR NETWORK OR SYSTEMS TO FAIL.
We intend to significantly expand our network to improve capacity and
performance. We expect to co-locate some servers with ISPs. We also intend to
implement new commercial databases to help store and manage our information. If
we experience disruptions in our network as a result of these efforts or if the
efforts are unsuccessful, then our ability to provide our services and generate
revenue will be harmed.
In the future, we may need to expand our network and systems at a more
rapid pace than we have historically. We may suddenly require additional
bandwidth for which we have not adequately planned. We may secure an extremely
large customer with an extraordinary number of page views that would require
significant system resources. We may gain new accounts at such a rapid rate that
our systems are unable to process the information. In the event that one or more
of these factors occurs, our network or systems may not be capable of meeting
the demand for increased capacity. We may lose valuable Internet user data or
our network may temporarily shutdown if we fail to expand our network to meet
future growth. Any lapse in our ability to collect Internet user information
will decrease the value of our existing data as well as prevent us from
providing the complete data requested by our customers. Any disruption in our
network processing or loss of Internet user data may damage our reputation and
result in the loss of customers.
WE MAY BE LIABLE TO OUR CUSTOMERS AND MAY LOSE CUSTOMERS IF WE SUPPLY INACCURATE
INTERNET USER INFORMATION OR IF OUR ABILITY TO SUPPLY THIS INFORMATION IS
INTERRUPTED.
The information in our databases may contain inaccuracies. In addition, our
ability to collect and report data may be interrupted by a number of factors,
including our inability to access the Internet or failure of our network or
software systems. Hackers, or individuals who attempt to breach our network
security, could, if successful, misappropriate proprietary information or cause
interruptions in our services. If we experience any
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<PAGE> 13
breaches of our network security or sabotage, we might be required to expend
significant capital and resources to protect against, or to alleviate, problems.
We may not be able to remedy any problems caused by hackers or saboteurs in a
timely manner, if at all. In addition, computer viruses may harm our systems,
and the transmission of computer viruses could expose us to litigation or to a
material risk of loss. Any irregularities or inaccuracies in the data we supply,
or any interruption in our ability to supply that data, may reduce our operating
income or require us to spend substantial amounts to defend lawsuits and pay any
resulting damage awards as well as divert management's attention from the
operation of our business. We may be liable to our customers for loss of
business, loss of future revenue, breach of contract or even for the loss of
goodwill to their business. In addition to potential liability, our supplying of
inaccurate information or the interruption of our ability to supply that
information could hurt our public image and result in the loss of both existing
and potential customers.
WE COULD BE HELD LIABLE TO THIRD PARTIES OR GOVERNMENTAL AGENCIES OR LOSE
CUSTOMERS AND OUR BUSINESS MAY BE HARMED BASED ON THE CONTENT THAT IS ON OUR WEB
PROPERTIES OR ON SITES TO WHICH WE LINK OR THAT WE HOST.
We could be held liable to third parties if the content on our web
properties or web sites to which we link or that we host violates others'
copyright, trademark or other intellectual property rights or is deemed or
perceived to be obscene or defamatory. Our web properties include content that
third parties provide to us which we do not monitor or control. We may not
discover or be able to change in a timely manner any content on our web
properties that may cause third parties or governmental agencies to bring legal
actions against us or that would cause customers to stop visiting our web sites.
Any liability, or even threatened liability, stemming from these possibilities,
could damage our public image, cause us to incur legal costs and divert
management's attention from our operations, which could in turn adversely affect
our business and the value of our stock.
We may lose customers or receive negative publicity as a result of negative
reaction to content on our web sites or web sites to which we link or that we
host, including sites with controversial adult, political, racial or religious
content. In the past, we have received correspondence from Internet users who
state that they will not visit our web sites based upon some of the content to
which our sites link. We do not monitor or review the content of sites to which
we link or that we host, and we do not intend to do so in the future. If we
receive negative publicity, businesses and Internet users may decide not to
visit our web properties or use our services, which will harm our business and
could cause our stock price to decline.
IF THE INFORMATION THAT WE COLLECT AND USE WERE DEEMED PERSONALLY IDENTIFYING,
OUR ABILITY TO COLLECT AND REPORT THIS INFORMATION WOULD BE LIMITED.
Both existing and proposed laws regulate and restrict the collection and
use of information over the Internet that is considered personally identifying.
These laws are changing and vary among domestic and foreign jurisdictions. We do
not believe that the Internet user information that we currently collect without
the user's consent is personally identifying. However, the scope of information
collected over the Internet that is considered personally identifying may become
more expansive and it is possible that current and future legislation may apply
to the information that we collect. Third parties or governmental agencies may
charge us with violations of current or future laws regarding the collection of
information, exposing us to litigation and potential liability. In the event
that the information that we collect and use is considered to be personally
identifying, our ability to collect and use this information may be restricted
and we may have to change our methods. Any restriction or change to our
information collection methods would cause us to spend substantial money and
time to make such changes and could decrease the amount and value of the
information that we collect.
INCREASED REGULATION OR LAWS OF ONLINE PROFILING MAY LIMIT OUR ABILITY TO
COLLECT AND USE INTERNET USER INFORMATION AND RESULT IN A DECREASE IN THE VALUE
OF OUR SERVICES.
If foreign or domestic governmental authorities enact regulations or laws
that place limitations on how we use the Internet usage data that we collect,
especially our profiling practices, the amount and value of the
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<PAGE> 14
information that we collect would decrease, our business operations would be
negatively affected and the value of your investment would decline. Online
profiling is our practice of aggregating information about users' interest,
gathered primarily by recording their movements online. Domestic and foreign
governments are considering restricting the collection and use of Internet usage
data. Some argue that even anonymous data, individually or when aggregated, may
reveal too much information about Internet users.
If governmental authorities were to follow privacy advocates'
recommendations and enact laws that limit our online profiling practices, we
would likely have to obtain the express consent, or "opt-in," of an Internet
user before we could collect, share, or use any of that user's information. It
might also not be possible to comply with all foreign governmental restrictions
simultaneously. Any change to an opt-in system of profiling would damage our
ability to aggregate and utilize the information we currently collect from
Internet users and would reduce the amount and value of the information that we
provide to customers. A reduction in the value of our information might cause
some existing customers to discontinue their use of our services or discourage
potential customers from subscribing to our services, which would reduce our
revenues. We would also need to expend considerable effort and resources, both
human and financial, to develop new information collection procedures to comply
with an opt-in requirement. Even if we succeeded in developing new procedures,
we might be unable to convince Internet users to agree to our use of their
information. This would negatively impact our revenue, growth and potential for
expanding our business and could cause our stock price to decline.
LIMITATIONS ON THE USE OF COOKIES TO COLLECT INFORMATION MAY REDUCE OUR ABILITY
TO DEVELOP ONLINE PROFILES AND AGGREGATE INTERNET USER INFORMATION.
Our technology currently uses "cookies," or small files of information
placed on a user's hard drive or other storage medium, to collect information
about an Internet user's movement through the Internet. This collection of
behavioral information can be accomplished without the user's knowledge or
consent. Most currently available Internet browsers allow users to modify their
browser settings to prevent cookies from being stored on their hard drive
without their knowledge, and a minority of users currently do so. Users can also
delete cookies from their hard drive at any time, and widely-available software
allows Internet users to sweep all cookies from their computers. If a large
number of Internet users refuse, disable or delete their cookie files, the
number of profiles to which we have access and the value of our services based
on those profiles would decrease.
Some privacy advocates and governmental officials have suggested
restricting or eliminating the use of cookies. If the use or effectiveness of
cookies is limited, we would be required to switch to alternative technologies
to collect user profile information. Alternative technologies may be unavailable
or substantially less effective than cookies. Creating replacement technology
for cookies could require us to expend significant time and resources. We may be
unable to complete this alternative technology development in time to avoid
negative consequences to our business, and the replacement methods we develop
may not be commercially feasible. In the context of our existing technology, the
replacement of cookies might also reduce our existing customer base by requiring
current customers to take specific action to accommodate new technology.
In addition, privacy concerns may cause some web users to be less likely to
visit web sites that subscribe to our services. If enough web users choose not
to visit sites in which we have embedded our technology and from which we
collect information, our ability to collect information and provide our services
effectively would be adversely affected. This would, in turn, reduce the value
of our services and inhibit the growth of our business.
WE MAY BE THE TARGET OF LEGAL ACTION BASED ON THE WAY WE COLLECT AND USE
INTERNET USER INFORMATION.
We collect, use and distribute information derived from the activities of
Internet users. Recently, some companies have been the subject of class action
lawsuits and governmental investigations based on their collection, use and
distribution of Internet user information. Governmental entities and private
persons or entities, may assert that our methods of collecting, using and
distributing Internet user information are illegal
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<PAGE> 15
or improper. Any such legal action, even if unsuccessful, may distract our
management's attention, divert our resources, negatively affect our public image
and harm our business.
WIDESPREAD ACCEPTANCE OF OUR SERVICES DEPENDS IN LARGE PART ON INCREASING MARKET
AWARENESS OF OUR BRANDS.
We believe that maintaining and strengthening the WebSideStory brand and
the other brands that we use, such as HitBox, Yep and StatMarket, are important
to our business and important elements in attracting new customers. Our ability
to successfully promote and position our brands will depend largely on the
effectiveness of our marketing efforts and our ability to develop reliable and
useful services at competitive prices. Due in part to the emerging nature of the
market for Internet user measurement and analysis services and the substantial
resources available to many of our competitors, we may have only a short time in
which we have an opportunity to achieve and maintain a significant market share.
Furthermore, the importance of brand recognition will increase as competition in
the market for our services increases. Therefore, we will need to increase our
financial commitment to creating and maintaining brand awareness. If we are
unsuccessful in these endeavors, we may have difficulty attracting new
customers.
OUR FUTURE SUCCESS DEPENDS ON THE GROWTH OF THE INTERNET.
The acceptance and effectiveness of the Internet as a medium for commerce
and communication is not yet fully established. We believe that much of the
value of our Internet user measurement and analysis services is derived from
businesses wanting to understand and influence Internet users.
Even if the use of the Internet grows, the Internet infrastructure may not
be able to support the demands placed on it by this growth. Factors affecting
the ability of the Internet to support these demands include:
- security concerns of Internet users;
- inadequate network infrastructure;
- inconsistent quality of service; and
- lack of availability of cost-effective, high-speed Internet service.
As a result, the performance and reliability of the Internet may decline.
Web sites and proprietary online services have experienced interruptions in
their service as a result of outages, sabotage and other delays occurring
throughout their infrastructure. If these outages, sabotage or other delays
frequently occur in the future, Internet usage as a medium for communication and
commerce could grow more slowly or decline. Therefore, if the use of the
Internet as a medium for communication or commerce does not grow, then the
demand for our services will decrease and our operating results will suffer.
OUR BUSINESS MAY NOT BE SUCCESSFUL IF WE LOSE THE SERVICES OF OUR EXISTING KEY
EMPLOYEES OR IF OUR MANAGEMENT TEAM FAILS TO WORK TOGETHER EFFECTIVELY.
We expect that the services of John J. Hentrich, our Chief Executive
Officer and President, Blaise P. Barrelet, our Chairman and Chief Internet
Architect, as well as the remainder of our executive team, will be important to
our future operations. Our management team has been working together only for a
short while and may not be able to work together effectively. Many members of
our management team have had only limited experience managing a rapidly growing
company, on either a public or private basis. John J. Hentrich, our President
and Chief Executive Officer, joined us in November 1999 and has not served in
such capacity in a public company prior to joining us. In addition Terance A.
Kinninger, our Senior Vice President and Chief Financial Officer, Meyar Sheik,
our Vice President, Chief Marketing Officer-Enterprise, and Randall Broberg, our
General Counsel and Chief Privacy Officer, joined us in April 2000. Any of our
key personnel may terminate his or her employment relationship with our company
on short notice. We do not maintain any "key person" life insurance policies
except for a policy on Blaise P. Barrelet, our Chairman and Chief Internet
Architect. If we are unable to maintain an effective executive team that works
well together, we may not be able to achieve our short or long-term objectives
or create or maintain stockholder value.
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WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE THE GROWTH OF OUR BUSINESS.
To date we have experienced rapid growth. In the beginning of 1999, we had
approximately 30 employees. As of March 31, 2000, we had more than 100
employees. Most of these employees, including some of our executive officers,
have very limited experience with our company and understanding of our systems
and controls. We believe that we will need to continue to grow in the future in
order to be competitive in our market. We will need to attract and hire
additional sales, technical and management personnel in an intensely competitive
hiring environment. At the same time, we will need to upgrade and expand our
financial, operational and managerial systems and controls. If we fail to manage
our growth effectively, our expenses could increase and our management's time
and attention could be diverted. If we do not succeed in these efforts, we will
be unable to effectively grow and manage our business, and our financial results
could be negatively affected.
THE COMPETITION FOR SKILLED PERSONNEL IS INTENSE AND IF WE FAIL TO ATTRACT,
INTEGRATE AND RETAIN SKILLED PERSONNEL OUR BUSINESS WILL BE ADVERSELY AFFECTED.
Our future success depends on our ability to hire and retain highly skilled
personnel. In particular, we will need to recruit into our sales and marketing
and technology development organizations, both domestically and internationally.
Competition for these and other candidates is intense and turnover in technology
companies is high. We cannot assure you that we will be able to successfully
attract, integrate or retain sufficiently qualified personnel. Our inability to
retain and attract the necessary personnel could adversely affect our business.
OUR PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS HAVE SUBSTANTIAL
CONTROL OVER OUR AFFAIRS.
Our executive officers and directors and entities affiliated with them
will, in the aggregate, beneficially own approximately % of our common
stock following this offering. In particular, following the completion of this
offering, Blaise P. Barrelet, our Chairman and Chief Internet Architect and
Agnes L. Barrelet, one of our Vice Presidents and the spouse of Mr. Barrelet,
together will own approximately % of our outstanding common stock. These
stockholders will have the ability to exert substantial influence over all
matters requiring approval by our stockholders. These matters include the
election and removal of directors and any merger, consolidation or sale of all
or substantially all of our assets. In addition, they may dictate the management
of our business and affairs. This concentration of ownership could have the
effect of delaying, deferring or preventing a change in control or impeding a
merger or consolidation, takeover or other business combination.
THE SUCCESS OF OUR BUSINESS DEPENDS IN LARGE PART ON OUR ABILITY TO PROTECT AND
ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS EFFECTIVELY.
We regard the protection of our inventions, copyrights, service marks,
trademarks and trade secrets as important to our future success. We rely on a
combination of patent, copyright, service mark, trademark, and trade secret laws
and contractual restrictions to establish and protect our proprietary rights. We
endeavor to enter into agreements with our employees and contractors and
agreements with parties with whom we do business in order to limit access to and
disclosure of our proprietary information. Despite our efforts, we may be
unsuccessful in these endeavors. Moreover, others may independently develop
technologies that are competitive, or even infringing. The enforcement of our
intellectual property rights also depends on our legal actions against such
infringers being successful, but we cannot be sure such actions will be
successful, even when our rights have been infringed.
We have three patent applications pending in the United States and have
registered service marks in the United States and the European Union. We cannot
assure you that patent or service mark registrations will issue with respect to
pending or future applications or that any issued patents or registered service
marks will be enforceable. Because of the global nature of the Internet,
effective patent, trademark, service mark, copyright and trade secret protection
may not be available in every country in which our services are available
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<PAGE> 17
over the Internet. In addition, the legal standards relating to the validity,
enforceability and scope of protection of intellectual property rights in
Internet-related industries are uncertain and still evolving.
Third parties may claim that our technologies infringe their proprietary
rights. If a third party successfully asserts a claim that we are infringing
their proprietary rights, royalty or licensing agreements might not be available
on terms we find acceptable or at all. We expect that the number of infringement
claims in our market will increase as the number of services and competitors in
our industry grows. These claims, whether meritorious or not, could:
- be time-consuming;
- result in costly litigation; or
- require us to enter into royalty or licensing agreements.
As a result, any third-party intellectual property claims against us could
adversely affect our business, increase our expenses, and divert our
management's attention. Even if we have not infringed any such rights, we cannot
be sure our legal defenses will be successful. If we are successful defending
against such claims, our legal defense could require significant financial
resources and management time.
We also regard the information that we store on Internet users' cookies as
proprietary. However, the only protection we have from others accessing and
using the data that we collect is that current technology does not allow others
to access information we place on individual cookies. We cannot assure you that
technology will not be invented that will allow others to access our
information. If our information can be accessed by others, it would decrease the
value of that information which would have a material adverse effect on our
business.
BECAUSE WE CONDUCT OPERATIONS IN EUROPE AND BECAUSE OUR BUSINESS STRATEGY
INCLUDES EXPANDING OUR INTERNATIONAL OPERATIONS, OUR BUSINESS IS SUSCEPTIBLE TO
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS.
We incorporated a subsidiary in France in the first quarter of 2000, and
our business strategy includes expanding our international operations.
Conducting international operations subjects us to risks in addition to those we
face in the United States. These include:
- currency exchange rate fluctuations;
- unexpected changes in foreign regulatory requirements;
- maintaining and servicing computer hardware in distant locations;
- longer accounts receivable payment cycles and difficulties in collecting
accounts receivable;
- difficulties in managing and staffing international operations;
- potentially adverse tax consequences, including restrictions on the
repatriation of earnings;
- the burdens of complying with a wide variety of foreign laws; and
- reduced protection for intellectual property rights in some countries.
The occurrence of any one of these risks could negatively affect our
international business and, consequently, our results of operations generally.
In addition, the Internet may not be used as widely in international markets in
which we expand our international operations and, as a result, we may not be
successful in offering our services there.
WE MAY EXPAND BY ACQUISITIONS, STRATEGIC INVESTMENTS OR THROUGH STRATEGIC
RELATIONSHIPS THAT MAY DIVERT OUR MANAGEMENT'S ATTENTION AND CONSUME RESOURCES
THAT ARE NECESSARY TO SUSTAIN OUR BUSINESS.
If appropriate opportunities present themselves, we may acquire other
complementary businesses, technologies, services or products. We also may enter
into strategic relationships or make strategic investments if we believe they
are in our best interests. We currently have no agreements or commitments
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relating to any acquisition or strategic investment or relationship. We cannot
assure you that we would be able to complete future acquisitions successfully or
to integrate acquired businesses, technologies, services or products into our
current operations. An acquisition or strategic investment or relationship may
result in unforeseen operating difficulties and expenditures. It may also
require significant management attention that would otherwise be available for
ongoing development of our business. Moreover, we cannot assure you that the
anticipated benefits of any acquisition or strategic investment or relationship
would be realized. In connection with one or more of those transactions, we may:
- issue additional equity securities which would dilute stockholders;
- incur debt on terms unfavorable to us or that we are unable to repay;
- incur contingent liabilities;
- integrate additional employees; and
- incur amortization expenses related to goodwill and other intangible
assets.
These actions could have a material adverse effect on our stock price and
consequently your investment in our common stock.
MANAGEMENT HAS BROAD DISCRETION AS TO THE USE OF PROCEEDS FROM THIS OFFERING.
We may apply the proceeds of this offering to uses that do not improve our
results of operations. Our management will have broad discretion with respect to
the use of most of the proceeds from this offering. You will be relying on the
judgment of our management concerning these uses. The failure of our management
to apply these funds effectively could result in unfavorable returns and
uncertainty about our prospects, each of which could cause the price of our
common stock to decline. See "Use of Proceeds."
RISKS RELATED TO THIS OFFERING
THERE MAY BE VOLATILITY IN OUR STOCK PRICE.
Prior to this offering, there has been no public market for our common
stock. We cannot predict the extent to which investor interest will lead to the
development of an active and liquid trading market. The initial public offering
price for the shares will be determined by negotiations between us and the
representatives of the underwriters and may not be indicative of the market
price of the common stock that will prevail in the trading market. The market
price of our common stock may decline below the initial public offering price.
The market prices of the securities of Internet-related companies have been
especially volatile. Some companies that have had volatile market prices for
their securities have been subject to securities class action suits filed
against them. If a suit were to be filed against us, regardless of the outcome,
it would result in substantial costs and a diversion of our management's
attention and resources. This could adversely affect our business, results of
operations and financial condition.
THERE MAY BE AN ADVERSE EFFECT ON THE MARKET PRICE OF OUR STOCK AS A RESULT OF
SHARES BEING AVAILABLE FOR SALE IN THE FUTURE.
Sales of a substantial amount of common stock in the public market, or the
perception that these sales may occur, could adversely affect the market price
of our common stock prevailing from time to time. This could also impair our
ability to raise additional capital through the sale of our equity securities.
After this offering, we will have shares of common stock outstanding,
or shares if the underwriters over-allotment option is exercised in
full. Of these shares, the shares sold in this offering will be freely tradable,
except for shares purchased by an affiliate of ours, which will be subject to
the limitations of Rule 144 under the Securities Act. The remaining
shares are "restricted shares," and will become eligible for sale in the public
market at various times after 180 days after the date of this prospectus,
subject to the limitations and other conditions of Rule 144 under the Securities
Act.
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In addition, after this offering, the holders of shares of common
stock will have registration rights and, subject to market conditions, may
require us to register all or a part of these shares. If our stockholders
attempt to sell a significant number of shares of our common stock, then the
price of our common stock may decline. See "Shares Eligible for Future Sale."
THE TANGIBLE BOOK VALUE OF THE COMMON STOCK WILL BE SUBSTANTIALLY LOWER THAN THE
OFFERING PRICE.
The initial public offering price will be substantially higher than the pro
forma tangible book value per share of our outstanding common stock. If you
purchase our common stock in this offering, the shares you buy will experience
an immediate and substantial dilution in tangible book value per share. The
shares of common stock owned by the existing stockholders will receive a
material increase in the pro forma tangible book value per share. The dilution
to investors in this offering will be approximately $ per share. As a
result, if we were to distribute our tangible assets to our stockholders
immediately following this offering, purchasers of shares of common stock in
this offering would receive less than the amount paid for such shares. See
"Dilution."
EFFECTS OF ANTI-TAKEOVER PROVISIONS COULD INHIBIT OUR ACQUISITION BY A THIRD
PARTY.
Some of the provisions of our certificate of incorporation, bylaws and
Delaware law could, together or separately:
- discourage potential acquisitions proposals;
- delay or prevent a change in control; and
- limit the price that investors might be willing to pay in the future for
shares of our common stock.
In particular, our board of directors may issue shares of preferred stock
with rights and privileges that might be senior to our common stock, without the
consent of the holders of the common stock. We are subject to Section 203 of the
Delaware General Corporation Law, which generally prohibits a Delaware
corporation from engaging in any of a broad range of business combinations with
any "interested" stockholder for a period of three years following the date on
which the stockholder became an "interested" stockholder. See "Description of
Capital Stock."
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve many risks
and uncertainties. These statements relate to future events or our future
financial performance. In some cases, you can identify forward-looking
statements by terminology including "could," "may," "will," "should," "except,"
"plan," "anticipate," "believe," "estimate," "predict," "potential" or
"continue," the negative of these terms or other comparable terminology. These
statements are only predictions. Actual events or results may differ materially.
In evaluating these statements, you should specifically consider various
factors, including the risks described above and in other parts of this
prospectus. These factors may cause our actual results to differ materially from
any forward-looking statement.
We cannot guarantee future results, levels of activity, performance or
achievements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform them to actual results
or to changes in our expectations.
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USE OF PROCEEDS
We estimate that our net proceeds from the offering will be approximately
$ million ($ million if the underwriters' option to purchase
additional shares is exercised in full), after deducting the underwriting
discounts and commissions and estimated offering expenses.
We expect to use $15 million of our net proceeds for the mandatory
redemption of all outstanding shares of our redeemable preferred stock which
becomes due and payable upon the closing of our initial public offering. We
expect to use the remaining net proceeds for working capital and general
corporate purposes. The amounts we actually expend for such working capital and
general corporate purposes may vary significantly and will depend on a number of
factors, including the amount of our future revenues and the other factors
described under "Risk Factors." Our management will retain broad discretion in
the allocation of the net proceeds of this offering. A portion of the net
proceeds may also be used to acquire or invest in complementary businesses,
technologies, product lines or products. However, we have no current agreements
or commitments with respect to any such acquisition. Pending such uses, the net
proceeds of this offering will be invested in short-term, interest-bearing,
investment grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings to finance the growth and
development of our business and therefore do not anticipate paying any cash
dividends in the foreseeable future. In addition, covenants in our financing
arrangements currently prohibit or limit our ability to declare or pay cash
dividends. Any future determination to pay cash dividends will be at the
discretion of the board of directors and will be dependent upon our financial
condition, results of operations, capital requirements, general business
condition and other factors that our board of directors may deem relevant.
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CAPITALIZATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following table sets forth our capitalization as of December 31, 1999.
The as adjusted column reflects: (a) the automatic conversion of all outstanding
shares of our convertible redeemable preferred stock into 7,064,850 shares of
common stock at the closing of this offering, (b) the automatic redemption of
our redeemable preferred stock in the amount of $15,000 at the closing of this
offering, (c) the repayment of our note payable to a former stockholder in the
amount of $215 plus the related unamortized discount of $25, (d) an increase in
the authorized number of shares of common stock and preferred stock and the sale
of shares of our common stock in this offering at an assumed initial
public offering price of $ per share, after deducting the underwriting
discounts and commissions and estimated offering expenses, and (e) the receipt
and application of the net proceeds from this offering.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------
ACTUAL AS ADJUSTED
-------- -----------
<S> <C> <C>
Note payable to former stockholder (current and long-term
portion).................................................. $ 215
Redeemable preferred stock, no par value; 100 shares
designated, issued and outstanding, actual; no shares
authorized, issued or outstanding, as adjusted............ 8,636
Convertible redeemable preferred stock, no par value;
15,034,712 shares designated, issued and outstanding,
actual; no shares authorized, issued or outstanding, as
adjusted.................................................. 20,829
Stockholders' equity (deficit):
Preferred stock, $0.001 par value; no shares authorized,
issued or outstanding, actual; 10,000,000 shares
authorized and no shares issued or outstanding, as
adjusted...............................................
Common stock, $0.001 par value; 30,827,531 shares
authorized and 14,682,758 shares issued and
outstanding, actual; shares authorized and
shares issued and outstanding, as adjusted............. 3
Additional paid-in capital................................ 6,592
Unearned stock-based compensation......................... (4,118)
Accumulated deficit....................................... (25,270)
-------- --------
Total stockholders' deficit............................ (22,793)
-------- --------
Total capitalization................................... $ 6,887
======== ========
</TABLE>
In addition to the shares of common stock outstanding after this
offering, as of the closing of this offering and based on the number of shares
issued and options granted as of December 31, 1999, we expect to have additional
shares of common stock available for issuance under the following plans and
arrangements:
- 3,973,964 shares issuable under our stock option plans, consisting of:
- 2,259,655 shares underlying options outstanding at a weighted
average exercise price of $1.64 per share, of which 105,214 were
exercisable; and
- 1,714,309 shares available for future issuance;
- 500,000 shares available for issuance under our 2000 Employee Stock
Purchase Plan; and
- 13,333 shares issuable upon exercise of a warrant held by Imperial
Bank.
Please read the capitalization table together with the sections of this
prospectus entitled "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and the related notes included elsewhere
in this prospectus.
18
<PAGE> 23
DILUTION
As of December 31, 1999, our pro forma net tangible book value was
approximately $6.6 million, or approximately $0.30 per share of common stock.
Pro forma net tangible book value per share represents the amount of our total
tangible assets less our total liabilities divided by the total number of shares
of common stock outstanding, after giving effect to the conversion of all
outstanding shares of our convertible redeemable preferred stock.
After giving effect to our sale of common stock in this offering at an
assumed initial public offering price of $ per share, and our receipt of the
estimated net proceeds from the sale, 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 net tangible book value of
$ per share to existing stockholders and an immediate dilution of $ per
share to new investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share before the
offering............................................... $0.30
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 differences between existing stockholders and the new
investors with respect to the number of shares of common stock purchased from
us, the total consideration paid and the average price per share paid before
deducting the underwriting discounts and commissions and our estimated offering
expenses.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- ------------------------ AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................. 21,747,609 % $21,749,684 % $1.00
New investors.........................
---------- ----- ----------- ------
Total............................... 100.0% $ 100.0% $
========== ===== =========== ======
</TABLE>
In addition to the shares of common stock outstanding after this
offering, as of the closing of this offering and based on the number of shares
issued and options granted as of December 31, 1999, we expect to have additional
shares of common stock available for issuance under the following plans and
arrangements:
- 3,973,964 shares issuable under our stock option plans, consisting of:
- 2,259,655 shares underlying options outstanding at a weighted average
exercise price of $1.64 per share, of which 105,214 shares were
exercisable; and
- 1,714,309 shares available for future issuance;
- 500,000 shares available for issuance under our 2000 Employee Stock
Purchase Plan; and
- 13,333 shares issuable upon exercise of a warrant held by Imperial Bank.
19
<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
You should read the following selected consolidated financial data in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations". The selected consolidated statement of operations
data for the years ended December 31, 1997, 1998 and 1999 and the selected
consolidated balance sheet data as of December 31, 1998 and 1999 are derived
from our consolidated financial statements and the related notes included
elsewhere in this prospectus. The selected consolidated statement of operations
data for the period from September 16, 1996 (inception) to December 31, 1996 and
the selected consolidated balance sheet data as of December 31, 1996 and 1997
are derived from our consolidated financial statements and the related notes
which are not included in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 16, 1996
(INCEPTION) YEAR ENDED DECEMBER 31,
TO DECEMBER 31, ---------------------------------------
1996 1997 1998 1999
------------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue:
Advertising...................................... $ 13 $ 1,460 $ 4,587 $ 8,521
Technology services.............................. -- 160 918 1,005
Subscription services............................ -- -- -- 74
----------- ----------- ----------- -----------
Total revenue.................................. 13 1,620 5,505 9,600
Operating expenses:
Sales and marketing.............................. -- 296 1,103 3,414
Technology development and operations............ 9 245 1,423 3,412
General and administrative....................... 1 581 1,513 2,699
Stock-based compensation*........................ -- -- -- 1,998
----------- ----------- ----------- -----------
Total operating expenses....................... 10 1,122 4,039 11,523
----------- ----------- ----------- -----------
Income (loss) from operations...................... 3 498 1,466 (1,923)
Interest income (expense), net..................... -- 5 (5) 78
Other income....................................... -- -- -- 110
----------- ----------- ----------- -----------
Income (loss) before provision for (benefit from)
income taxes..................................... 3 503 1,461 (1,735)
Provision for (benefit from) income taxes.......... 2 199 624 (550)
----------- ----------- ----------- -----------
Net income (loss).................................. 1 304 837 (1,185)
Accretion of discount on redeemable preferred
stock............................................ -- -- -- 467
Adjustment of premium on convertible redeemable
preferred stock.................................. -- -- -- (699)
----------- ----------- ----------- -----------
Net income (loss) attributable to common
stockholders..................................... $ 1 $ 304 $ 837 $ (1,417)
=========== =========== =========== ===========
Net income (loss) per share attributable to common
stockholders:
Basic............................................ $ 0.00 $ 0.01 $ 0.05 $ (0.09)
=========== =========== =========== ===========
Diluted.......................................... $ 0.00 $ 0.01 $ 0.04 $ (0.09)
=========== =========== =========== ===========
Shares used in computing net income (loss) per
share attributable to common stockholders:
Basic............................................ 30,303,030 30,303,030 18,011,623 15,595,899
=========== =========== =========== ===========
Diluted.......................................... 30,303,030 30,303,030 18,760,557 15,595,899
=========== =========== =========== ===========
Unaudited pro forma net loss per share attributable
to common stockholders, basic and diluted........ $ (0.08)
===========
Shares used in computing unaudited pro forma net
loss per share attributable to common
stockholders, basic and diluted.................. 17,098,224
===========
*Stock-based compensation:
Sales and marketing............................. $ -- $ -- $ -- $ 44
Technology development and operations........... -- -- -- 34
General and administrative...................... -- -- -- 1,920
----------- ----------- ----------- -----------
$ -- $ -- $ -- $ 1,998
=========== =========== =========== ===========
</TABLE>
20
<PAGE> 25
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1996 1997 1998 1999
---- ------ ------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEETS DATA:
Cash and cash equivalents................................... $16 $ 437 $ 330 $ 3,254
Working capital............................................. 3 (96) (93) 4,209
Total assets................................................ 19 1,153 2,024 8,798
Note payable to former stockholder (current and long-term
portion).................................................. -- -- 277 215
Redeemable preferred stock.................................. -- -- -- 29,465
Total stockholders' equity (deficit)........................ 6 310 682 (22,793)
</TABLE>
- ------------
For more information regarding the calculation of the number of shares used
in per share computations, see Note 2 to our consolidated financial statements
included elsewhere in this prospectus. Unaudited pro forma net loss per share
attributable to common stockholders reflects the conversion of our convertible
redeemable preferred stock into common stock as of the date of issuance, June
18, 1999.
21
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our
consolidated financial statements and the related notes and other financial
information appearing elsewhere in this prospectus. In addition to historical
information, the following discussion and other parts of this prospectus contain
forward-looking information that involves risks and uncertainties. Our actual
results could differ materially from those anticipated by such forward-looking
information due to factors discussed under "Risk Factors," "Business" and
elsewhere in this prospectus.
OVERVIEW
We are a leading application service provider, or ASP, focused on
delivering detailed, real-time web site analysis and user behavior information
to customers who operate web sites that are critical to their businesses. As an
ASP, we deliver the benefits of outsourced Internet intelligence as well as
third-party verification of critical data. We commenced operations in September
1996 as a California corporation, and we intend to reincorporate in the state of
Delaware prior to the closing of this offering.
We introduced our basic HitBox measurement and analysis service in the
fourth quarter of 1996. We offer this service in exchange for the right to
display banner ads on the customers' web sites. When users of our HitBox
customers' web sites click on these banner ads, they are directed to our web
properties or to the web sites of our advertising customers. In connection with
our basic HitBox service, we generate revenue primarily from the sale of online
advertising on our web properties. This advertising is sold under short-term
contracts that range in duration from 30 to 90 days. We sell our banner ads on
both a cost-per-click-through, or CPC, and a cost-per-thousand impressions, or
CPM, basis. We recognize revenue from advertising contracts ratably over the
period in which the ads are displayed on our web sites, provided that no
significant obligations remain at the end of the contract term. If any
significant obligations remain at the end of the term, we defer recognition of
the related advertising revenues until the obligations are fulfilled.
Historically, we have derived the substantial majority of our revenue from sales
of online banner ads for web sites, including sites that contain adult content.
We expect that our advertising revenue will decrease as a percentage of revenue
but will continue to be a substantial portion of our revenue in the foreseeable
future. In late 1999, we adopted policies designed to eliminate all revenue from
adult advertising on our web sites and we anticipate the elimination of such
revenue from sales of advertising for adult content sites in the near future.
In 1999, we began focusing our efforts on developing fee-based subscription
services. Correspondingly, we introduced HitBox Pro and HitBox Enterprise in the
third quarter of 1999. HitBox Pro is our mid-level measurement and analysis
service that delivers basic statistics and reports of Internet user behavior for
a flat fee which is adjusted quarterly. We recognize HitBox Pro subscription
services revenues ratably over the term of the contract. Contracts for our
HitBox Pro service are generally three months in duration. HitBox Enterprise is
our premium measurement and analysis service that delivers all of our available
statistics and reports. We recognize HitBox Enterprise subscription services
revenue monthly based on the number of web sites and page views monitored by our
service in the preceding month. HitBox Enterprise contracts are generally one
year in duration and are cancellable within the first 30 days of the contract.
Our StatMarket service provides broad Internet trends based on data
aggregated by our HitBox services. We began offering StatMarket services on a
flat-fee subscription basis in the fourth quarter of 1999. Prior to the fourth
quarter of 1999, we did not charge a fee for this service. We recognize
StatMarket subscription services revenue ratably over the term of the contract,
which range from one month to one year in duration.
We currently earn technology services revenue from hosting third-party web
sites on our network. Contracts for technology services generally have three
month terms. As we do not intend to focus on hosting services in the future, we
expect that revenues from hosting services will significantly decline.
We intend to focus significant additional sales and marketing resources on
expanding revenue from HitBox Enterprise and our other fee-based subscription
services, including our recently introduced HitBox Wireless service. We intend
to expand our direct sales and marketing organizations both domestically and
22
<PAGE> 27
internationally as well as develop new indirect sales and distribution channels
for our services. In the first quarter of 2000, we opened a subsidiary in France
to market our services in Europe. As a result of these activities, we expect
that our future operating expenses will increase significantly.
We were profitable on an annual basis from inception through 1998. In 1999,
we incurred a net loss of approximately $1.2 million primarily as a result of
stock-based compensation of approximately $2.0 million, and increased expenses
related to the development and launch of our HitBox Enterprise service. In the
future, we intend to increase spending on technology development and operations
and sales and marketing in order to maintain our technology leadership and
expand our sales and distribution channels. As a result of increases in these
operating expenses as well as other expenses, we may incur losses in future
periods.
RESULTS OF OPERATIONS
The following table sets forth selected statement of operations data for
the periods indicated, expressed as a percentage of total revenue:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Revenues:
Advertising.............................................. 90.1% 83.3% 88.8%
Technology services...................................... 9.9 16.7 10.4
Subscription services.................................... -- -- 0.8
------ ------ ------
Total revenues........................................ 100.0 100.0 100.0
Operating expenses:
Sales and marketing...................................... 18.3 20.0 35.6
Technology development and operations.................... 15.1 25.9 35.5
General and administrative............................... 35.9 27.5 28.1
Stock-based compensation................................. -- -- 20.8
------ ------ ------
Total operating expenses.............................. 69.3 73.4 120.0
Income (loss) from operations.............................. 30.7 26.6 (20.0)
------ ------ ------
Other income (expense), net................................ 0.3 (0.1) 2.0
------ ------ ------
Income (loss) before provision for (benefit from) income
taxes.................................................... 31.0 26.5 (18.0)
------ ------ ------
Provision for (benefit from) income taxes.................. 12.3 11.3 (5.7)
------ ------ ------
Net income (loss).......................................... 18.7% 15.2% (12.3)%
====== ====== ======
</TABLE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Revenue.
Total revenue increased from $5.5 million for 1998 to $9.6 million for 1999
or year-to-year revenue growth of 74.4%. No single customer accounted for more
than 10% of our total revenue in 1998 or 1999.
Advertising. Advertising revenue increased from $4.6 million, or 83.3% of
total revenue, for 1998 to $8.5 million, or 88.8% of total revenue, for 1999.
Advertising revenue increased primarily because of increased sales of banner ads
due to increased distribution of our basic HitBox service and the resulting
increase in traffic to our web properties. In addition, our ability to maximize
the value of our advertising inventory improved as a result of the growth of our
advertising sales force. In the future, we expect advertising revenue to
increase in absolute dollars, but to decrease as a percentage of total revenue
due to more significant growth expected from our subscription services revenue.
Subscription services. We commenced our subscription services in the third
quarter of 1999 and recognized $74,000 in subscription services revenue in 1999.
Subscription services revenue was 0.8% of total revenues for 1999. We expect
future subscription services revenue to increase both in absolute dollars and as
23
<PAGE> 28
a percentage of total revenue as the result of the acquisition of new customers
and growth in accounts and an increase in page views from our existing
customers.
Technology services. Technology services revenue derived from web site
hosting services increased from $918,000, or 16.7% of total revenue, for 1998 to
$1.0 million, or 10.5% of total revenue, for 1999. As we do not intend to focus
on hosting services in the future, we anticipate revenue from hosting services
to significantly decline.
Operating expenses.
Sales and marketing. Sales and marketing expenses consist primarily of
compensation, sales commissions and marketing costs including advertising,
marketing materials, trade shows, and public relations. Sales and marketing
expenses increased from $1.1 million, or 20.0% of total revenue, for 1998 to
$3.4 million, or 35.6% of total revenue, for 1999. The increase was attributable
to an increase in the number of sales and marketing personnel and related
expenses and, to a lesser extent, an increase in spending on marketing
materials, trade shows and public relations. We intend to continue to expand and
enhance our sales and marketing organization to improve sales of our
subscription services and advertising inventory. In addition, to the extent we
develop indirect channels of distribution, our expenses associated with sales
personnel and marketing partners will likely increase. As a result, we expect
sales and marketing expenses to continue to increase in the future.
Technology development and operations. Technology development and
operations expenses consist primarily of salaries and consulting expenses,
amortization of capitalized software development costs, Internet connectivity
charges, equipment depreciation and other expenses related to improving and
supporting our network. Technology development and operations expenses increased
from $1.4 million, or 25.9% of total revenue, for 1998 to $3.4 million, or 35.5%
of total revenue, for 1999. The increase is primarily a result of increased
salaries and other costs associated with additional personnel and, to a lesser
extent, from increased equipment depreciation and Internet connectivity charges.
We intend to hire additional personnel and expand and improve our network to
support our new ASP services and to process more user behavior information. As a
result, we anticipate that our technology development and operations expenses
will continue to increase.
We account for the software development component of our technology
development and operations costs in accordance with Statement of Position, or
SOP, 98-1, "Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use." In accordance with SOP 98-1, our internal and external costs
incurred to develop internal-use computer software during the application
development stage are capitalized. Our application stage costs generally include
software configuration, coding, installation to hardware and testing. We also
capitalize the costs of upgrades and enhancements that result in additional
functionality. We expense costs for maintenance and minor upgrades and
enhancements as these costs are incurred. Our capitalized software development
costs are amortized on a straight-line basis over the estimated useful lives of
the related software applications ranging from two months to 30 months. As a
result of the application of SOP 98-1, we capitalized software development costs
of $447,000 and $1,211,000 for 1998 and 1999, respectively. We recorded
amortization of capitalized software development costs of $277,000 and $799,000
for 1998 and 1999, respectively.
General and administrative. General and administrative expenses consist
primarily of salaries and related costs of our executive, financial and other
administrative functions, consulting and professional fees and depreciation.
General and administrative expenses increased from $1.5 million, or 27.5% of
total revenue, for 1998 to $2.7 million, or 28.1% of total revenue, for 1999.
The increase was attributable to increases in salaries and other costs
associated with new personnel, professional fees, the relocation of our
principal offices and other administrative expenses necessary to support our
growth. We expect general and administrative expenses to increase in future
periods to support the anticipated growth of our business.
Stock-based compensation.
In connection with the grant of certain stock options to employees, we
recorded unearned stock-based compensation charges within stockholders' equity
of $6.1 million for the year ended December 31, 1999,
24
<PAGE> 29
representing the difference between the exercise price of these options and the
deemed fair value, for financial reporting purposes, of our common stock as of
the date of grant. We will amortize these amounts over the respective vesting
periods of the options using an accelerated graded vesting method in accordance
with Financial Accounting Standards Board Interpretation No. 28, "Accounting for
Stock Appreciation Rights and Other Variable Stock Option or Award Plans."
Amortization of stock-based compensation was $2.0 million for the year ended
December 31, 1999. We expect to amortize the remaining stock-based compensation
in the amount of $2,408, $1,128, $498 and $84 for the years ended December 31,
2000, 2001, 2002 and 2003, respectively. The actual amount of stock-based
compensation expense we recognize in future periods could decrease if options
for which accrued compensation has been recorded are forfeited before they vest.
Provision for (benefit from) income taxes.
Income tax expense decreased from $624,000 in 1998 to a $(550,000) tax
benefit in 1999, primarily as a result of our ability to carryback our 1999 net
loss against prior years when we had recognized income tax expense. The
effective tax rate was reduced from a 42.7% tax rate provision in 1998 to a
31.7% tax rate benefit as a result of non-tax deductible stock-based
compensation.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Revenue.
Total revenue increased from $1.6 million for 1997 to $5.5 million for 1998
or year-to-year revenue growth of 239.8%. No single customer accounted for more
than 10% of our total revenues in either 1997 or 1998.
Advertising. Advertising revenue increased from $1.5 million, or 90.1% of
total revenue, for 1997 to $4.6 million, or 83.3% of total revenue, for 1998.
Advertising revenue increased primarily because of increased sales of banner
ads, which was due to increased distribution of our basic HitBox service and the
resulting increase in traffic to our web properties.
Technology Services. Technology services revenue derived from hosting
services increased from $160,000, or 9.9% of total revenue, for 1997 to
$918,000, or 16.7% of total revenue, for 1998. This increase was primarily due
to our increased ability to provide hosting services resulting from the
expansion of our network operations center.
Operating Expenses.
Sales and Marketing. Sales and marketing expenses increased from $296,000,
or 18.3% of total revenue, for 1997 to $1.1 million, or 20.0% of total revenue,
for 1998. The increase was attributable to an increase in salaries and bonuses,
including additional sales and marketing personnel and, to a lesser extent, an
increase in spending on marketing materials, trade shows and public relations.
Technology development and operations. Technology development and
operations expenses increased from $245,000, or 15.1% of total revenue, for 1997
to $1.4 million, or 25.9% of total revenue, for 1998. The increase primarily
resulted from salaries and bonuses, including additional personnel, amortization
of capitalized software development costs, equipment depreciation and Internet
connectivity charges. As a result of the application of SOP 98-1, we capitalized
software development costs of $274,000 and $447,000 for 1997 and 1998,
respectively. We recorded amortization of capitalized software development costs
of $6,000 and $277,000 for 1997 and 1998, respectively.
General and administrative. General and administrative expenses increased
from $581,000, or 35.9% of total revenue, for 1997 to $1.5 million, or 27.5% of
total revenue, for 1998. The increase was attributable to increases in salaries
and bonuses, including additional new personnel, professional fees and other
administrative expenses necessary to support our growth.
25
<PAGE> 30
Provision for (benefit from) income taxes
Income tax expense increased from $199,000 in 1997 to $624,000 in 1998,
primarily as a result of an increase in income before income taxes. Our
effective tax rate increased from 39.6% in 1997 to 42.7% in 1998 primarily as a
result of certain expenses that are not deductible for tax purposes.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth unaudited quarterly consolidated statements
of operations for the eight quarters ended December 31, 1999, as well as the
percentage of total revenue represented by each item. We believe this unaudited
information has been prepared on the same basis as the audited consolidated
financial statements appearing elsewhere in this prospectus and includes all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair presentation of our results of operations for the quarters presented. You
should read this information in conjunction with our annual audited consolidated
financial statements and related notes appearing elsewhere in this prospectus.
The results of operations for any quarter are not necessarily indicative of the
results of operations for any future period.
26
<PAGE> 31
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1998 1998 1998 1998 1999 1999
--------- -------- ------------- ------------ --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS:
Revenue:
Advertising............... $ 891 $1,033 $1,259 $1,404 $1,975 $2,339
Technology services....... 187 243 268 220 189 262
Subscription services..... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total revenue........... 1,078 1,276 1,527 1,624 2,164 2,601
------ ------ ------ ------ ------ ------
Operating expenses:
Sales and marketing....... 245 270 314 274 511 781
Technology development and
operations.............. 255 352 428 388 568 857
General and
administrative.......... 244 321 558 390 441 814
Stock-based
compensation............ -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total operating
expenses.............. 744 943 1,300 1,052 1,520 2,452
------ ------ ------ ------ ------ ------
Income (loss) from
operations................ 334 333 227 572 644 149
Other income (expense),
net....................... (3) (6) 1 3 (4) 115
------ ------ ------ ------ ------ ------
Income (loss) before
provision for (benefit
from) income taxes........ 331 327 228 575 640 264
Provision for (benefit from)
income taxes.............. 141 140 97 246 203 84
------ ------ ------ ------ ------ ------
Net income (loss)........... $ 190 $ 187 $ 131 $ 329 $ 437 $ 180
====== ====== ====== ====== ====== ======
AS A PERCENTAGE OF TOTAL
REVENUE:
Revenue:
Advertising............... 82.7% 81.0% 82.4% 86.5% 91.3% 89.9%
Technology services....... 17.3 19.0 17.6 13.5 8.7 10.1
Subscription services..... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total revenue........... 100.0 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ ------ ------
Operating expenses:
Sales and marketing....... 22.7 21.2 20.6 16.9 23.6 30.0
Technology development and
operations.............. 23.7 27.6 28.0 23.9 26.2 32.9
General and
administrative.......... 22.6 25.2 36.5 24.0 20.4 31.3
Stock-based
compensation............ -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total operating
expenses.............. 69.0 74.0 85.1 64.8 70.2 94.2
------ ------ ------ ------ ------ ------
Income (loss) from
operations................ 31.0 26.0 14.9 35.2 29.8 5.8
Other income (expense),
net....................... (0.3) (0.5) 0.1 0.2 (0.2) 4.4
------ ------ ------ ------ ------ ------
Income (loss) before
provision for (benefit
from) income taxes........ 30.7 25.5 15.0 35.4 29.6 10.2
Provision for (benefit from)
income taxes.............. 13.1 11.0 6.4 15.1 9.4 3.2
------ ------ ------ ------ ------ ------
Net income (loss)........... 17.6% 14.5% 8.6% 20.3% 20.2% 7.0%
====== ====== ====== ====== ====== ======
<CAPTION>
QUARTER ENDED
----------------------------
SEPTEMBER 30, DECEMBER 31,
1999 1999
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS:
Revenue:
Advertising............... $1,939 $ 2,268
Technology services....... 281 273
Subscription services..... 12 62
------ -------
Total revenue........... 2,232 2,603
------ -------
Operating expenses:
Sales and marketing....... 1,038 1,084
Technology development and
operations.............. 869 1,118
General and
administrative.......... 474 970
Stock-based
compensation............ -- 1,998
------ -------
Total operating
expenses.............. 2,381 5,170
------ -------
Income (loss) from
operations................ (149) (2,567)
Other income (expense),
net....................... 38 39
------ -------
Income (loss) before
provision for (benefit
from) income taxes........ (111) (2,528)
Provision for (benefit from)
income taxes.............. (35) (802)
------ -------
Net income (loss)........... $ (76) $(1,726)
====== =======
AS A PERCENTAGE OF TOTAL
REVENUE:
Revenue:
Advertising............... 86.9% 87.1%
Technology services....... 12.6 10.5
Subscription services..... 0.5 2.4
------ -------
Total revenue........... 100.0 100.0
------ -------
Operating expenses:
Sales and marketing....... 46.5 41.6
Technology development and
operations.............. 38.9 43.0
General and
administrative.......... 21.2 37.3
Stock-based
compensation............ -- 76.8
------ -------
Total operating
expenses.............. 106.6 198.7
------ -------
Income (loss) from
operations................ (6.6) (98.7)
Other income (expense),
net....................... 1.7 1.5
------ -------
Income (loss) before
provision for (benefit
from) income taxes........ (4.9) (97.2)
Provision for (benefit from)
income taxes.............. (1.6) (30.8)
------ -------
Net income (loss)........... (3.3)% (66.4)%
====== =======
</TABLE>
Our quarterly operating results may vary significantly from quarter to
quarter, are difficult to predict and may fluctuate due to a variety of factors,
many of which are beyond our control. We may experience seasonality in our
business, among other things, due to the decline of Internet usage during the
summer months and an increase during the holiday months in the fourth quarter.
See "Risk Factors -- Seasonal and other fluctuations in our operating results
may make it difficult to predict our future performance and may result in
volatility in the market price of our common stock." We believe that
period-to-period comparisons of our historical operating results are not
meaningful and that you should not rely upon them as an indication of future
performance. If we fail to meet the expectations of public market analysts and
investors, the market price of our common stock may be materially adversely
affected. See "Risk Factors -- There may be volatility in our stock price."
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<PAGE> 32
LIQUIDITY AND CAPITAL RESOURCES
From inception until June 1999, we financed our operations primarily from
cash flow from operations and capital lease obligations. In June 1999, we issued
shares of our convertible redeemable preferred stock and redeemable preferred
stock to two venture capital firms. The firms purchased the preferred stock for
a cash payment of $5 million and the contribution of 2,088,154 shares of our
previously outstanding common stock which they had acquired from three of our
stockholders.
In April 2000, we entered into a $3 million revolving line of credit
arrangement with a commercial bank that expires in April 2001. The line of
credit provides up to $3 million for general corporate purposes and to finance
capital equipment purchases. To date, we have not borrowed any funds under our
line of credit. However, as a result of a standby letter of credit arrangement
entered into in connection with a lease, our borrowing availability under the
line of credit has been reduced by the amount of the standby letter of credit to
approximately $2.6 million. In connection with obtaining our line of credit, we
issued a five-year warrant to purchase 13,333 shares of our common stock at an
exercise price of $15.00 per share.
Net cash provided by operating activities was $1.0 million, $1.3 million
and $1.2 million in 1997, 1998 and 1999, respectively. Net cash provided by
operating activities in 1997 consisted primarily of net income and an increase
in payables and accrued expenses. Net cash provided by operating activities in
1998 consisted primarily of net income and non-cash depreciation and
amortization expenses. Net cash provided by operating activities in 1999
consisted primarily of non-cash expenses including stock-based compensation and
depreciation and amortization plus increased payables and accrued expenses
offset by a net loss and increased receivables.
Since our inception, our investing activities have consisted primarily of
purchases of fixed assets and investments in software development, related
principally to our network operating center and computer equipment for our
employees. Capital expenditures totaled $572,000, $1.1 million and $2.9 million
in 1997, 1998 and 1999, respectively. We will continue to invest heavily in our
network operations center and in our software development to ensure reliability
of our network and to rapidly introduce new services and enhancements to our
existing services and web properties.
Cash (used in) provided by financing activities was ($292,000) and $4.6
million in 1998 and 1999, respectively. Our financing activities over the last
three years consisted primarily of the sale of our preferred stock, offset by
the payment of notes payable.
As of December 31, 1999, we had $3.3 million of cash and cash equivalents
and $4.2 million in working capital. The note payable to our former shareholder
is due and payable upon the completion of this public offering. Upon completion
of this offering, we are required to redeem all of our redeemable preferred
stock outstanding for an aggregate cash payment of $15 million. We believe that
the net proceeds from the sale of common stock in this offering, together with
our current cash and cash equivalents, will be sufficient to redeem the
redeemable preferred stock and to meet our working capital and capital
expenditure requirements for at least the next twelve months. We may need to
raise additional funds in the event that we pursue strategic acquisitions or
investments in complementary businesses, technologies, or experience operating
losses that exceed our expectations. If we raise additional funds through the
issuance of equity or convertible debt securities, our existing stockholders may
experience dilution. In the event that additional financing is required, we may
not be able to obtain it on acceptable terms or at all.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards, or SFAS, No. 133, "Accounting
for Derivative Instruments and Hedging Activities," is effective for fiscal
years beginning after June 15, 2000. Because we hold no derivative financial
instruments and do not engage in any hedging activities, the adoption of SFAS
No. 133 is not expected to have a material impact on our financial position or
results of operations.
Staff Accounting Bulletin ("SAB") No. 101 provides the views of the
Securities and Exchange Commission in applying generally accepted accounting
principles to selected revenue recognition issues. SAB
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<PAGE> 33
No. 101 is not expected to have a material impact on the Company's financial
position or results of operations.
MARKET RISK
Foreign Currency Exchange Rate Risk
To date, our revenues have been denominated in U.S. dollars and are
generated primarily from customers in the United States. As a result, we have
experienced limited exposure to foreign currency exchange risk. With the
incorporation of our French subsidiary and plans for further international
expansion, we anticipate future revenues from international markets to be
denominated in the currency of the applicable market. As a result, our operating
results may become subject to significant fluctuations based upon changes in
exchange rates of certain currencies in relation to the U.S. dollar. We will
analyze our exposure to currency fluctuations and may engage in financial
hedging techniques in the future to minimize the effect of these potential
fluctuations; however, exchange rate fluctuations may adversely affect our
financial results in the future.
Interest Rate Risk
As of December 31, 1999, we had cash and cash equivalents of $3.3 million
consisting of cash and highly liquid, short-term investments. Declines of
interest rates over time will reduce our interest income from our short-term
investments. Our outstanding notes payable and capital lease obligations are all
at fixed interest rates and therefore have minimal exposure to interest rate
fluctuations. Our line of credit bears interest at prime plus one-quarter of a
percent, therefore, we are exposed to interest expense increases to the extent
prime increases. We currently have no borrowings under our line of credit.
YEAR 2000 COMPLIANCE
We currently are not aware of any Year 2000 problem in any of our critical
systems and services. However, our business could be harmed if we were to
experience a Year 2000 problem in the future and we cannot guarantee that we
will not experience Year 2000 problems in the future or that third parties that
we rely on will not experience Year 2000 problems that will affect us.
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BUSINESS
OVERVIEW
We are a leading application service provider, or ASP, focused on
delivering detailed, real-time web site analysis and user behavior information
to customers who operate web sites that are important to their businesses. As an
ASP, we provide businesses the advantages of an outsource solution allowing them
to avoid traditionally large hardware and software expenses. The benefits of our
technology services include the delivery of wireline or wireless environment
independence, accurate and real time Internet intelligence, rapid
implementation, ease of use and the flexibility to adapt to rapidly growing web
sites and online businesses.
The intelligence we provide to our business customers assists them in
making mission critical decisions and identifying growth opportunities. Our
technology is highly scalable and is currently used to monitor over 150,000
accounts and 100 million page views per day. Our customers include both large
enterprises and emerging Internet companies, such as Cisco-EMEA, Conseco Inc.,
Ewanted.com Corporation, Hewlett-Packard Company, Lucent Technologies, Inc.,
Paymybills.com, Inc., Proflowers, Inc., Skechers USA, Inc. and SkyDesk, Inc.
INDUSTRY BACKGROUND
Growth of the Internet
The Internet has emerged as an important medium for communications and
electronic commerce, or eCommerce, involving millions of users and web sites.
Internet growth is expected to continue as browser access becomes more widely
available across both wireline and wireless infrastructures. International Data
Corporation, or IDC, estimates that the number of web users worldwide will
increase from 142 million at the end of 1998 to approximately 502 million by the
end of 2003. Forrester Research estimates that spending on software and services
to support eCommerce alone exceeded $5.6 billion in 1998 and will grow to $35
billion by 2002.
Access to the Internet through wireless devices is a fast growing segment
of Internet access. IDC forecasts that the number of users in the United States
of wireless devices that have the ability to send and receive information over
the Internet will increase from 7.4 million in 1999 to 61.5 million in 2003.
The Need to Understand Internet User Behavior
As businesses increasingly rely on the Internet, they are competing in a
new and rapidly evolving environment. In addition to creating challenges, the
Internet also creates opportunities to measure and analyze Internet user
behavior. The ability to understand customer preferences based on Internet user
behavior can provide a competitive business advantage. This understanding could
enable businesses to make informed and insightful decisions about their online
strategies and to respond to changing customer preferences by customizing their
Internet content, commerce and advertising.
As users increasingly gain access to the Internet through wireless devices,
we believe the importance of providing customized content to these wireless
users will accelerate. Limitations of wireless devices, such as airtime charges
and small display screens, require optimal customization of mobile Internet
content. In addition, as wireless devices such as Palm VII Connected Organizers
and web-enabled phones enable anytime, anywhere Internet access, Internet users
will be increasingly attracted to real time, intelligent and customized
information. To efficiently meet demands of mobile Internet users, businesses
need to understand and respond to customer preferences on the wireless Internet.
Limitations of Traditional Software Approaches to Understanding Internet User
Behavior
Online user interaction occurs in a dynamic environment and generates
volumes of potentially high-value user data from which businesses could benefit.
This data provides information about business and consumer preferences and
purchasing activity. However, Internet usage data is being constantly generated
by millions of users and requires sophisticated processing capabilities to
become useful business information. We believe
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<PAGE> 35
that the volume of data available today on the Internet can overwhelm many
conventional software approaches. As a result, many businesses using these
conventional software approaches may fail to capitalize on an important
resource.
The complexity of the open architecture of the Internet makes it difficult
to collect and understand user behavior with traditional software methods. First
generation in-house software solutions periodically collect user data from file
servers, which are only a portion of the distributed architecture of the
Internet. Consequently, those methods capture only incomplete information. These
solutions fail to capture critical user information from sources behind the file
server such as browsers, proxy servers, distributed hosting networks and
wireless gateways.
The Internet permits businesses to outsource the collection of this
critical business information to new, trusted service providers able to process,
analyze and enrich the information for their customers. To be most effective, an
outsourced service that measures and analyzes Internet user behavior must:
- deliver timely and accurate information about actual user behavior;
- respect the privacy of users;
- be flexible and easy to use and implement; and
- function in all current and emerging Internet environments.
OUR SOLUTION
We are a leading application service provider, or ASP, focused on
delivering detailed, real-time web site analysis and user behavior information
to customers who operate web sites that are critical to their businesses. As an
ASP, we run our applications and store information on our network, and,
therefore our customers do not have to acquire or support hardware and software
to realize the benefits of our services. Furthermore, our solution is easy to
implement, requires minimal upfront cost and provides user-friendly and
meaningful online reports. The intelligence we provide to our business customers
assists them in making mission-critical decisions and identifying growth
opportunities.
Our Internet User Behavior Measurement and Analysis Solution
Our HitBox services provide businesses with Internet user behavior
measurement and analysis solutions that:
- collect and measure information about Internet users such as immediately
previous Internet visit, frequency of visits, ISPs, time zones, computing
environments, search engines and search terms;
- present detailed behavioral statistics and graphical reports;
- provide secure, real-time access to customer reports over the Internet
through desk-top computers and wireless devices;
- provide historical analysis based upon archived Internet user information
in our network; and
- protect user privacy and anonymity.
We can minimize our customer's initial costs and allow them to quickly
implement effective solutions. Our customers pay monthly subscription fees,
rather than incurring large upfront costs related to the acquisition and
implementation of traditional hardware and software solutions.
Our ASP model allows us to aggregate Internet information on our network to
provide value-added information services. Our HitBox services collect
information based on the browser activity of Internet users rather than the
server activity of Internet content providers. As a result, we measure requests
for content from Internet users without regard to how or from where the content
is served. Our HitBox technology is also generally able to distinguish between
automated requests for content and actual users.
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We publish this user information in our large and growing database in a
number of ways. StatMarket provides numerous statistics about broad Internet
trends such as overall usage, browser technology, screen settings and other
similar statistics. We publish on HitBox.com a categorical ranking of web sites
based on popularity. We also have a consumer-oriented portal called Yep.com that
highlights the web sites using our HitBox services.
Benefits of Our Solutions to Our Customers
Our Internet user behavior measurement and analysis services provide the
following benefits to our customers:
Environment Independence. We provide both wireline and wireless HitBox
services to online businesses, whatever their Internet environment. Our HitBox
services are compatible with operating systems, protocols, platforms and
browsers such as Windows, Linux, Unix, MacOS, Hyper Text Markup Language (HTML),
Handheld Devices Markup Language (HDML), Wireless Application Protocol (WAP),
Internet Explorer, Netscape Navigator and PalmOS. HitBox Wireless can measure
and report real-time detailed statistics about wireless Internet user behavior.
We believe we are the first to market such a wireless service, and we have filed
for patent protection of our technology.
Internet Intelligence. Our HitBox services allow businesses to develop
clear insights and more informed and responsive business strategies by providing
them with accurate and timely information about the behavior and preferences of
their Internet users.
- Accurate, Mission-Critical Data. Our HitBox services collect, measure and
report mission-critical information about Internet user behavior on our
customers' web sites based on the browser activity of actual Internet
users. Our HitBox services also put our customers' information into
relative context by comparing their data to that in our aggregate
database of information from many customers' accounts.
- Real-Time Information. Our customers can react to information about
Internet user behavior in real time rather than waiting for reports of
historical information. When an Internet user accesses one of our
customers' web pages, our network immediately updates the customer's data
in our database and on our web sites.
Rapid Implementation. Our HitBox technology allows online businesses to
begin collecting and measuring information about Internet users within seconds
of inserting our HitBox sensors into their web pages. As an ASP, we run the
HitBox applications and store the businesses' information on our network, so our
customers do not have to implement hardware or software solutions to realize the
benefits of the HitBox services.
Ease of Use. Our HitBox services do not require our customers to provide
extensive training or on-going support. Customer information is presented in
graphical reports that are available over the Internet 24 hours a day, seven
days a week.
Flexibility. As our customers change their web sites, our HitBox services
can be easily adapted to collect and measure Internet user behavior on new web
pages. As an ASP, we provide outsourced services that make it easier for our
customers to grow their online businesses.
STRATEGY
Our objective is to be the leading provider of Internet infrastructure
technology services that collect, measure and report Internet user behavior. Our
primary strategies to achieve this objective are:
Maintain Technology Leadership. We are committed to maintaining our
position as a leading provider of Internet infrastructure technology services.
In particular, we plan to continue to refine our proprietary core technology and
to develop next generation applications of our HitBox Enterprise, HitBox
Wireless and other HitBox services.
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Increase the Depth of Our Internet Intelligence. We intend to increase the
amount of information about Internet user behavior contained in our database to
enhance the value of our services. In particular, we intend to increase the
number of domestic and international Internet destinations that carry our HitBox
technology. By increasing the number of the data collection sources we employ,
we acquire more comprehensive information which is of higher value to our
customers. We also plan to measure usage of new Internet access devices as they
are developed, including additional wireless devices.
Measure Wireless Internet User Behavior. An increasing portion of Internet
access will come through wireless devices. We believe it will be vital for
businesses to understand user behavior in this market. We believe that our
HitBox Wireless service is the first to offer measurement and analysis of
wireless Internet user behavior. We intend to capitalize on our first-mover
advantage and pursue our objective to become an industry standard in measuring
user behavior on the wireless Internet through a focus on marketing our HitBox
Wireless service.
Focus on Our Enterprise Customers. We intend to aggressively market our
HitBox Enterprise services. We believe our technology and services provide
distinctive capabilities to enterprise customers who are building leading online
businesses. By working closely with these customers, we intend to leverage our
technologies to assist them in developing awareness and insight into their
businesses and improving growth opportunities. We intend to thereby build
loyalty among our enterprise customers and leverage our relationships to
increase penetration of our enterprise services.
Expand Direct Sales and Develop Indirect Distribution Channels. We intend
to increase the size of our sales and marketing organization and to develop
indirect distribution channels. Specifically, we intend to increase the number
of employees dedicated to selling our HitBox services and Internet advertising.
We plan to develop indirect channels to improve distribution of our HitBox
services and to expand our customer base by entering into co-marketing or
distribution agreements with strategic parties.
Expand Brand Awareness and Increase Market Penetration. We intend to
improve awareness of our brands through increased sales and marketing efforts.
For example, we are making a portion of our StatMarket information available to
major news media. Additionally, we are also pursuing strategic alliances with
leading commerce service providers, Internet service providers and other
solution providers. We believe that the combination of marketing efforts,
service innovation and strategic alliances will improve our corporate visibility
and, in turn, accelerate market penetration of our services.
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TECHNOLOGY
Our technology provides us a proprietary method for collecting, processing
and reporting data from web sites across the Internet. We collect statistical
data from each visitor to a site via the insertion of a HitBox sensor on web
pages we monitor. Each of our HitBox services is completely Internet-based,
obviating the need for customer server resources or information technology
personnel to administer the application. We offer businesses multiple data
measurement and reporting services using the information collected by our
network. Our proprietary HitBox data collection process and a description of how
we process and report collected data are illustrated by the following chart:
[TECHNOLOGY DIAGRAM]
(1) The browser, whether from a wireline or wireless device, requests
content, like a web page, from a server.
(2) The server sends requested content with an embedded HitBox sensor to
the browser.
(3) The HitBox sensor embedded in the requested content causes the browser
to request a small file from our network and send anonymous identifier
information.
(4) We return a file and update the anonymous profile.
(5) We provide online services and reports based on the anonymous user
profiles and behavioral information that we collect.
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The HitBox sensors have multiple functions, all of which are executed
simultaneously. First, when a browser accesses any content on the Internet with
an embedded HitBox sensor, the HitBox sensor directs the browser to request a
file from our network. Second, our network reads data from the browser request,
including an anonymous user profile unique to the browser. Third, when our
network receives and analyzes the browser request, the HitBox sensor acts as a
placeholder for the file that we send back to the user which is either an
invisible image file, our HitBox banner or a third-party banner. Finally, we
update the anonymous profile on the browser to reflect the visit to a site
within the HitBox community.
We currently own and operate the network facilities that support our
technology services. Our network operations center is comprised of a large
server farm connected to the Internet through several bandwidth providers. In
the future, we may co-locate our servers in third-party facilities, and we may
deliver some content through distributed network services with geographic
diversity.
As of March 31, 2000, we had approximately 51 employees engaged in
technology development and operations activities. Our technology development
expenditures were approximately $245,000, $1.4 million and $3.4 million for
1997, 1998 and 1999, respectively.
SUBSCRIPTION SERVICES AND WEB PROPERTIES
We offer the following subscription services and web properties based on
our core HitBox technology for collecting and reporting information about
Internet user behavior:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
SUBSCRIPTION SERVICES
<S> <C>
- ------------------------------------------------------------------------------------------------
HitBox Enterprise Our premium Internet user behavior measurement and analysis
service that delivers statistics and reporting tools for
fees. (www.hitboxenterprise.com)
- ------------------------------------------------------------------------------------------------
HitBox Pro Our mid-level service that delivers basic statistics and
reporting for fees. (www.resources.hitbox.com)
- ------------------------------------------------------------------------------------------------
HitBox Our entry-level service that provides statistics and
reporting in exchange for placing advertising on pages that
are tracked. (www.resources.hitbox.com)
- ------------------------------------------------------------------------------------------------
StatMarket Delivery of information on broad Internet usage patterns
based on data aggregated from HitBox customers for fees.
(www.statmarket.com)
- ------------------------------------------------------------------------------------------------
HitBox Wireless Our wireless Internet user behavior measurement and analysis
for fees. (www.hitboxwireless.com)
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
WEB PROPERTIES
<S> <C>
- ------------------------------------------------------------------------------------------------
HitBox.com Community site for web site operators that also includes
customers' traffic data.
- ------------------------------------------------------------------------------------------------
Yep.com Consumer portal showcasing users of our HitBox services.
- ------------------------------------------------------------------------------------------------
</TABLE>
Subscription Services
Our HitBox services allow our customers to gauge the number of visitors to
their web site, their origination, popular viewing times, the nature of the
equipment used and visitors' navigation within the site. All of our HitBox
services identify and report:
- Internet user behavior with page-to-page path tracking capability,
including point of entry, user paths and exit page;
- usage statistics, including unique visitors and page views;
- referral information, including URL, domain, e-mail or newsgroup that
directed the visitor to the site, major Internet service providers,
referring search engines and keyword search used;
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<PAGE> 40
- loyalty metrics, including number of reloads and return visitors;
- browser type;
- operating system type;
- plug-in and Java-Script information;
- the user's screen colors and resolution;
- timing metrics, including rush hours, time spent and traffic during prime
time; and
- traffic history and projections.
HitBox Enterprise
HitBox Enterprise, our premium fee-based HitBox service, is designed to
serve the needs of high-value web properties. HitBox Enterprise provides
real-time statistics and detailed anonymous aggregate profiles of visitors to a
customer's web site. In addition to our standard HitBox features, HitBox
Enterprise provides the following premium services:
- benchmark comparisons with broad Internet statistics from our StatMarket
service;
- tracking of secure web pages;
- greater multi-page tracking capability;
- standardized e-mail reports and graphics e-mailed on demand;
- increased levels of password protection; and
- anonymous Internet users profiles, based on the preferences of visitors
within the network of HitBox users.
HitBox Pro
HitBox Pro is a mid-level fee-based version of our HitBox service for
online businesses that do not require all of the statistics and reports offered
in our HitBox Enterprise service.
HitBox
HitBox is our entry-level Internet user measurement and analysis service.
Our HitBox customers enjoy the same statistics and reports as our HitBox Pro
customers. Instead of charging a fee, we exchange our basic HitBox service for
the right to place a banner ad on the customer's web site, which we use to
derive advertising revenue.
StatMarket
StatMarket is our service that provides customers with information on broad
Internet usage trends. We update and publish the information on StatMarket.com
regularly based on information collected from millions of users of web sites
containing embedded HitBox sensors. Businesses subscribe to our StatMarket
service to monitor these trends.
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[STATMARKET SCREENSHOT]
HitBox Wireless
HitBox Wireless provides real-time measurement and reporting of Internet
user behavior from those who access the Internet with wireless devices such as
web-enabled phones and web-connected organizers. HitBox Wireless provides
Internet user behavior intelligence in the wireless Internet environment,
including the following statistics:
- page-to-page path tracking;
- timing metrics including rush hours, time spend and traffic during
prime-time;
- traffic history and projections;
- types of wireless devices used;
- service providers;
- area codes of web-enabled phone users;
- screen resolutions; and
- markup language supported by the device.
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Web Properties
HitBox.com
HitBox.com serves as a community for webmasters allowing them to interact
with each other and share ideas. Many webmasters who frequent HitBox.com use the
HitBox Internet user behavior measurement and analysis technology. Webmasters
visit HitBox.com regularly to check their statistics. HitBox.com categorizes
sites that use HitBox technology and ranks each by number of visitors to the
site. These rankings give our customers a venue to promote their sites and
generate additional traffic.
[HITBOX.COM SCREENSHOT]
Yep.com
Yep.com is our consumer-oriented portal. Its navigation engine showcases
those Internet sites that use our HitBox services. We also provide technologies,
tools and content to users of Yep.com that we believe make the experience of
surfing the Internet more enjoyable and productive. The Yep.com search
architecture includes topics of interests to consumers such as arts and
literature, business and career, entertainment and other similar topics. We rank
the Internet sites listed on Yep.com based on the sites' popularity and quality.
A site's popularity is measured by the average number of unique daily page
visits. A site's quality is based on
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number of bookmarks, speed of web site, length of users' stays, number of
same-day visits, number of repeat visitors and other similar criteria.
[yep.com SCREEN SHOT]
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CUSTOMERS
Our HitBox customers range from small Internet businesses to Fortune 100
companies. No single customer has accounted for more than 10% of our revenue in
a calendar year. The following is a representative list of our HitBox Enterprise
customers.
<TABLE>
<S> <C>
Bamboo Online/IPIX LoqueSea.com, Inc.
Bullseye Art Ltd. Lucent Technologies, Inc.
Cisco-EMEA Mercado Libre, Inc.
Campbell Soup Company MedScout Corporation
Carfax, Inc. Mondera.com
Conseco Inc. Paymybills.com, Inc.
ehobbies.com, Inc. Peakhour Pty Ltd
Ewanted.com Corporation Proflowers, Inc.
Freei Networks, Inc. Qingniao.net Holdings LTD
Free Lance Star, The Sketchers USA, Inc.
Hewlett-Packard Company SkyDesk, Inc.
inonMedia Corp. SportsYA, Inc.
Interactive Collector Limited SupermarketsOnline, Inc.
International Merchant System Zappos.com, Inc.
Janssen Pharmaceutical
</TABLE>
CASE STUDIES
The following case studies illustrate some of the benefits provided to
businesses by our HitBox Enterprise service.
Carfax, Inc.
Carfax, a leading online provider of vehicle history data, was centralizing
its large server operations into a single server bank. Carfax's systems were
soon becoming overloaded with the management of the log files and reporting of
server activities. Carfax switched to HitBox Enterprise and soon benefited by
eliminating log files and having its Internet user behavior information
available real-time on our web site.
Lucent Technologies, Inc.
Lucent, a large manufacturer and marketer of enterprise communications
solutions, built a new web site for its business partners and needed a web site
analysis solution that could be implemented immediately with little to no drain
on Lucent's resources. Lucent chose HitBox Enterprise because it could begin
collecting data within a couple of days. This allowed Lucent to focus its
internal resources on the mission critical aspects of its web site, be more
responsive to its channel partners and drive more sales through its channels.
Proflowers, Inc.
Proflowers, a leading online retailer of floral products, needed a service
that could effectively measure the popularity of each page and its peak traffic
hours. HitBox Enterprise provides Proflowers.com with accurate, real-time
information about its Internet users on a page-by-page basis that assists
Proflowers, Inc. in managing its holiday selling seasons.
Skechers USA, Inc.
Skechers, a major shoe manufacturer and retailer, wanted to observe its
customers' online behavior and buying trends as they occurred. Skechers wanted
to react to its customers' preferences in shoe styles and colors immediately,
rather than wait for log-file reports to be generated. Through the use of HitBox
Enterprise, Skechers can now spot buying trends instantly and use this
information to more quickly customize its site design and drive sales.
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SportsYA, Inc.
SportsYA, an international sports portal, operates six web properties that
are focused on geographic markets including Spain, Mexico, Brazil, Argentina and
the United States. It wanted a single provider to give them site-by-site and
content-category analytics. SportsYA chose HitBox Enterprise to measure and
analyze its total and specific traffic in different parts of its sites. SportsYA
established separate HitBox Enterprise accounts, along with an aggregate
account, so that it could track individual traffic in the Chat, Media and
ProShop parts of its sites. SportsYa chose HitBox Enterprise because it provided
a powerful solution that allows it to track several subsections within a site.
SALES AND MARKETING
We currently market our basic HitBox service primarily through webmaster
referral and viral marketing. We sell and market our HitBox Enterprise service
and advertising inventory primarily through our direct sales force, which
consisted of 21 sales personnel as of March 31, 2000. Most of our sales force
operates out of our San Diego office. We expect to use strategic relationships
with channel partners, such as Internet service providers, to promote our
services. We recently opened a sales office in France to pursue international
sales and marketing opportunities.
Our marketing organization provides market direction and supports sales
efforts through awareness and lead generation programs. Key marketing programs
include:
- market analysis;
- regular press releases showcasing the information in our database and web
properties;
- public relations activities and speaking engagements;
- direct mail and e-mail programs;
- brochures, data sheets and website marketing; and
- industry-focused programs.
To increase the sales of our subscription services, we intend to hire a
large number of additional direct sales personnel and establish channel partner
relationships. Accordingly, we anticipate a significant increase in our sales
and marketing expenditures in the foreseeable future.
COMPETITION
The market for Internet intelligence and information solutions, including
user profiling, online advertising services and systems and web site traffic
analysis is new, rapidly evolving and intensely competitive. We expect
competition to increase both from existing competitors and new market entrants
for various components of our services. We compete primarily on the basis of
product functionality, depth and quality of Internet user information and level
of service.
We believe that we compete in the following markets and with companies in
each market including the companies listed below:
Web Site Traffic Measurement. Accrue Software, Inc., Engage Technologies,
Inc., NetGenesis Corp. and WebTrends Corporation market software that measures
site-specific Internet usage.
Internet Advertising Enablers. DoubleClick, Inc., LinkExchange, Inc. and
Engage Technologies, Inc. market products that allow customers to create and use
profiles of individual web visitors to target advertisements to certain Internet
users.
Internet User Measurement Services. MediaMetrix, Inc. and NetRatings, Inc.
collect information from a representative sample of Internet users called panels
and extrapolate this data to estimate broad usage patterns across the Internet.
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<PAGE> 46
In addition, we face competition from individual web sites that develop
independent methods of measuring their own audience or from other companies that
develop alternative audience measurement technologies to those already provided
by us. Some of the largest web publishers use internally developed interactive
marketing solutions rather than the commercial solutions offered by us and our
competitors.
Many of our current competitors, as well as a number of potential
competitors, have longer operating histories, greater name recognition and
substantially greater financial, technical and marketing resources than we have,
including competitors affiliated with America Online, Microsoft and IBM. Our
current and potential competitors also may have more extensive customer bases
and larger proprietary databases. In addition, current and potential competitors
have established or may establish cooperative relationships among themselves or
with third parties to more effectively distribute their products or to enhance
their product and service offerings.
INTELLECTUAL PROPERTY
To protect our proprietary rights, we rely generally on copyright,
trademark and trade secret laws and confidentiality agreements or licenses with
employees, consultants, vendors, clients and corporate parties. WebSideStory,
HitBox and StatMarket have been registered as service marks by the U.S. Patent
and Trademark Office, and Yep has received a Notice of Allowance. HitBox has
also been registered in the European Union, and registration of HitBox has been
granted in Japan. We have registered with the United States Copyright Office the
copyrights in our web properties, Hitbox.com, Yep.com and StatMarket.com. We
also have applied for three patents covering certain aspects of our technology
and business methods.
Despite these protections, a third party could, without authorization,
disclose, copy or otherwise obtain and use our technology or develop similar
technology or services independently. Our proprietary rights will not prohibit
competitors from developing services similar to ours by development efforts that
do not infringe on our rights. In addition, the laws of some foreign countries
will not protect our proprietary rights to the same extent as do the laws of the
United States, and effective patent, copyright, trademark and trade secret
protection may not be available in these jurisdictions. In order to protect our
intellectual property rights we may institute litigation or other proceedings
against third parties that we believe are infringing our rights. These actions
may be costly and may divert our management's time and attention.
We currently have three patents pending in the United States relating to
web-based multiple-page tracking of visitor paths for both wireline and wireless
Internet access. We have also filed these three patent applications worldwide.
We cannot assure you that our pending, or any future, patent applications will
be granted, that any existing or future patents will not be challenged,
invalidated or circumvented, or that the rights granted under or any patent that
may issue will provide competitive advantages to us. Many of our current and
potential competitors dedicate substantially greater resources to the protection
and enforcement of intellectual property rights, especially patents. If a
blocking patent has issued or issues in the future to a third party, we would
need either to obtain a license to, or to design around, that patent. We may not
be able to obtain a license on acceptable terms, if at all, or design around the
patent, which could harm our ability to provide our services.
We pursue the registration of our service marks in the United States and in
other countries although we have not secured registration of all of our marks.
As of April 4, 2000, we had three registered United States service marks,
HitBox, StatMarket and WebSideStory, and we have applied for registration of
four additional service marks, The Pulse of the Internet, Traffic, Yep and the
Yep.com logo, which we believe are key to identifying and differentiating our
services from those of our competitors. In addition, we have one registered
service mark in the European Union, HitBox.
We may, in the future, license our proprietary rights, in particular our
HitBox technology, to third parties. These licensees may fail to abide by
compliance and quality control guidelines with respect to our proprietary rights
or take actions that would severely harm our ability to use our proprietary
rights and our business.
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<PAGE> 47
We attempt to avoid infringing known proprietary rights of third parties in
our product development efforts. It is difficult to proceed with certainty in a
rapidly evolving technological environment in which there exist numerous patent
applications pending, many of which are confidential when filed, with regard to
similar technologies. In addition, the true scope of many recently issued
patents regarding methods of conducting business is very uncertain. If we were
to discover that our technology violates third-party proprietary rights, we
might not be able to obtain licenses or continue offering our services based on
our technology without substantial reengineering. Any efforts to undertake this
reengineering might not be successful, and any necessary licenses might not be
available on commercially reasonable terms, if at all.
Litigation for claims of infringement might not be avoided or settled
without incurring substantial expenses and damage awards. In addition, any of
these claims, even if not meritorious, could result in the expenditure of
significant financial and managerial resources and could result in injunctions
preventing us from delivering our services based on our technology or licensing
our technology to third parties or clients. These claims could harm our
business.
In the future, we may seek to license third party technology to be
integrated with our internally developed technology. We cannot assure you that
third-party technology licenses will be available to us on commercially
reasonable terms. The unavailability of any of these technologies could harm our
business. In addition, by using technology licensed from third parties, we may
be charged with infringement by other parties. Even if we receive broad
indemnification from our licensors, they may not be sufficiently capitalized and
may not be able to indemnify us in the event of infringement, resulting in
substantial exposure to us. Any infringement claims, even if not meritorious,
could result in the expenditure of significant financial and managerial
resources in addition to potential product redevelopment costs and delays, all
of which could harm our business.
UNITED STATES AND FOREIGN GOVERNMENT REGULATION
Congress has recently passed legislation that regulates certain aspects of
the Internet, including online access to obscene or pornographic content,
copyright infringement, user privacy, taxation, access charges, liability for
third-party activities, domain names, and jurisdictions. The Federal Trade
Commission has investigated the privacy policies and the collection, maintenance
and sharing of information concerning Internet users and of numerous
Internet-based businesses. Several state attorneys general have brought consumer
protection law claims against Internet-based businesses claiming privacy related
legal violations. Regulatory inquiries and litigation of these types are often
expensive and time consuming. Several state legislatures have passed laws
relating to usage of unsolicited email, or "spam." In addition, federal, state,
local and foreign governmental organizations also are considering, and may
consider in the future, other legislative and regulatory proposals that would
regulate the Internet. Areas of potential regulation include libel, pricing,
quality of products and services, and intellectual property ownership.
The European Union also has recently enacted several directives relating to
the Internet. In order to safeguard against the spread of certain illegal and
socially harmful materials on the Internet, the European Commission has drafted
the "Action Plan on Promoting the Safe Use of the Internet." Other European
Commission directives address the regulation of privacy, eCommerce, security,
commercial piracy, consumer protection and taxation of transactions completed
over the Internet. Generally, the European Union has taken a more restrictive
approach to the collection and use of information related to Internet access.
The governments of other states or foreign countries might attempt to
regulate our transmissions or levy sales or other taxes relating to our
activities. The laws governing the Internet, however, remain largely unsettled,
even in areas where there has been some legislative action. It may take years to
determine whether and how existing laws such as those governing intellectual
property, privacy, libel and taxation apply to the Internet and Internet
advertising. In addition, the growth and development of the market for Internet
commerce may prompt calls for more stringent consumer protection laws, both in
the United States and abroad, that may impose additional burdens on companies
conducting business over the Internet. Our business and financial results could
be materially harmed by the adoption or modification of laws or regulations
relating to the Internet.
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<PAGE> 48
We do not know how courts or governments will interpret both existing and
new laws. New laws or the application of existing laws and regulations may
affect our business and these laws and regulations may be inconsistent. In
addition, our business may be indirectly affected by our clients being subject
to such legislation. Increased regulation of the Internet may decrease the
growth in the use of the Internet, decreasing the demand for our services,
increasing our cost of doing business, or otherwise significantly affect our
business and financial results.
EMPLOYEES
On March 31, 2000, we had 103 employees, including:
- 33 in sales and marketing;
- 51 in technology development and operations; and
- 19 in general administration.
We have never had a work stoppage, no employees are represented under
collective bargaining agreements and we consider current relations with
employees to be good.
FACILITIES
Our principal offices currently occupy approximately 40,000 square feet
located at 10182 Telesis Court, 6th Floor, San Diego, California under a lease
that expires in January 2007 and also grants us an option to lease approximately
21,000 square feet of additional space at the same site. We believe that our
facilities are adequate for our current operations and that additional space can
be obtained if needed.
LEGAL PROCEEDINGS
We are not currently subject to any material legal proceedings. We may from
time to time become a party to various legal proceedings in the ordinary course
of business.
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<PAGE> 49
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information about our directors,
executive officers and key employees as of April 14, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John J. Hentrich..................... 50 President, Chief Executive Officer and Director
Blaise P. Barrelet................... 36 Chairman of the Board of Directors and Chief Internet
Architect
Michael S. Christian................. 39 Senior Vice President
Terance A. Kinninger................. 44 Senior Vice President and Chief Financial Officer
Meyar Sheik.......................... 38 Vice President, Chief Marketing Officer Enterprise
Thomas H. Stigler.................... 43 Vice President, Enterprise Sales and Business
Development
Randall K. Broberg................... 39 General Counsel and Chief Privacy Officer
Benjamin H. Ball(1)(2)............... 34 Director
Kurt R. Jaggers(1)(2)................ 41 Director
Walter G. Kortschak(1)(2)............ 40 Director
</TABLE>
- ---------------
(1) Member of the compensation committee.
(2) Member of the audit committee.
John J. Hentrich has served as our President and Chief Executive Officer
since December 1999 and has served as a member of our board of directors since
March 2000. He served as our Senior Vice President and Chief Financial Officer
from November 1999 to December 1999. Prior to joining us, from May 1991 to
November 1999, he was a partner in the San Diego office of Baker & McKenzie
where he specialized in representation of advanced technology enterprises,
chaired the San Diego corporate and securities practice and co-chaired the
national securities practice. Mr. Hentrich holds a B.A. degree in philosophy
from Fordham University, a Ph.D. in philosophy from Yale University and a J.D.
from Yale Law School.
Blaise P. Barrelet has served as our Chairman of the Board of Directors
since he founded WebSideStory in 1996 and since January 2000 has served as our
Chief Internet Architect. From 1996 until December 1999, he served as our
President and Chief Executive Officer and oversaw all of our Internet technology
development. He has over 16 years of high-tech and entrepreneurial experience
and has held a number of positions, including director of the software division
at Tekelec Group, France, from 1991 to 1993. In 1994, he co-founded Reword
Corporation, an Internet software localization company.
Michael S. Christian currently serves as our Senior Vice President and has
been an officer of the company since November 1998. Mr. Christian served as a
member of our board of directors from June 1999 to March 2000. Prior to joining
us, Mr. Christian served as international counsel to Banque Worms, a French
commercial bank, from 1989 to 1994 and was an associate lawyer with the San
Diego office of Baker & McKenzie from 1995 to 1998. Mr. Christian holds a B.A.
degree in literature from the University of California at San Diego and a J.D.
from the Harvard Law School.
Terance A. Kinninger has served as our Senior Vice President and Chief
Financial Officer since April 2000. Prior to joining us, Mr. Kinninger served as
Senior Vice President of Finance and Operations and Chief Financial Officer of
MetaCreations Corporation, a software company, from July 1995 to January 2000
and was Chief Financial Officer, Senior Vice President, Business Development and
a General Manager of Delphi Information Systems, a software company, from
October 1990 to June 1995. Mr. Kinninger was also previously employed by Coopers
and Lybrand, LLP as a certified public accountant and holds a B.S. degree from
Miami University.
Meyar Sheik has served as our Vice President, Chief Marketing Officer
Enterprise since he joined us in April 2000. Mr. Sheik served as Vice President
Worldwide Marketing and Strategic Alliances of Supernova,
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<PAGE> 50
Inc., a software company, from October 1997 to March 2000 and Vice President
Worldwide Marketing of Proginet Corp., a software company, from June 1994 to
July 1997.
Thomas H. Stigler has served as our Vice President, Enterprise Sales and
Business Development since he joined us in February 2000. Mr. Stigler served as
Vice President, Sales and Business Strategy for Digital Lava, Inc., a software
and services company, from November 1995 to September 1999, was an account
executive for Sybase, Inc., a software company, from February 1995 to November
1995 and was a District Manager for Hitachi Data Systems, Inc. from January 1993
to February 1995. From December 1980 to January 1993, he served as an account
executive, marketing manager and representative at IBM Corporation. Mr. Stigler
holds a B.S. degree from Northwestern University.
Randall K. Broberg has served as our General Counsel and Chief Privacy
Officer since joining us in April 2000. Mr. Broberg is an Internet and
intellectual property law specialist. Prior to joining us, he was a shareholder
in the La Jolla, California office of Heller Ehrman White & McAuliffe from
December 1998 to April 2000, specializing in the representation of Internet
companies, and a partner and of counsel at the San Diego office of Baker &
McKenzie from August 1994 to December 1998. Prior to that he was General Counsel
and Director of Corporate Development at Diverted Electronics, Inc. Mr. Broberg
holds an A.B. from Stanford University and a J.D. from the University of
Virginia School of Law.
Benjamin H. Ball has served as a member of our board of directors since
June 1999. Mr. Ball is a founding partner of Francisco Partners, a private
equity investment firm, where he has been employed since October 1999. Prior to
co-founding Francisco Partners, Mr. Ball served as a Vice President for TA
Associates, Inc., a private equity investment firm, from 1997 to 1999. Mr. Ball
holds an A.B. from Harvard College and an M.B.A from Stanford University.
Kurt R. Jaggers has served as a member of our board of directors since
December 1999. Mr. Jaggers has served as a Managing Director of TA Associates,
Inc., since January 1997, was a Principal there from January 1993 to December
1996 and was Vice President from 1990 to 1992. Mr. Jaggers received a B.S.
degree and an M.S. degree in electrical engineering, followed by an M.B.A. from
Stanford University. He is currently a director of Invitrogen Corporation, a
biotechnology company, as well as several private companies.
Walter G. Kortschak has served as a member of our board of directors since
June 1998. Mr. Kortschak is a Managing Partner and a Managing Member of various
entities affiliated with Summit Partners, LLC, a private equity capital firm,
where he has been employed since June 1989. Summit Partners, LLC, and its
affiliates manage a number of venture capital funds, including Summit Ventures
V, L.P., Summit V Advisors (QP) Fund, L.P., Summit V Advisors Fund, L.P. and
Summit Investors III, L.P. Mr. Kortschak holds a B.S. in engineering from Oregon
State University, an M.S. in engineering from The California Institute of
Technology and an M.B.A. from the University of California at Los Angeles. Mr.
Kortschak also serves as a member of the board of directors of E-Tek Dynamics,
Inc., an optical components and modules company and Somera Communications, Inc.,
a telecommunications equipment company.
BOARD COMPOSITION
Our board of directors currently consists of five members. Prior to the
closing of this offering, our board of directors will be divided into three
classes, as nearly equal in number as possible, with each director serving a
three year term and one class being elected at each year's annual meeting of
stockholders. At each annual meeting of stockholders, the successors to each
class of directors will be elected to serve for three year terms from the time
of election and qualification until the next annual meeting at which such
directors' class stands for election. Our by-laws provide that the authorized
number of directors may be changed only by resolution of the board of directors.
Executive officers are elected by the board of directors on an annual basis
and serve until their successors have been duly elected and qualified.
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<PAGE> 51
BOARD COMMITTEES
Our board of directors has established an audit committee and a
compensation committee. The audit committee consists of Messrs. Jaggers,
Kortschak and Ball. The audit committee reviews and monitors our financial
statements and accounting practices, makes recommendations to our board of
directors regarding the selection of independent auditors, reviews the results
and scope of the audit and other services provided by our independent auditors
and reviews and evaluates our audit and control functions.
The compensation committee consists of Messrs. Jaggers, Kortschak and Ball.
The compensation committee makes decisions concerning and makes recommendations
regarding salaries, benefits and incentive compensation for our employees,
consultants, directors and other persons compensated by our company. The
compensation committee also administers our stock plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers serves as a member of the board of directors
of any entity that has one or more of its executive officers serving as a member
of our board of directors or compensation committee. We did not have a
compensation committee during 1999. We appointed our compensation committee in
April 2000.
EXECUTIVE COMPENSATION
The following table sets forth summary information concerning compensation
awarded to, earned by, or accrued for services rendered to us in all capacities
during the fiscal year ended December 31, 1999 by John J. Hentrich, Blaise P.
Barrelet, Agnes L. Barrelet and Michael S. Christian. These four officers are
referred to as the named executive officers in this prospectus. The compensation
described in this table does not include medical, group life insurance or other
benefits which are available generally to all of our salaried employees, nor
does it include certain perquisites and other personal benefits received.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION -------------------------------
----------------------------------------- SECURITY
ALL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($)(1) OPTIONS(#)(2) COMPENSATION($)
--------------------------- --------- -------- ------------------ ------------- ---------------
<S> <C> <C> <C> <C> <C>
John J. Hentrich, President,
Chief Executive Officer and
Director(3)................... $ 21,000 $ -- $ -- 1,854,517 $ --
Blaise P. Barrelet, Chairman and
Chief Internet Architect(4)... 510,000 -- 6,273 -- --
Agnes L. Barrelet, Vice
President(5).................. 340,000 -- -- -- --
Michael S. Christian, Senior
Vice President................ 100,000 200,000 7,599 -- --
</TABLE>
- ---------------
(1) Represents a car allowance.
(2) Includes 1,324,654 shares issuable under an option intended to qualify as an
incentive stock option under Section 422 of the Internal Revenue Code of
1986, as amended, and 529,861 shares issuable upon exercise of a warrant.
(3) John Hentrich joined the Company in November 1999 and was appointed
President and Chief Executive Officer in December 1999.
(4) The salary for Blaise Barrelet has been reduced for future periods. See
"-- Employment Agreements."
(5) The salary for Agnes Barrelet has been reduced for future periods. See
"-- Employment Agreements." Mrs. Barrelet served as an executive officer of
WebSideStory until January 2000 and as a director until April 2000.
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<PAGE> 52
STOCK OPTION GRANTS
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth, for the fiscal year ended December 31,
1999, certain information regarding options granted to each of the named
executive officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------
PERCENTAGE
NUMBER OF OF TOTAL
SECURITIES OPTIONS/WARRANTS FAIR
UNDERLYING GRANTED TO EXERCISE VALUE
OPTIONS/WARRANTS EMPLOYEES PRICE PER PRICE ON
GRANTED IN FISCAL SHARE DATE OF EXPIRATION
NAME (#) YEAR(%) ($) GRANT DATE
---- ---------------- ---------------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
John J. Hentrich(1).......... 529,861 19.8% $ 0.21 $ 1.05 12/31/03
John J. Hentrich(2).......... 1,324,654 49.6 1.05 1.05 12/31/10
Blaise P. Barrelet........... -- -- -- -- --
Agnes L. Barrelet............ -- -- -- -- --
Michael S. Christian......... -- -- -- -- --
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
TERM($)
----------------------------------
NAME 0% 5% 10%
---- -------- ---------- ----------
<S> <C> <C> <C>
John J. Hentrich(1).......... $445,084 $ 794,792 $1,331,541
John J. Hentrich(2).......... -- 874,272 2,216,146
Blaise P. Barrelet........... -- -- --
Agnes L. Barrelet............ -- -- --
Michael S. Christian......... -- -- --
</TABLE>
- ---------------
(1) Includes 529,861 shares issuable under an immediately exercisable warrant.
(2) Includes 1,324,654 shares issuable under an immediately exercisable option
subject to a right of repurchase that lapses over three years.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
The following table sets forth, with respect to each of the named executive
officers, information regarding the number and value of securities underlying
unexercised options held by the named executive officers as of December 31,
1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
ON VALUE YEAR-END(#) AT FISCAL YEAR-END($)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John J. Hentrich(1)............ -- $ -- 1,854,516 -- $445,084 $ --
Blaise P. Barrelet............. -- -- -- -- -- --
Agnes L. Barrelet.............. -- -- -- -- -- --
Michael S. Christian........... 104,245 -- 739,121 32,391 747,251 32,747
</TABLE>
- ---------------
(1) Includes 1,324,654 shares issuable under an immediately exercisable option
subject to a right of repurchase that lapses over three years and 529,861
shares issuable under an immediately exercisable warrant.
EMPLOYMENT AGREEMENTS
The employment with our executives is generally at will. The agreements we
enter into with our employees seek to ensure that we are the sole owner of all
intellectual property and inventions involving the activities or contributions
of our employees.
We entered into an agreement with John J. Hentrich as of February 2000 in
connection with his employment as President and Chief Executive Officer. The
agreement is for no specified term and calls for a base salary of $275,000
annually. The agreement also provides that Mr. Hentrich is entitled to receive
annual bonuses of $397,782, $502,898 and $120,868 in 2000, 2001 and 2002,
respectively, payable in scheduled monthly installments. Upon the termination of
Mr. Hentrich by the company without cause or the occurrence of certain events
following a change-in-control, Mr. Hentrich is entitled to one year's base
salary plus an amount equal to the greater of the prior year's performance bonus
and the estimated current year's bonus. Also, upon a change-in-control, 50% of
Mr. Hentrich's unvested shares will vest and following a change-in-
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<PAGE> 53
control, if Mr. Hentrich is terminated without cause or certain events occur,
all of Mr. Hentrich's shares will vest.
We have an employment agreement with each of Blaise P. Barrelet, our
Chairman and Chief Internet Architect, and Agnes L. Barrelet, our Vice President
and the spouse of Mr. Barrelet. We currently pay each of them $50,000 annually
plus a bonus as determined by the compensation committee. We also lease
automobiles for each of them. These agreements may be terminated at any time by
either party. We provide medical benefits consistent with those provided to
employees generally.
We have an employment agreement with Michael S. Christian, our Senior Vice
President. The agreement is for no specified term, and Mr. Christian currently
earns a base salary of $160,000 annually. We also lease an automobile for Mr.
Christian. This agreement may be terminated at any time by either party. We
provide medical benefits to Mr. Christian consistent with those provided to
employees generally.
At the time of commencement of employment, our employees generally execute
an agreement in which they agree that their employment will be at will and that
they will comply with the policies outlined in the Employee Handbook. This
agreement also includes a proprietary information and inventions assignment
provision.
STOCK OPTION PLANS
1998 and 1999 Stock Option Plans
Our 1998 and 1999 Stock Option Plans referred to as the 1998 and 1999
Option Plans, respectively, provide for the grant of incentive stock options,
which may provide for preferential tax treatment, to our employees, and for the
grant of nonstatutory stock options and stock purchase rights to our employees
and directors. There are a total of 189,667 and 72,167 shares outstanding
subject to options granted pursuant to the 1998 Option Plan and the 1999 Option
Plan, respectively. These options continue to be governed by the terms of the
plan pursuant to which they were granted, however no additional options will be
granted pursuant to either plan.
2000 Stock Option Plans
In November 1999, the board adopted our 2000 Equity Incentive Plan,
referred to as the 2000 Incentive Plan, which amended and restated both our 1998
Option Plan and our 1999 Option Plan. A total of 3,973,964 shares of common
stock are currently reserved for issuance pursuant to the 2000 Incentive Plan
and upon the effectiveness of this offering, and at the end of each quarter,
this share reserve automatically increases by the lesser of the following:
- 17.5% of our outstanding shares; and
- an amount to be determined by our board of directors
provided that the share reserve under the 2000 Incentive Plan can never exceed
3,973,964 shares of our common stock. The 2000 Incentive Plan provides for the
grant of options to our directors, officers and key employees, and our
consultants and certain of our advisors. Options to purchase 1,997,821 shares
under the 2000 Incentive Plan are currently outstanding, and 1,714,309 shares
remain available for issuance pursuant to the 2000 Incentive Plan.
The 2000 Incentive Plan permits the granting of options intended to qualify
as incentive stock options within the meaning of Section 422 of the Internal
Revenue Code to employees (including officers and employee directors) and
nonstatutory stock options to employees (including officers and employee
directors), directors and consultants (including non-employee directors). In
addition, the 2000 Incentive Plan permits the granting of stock bonuses and
rights to purchase restricted stock. No person is eligible to be granted options
covering more than 8 million shares of common stock in any calendar year.
The 2000 Incentive Plan is administered by our board of directors or a
committee appointed by the board. Subject to the limitations set forth in the
2000 Incentive Plan, the board has the authority to select the persons to whom
grants are to be made, to designate the number of shares to be covered by each
stock
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<PAGE> 54
award, to determine whether an option is to be an incentive stock option or a
nonstatutory stock option, to establish vesting schedules, to specify the option
exercise price and the type of consideration to be paid upon exercise and,
subject to certain restrictions, to specify other terms of stock awards.
The maximum term of options granted under the 2000 Incentive Plan is ten
years. The aggregate fair market value, determined at the time of grant, of the
shares of common stock with respect to which incentive stock options are
exercisable for the first time by an optionee during any calendar year (under
all of our incentive plans) may not exceed $100,000 or the options or portion
thereof which exceed such limit (according to the order in which they are
granted) shall be treated as nonstatutory stock options. Stock options granted
under the 2000 Incentive Plan are generally non-transferable. Options expire
three months after the termination of an optionee's service. In general, if an
optionee is permanently disabled or dies during his or her service, such
person's options may be exercised up to 12 months following such disability and
18 months following such death.
The exercise price of options granted under the 2000 Incentive Plan is
determined by the board of directors in accordance with the guidelines set forth
in the 2000 Incentive Plan. The exercise price of an incentive stock option
cannot be less than 100% of the fair market value of the common stock on the
date of the grant. The exercise price of a nonstatutory stock option cannot be
less than 85% of the fair market value of the common stock on the date of grant.
Options granted under the 2000 Incentive Plan vest at the rate specified in the
option agreement. The exercise price of incentive stock options granted to any
person who at the time of grants owns stock representing more than 10% of the
total combined voting power of all classes of our capital stock must be at least
110% of the fair market value of such stock on the date of grant and the term of
such incentive stock options cannot exceed five years.
Any stock bonuses or restricted stock purchase awards granted under the
2000 Incentive Plan shall be in such form and will contain such terms and
conditions as the board deems appropriate. The purchase price under any
restricted stock purchase agreement will not be less than 85% of the fair market
value of our common stock on the date of grant. Stock bonuses and restricted
stock purchase agreements awarded under the 2000 Incentive Plan are generally
transferable.
Pursuant to the 2000 Incentive Plan, shares subject to stock awards that
have expired or otherwise terminated without having been exercised in full
become available for grant, but exercised shares repurchased by us pursuant to a
right of repurchase will not then become available for grant.
Upon certain changes in control, all outstanding stock awards under the
2000 Incentive Plan must either be assumed or substituted for by the surviving
entity. In the event the surviving entity does not assume or substitute for such
stock awards, such stock awards will be accelerated and then terminated to the
extent not exercised prior to such change in control.
The board has the authority to amend or to terminate the 2000 Incentive
Plan as long as such action does not adversely affect any outstanding option,
stock purchase right or stock bonus and provided that stockholder approval shall
be required to the extent required by applicable law. The existence of the 2000
Incentive Plan does not affect the board's ability to grant other incentives or
compensation pursuant to other authority.
2000 EMPLOYEE STOCK PURCHASE PLAN
In April 2000, we adopted the 2000 Employee Stock Purchase Plan. A total of
500,000 shares of common stock have been reserved for issuance under the
Purchase Plan. This share reserve shall automatically increase each year, based
upon a formula, equal to the lesser of 200,000 shares or an amount determined by
the board. The Purchase Plan is intended to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Internal Revenue Code.
Under the Purchase Plan, the board may authorize participation by eligible
employees, including officers, in periodic offerings following the commencement
of the Purchase Plan.
Unless otherwise determined by the board, employees are eligible to
participate in the Purchase Plan only if they are employed by us or our
subsidiary designated by the board for at least 20 hours per week and
50
<PAGE> 55
are customarily employed by us or our subsidiary designated by the board for at
least 5 months per calendar year. Employees who participate in an offering may
have up to 15% of their earnings withheld pursuant to the Purchase Plan. The
amount withheld is then used to purchase shares of the common stock on specified
dates determined by the board. The price of common stock purchased under the
Purchase Plan will be equal to 85% of the lower of the fair market value of the
common stock at the commencement date of each offering period or the relevant
purchase date. Employees may end their participation in the offering at any time
during the offering period and participation ends automatically on termination
of employment.
In the event of a merger, reorganization, consolidation or liquidation, the
board has discretion to provide that each right to purchase common stock will be
assumed or an equivalent right will be substituted by the successor corporation
or the board may provide for all sums collected by payroll deductions to be
applied to purchase stock immediately prior to such merger or other transaction.
The board has the authority to amend or terminate the Purchase Plan, provided,
however, that no such action may adversely affect any outstanding rights to
purchase common stock.
401(K) PLAN
We provide a Basic Savings Plan, or 401(k) Plan, that covers our full-time
employees located in the United States. Our 401(k) Plan is intended to qualify
under Section 401(k) of the Internal Revenue Code of 1986, as amended, so that
contributions to our 401(k) Plan by employees or by us, and the investment
earnings thereon, are not taxable to employees until withdrawn from our 401(k)
Plan. If our 401(k) Plan qualifies under Section 401(k) of the Internal Revenue
Code of 1986, as amended, contributions by us, if any, will be deductible by us
when made.
Pursuant to our 401(k) Plan, employees may elect to reduce their current
compensation by up to the statutorily prescribed annual limit of $10,500 in 2000
and to have the amount of such reduction contributed to our 401(k) Plan. Our
401(k) Plan permits, but does not require, additional matching contributions to
our 401(k) Plan by us on behalf of all participants in our 401(k) Plan. To date,
we have not made any matching contributions to our 401(k) Plan.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION ON LIABILITY
Our By-laws provide that we shall indemnify our directors and executive
officers and may indemnify other employees and agents to the fullest extent
permitted by Delaware law. We are also empowered under our By-laws to enter into
indemnification agreements with our directors and officers and to purchase
insurance on behalf of any person we are required or permitted to indemnify.
Pursuant to this provision, we have entered into indemnification agreements with
each of our directors and executive officers and certain other employees.
In addition, our Amended and Restated Certificate of Incorporation provides
that our directors will not be personally liable to us or our stockholders for
monetary damages for any breach of fiduciary duty as a director, except for
liability:
- for any breach of the director's duty of loyalty to us or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law; or
- for any transaction from which the director derives an improper personal
benefit.
Our Amended and Restated Certificate of Incorporation also provides that if
the Delaware General Corporation Law is amended after the approval by our
stockholders of the restated certificate of incorporation to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of our directors shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law. This limitation of
liability does not apply to liabilities arising under the federal securities
51
<PAGE> 56
laws or state or federal environmental laws and does not affect the availability
of equitable remedies such as injunctive relief or rescission.
We maintain directors' and officers' liability insurance and intend to
continue to maintain this insurance in the future.
CERTAIN TRANSACTIONS
EXECUTIVE EMPLOYMENT AGREEMENTS
In November 1999, John J. Hentrich joined us as our Chief Financial
Officer, then later became our Chief Executive Officer and President. In
connection with his employment, he was granted options to purchase 1,324,655
shares of common stock at $1.05 per share and a warrant for 529,862 shares of
common stock exercisable for $0.21 per share. In February 2000, he exercised his
warrant and paid with a promissory note. In January 2000 he exercised his
options and also paid with a promissory note.
On April 10, 2000 we entered into an employment agreement with Terance A.
Kinninger, our Senior Vice President and Chief Financial Officer. We currently
pay Mr. Kinninger $200,000 annually plus a bonus of up to $50,000 contingent
upon reasonably established goals established by our chief executive officer.
Mr. Kinninger is also entitled to a mid-year bonus based upon the attainment of
established financial goals. The agreement also provides for the grant of
non-statutory options to purchase 137,500 shares of our common stock at an
exercise price of $2.04 per share. Following a change of control, if Mr.
Kinninger is terminated without cause or if he resigns for good reason, one-half
of his unvested options will vest. In addition, if Mr. Kinninger's employment is
terminated within the first year of employment under certain circumstances, up
to 44,444 shares will vest.
MANAGEMENT INDEBTEDNESS
On January 3, 2000, Mr. Hentrich delivered a promissory note in favor of
our company in the principal amount of $111,271 as consideration for the
purchase of our common stock. The note bears interest at 6.5% per annum and is
due and payable on January 3, 2003.
On February 28, 2000, Mr. Hentrich delivered a promissory note in favor of
our company in the principal amount of approximately $1.4 million as
consideration for the purchase of our common stock. The note bears interest at
6.5% per annum and is due and payable on February 27, 2004. The principal plus
accrued interest is forgiven in 24 equal monthly installments commencing April
1, 2000 and ending on March 1, 2002 provided Mr. Hentrich remains employed with
our company.
On March 23, 2000, Mr. Hentrich delivered a promissory note in favor of our
company in the principal amount of $69,735 as consideration for the purchase of
our common stock. The note bears interest at 6.5% per annum and is due and
payable on March 23, 2003.
FINANCING TRANSACTION
In June 1999, we issued an aggregate of 15,034,712 shares of our
convertible redeemable preferred stock and 100 shares of our redeemable
preferred stock to various entities affiliated with TA Associates, Inc. and
Summit Partners, LLC, in exchange for 2,088,154 shares of common stock of the
Company and $5 million in cash. These investors previously purchased the common
stock for $25 million from Blaise Barrelet, our Chairman and Chief Internet
Architect, Agnes Barrelet, one of our directors at the time and the spouse of
Mr. Barrelet, and Michael Christian, our Senior Vice President. Kurt Jaggers,
one of our directors, is a managing director of TA Associates, Inc. Walter
Kortschak another of our directors, is a managing partner of Summit Partners,
LLC. Upon the closing of this offering, each outstanding share of convertible
redeemable preferred stock will be converted into approximately 0.47 shares of
common stock and each outstanding share of redeemable preferred stock will be
redeemed for $150,000 per share. In connection with this transaction, Mr.
Christian was paid a bonus of $200,000.
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<PAGE> 57
PRINCIPAL STOCKHOLDERS
The following table contains information about the beneficial ownership of
our common stock before and after our initial public offering for:
- each stockholder known by us to own beneficially more than 5% of the
common stock;
- each of our directors;
- each of our named executive officers; and
- all directors and executive officers as a group.
The percentage of ownership in the following table is based on 23,635,457
shares of common stock outstanding on March 31, 2000, as adjusted to reflect the
conversion of all outstanding shares of convertible redeemable preferred stock
upon the closing of this offering. The table assumes no exercise of the
underwriters' over-allotment option.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Except as indicated by footnote and subject
to community property laws where applicable, to our knowledge the persons named
in the table below have sole voting and investment power with respect to all
shares of common stock shown as beneficially owned by them. In computing the
number of shares beneficially owned by a person and the percentage ownership of
that person, shares of common stock subject to options or warrants held by that
person that are currently exercisable or will become exercisable within 60 days
after March 31, 2000 are deemed outstanding, while such shares are not deemed
outstanding for purposes of computing percentage ownership of any other person.
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK
OUTSTANDING
NUMBER OF SHARES -------------------
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER(1) OWNED OFFERING OFFERING
------------------- ---------------- -------- --------
<S> <C> <C> <C>
Blaise P. Barrelet(2)....................................... 14,516,091 61.4% %
Agnes L. Barrelet(2)........................................ 14,516,091 61.4%
John J. Hentrich(3)......................................... 1,854,517 7.9%
Michael S. Christian(4)..................................... 771,511 3.3%
Benjamin H. Ball(5).........................................
One Maritime Plaza, Suite 2500
San Francisco, CA 94111
Kurt R. Jaggers(6).......................................... 3,532,425 15%
TA Associates, Inc.
125 High Street, High Street Tower
Suite 2500
Boston, MA 02110
Walter G. Kortschak(7)...................................... 3,532,425 15%
Summit Partners, LLC
499 Hamilton Avenue, Suite 200
Palo Alto, CA 94301
Entities affiliated with Summit Partners Funds(8)........... 3,532,425 15%
499 Hamilton Avenue, Suite 200
Palo Alto, CA 94301
Entities affiliated with TA Associates, Inc.(9)............. 3,532,425 15%
125 High Street, High Street Tower
Suite 2500
Boston, MA 02110
All executive officers and directors as a group (7
persons)(10).............................................. 24,206,969 99%
</TABLE>
53
<PAGE> 58
- ------------
* Represents beneficial ownership of less than 1% of the outstanding shares
of common stock.
(1) Unless otherwise indicated, the address for each person or entity named
below is c/o WebSideStory, Inc., 10182 Telesis Court, 6th Floor, San Diego,
California 92121.
(2) Includes 11,846,499 shares held by Blaise P. Barrelet, our Chairman and
Chief Internet Architect, and 2,669,592 shares held by Agnes L. Barrelet,
our Vice President and the spouse of Blaise P. Barrelet.
(3) Includes 1,324,654 shares subject to a right of repurchase in favor of the
company which right lapses over time or upon the occurrence of certain
events.
(4) Includes 33,333 shares issued upon exercise of options and 738,178 shares
that are currently exercisable or will become exercisable within 60 days
after .
(5) Until October 1999, Mr. Ball was a Vice President of TA Associates, Inc.
and retains pecuniary interest in shares held by TA Investors
LLC. Mr. Ball does not have voting or dispositive power with respect to any
other of the shares owned by the TA funds and disclaims beneficial
ownership of these shares.
(6) Mr. Jaggers, one or our directors, is a Managing Director of TA Associates,
Inc. Mr. Jaggers does not have voting or dispositive power with respect to
the shares owned by the TA funds and disclaims beneficial ownership of
these shares.
(7) Mr. Kortschak, one or our directors, is a managing member of Summit
Partners, LLC, which is the general partner of Summit Partners, V, L.P.,
which is the general partner of each of the following funds: Summit
Ventures V, L.P., Summit V Companion Fund, L.P., Summit V Advisors Fund,
L.P. and Summit V Advisors Fund (QP), L.P. Mr. Kortschak is also a general
partner of Summit Investors III, L.P., which owns stock in our company.
Summit Partners, LLC, through an investment committee, has voting and
dispositive power with respect to shares owned by the Summit Funds. Mr.
Kortschak is a member of the investment committee of Summit Partners, LLC.
Mr. Kortschak does not have voting or dispositive power with respect to the
shares owned by the Summit funds and disclaims beneficial ownership of
these shares.
(8) Includes 2,619,840 shares held by Summit Ventures V, L.P., 609,882 shares
held by Summit V Companion Fund, L.P., 56,558 shares held by Summit V
Advisors Fund, L.P., 185,075 shares held by Summit V Advisors Fund (QP),
L.P. and 61,070 shares held by Summit Investors III, L.P. each of which is
an affiliate of Summit Partners, LLC. Summit Partners V, L.P. is the
general partner of each of Summit Ventures V, L.P., Summit V Companion
Fund, L.P. Summit Partners, LLC is the general partner of each of Summit
Partners V, L.P., Summit V Advisors Fund (QP), L.P. and Summit V Advisors
Fund, L.P. Summit Partners, LLC through an investment committee, exercises
sole voting and investment power with respect to the shares owned by the
Summit funds. Mr. Kortschak is a member of the investment committee of
Summit Partners, LLC.
(9) Includes 2,878,524 shares held by TA/Advent VIII L.P., 541,639 shares held
by Advent Atlantic and Pacific III L.P., 54,692 shares held by TA
Executives Fund LLC and 57,570 shares held by TA Investors LLC. TA/Advent
VIII L.P., Advent Atlantic and Pacific III L.P., TA Executives Fund LLC and
TA Investors LLC are part of an affiliated group of investment
partnerships. The general partner of TA/Advent VIII L.P. is TA Associates
VIII LLC. The general partner of Advent Atlantic and Pacific III L.P. is TA
Associates AAP III Partners L.P. TA Associates, Inc. is the general partner
of TA Associates AAP III Partners L.P. and is the sole manager of TA Advent
VIII, LLC, TA Executives Fund LLC and TA Investors LLC. In this capacity TA
Associates, Inc., through an executive committee, exercises sole voting and
investment power with respect to all shares held of record by the named
investment partnerships. Individually, no stockholder, director or officer
of TA Associates, Inc., or any of the above-mentioned funds, is deemed to
have or share such voting or investment power.
(10) Includes shares described in the notes above, as applicable.
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<PAGE> 59
DESCRIPTION OF CAPITAL STOCK
Immediately following the closing of this offering and the filing of our
restated certificate of incorporation, our authorized capital stock will consist
of 100,000,000 shares of common stock, $0.001 par value per share, and
10,000,000 shares of preferred stock, $0.001 par value per share. As of December
31, 1999, after giving effect to the conversion of all outstanding preferred
stock into common stock upon the closing of this offering, there were
outstanding 21,747,609 shares of common stock held of record by 13 stockholders
and options to purchase 2,259,655 shares of common stock.
COMMON STOCK
The holders of common stock are entitled to one vote per share on all
matters to be voted on by the stockholders. Subject to preferences that may be
applicable to any outstanding shares of preferred stock, holders of common stock
are entitled to receive ratably such dividends as may be declared by the board
of directors out of funds legally available therefor. In the event of our
liquidation, dissolution or winding up, holders of common stock are entitled to
share ratably in all assets remaining after payment of liabilities and the
liquidation preferences of any outstanding shares of preferred stock. Holders of
common stock have no preemptive, conversion, subscription or other rights. There
are no redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are, 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, all outstanding shares of our
convertible redeemable preferred stock will be converted into shares of common
stock and we will redeem all outstanding shares of our redeemable preferred.
Following the conversion, our certificate of incorporation will be amended and
restated to delete all references to these shares of preferred stock. Under the
restated certificate of incorporation, the board has the authority, without
further action by stockholders, to issue up to 5,000,000 shares of preferred
stock in one or more series. In addition, our board may fix the rights,
preferences and privileges, of any preferred stock it determines to issue. Any
or all of these rights may be superior to the rights of the common stock.
Preferred stock could thus be issued quickly with terms calculated to delay or
prevent a change in our control or to make removal of our management more
difficult. Additionally, our issuance of preferred stock may decrease the market
price of our common stock. At present, we have no plans to issue any shares of
preferred stock.
REGISTRATION RIGHTS
The holders of shares of our convertible redeemable participating preferred
stock and the holder of a warrant to purchase 13,333 shares of our common stock
are entitled to certain registration rights with respect to the registration
under the Securities Act of the common stock into which those shares are
convertible. These rights are provided for under the terms of a registration
rights agreement between us and the holders of the registrable securities.
Beginning one year following the date of this prospectus, holders of a majority
of the then outstanding registrable securities may require on up to two
occasions that we register for public resale all or any portion of their
registrable securities (representing offering proceeds aggregating not less than
$20 million for an initial public offering or $10 million otherwise). We need
not register these shares if the requested registration would occur within six
months following the effective date of any other registration statement we have
filed. Also, we may defer the registration of these shares for up to 120 days
if, in the good faith judgment of our board of directors, it would be seriously
detrimental to us and our stockholders for the registration statement to be
filed or if there is a valid business purpose or reason for delaying filing or
effectiveness. Furthermore, in the event we elect to register any of our shares
of common stock for purposes of effecting any public offering, the holders of
registrable securities are entitled to include their shares of common stock in
the registration, but we may limit the number of shares proposed to be
registered in view of market conditions. All expenses in connection with any
registration, other than underwriting fees, discounts and commissions, will be
borne by us.
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<PAGE> 60
ANTI-TAKEOVER PROVISIONS
Delaware Law
We are governed by the provisions of Section 203 of the Delaware Law. In
general, Section 203 prohibits a public Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sale or other transactions
resulting in a financial benefit to the stockholder. An "interested stockholder"
is a person who, together with affiliates and associates, owns (or within three
years, did own) 15% or more of the corporation's voting stock. The statute could
have the effect of delaying, deferring or preventing a change in our control.
Charter and Bylaw Provisions
Our bylaws provide that special meetings of our stockholders may be called
only by the Chairman of the board of directors, our Chief Executive Officer, by
the board of directors pursuant to a resolution adopted by a majority of the
total number of authorized directors, or by the holders of 10% of our
outstanding voting stock. Our restated certificate of incorporation also
specifies that the authorized number of directors may be changed only by
resolution of the board of directors and does not include a provision for
cumulative voting for directors. Under cumulative voting, a minority stockholder
holding a sufficient percentage of a class of shares may be able to ensure the
election of one or more directors. These and other provisions contained in our
restated certificate of incorporation and bylaws could delay or discourage
certain types of transactions involving an actual or potential change in control
of us or our management (including transactions in which stockholders might
otherwise receive a premium for their shares over then current prices) and may
limit the ability of stockholders to remove current management or approve
transactions that stockholders may deem to be in their best interests and,
therefore, could adversely affect the price of our common stock.
THE NASDAQ NATIONAL MARKET
We have applied to list our common stock on the Nasdaq National Market
under the trading symbol "WSSI."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Equiserve Trust
Company.
56
<PAGE> 61
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock, and
we cannot assure you that a significant public market for our common stock will
develop or be sustained after this offering. As described below, no shares
currently outstanding will be available for sale immediately after this offering
due to certain contractual restrictions on resale. Sales of substantial amounts
of our common stock in the public market after the restrictions lapse could
adversely affect the prevailing market price and our ability to raise equity
capital in the future.
Upon completion of this offering, we will have outstanding shares
of common stock, assuming no exercise of the underwriters' over-allotment option
and no exercise of outstanding options. Of these shares, all of the shares sold
in this offering will be freely tradable without restriction under the
Securities Act unless purchased by our affiliates.
The remaining 23,635,457 shares of common stock held by existing
stockholders are restricted securities. Restricted securities may be sold in the
public market only if registered or if they qualify for an exemption from
registration described below under Rules 144, 144(k) or 701 promulgated under
the Securities Act.
As a result of the lock-up agreements and the provisions of Rules 144,
144(k) and 701 described below, these restricted shares will be available for
sale in the public market as follows:
- no shares may be sold prior to 180 days from the date of this prospectus;
and
- shares will have been held long enough to be sold under
Rule 144 or Rule 701 beginning 181 days after the date of this
prospectus, however the resale of these restricted shares will be limited
by volume and other resale restrictions under Rule 144 because the
holders of these shares are our affiliates.
RULE 144
In general, under Rule 144, a person who has beneficially owned restricted
securities 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 our common stock then outstanding which
will equal approximately shares immediately after this
offering; or
- the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale.
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.
Under Rule 144(k), a person who is not deemed to have 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 such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144 discussed above.
RULE 701
In general, under Rule 701, any of our employees, consultants or advisors
who purchases or receives shares from us in connection with a compensatory stock
purchase plan or option plan or other written agreement will be eligible to
resell their shares beginning 90 days after the date of this prospectus. Non-
affiliates will be able to sell their shares subject only to the manner-of-sale
provisions of Rule 144. Affiliates will be able to sell their shares without
compliance with the holding period requirements of Rule 144.
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<PAGE> 62
REGISTRATION RIGHTS
Upon completion of this offering, the holders of 7,078,184 shares of our
common stock will be entitled to rights with respect to the registration of
their shares under the Securities Act. See "Description of Capital
Stock - Registration Rights." Except for shares purchased by affiliates,
registration of their shares under the Securities Act would result in such
shares becoming freely tradable without restriction under the Securities Act
immediately upon the effectiveness of the registration.
STOCK OPTIONS
Immediately after this offering, we intend to file a registration statement
under the Securities Act covering the shares of common stock reserved for
issuance upon exercise of outstanding options and options available for grant.
The registration statement is expected to be filed and become effective as soon
as practicable after the closing of this offering. Accordingly, shares
registered under the registration statement will, subject to Rule 144 volume
limitations applicable to affiliates, be available for sale in the open market
beginning 180 days after the effective date of the registrant statement of which
this prospectus is a part.
LOCK-UP ARRANGEMENTS
Holders of a total of shares of common stock (including preferred
stock convertible into common stock and including all stock held by executive
officers and directors), and options to purchase a total of shares of
common stock have agreed not to sell or otherwise dispose of any unrestricted
shares of common stock for a period of 180 days after the date of this
prospectus without the prior written consent of FleetBoston Robertson Stephens
Inc. In addition, all options granted under our equity incentive plans are
subject to similar lock-up arrangements pursuant to agreements between the
optionees and us.
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<PAGE> 63
UNDERWRITING
The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., U.S. Bancorp Piper Jaffray Inc. and William
Blair & Company, L.L.C., have severally agreed with us, subject to the terms and
conditions of the underwriting agreement, to purchase from us the number of
shares of common stock set forth below opposite their respective names. The
underwriters are committed to purchase and pay for all shares if any are
purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
FleetBoston Robertson Stephens Inc. ........................
U.S. Bancorp Piper Jaffray Inc. ............................
William Blair & Company, L.L.C. ............................
--------
Total.....................................................
========
</TABLE>
The representatives have advised us that the underwriters propose to offer
the shares of common stock to the public at the public offering price set forth
on the cover page of this prospectus and to certain dealers at that price less a
concession of not in excess of $ per share, of which $ may be
reallowed to other dealers. After this offering, the public offering price,
concession and reallowance to dealers may be reduced by the representatives. No
such reduction shall change the amount of proceeds to be received by us as set
forth on the cover page of this prospectus. The common stock is offered by the
underwriters as stated herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part.
Prior to this offering, there has been no public market for the common
stock. Consequently, the public offering price for the common stock offered by
this prospectus has been determined through negotiations among the
representatives and us. Among the factors considered in such negotiations were
prevailing market conditions, certain of our financial information, market
valuations of other companies that we and the representatives believe to be
comparable to us, estimates of our business potential, the present state of our
development and other factors deemed relevant.
The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed five percent of the total number of shares
offered.
Over-Allotment Option
We have granted to the underwriters an option, exercisable during the
30-day period after the date of this prospectus, to purchase up to
additional shares of common stock to cover over-allotments, if any, at
the public offering price less the underwriting discount set forth on the cover
page of this prospectus. If the underwriters exercise their over-allotment
option to purchase any of the additional shares of common stock, the
underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof as the number of shares to be
purchased by each of them bears to the total number of shares of common stock
offered in this offering. If purchased, these additional shares will be sold by
the underwriters on the same terms as those on which the shares offered hereby
are being sold. We will be obligated, pursuant to the over-allotment option, to
sell shares to the underwriters to the extent the over-allotment option is
exercised. The underwriters may exercise the over-allotment option only to cover
over-allotments made in connection with the sale of the shares of common stock
offered in this offering.
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<PAGE> 64
The following table summarizes the compensation to be paid to the
underwriters by us.
<TABLE>
<CAPTION>
TOTAL
---------------------
WITHOUT WITH
PER OVER- OVER-
SHARE ALLOTMENT ALLOTMENT
-------- --------- ---------
<S> <C> <C> <C>
Underwriting Discounts and Commissions payable by
WebSideStory..............................................
</TABLE>
WebSideStory estimates expenses payable by us in connection with this
offering, other than the underwriting discounts and commissions referred to
above, will be approximately $ .
Indemnity
The underwriting agreement contains covenants of indemnity between the
underwriters and us against certain civil liabilities, including liabilities
under the Securities Act, and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
Lock-Up Agreements
Each executive officer and director of WebSideStory and substantially all
of our other stockholders have agreed, subject to specified exceptions, not to
offer to sell, contract to sell, or otherwise sell, dispose of, loan, pledge or
grant any rights with respect to any shares of common stock or any options or
warrants to purchase any shares of common stock, or any securities convertible
into or exchangeable for shares of common stock owned as of the date of this
prospectus or thereafter acquired directly by those holders or with respect to
which they have the power of disposition, without the prior written consent of
FleetBoston Robertson Stephens Inc. This restriction terminates after the close
of trading of the shares on the 180th day of (and including) the day the shares
commenced trading on the Nasdaq National Market. However, FleetBoston Robertson
Stephens Inc. may, in its sole discretion and at any time or from time to time
before the termination of the 180-day period, without notice, release all or any
portion of the securities subject to lock-up agreements. There are no existing
agreements between the Representatives and any of our shareholders who have
executed a lock-up agreement providing consent to the sale of shares prior to
the expiration of the lock-up period.
In addition, we have agreed that during the lock-up period we will not,
without the prior written consent of FleetBoston Robertson Stephens Inc.,
subject to certain exceptions, consent to the disposition of any shares held by
shareholders subject to lock-up agreements prior to the expiration of the
lock-up period, or issue, sell, contract to sell, or otherwise dispose of, any
shares of common stock, any options or warrants to purchase any shares of common
stock or any securities convertible into, exercisable for or exchangeable for
shares of common stock other than our sale of shares in this offering, the
issuance of our common stock upon the exercise of outstanding options or
warrants, and the issuance of options under existing stock option and incentive
plans provided that those options do not vest prior to the expiration of the
lock-up period. See "Shares Eligible for Future Sale."
Listing
The common stock has been applied for quotation on the Nasdaq National
Market under the symbol "WSSI."
Stabilization
The representatives have advised us that, pursuant to Regulation M under
the Securities Act of 1933, some persons participating in the offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, that may have the effect of
stabilizing or maintaining the market price of the shares of common stock at a
level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of shares of common stock on
behalf of the underwriters for the purpose of fixing or maintaining the price of
the common stock. A "syndicate covering
60
<PAGE> 65
transaction" is the bid for or purchase of common stock on behalf of the
underwriters to reduce a short position incurred by the underwriters in
connection with the offering. A "penalty bid" is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with the offering if the common
stock originally sold by such underwriter or syndicate member purchased by the
representatives in a syndicate covering transaction and has therefore not been
effectively placed by such underwriter or syndicate member. The representatives
have advised us that such transactions may be effected on the Nasdaq National
Market or otherwise and, if commenced, may be discontinued at any time.
Directed Share Program
At WebSideStory's request, certain of the underwriters have reserved up to
% of the shares of common stock (the "Directed Shares") for sale at the
initial public offering price to persons who are directors, officers or
employees of WebSideStory, or who are otherwise associated with the Company and
its affiliates, and who have advised WebSideStory of their desire to purchase
such shares. The number of shares of common stock available for sale to the
general public will be reduced to the extent of sales of the Directed Shares to
any of the persons for whom they have been reserved. Any shares not so purchased
will be offered by the underwriters on the same basis as all other shares of
common stock offered hereby. We have agreed to indemnify those certain
underwriters against certain liabilities and expenses, including liabilities
under the Securities Act, in connection with the sales of directed shares.
LEGAL MATTERS
Gray Cary Ware & Freidenrich LLP in San Diego, California will pass upon
the validity of the shares of common stock offered by this prospectus and
certain other legal matters for us. Brobeck, Phleger & Harrison LLP in Irvine,
California will pass upon certain legal matters for the underwriters.
EXPERTS
The audited financial statements at December 31, 1998 and 1999 and for each
of the three years in the period ended December 31, 1999 included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
61
<PAGE> 66
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act, including the exhibits with the
registration statement, with respect to the shares offered by this prospectus.
This prospectus does not contain all the information contained in the
registration statement. For further information with respect to us and the
shares to be sold in this offering, we refer you to the registration statement.
Statements contained in this prospectus as to the contents of any contract,
agreement or other document to which we make reference are not necessarily
complete. In each instance, we refer you to the copy of the contract, agreement
or other document filed as an exhibit to the registration statement, each
statement being qualified in all respects by the more complete description of
the matter involved.
You may read and copy all or any portion of the registration statement or
any reports, statements or other information we file at the Security and
Exchange Commission's public reference room at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Security and Exchange
Commission's regional offices located at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048. Please call the Securities and Exchange Commission at 1-800-SEC-0330
for further information on the operation of the public reference rooms. You can
receive copies of these documents upon payment of a duplicating fee by writing
to the Securities and Exchange Commission. Our Commission filings, including the
registration statement, will also be available to you on the Commission's
Internet site at http://www.sec.gov.
We intend to send our stockholders annual reports containing audited
consolidated financial statements and quarterly reports containing unaudited
financial statements for the first three quarters of each fiscal year.
62
<PAGE> 67
WEBSIDESTORY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1998 and 1999.......................... F-4
Consolidated Statements of Stockholders' Equity (Deficit)
for the Years Ended December 31, 1997, 1998 and 1999...... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1998 and 1999.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 68
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
WebSideStory, Inc.
The stock split and reincorporation described in Note 1 to the consolidated
financial statements have not been consummated at April 17, 2000. When they have
been consummated, we will be in a position to furnish the following report:
"In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of operations, of stockholders'
equity (deficit) and of cash flows present fairly, in all material
respects, the financial position of WebSideStory, Inc. and its
subsidiary (the "Company") at December 31, 1998 and 1999, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above."
PRICEWATERHOUSECOOPERS LLP
San Diego, California
April 17, 2000, except for the portion
of Note 1 discussing the
stock split to which
the date is , 2000
and the portion of Note 1
discussing the reincorporation
to which the date is , 2000
F-2
<PAGE> 69
WEBSIDESTORY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, DEFICIT
------------------ DECEMBER 31,
1998 1999 1999
------ -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 330 $ 3,254
Restricted cash........................................... -- 100
Accounts receivable, net of allowance for doubtful
accounts of $0 and $76.................................. 93 636
Receivable from leasing company........................... 72 --
Income taxes receivable................................... -- 704
Deferred tax assets....................................... 143 921
Prepaid expenses and other current assets................. 106 204
------ --------
Total current assets.................................... 744 5,819
Property and equipment, net................................. 688 1,937
Acquired technology, net.................................... 141 --
Software development costs, net............................. 437 850
Deferred tax assets......................................... -- --
Intangible and other assets................................. 14 192
------ --------
$2,024 $ 8,798
====== ========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable.......................................... $ 112 $ 787
Accrued expenses.......................................... 42 243
Deferred revenue.......................................... 254 282
Amounts owed to customers................................. 20 174
Income taxes payable...................................... 274 --
Note payable to former president.......................... 50 --
Current portion of note payable to former stockholder..... 46 50
Current portion of capital lease obligations.............. 39 74
------ --------
Total current liabilities............................... 837 1,610
Note payable to former stockholder, less current portion.... 231 165
Capital lease obligations, less current portion............. 70 29
Deferred tax liabilities.................................... 204 322
------ --------
Total liabilities....................................... 1,342 2,126
------ --------
Commitments (Note 8)
Redeemable preferred stock, 15,034,812 shares authorized:
Redeemable preferred stock, no par value; 100 shares
designated, issued and outstanding at December 31, 1999
and December 31, 1999 pro forma; redemption value of
$15,000,000............................................. -- 8,636 $ 8,636
Convertible redeemable preferred stock, no par value;
15,034,712 and 0 shares designated, issued and
outstanding at December 31, 1999 and December 31, 1999
pro forma; redemption value of $15,000,000.............. -- 20,829 --
------ -------- --------
-- 29,465 8,636
Stockholders' equity (deficit)
Common stock, $0.001 par value; 25,000,000, 30,827,531 and
30,827,531 shares authorized at December 31, 1998 and
1999 and December 31, 1999 pro forma; 16,666,666,
14,682,757 and 21,747,609 shares issued and outstanding
at December 31, 1998 and 1999 and December 31, 1999 pro
forma................................................... 3 3 10
Additional paid-in capital................................ -- 6,592 21,585
Unearned stock-based compensation......................... -- (4,118) (4,118)
Retained earnings (accumulated deficit)................... 679 (25,270) (19,441)
------ -------- --------
Total stockholders' equity (deficit).................... 682 (22,793) $ (1,964)
------ -------- ========
$2,024 $ 8,798
====== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-3
<PAGE> 70
WEBSIDESTORY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Advertising........................................... $ 1,460 $ 4,587 $ 8,521
Technology services................................... 160 918 1,005
Subscription services................................. -- -- 74
----------- ----------- -----------
Total revenue...................................... 1,620 5,505 9,600
----------- ----------- -----------
Operating expenses:
Sales and marketing................................... 296 1,103 3,414
Technology development and operations................. 245 1,423 3,412
General and administrative............................ 581 1,513 2,699
Stock-based compensation (*).......................... -- -- 1,998
----------- ----------- -----------
Total operating expenses........................... 1,122 4,039 11,523
----------- ----------- -----------
Income (loss) from operations........................... 498 1,466 (1,923)
Other income (expense):
Interest expense...................................... -- (31) (40)
Interest income....................................... 5 26 118
Other income.......................................... -- -- 110
----------- ----------- -----------
Income (loss) before provision for (benefit from) income
taxes................................................. 503 1,461 (1,735)
Provision for (benefit from) income taxes............... 199 624 (550)
----------- ----------- -----------
Net income (loss)....................................... 304 837 (1,185)
Accretion of discount on redeemable preferred stock..... -- -- 467
Adjustment of premium on convertible redeemable
preferred stock....................................... -- -- (699)
----------- ----------- -----------
Net income (loss) attributable to common stockholders... $ 304 $ 837 $ (1,417)
=========== =========== ===========
Net income (loss) per share attributable to common
stockholders:
Basic................................................. $ 0.01 $ 0.05 $ (0.09)
=========== =========== ===========
Diluted............................................... $ 0.01 $ 0.04 $ (0.09)
=========== =========== ===========
Shares used in computing net income (loss) per share
attributable to common stockholders:
Basic................................................. 30,303,030 18,011,623 15,595,899
=========== =========== ===========
Diluted............................................... 30,303,030 18,760,557 15,595,899
=========== =========== ===========
Unaudited pro forma net loss per share attributable to
common stockholders, basic and diluted................ $ (0.08)
===========
Shares used in computing unaudited pro forma net loss
per share attributable to common stockholders, basic
and diluted........................................... 17,098,224
===========
- ---------------
(*) Stock-based compensation:
Sales and marketing $ -- $ -- $ 44
Technology development and operations -- -- 34
General and administrative -- -- 1,920
----------- ----------- -----------
$ -- $ -- $ 1,998
=========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-4
<PAGE> 71
WEBSIDESTORY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK ADDITIONAL UNEARNED EARNINGS STOCKHOLDERS'
---------------------- PAID-IN STOCK-BASED (ACCUMULATED EQUITY
SHARES ISSUED AMOUNT CAPITAL COMPENSATION DEFICIT) (DEFICIT)
------------- ------ ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996... 30,303,030 $ 5 $ -- $ -- $ 1 $ 6
Net income..................... -- -- -- -- 304 304
----------- --- ------ ------- -------- --------
BALANCE AT DECEMBER 31, 1997... 30,303,030 5 -- -- 305 310
Repurchase of common stock
(Note 3)..................... (13,636,364) (2) -- -- (463) (465)
Net income..................... -- -- -- -- 837 837
----------- --- ------ ------- -------- --------
BALANCE AT DECEMBER 31, 1998... 16,666,666 3 -- -- 679 682
Exercise of stock options...... 104,245 4 -- -- -- 4
Tax benefit from exercise of
stock options................ -- -- 476 -- -- 476
Unearned stock-based
compensation................. -- -- 6,116 (6,116) -- --
Amortization of unearned stock-
based compensation........... -- -- -- 1,998 -- 1,998
Accretion of discount on
redeemable preferred stock... -- -- -- -- (467) (467)
Adjustment of premium on
convertible redeemable
preferred stock.............. -- -- -- -- 699 699
Repurchase of common stock as
part of preferred stock
financing (Note 5)........... (2,088,154) (4) -- -- (24,996) (25,000)
Net loss....................... -- -- -- -- (1,185) (1,185)
----------- --- ------ ------- -------- --------
BALANCE AT DECEMBER 31, 1999... 14,682,757 $ 3 $6,592 $(4,118) $(25,270) $(22,793)
=========== === ====== ======= ======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-5
<PAGE> 72
WEBSIDESTORY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1998 1999
------ ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $ 304 $ 837 $(1,185)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 58 517 1,392
Deferred income taxes.................................. (59) 120 (660)
Non-cash stock-based compensation...................... -- -- 1,998
Changes in assets and liabilities, net of effect of
acquisition in 1998:
Accounts receivable.................................. (4) (89) (543)
Income taxes receivable.............................. -- -- (228)
Prepaid expenses and other assets.................... (26) (94) (376)
Accounts payable and accrued expenses................ 343 (127) 876
Deferred revenue..................................... 120 128 28
Amounts owed to customers............................ -- 20 154
Income taxes payable................................. 256 16 (274)
------ ------- -------
Net cash provided by operating activities......... 992 1,328 1,182
------ ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment........................ (298) (553) (1,643)
Capitalization of software development costs.............. (274) (447) (1,211)
Acquisition of Reword Corporation, net of cash acquired
(Note 3)............................................... -- (142) --
------ ------- -------
Net cash used in investing activities............. (572) (1,142) (2,854)
------ ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of stock options................................. -- -- 4
Principal payments on note payable to former president.... -- (100) (50)
Principal payments on note payable to former
stockholder............................................ -- (58) (62)
Repurchase of common stock -- cash portion................ -- (130) --
Proceeds from sale of preferred stock, net of issuance
costs (Note 5)......................................... -- -- 4,697
Proceeds from sale-leaseback transaction (Note 2)......... -- -- 72
Principal payments on capital leases...................... -- (4) (65)
------ ------- -------
Net cash (used in) provided by financing
activities...................................... -- (292) 4,596
------ ------- -------
Net increase (decrease) in cash and cash equivalents........ 420 (106) 2,924
Cash and cash equivalents at beginning of year.............. 16 436 330
------ ------- -------
Cash and cash equivalents at end of year.................... $ 436 $ 330 $ 3,254
====== ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest.................................... $ -- $ 31 $ 40
Cash paid for income taxes................................ 2 488 303
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
TRANSACTIONS
Property and equipment acquired under capitalized
leases................................................. $ -- $ 41 $ 59
Execution of note payable as partial consideration for
stock repurchase....................................... -- 400 --
Execution of note payable to president as partial
consideration in connection with the acquisition of
Reword Corporation..................................... -- 150 --
Execution of sale-leaseback transaction in December 1998
for which proceeds were funded in January 1999......... -- 72 --
Tax benefit from exercise of nonstatutory stock options... -- -- 476
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-6
<PAGE> 73
WEBSIDESTORY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. THE COMPANY
BUSINESS
WebSideStory, Inc. (the "Company") was founded and commenced operations on
September 16, 1996. The Company is a Web-based application service provider that
delivers detailed, real-time Web site analysis and user behavior information to
customers who operate Web sites.
The Company's revenues are derived from the sale of on-line banner
advertisements, technology services and subscription services. Advertising
contracts range in duration from one to three months. Traffic to the Company's
Web sites is directed from the Web sites of its subscribers, who are provided
the free use of the Company's services. Advertising rates are typically based
upon the display of a minimum number of "impressions," or times that an
advertisement appears in pages viewed by users of the Company's Web sites, over
the term of the contract. Rates for some contracts may also be based on a
minimum number of "click-throughs," where an end user must actually click
through a banner advertisement. The Company does not engage in any barter
advertising. Revenues derived from technology services contracts, which consist
primarily of Web hosting contracts, generally have three-month terms.
Subscription services involve the provision of statistics and reports of
Internet user behavior for a fee, which is either flat or based on the actual
number of Web sites and page views monitored by the Company's service. Contracts
for subscription services range in duration from one month to a year.
The Company's business consists of a single operating segment, and its
operations were located solely in the United States through December 1999. In
February 2000, the Company established a wholly-owned subsidiary in France,
WebSideStory SAS, in order to pursue the sale of its products and services in
that market. Revenues from customers located outside of the United States were
immaterial for all of the periods presented. No single customer accounted for
10% or more of the Company's revenues in any of the periods presented.
REINCORPORATION
In April 2000, the Company's Board of Directors (the "Board") authorized
the reincorporation of the Company in the State of Delaware. The reincorporation
is expected to be certified by the State of Delaware before the effective date
of the Company's proposed initial public offering ("IPO").
STOCK SPLIT
In connection with its proposed IPO, the Company will be effecting a
six-for-one reverse common stock split. All per share and share amounts in the
consolidated financial statements have been retroactively restated to reflect
the effect of this reverse stock split.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED PRO FORMA CONSOLIDATED STOCKHOLDERS' DEFICIT
If the IPO contemplated by the Company is consummated as presently
anticipated, all of the convertible preferred stock outstanding as of the
closing will automatically convert into 7,064,850 shares of common stock based
on the shares of convertible preferred stock outstanding at December 31, 1999.
Unaudited pro forma stockholders' deficit as of December 31, 1999 reflects this
conversion of preferred stock as if such conversion had occurred as of December
31, 1999.
F-7
<PAGE> 74
WEBSIDESTORY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts
of WebSideStory, Inc. and its wholly-owned subsidiary, Reword Corporation
("Reword"). All intercompany accounts and transactions have been eliminated in
consolidation.
USE OF ESTIMATES
In the normal course of preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the dates
of the financial statements, as well as the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity date at
date of purchase of three months or less to be cash equivalents. Cash
equivalents consist of certificates of deposit.
RESTRICTED CASH
Restricted cash consists of a $100 certificate of deposit which is
restricted in connection with litigation with a competitor. In January 2000, the
amount became unrestricted as a result of settlement of the litigation.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is computed using the straight-line method based upon
the estimated useful lives of the assets ranging from three to five years.
Amortization of leasehold improvements is computed using the shorter of the term
of the related leases or the estimated useful lives of the improvements.
Expenditures for maintenance and repairs are charged to operations as incurred.
LONG-LIVED ASSETS
The Company assesses potential impairments to its long-lived assets when
there is evidence that events or changes in circumstances indicate that the
carrying amount of an asset may not be recovered. An impairment loss would be
recognized when an asset's fair value, determined based on undiscounted cash
flows expected to be generated by the asset, is less than its carrying amount.
Any required impairment loss would be measured as the amount by which the
asset's carrying value exceeds its fair value, and would be recorded as a
reduction in the carrying value of the related asset and a charge to results of
operations. See Note 3 regarding an impairment of acquired technology identified
by the Company during 1999. No other impairment losses have been identified by
the Company.
REVENUE RECOGNITION
Advertising revenues are recognized ratably over the period in which the
advertisements are displayed, provided that no significant Company obligations
remain at the end of the respective periods. Company obligations typically
include the guarantee of a minimum number of impressions or click-throughs.
Amounts owed to customers arise to the extent that minimum guaranteed
impressions or click-throughs under prepaid advertising contracts are not met at
the completion of the service period. Deferred revenue represents undelivered
impressions or click-throughs under prepaid advertising contracts that have not
been completed at the end of an accounting period.
F-8
<PAGE> 75
WEBSIDESTORY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Revenues derived from technology services are recognized ratably over the
term of the related service periods. Revenues derived from flat-fee subscription
services are recognized ratably over the term of the related service periods.
Revenues derived from other subscription services are recognized on the basis of
the actual number of page views and Web sites monitored by the Company's
service.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense for 1997,
1998 and 1999 totaled $35, $192 and $955, respectively.
TECHNOLOGY DEVELOPMENT AND OPERATIONS COSTS
Technology development and operations costs include expenses incurred by
the Company to develop, enhance, manage, maintain and operate the Company's Web
sites. The software development component of technology development and
operations costs are accounted for in accordance with Statement of Position
(SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use." In accordance with SOP 98-1, internal and external costs
incurred to develop internal-use computer software during the application
development stage are capitalized. Application stage costs generally include
software configuration, coding, installation to hardware and testing. Costs of
upgrades and enhancements that result in additional functionality are also
capitalized. Costs incurred for maintenance and minor upgrades and enhancements
are expensed as incurred. Capitalized software development costs are amortized
on a straight-line basis over the estimated useful lives of the related software
applications ranging from 2 months to 30 months. The estimated useful lives are
based on planned or expected replacement or significant modification of software
applications, in response to the rapid rate of change in the internet industry
and technology in general. The Company capitalized software development costs of
$274, $447 and $1,211 during 1997, 1998 and 1999. Amortization expense for 1997,
1998 and 1999 totaled $6, $277 and $799.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents
and accounts receivable. The Company places its cash and temporary cash
investments with high-quality financial institutions for which credit loss is
not anticipated. Accounts receivable are generally unsecured and are derived
from revenues earned from customers located primarily in the United States. The
Company performs ongoing credit evaluations of its customers and maintains an
allowance for potential credit losses as considered necessary. At December 31,
1998, no such allowances have been established as all amounts were considered by
management to be fully collectible. At December 31, 1999, the Company
established an allowance for potential credit losses of $76.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts shown for the Company's cash equivalents approximate
their fair values due to the short-term maturity of these instruments. The
carrying amounts shown for the Company's notes payable and capital lease
obligations are also considered by management to be reasonable indicators of
their fair values based upon borrowing rates that are currently available for
obligations of similar terms and maturities.
RECEIVABLE FROM LEASING COMPANY
In December 1998, the Company executed a sale-leaseback transaction with a
leasing company, simultaneous to which title to certain property and equipment
previously owned by the Company was transferred to the leasing company. The
leasing company funded the related proceeds to the Company in January 1999.
Accordingly, the Company has recorded a receivable due from the leasing company
at
F-9
<PAGE> 76
WEBSIDESTORY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
December 31, 1998. The proceeds received were equal to the net book value of the
assets transferred; therefore, no gain or loss was recorded in connection with
this sale-leaseback transaction. The Company has accounted for the leased assets
as a capital lease in the accompanying consolidated financial statements at
December 31, 1998 and 1999.
INCOME TAXES
The Company provides for income taxes utilizing the liability method. Under
the liability method, current income tax expense or benefit is the amount of
income taxes expected to be payable or refundable for the current year. A
deferred income tax asset or liability is computed for the expected future
impact of differences between the financial reporting and tax bases of assets
and liabilities and for the expected future tax benefit to be derived from tax
credit and loss carryforwards. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Tax rate
changes are reflected in income during the period such changes are enacted.
STOCK-BASED COMPENSATION
The Company measures compensation expense for its employee stock-based
compensation plans using the intrinsic value method and provides pro forma
disclosures of net income as if a fair value-based method had been applied in
measuring compensation expense. Accordingly, compensation cost for stock options
is measured as the excess, if any, of the deemed fair value of the Company's
common stock for financial reporting purposes at the date of grant over the
amount an employee must pay to acquire the stock. Stock-based compensation is
amortized over the related vesting periods using an accelerated graded method in
accordance with Financial Accounting Standards Board Interpretation ("FIN") No.
28, "Accounting for Stock Appreciation Rights and Other Variable Stock Option or
Award Plans."
COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) for all periods presented consists solely of
net income (loss).
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," is effective for fiscal
years beginning after June 15, 2000. Because the Company holds no derivative
financial instruments and does not engage in any hedging activities, adoption of
SFAS No. 133 is not expected to have a material impact on the Company's
financial position or results of operations.
Staff Accounting Bulletin ("SAB") No. 101 provides the views of the
Securities and Exchange Commission in applying generally accepted accounting
principles to selected revenue recognition issues. SAB No. 101 is not expected
to have a material impact on the Company's financial position or results of
operations.
EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing income (loss)
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings (loss) per share is computed by
dividing income (loss) available to common stockholders by the weighted average
number of common shares outstanding during the period increased to include
dilutive potential common shares that were outstanding during the period. For
1998, potential common shares consisted of outstanding stock options. The
dilutive effect of outstanding stock options is reflected in diluted earnings
per share in
F-10
<PAGE> 77
WEBSIDESTORY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1998 by application of the treasury stock method. The Company has excluded all
convertible preferred stock and outstanding stock options from the calculation
of diluted loss per share for the year ended December 31, 1999 because all such
securities are antidilutive for this period. The total number of potential
common shares excluded from the calculation of diluted loss per share for the
year ended December 31, 1999 was 10,625,880.
Unaudited pro forma net loss per share is computed as described above and
also gives effect, even if antidilutive, to potential common shares from
preferred stock that will automatically convert upon the closing of the
Company's proposed IPO (using the as-if converted method). Unaudited pro forma
net loss per share for the year ended December 31, 1999 excludes 3,561,030
potential common shares as their impact would be antidilutive.
The following table sets forth the computation of basic and diluted
earnings (loss) per share for 1997, 1998 and 1999 and unaudited pro forma net
loss per share for 1999:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PRO FORMA
------------------------------------ YEAR ENDED
1997 1998 1999 DECEMBER 31, 1999
---------- ---------- ---------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) attributable to common
stockholders.......................... $ 304 $ 837 $ (1,417) $ (1,417)
========== ========== ========== ==========
Denominator:
Denominator for basic earnings (loss) per
share -- weighted average shares
outstanding........................... 30,303,030 18,011,623 15,595,899 15,595,899
Effect of dilutive securities:
Dilutive options outstanding.......... -- 748,934 -- --
Convertible redeemable preferred
stock............................... -- -- -- 1,502,325
---------- ---------- ---------- ----------
Denominator for diluted earnings (loss)
per share -- adjusted weighted average
shares outstanding.................... 30,303,030 18,760,557 15,595,899 17,098,224
========== ========== ========== ==========
Basic earnings (loss) per share.......... $ 0.01 $ 0.05 $ (0.09) $ (0.08)
Diluted earnings (loss) per share........ $ 0.01 $ 0.04 $ (0.09) $ (0.08)
</TABLE>
3. RELATED PARTY TRANSACTIONS
ACQUISITION OF REWORD CORPORATION AND EXECUTION OF NOTE PAYABLE
On January 7, 1998, the Company acquired all of the outstanding capital
stock of Reword for total consideration of $300, consisting of $150 in cash and
the execution of a $150 note payable to the seller. Prior to its acquisition by
the Company, Reword was wholly-owned by the Company's primary stockholder and
former president. Because of the presence of a significant third-party minority
ownership interest in the Company at the date of the acquisition, the
acquisition has been recorded as a purchase for accounting purposes. The
purchase price was allocated to the assets and liabilities acquired based on
their estimated fair values. Of the total purchase price, $212 was allocated to
the technology acquired, which was being amortized over its estimated useful
life of three years. Amortization expense related to the purchased technology
totaled $71 during 1998 and 1999. At December 31, 1999, the Company wrote off
the remaining balance of the acquired technology as management decided not to
market the technology.
The note payable to the Company's former president bore interest at the
rate of 7% per annum and was payable in monthly installments of $10 plus accrued
interest through April 1, 1999. The note was repaid in
F-11
<PAGE> 78
WEBSIDESTORY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
full during the year ended December 31, 1999. Interest expense related to this
note totaled $7 and $2 during 1998 and 1999, respectively.
During 1997, the Company paid Reword $184 for consulting services and for
the use of certain equipment and facilities on a rental basis.
STOCK REPURCHASE AND EXECUTION OF NOTE PAYABLE
In connection with a Stock Purchase Agreement dated February 6, 1998, the
Company repurchased all of the outstanding shares of common stock held by one of
the founding stockholders for an aggregate purchase price of $530, consisting of
$130 in cash and the execution of a $400 note payable to the former stockholder.
The note, which does not bear a stated interest rate, is payable in quarterly
installments of $20 through January 1, 2003. However, in the event of a public
offering of the Company's common stock, upon the sale or transfer of the
Company's business or assets or upon the dissolution of the Company, the
outstanding note balance would become immediately payable. The Company recorded
a discount in the amount of $65 relating to the imputation of interest
associated with this note and is amortizing such discount to interest expense
over the term of the note using an effective interest rate of 7% per annum,
which it believes to be a reasonable indicator of its incremental borrowing
rate. At December 31, 1998 and 1999, the balance of this note was $277 and $215,
net of an unamortized discount totaling $43 and $25, respectively. Future
minimum payments under this note, including principal and interest, total $60,
$80, $80 and $20 during 2000, 2001, 2002 and 2003, respectively.
4. COMPOSITION OF CERTAIN BALANCE SHEET CAPTIONS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1998 1999
----- ------
<S> <C> <C>
PROPERTY AND EQUIPMENT:
Computers and office equipment............................ $ 805 $1,902
Furniture and fixtures.................................... 96 510
Leasehold improvements.................................... 7 184
----- ------
908 2,596
Accumulated depreciation and amortization................. (220) (659)
----- ------
$ 688 $1,937
===== ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1998 1999
---- -----
<S> <C> <C>
ACCRUED EXPENSES:
Accrued bonuses and commissions........................... $-- $ 83
Accrued vacation.......................................... 15 67
Accrued professional fees................................. 10 60
Other accrued expenses.................................... 17 33
--- ----
$42 $243
=== ====
</TABLE>
5. REDEEMABLE PREFERRED STOCK
PREFERRED STOCK TRANSACTION
On June 18, 1999, new investors purchased 2,088,154 shares of common stock
from the Company's two founders and a key executive for an aggregate purchase
price of $25,000. At the same time, the investors purchased 100 shares of
redeemable preferred stock and 15,034,712 shares of convertible redeemable
F-12
<PAGE> 79
WEBSIDESTORY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
preferred stock from the Company for aggregate consideration of 1) $5,000 and 2)
the contribution of the shares of common stock purchased from the founders and
key executive. For financial reporting purposes, the purchase of common stock
from the Company's two founders and the key executive and its contribution to
the Company is treated as a repurchase of the common stock by the Company. The
excess of the purchase price of the common stock purchased from the founders and
key executive over the original issuance cost of the common stock has been
recorded as a charge to retained earnings. The aggregate consideration to the
Company of $29,697 ($30,000, net of issuance costs of $303) has been allocated
to the two securities based on their relative fair values at the time of
issuance. The value ascribed to the redeemable preferred stock of $8,170
($8,253, net of issuance costs of $83) is being accreted to its redemption
amount, using the effective interest method, over the period from issuance until
redemption first becomes available to the holders of the security on June 18,
2005. The value ascribed to the convertible redeemable preferred stock of
$21,528 ($21,747, net of issuance costs of $219) is being adjusted to its
redemption amount, using the effective interest method, over the period from
issuance until redemption first becomes available to the holders of the security
on June 18, 2005. If redemption is not timely, the redemption amount bears
interest at 12% per annum from the redemption date through the date when
redemption actually occurs.
CHARACTERISTICS AND TERMS
Redeemable preferred stock
The redeemable preferred stock is non-convertible, non-voting and not
entitled to dividends. In the event of a liquidation, dissolution, winding up or
change of control of the Company, the holders of the redeemable preferred stock
shall be entitled to be paid (in preference to the holders of convertible
redeemable preferred stock and common stock) an amount equal to $150,000 per
share (the "Redeemable Liquidation Preference Amount"). The redeemable preferred
stock is redeemable at the Redeemable Liquidation Preference Amount: 1) for all
outstanding shares of preferred stock or a specified percentage of such
outstanding shares, on or after June 18, 2005, at the option of the holders of
at least two-thirds of the then outstanding redeemable preferred stock, or 2)
for all outstanding shares of redeemable preferred stock, automatically upon the
close of any public offering by the Company of its capital stock under the
Securities Act of 1933.
Convertible redeemable preferred stock
Holders of convertible redeemable preferred stock are entitled to elect up
to two directors, voting together as a separate class, and are entitled to
non-cumulative dividends when and if declared by the Board of Directors. Such
dividends are shared with the holders of common stock as if the convertible
redeemable preferred stock and the common stock were a single class of stock.
Holders of convertible redeemable preferred stock are entitled to the number of
votes equal to the number of shares of common stock into which the convertible
redeemable preferred stock may be converted. In December 1999, the Board of
Directors approved a change in the Conversion Rate into which the convertible
redeemable preferred stock is convertible into common stock from one-to-0.1667
to one-to-0.4698.
All shares of convertible redeemable preferred stock are convertible into
common stock at the Conversion Rate 1) at the option of the holders of at least
two-thirds of the then outstanding convertible redeemable preferred stock, or 2)
automatically upon the close of the Company's first underwritten initial public
offering of its common stock under the Securities Act of 1933. Conversion upon
the Company's first underwritten initial public offering is automatic provided
that: 1) aggregate proceeds net of underwriting discounts and commissions exceed
$20 million, 2) the value of the Company immediately prior to the offering is
equal to or greater than $150 million on a fully-diluted basis, 3) the common
stock offered for sale is listed on either the New York Stock Exchange or the
Nasdaq National Market, and 4) all outstanding shares of the Company's
redeemable preferred stock and all declared but unpaid dividends thereon are
redeemed in full. The Conversion Rate is subject to adjustment for dilution,
including stock splits, stock
F-13
<PAGE> 80
WEBSIDESTORY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
dividends, stock distributions and the issuance of stock options, stock rights
and convertible securities. The Company has reserved the full number of shares
of common stock deliverable upon conversion of the convertible redeemable
preferred stock.
The convertible redeemable preferred stock is redeemable at $0.9977 per
share plus declared and unpaid dividends (the "Convertible Liquidation
Preference Amount") on or after June 18, 2005, at the option of the holders of
at least two-thirds of the then outstanding convertible redeemable preferred
stock. Upon any liquidation, dissolution, winding up or change of control of the
Company, the holders of the convertible redeemable preferred stock are entitled
to be paid (subject to the prior payment of the Redeemable Liquidation
Preference Amount to the holders of redeemable preferred stock) the Convertible
Liquidation Preference Amount, in preference to the holders of common stock.
6. STOCK-BASED COMPENSATION
In February 1998, the Company executed a nonstatutory stock option
agreement with a key executive which entitles the executive to purchase an
aggregate of 875,758 shares of common stock at an exercise price of $0.039 per
share. The option was immediately vested as to 50% of the underlying shares at
the time of grant whereas the remaining 50% of the option shares vest ratably
from the grant date through February 2000. As part of the preferred stock
financing transaction in June 1999 (Note 5), new investors purchased 104,245
shares of common stock from the key executive that were purchased pursuant to
this option. Under the agreement, 0 and 104,245 shares of common stock were
purchased during the years ended December 31, 1998 and 1999, and 771,513 options
were outstanding as of December 31, 1999. The executive's option expires in
February 2003.
In November 1999, the Board of Directors adopted the Company's 2000 Equity
Incentive Plan (the "2000 Plan"). At December 31, 1999, 3,973,964 common shares
are available for issuance under the 2000 Plan. Options were previously granted
under the Company's 1998 Stock Option Plan (the "1998 Plan") and 1999 Stock
Option Plan (the "1999 Plan"). The 2000 Plan provides for the granting of
incentive stock options to employees and nonstatutory stock options to
employees, directors and consultants to the Company. In addition, the 2000 Plan
permits the granting of stock bonuses and rights to acquire restricted stock.
Vesting provisions and other terms and conditions are determined by the Board of
Directors at the time of grant. Options granted under the Plans generally vest
over three or four years. Options generally expire ten years from the date of
grant.
Stock option transactions under the Company's 2000, 1999 and 1998 Plans are
summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
--------------------- --------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Options outstanding at beginning of period.... 250,167 $6.00 -- --
Options granted............................... 2,142,988 1.39 250,167 $6.00
Options forfeited............................. (133,500) 5.83 --
--------- --------
Options outstanding at end of period.......... 2,259,655 1.64 250,167 6.00
========= ========
Options exercisable at end of period.......... 105,214 0
========= ========
</TABLE>
In December 1999, the Company granted an option to purchase 529,862 common
shares at an exercise price of $0.21 per share to the Company's newly appointed
President and Chief Executive Officer. The option may be exercised at any time
and expires in December 2003. The option was exercised in full in February 2000.
F-14
<PAGE> 81
WEBSIDESTORY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following table summarizes information about all options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- -----------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
-------- ----------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.039 771,513 3.15 $ 0.039 735,022 $ 0.039
0.21 529,862 3.97 0.21 529,862 0.21
1.05 1,997,821 9.94 1.05 105,214 1.05
6.00 - 6.60 261,834 9.13 6.17 0 --
---------- ---------
3,561,030 1,370,098
========== =========
</TABLE>
In connection with the grant of stock options, the Company recorded
unearned stock-based compensation within stockholders' equity of $6,116 during
the year ended December 31, 1999. Amortization of unearned stock-based
compensation, net of any charges reversed during the period for the forfeiture
of unvested awards, was $1,998 during the year ended December 31, 1999. At
December 31, 1999, the remaining unearned stock-based compensation of $4,118
will be amortized as follows: $2,408 in fiscal 2000, $1,128 in fiscal 2001, $498
in fiscal 2002 and $84 in fiscal 2003. The amount of stock-based compensation
expense to be recorded in future periods could decrease if awards for which
accrued but unamortized compensation expense has been recorded are forfeited.
Had compensation expense for employee stock options been determined based
on the fair value of the options on the date of grant, the Company's net income
(loss) and net income (loss) per share would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1998 1999
------ -------
<S> <C> <C>
Net income (loss) attributable to common stockholders
As reported............................................. $ 837 $(1,417)
Pro forma............................................... 836 (1,425)
Net income (loss) per share (diluted)
As reported............................................. 0.04 (0.09)
Pro forma............................................... 0.04 (0.09)
</TABLE>
F-15
<PAGE> 82
WEBSIDESTORY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The weighted-average grant-date fair value per share of options granted
during 1998 and 1999 was as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1998 1999
------ ------
<S> <C> <C>
Exercise price equal to deemed fair value of common stock
on the grant date:
Weighted-average exercise price.......................... $0.039 $ --
Weighted-average option fair value....................... 0.003 --
Exercise price greater than deemed fair value of common
stock on the grant date:
Weighted-average exercise price.......................... 6.00 6.60
Weighted-average option fair value....................... 0.0 0.0
Exercise price less than deemed fair value of common stock
on the grant date:
Weighted-average exercise price.......................... -- 1.05
Weighted-average option fair value....................... -- 2.34
</TABLE>
The fair value of the options was estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1999
---------- ----------
<S> <C> <C>
Expected life....................................... 1.79 years 2.01 years
Risk-free interest rate............................. 5.1% 5.9%
Expected volatility................................. 0.0% 0.0%
Expected divided yield.............................. 0.0% 0.0%
</TABLE>
The volatility of the Company's common stock underlying the options was not
considered because the Company's equity was not publicly traded as of December
31, 1999. For purposes of pro forma disclosures, the estimated fair value of
options is amortized to expense over the options' vesting periods using an
accelerated graded method in accordance with FIN 28.
7. QUALIFIED RETIREMENT PLAN
The Company sponsors an employee savings plan that qualifies as a deferred
salary arrangement under Section 401(k) of the Internal Revenue Code. Under the
savings plan, participating employees may defer a portion of their pre-tax
earnings, up to the Internal Revenue Service annual contribution limit.
Additionally, the Company may elect to make matching contributions into the
savings plan at its sole discretion. To date, the Company has not made any
matching contributions into the savings plan.
8. COMMITMENTS
The Company leases its primary office facilities and certain automobiles
under noncancelable operating lease arrangements which expire on various dates
through January 2007 and, with respect to the office leases, contain certain
renewal options. Rent expense under noncancelable operating lease arrangements
is accounted for on a straight-line basis and totaled $41, $103 and $304 during
1997, 1998 and 1999.
The Company also leases certain computer and office equipment under capital
leases that mature on various dates through September 2003. As of December 31,
1999, $175 of such equipment is included in
F-16
<PAGE> 83
WEBSIDESTORY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
property and equipment ($109 net of accumulated amortization). The
weighted-average interest rate associated with such capital leases approximates
16.4% at December 31, 1999.
In August 1999, the Company entered into a lease for approximately 40,000
square feet for its principal offices at an average of approximately $84 per
month. The Company began occupying the space in January 2000. The lease requires
the Company to lease approximately 21,000 square feet of additional space at the
same site beginning in September 2000 for approximately $42 per month during the
first year or an average of approximately $46 per month over the term of the
lease.
Future minimum lease payments under capital and operating lease
arrangements are as follows at December 31, 1999:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDING DECEMBER 31, LEASES LEASES
------------------------ ------- ---------
<S> <C> <C>
2000.................................................. $ 85 $ 1,026
2001.................................................. 15 1,591
2002.................................................. 12 1,564
2003.................................................. 7 1,588
2004.................................................. -- 1,644
Thereafter............................................ -- 3,462
---- -------
Total minimum payments................................ 119 $10,875
=======
Amount representing interest.......................... (16)
----
Present value of minimum lease payments............... 103
Less current portion of capital lease obligations..... (74)
----
Long-term portion of capital lease obligations........ $ 29
====
</TABLE>
9. INCOME TAXES
The components of the provision for (benefit from) income taxes are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1998 1999
----- ----- ------
<S> <C> <C> <C>
Current
Federal................................................... $204 $396 $ 26
State..................................................... 53 108 1
---- ---- -----
257 504 27
Deferred
Federal................................................... (58) 97 (410)
State..................................................... -- 23 (167)
---- ---- -----
(58) 120 (577)
---- ---- -----
$199 $624 $(550)
==== ==== =====
</TABLE>
F-17
<PAGE> 84
WEBSIDESTORY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1998 1999
---- ------
<S> <C> <C>
Deferred tax assets
Stock-based compensation related to nonstatutory stock
options................................................ $ -- $ 699
Capitalized legal costs................................... -- 117
State net operating loss carryforward..................... -- 83
Accrued bonuses and vacation.............................. 114 54
Deferred state income taxes............................... 37 --
Research and development tax credits...................... -- 76
Other..................................................... 8 33
---- ------
159 1,062
Deferred tax liabilities
Depreciation and amortization............................. (33) (99)
Capitalized software development costs.................... (187) (364)
---- ------
$(61) $ 599
==== ======
</TABLE>
The Company has not provided a valuation allowance against net deferred tax
assets at December 31, 1997, 1998 and 1999 because management believes that such
assets are more likely than not to be realized based upon historical and
expected trends in operating results.
At December 31, 1999, the Company had a net operating loss carryforward for
state purposes of $940. The expiration period for the net operating loss
carryforward will begin in 2005. At December 31, 1999, the Company has federal
and state research and development credit carryforwards of $51 and $55, which
begin expiring in 2020 and 2005.
A reconciliation of the income tax expense computed using the U.S. federal
statutory tax rate (34%) and the Company's provision for income taxes follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1998 1999
----- ----- ------
<S> <C> <C> <C>
Computed expected federal tax expense....................... $171 $497 $(590)
State taxes, net of federal benefit......................... 30 91 (71)
Stock-based compensation related to incentive stock
options................................................... -- -- 125
Other....................................................... (2) 36 (14)
---- ---- -----
$199 $624 $(550)
==== ==== =====
</TABLE>
10. BANK REVOLVING LINE OF CREDIT
In August 1999, the Company entered into a $4 million revolving line of
credit arrangement with a commercial bank that expires on August 2, 2000. The
line of credit provided up to $3 million for general corporate purposes and up
to $1 million to finance capital equipment expenditures. In September 1999, the
Company entered into a standby letter of credit arrangement with its bank for
$360 as part of the security arrangement underlying its new headquarters lease.
The letter of credit obligation, which will decrease annually by one third under
the terms of the lease, is deducted from the borrowing availability under the
line of credit. As of December 31, 1999, there were no borrowings under the line
of credit. As of December 31, 1999, the Company violated the minimum net income
requirements imposed by the line of credit agreement and, as a result, was
unable to borrow under the line of credit. In April 2000, the Company negotiated
an
F-18
<PAGE> 85
WEBSIDESTORY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
amendment to the line of credit agreement that expires in April 2001. The
amended agreement provides for a total of $3 million for general working capital
purposes and capital equipment purchases. The covenants were restated to include
a minimum liquidity covenant (defined as unrestricted cash and cash equivalents
plus eligible accounts receivable), measured monthly, of the greater of 1) 1.5
times current liabilities and all bank debt, or 2) the previous three month's
operating cash usage. Borrowings under the line of credit bear interest at the
bank's prime rate plus .25%. Equipment draws made under the line of credit will
be converted to a term loan in April 2001, which is repayable in 36 equal
principal payments plus interest.
A five-year warrant to purchase 13,333 shares of common stock at $15.00 per
share was granted in connection with this amendment. The fair value of the
warrant on the date of issuance was approximately $72 and will be recorded as a
deferred facility fee. The fair value was calculated on the date of issuance
using the Black-Scholes option pricing model with the following assumptions: 5
year expected life, 6.47% risk-free interest rate, 70% expected volatility and
0% expected dividend yield.
F-19
<PAGE> 86
[INSIDE BACK COVER]
[ARTWORK]
<PAGE> 87
[WEBSIDSTORY LOGO]
<PAGE> 88
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the registrant in
connection with the sale of the common stock being registered. All of the
amounts shown are estimates except for the SEC registration fee, the NASD filing
fee, and the Nasdaq National Market application fee.]
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
---------
<S> <C>
SEC Registration fee...................................... $
NASD filing fee...........................................
Nasdaq stock market listing application fee...............
Blue sky qualification fees and expenses..................
Director and officer liability insurance..................
Printing and engraving expenses...........................
Legal fees and expenses...................................
Accounting fees and expenses..............................
Transfer agent and registrar fees.........................
Miscellaneous.............................................
--------
Total................................................... $
========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under Section 145 of the Delaware General Corporation Law, the registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act").
The registrant's Certificate of Incorporation and Bylaws include provisions
to (i) eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty to the extent permitted by
Section 102(b)(7) of the General Corporation Law of Delaware (the "Delaware
Law") and (ii) require the registrant to indemnify its directors and officers to
the fullest extent permitted by Section 145 of the Delaware Law, including
circumstances in which indemnification is otherwise discretionary. Pursuant to
Section 145 of the Delaware Law, a corporation generally has the power to
indemnify its present and former directors, officers, employees and agents
against expenses incurred by them in connection with any suit to which they are
or are threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they reasonably
believed to be in or not opposed to, the best interests of the corporation and
with respect to any criminal action, they had no reasonable cause to believe
their conduct was unlawful. The registrant believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
These provisions do not eliminate the directors' duty of care, and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Delaware Law. In addition,
each director will continue to be subject to liability for breach of the
director's duty of loyalty to the registrant, for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
acts or omissions that the director believes to be contrary to the best
interests of the registrant or its stockholders, for any transaction from which
the director derived an improper personal benefit, for acts or omissions
involving a reckless disregard for the director's duty to the registrant or its
stockholders when the director was aware or should have been aware of a risk of
serious injury to the registrant or its stockholders, for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the registrant or its stockholders, for improper
transactions between the director and the registrant and for improper
distributions to stockholders and loans to directors and officers. The provision
also does not affect a director's responsibilities under any other law, such as
the federal securities law or state or federal environmental laws.
II-1
<PAGE> 89
The registrant has entered into indemnity agreements with each of its
directors and executive officers that require the registrant to indemnify such
persons against all expenses, judgments, fines, settlements and other amounts
incurred (including expenses of a derivative action) in connection with any
proceeding, whether actual or threatened, to which any such person may be made a
party by reason of the fact that such person is or was a director or an
executive officer of the registrant or any of its affiliated enterprises,
provided that such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
registrant and, with respect to any criminal proceeding, had no reasonable cause
to believe his conduct was unlawful. The indemnification agreements also set
forth certain procedures that will apply in the event of a claim for
indemnification thereunder.
At present, there is no pending litigation or proceeding involving a
director or officer of the registrant as to which indemnification is being
sought nor is the registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.
The registrant maintains directors' and officers' liability insurance and
intends to continue to maintain this insurance in the future. The registrant
also has an insurance policy covering the officers and directors of the
registrant with respect to certain liabilities, including liabilities arising
under the Securities Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of transactions by the Company since the
Company's inception in September 1996 that were not registered under the
Securities Act. Prior to the reincorporation in Delaware in , 2000,
it had been operating under the laws of California.
(a) In September 1996, the registrant issued 30,303,030 shares of common
stock to its founders for an aggregate purchase price of $5,500.
(b) In June of 1999, the registrant issued an aggregate of 15,034,712
shares of its convertible redeemable preferred stock and 100 shares of
its redeemable preferred stock to TA Associates, Inc. and Summit
Partners LP in exchange for 2,088,154 shares of the registrant's common
stock, which they had purchased from two of the founders and Michael
Christian and $5 million in cash.
(c) In December 1999, the registrant issued an option to purchase 1,324,655
shares of its common stock at an exercise price of $1.05 per share to
John Hentrich. Mr. Hentrich exercised his option in February 2000.
(d) In December 1999, the registrant issued a warrant to purchase 529,861
shares of its common stock at an exercise price of $0.21 per share to
John Hentrich. Mr. Hentrich exercised his warrant in February 2000.
(e) In January 2000, the registrant issued 33,333 shares of its common
stock to Michael Christian on the exercise of a stock option for an
aggregate purchase price of $1,300.
(f) In March 2000, the registrant issued a warrant to purchase 13,333
shares of our common stock at an exercise price of $15 per share to
Imperial Bank.
(g) From September 1996 (inception) to March 31, 2000, the registrant
granted options to purchase an aggregate of 2,923,017 shares of common
stock to directors, executive officers, employees and consultants
pursuant to its option plans including options to purchase 250,167
shares at an exercise price of $6.00, options to purchase 133,167
shares at an exercise price of $6.60, options to purchase 2,009,821
shares at an exercise price of $1.05 and shares at an exercise
price of $ . In addition, in February 1998, the registrant issued
options to purchase an aggregate of 875,758 shares of common stock to
Michael Christian, one of its key employees. Mr. Christian exercised
his option to purchase 104,245 shares of common stock in July 1999 and
33,333 shares of common stock in January 2000.
II-2
<PAGE> 90
The sale and issuance of the securities in the above transactions were
exempt from registration under the Securities Act by virtue of Rule 4(2) or Rule
701, or Regulation D, as transactions not involving a public offering. There
were no underwriters used in connection with any of the transactions set forth
in this Item 15. For additional information concerning these equity investment
transactions, see the section entitled "Certain Transactions" in the prospectus.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS.
<TABLE>
<S> <C>
1.1* Form of Underwriting Agreement.
3.1.1 Amended and Restated Articles of Incorporation.
3.1.2 Certificate of Amendment of Amended and Restated Articles of
Incorporation.
3.1.3* Form of Certificate of Incorporation of WebSideStory, Inc.,
to be filed immediately prior to and to become effective
upon closing of this offering.
3.2.1 Amended and Restated Bylaws of WebSideStory, Inc.
3.2.2* Form of By-laws of WebSideStory, Inc. to be in effect after
the closing of this offering.
4.1 Reference is made to Exhibits 3.1.1, 3.1.2, 3.2.1 and 3.2.2
for provisions of the charter documents defining the rights
of securityholders.
4.2* Specimen common stock certificate.
5.1* Opinion of Gray Cary Ware & Freidenrich LLP.
10.1 1998 Stock Option Plan, as amended.
10.1.1 Form of Nonstatutory Stock Option Agreement under the 1998
Stock Option Plan.
10.1.2 Form of Incentive Stock Option Agreement under the 1998
Stock Option Plan.
10.2 1999 Stock Option Plan, as amended.
10.2.1 Form of Nonstatutory Stock Option Agreement under the 1999
Stock Option Plan.
10.2.2 Form of Incentive Stock Option Agreement under the 1999
Stock Option Plan.
10.3 2000 Equity Incentive Plan, as amended.
10.3.1 Form of Omnibus Stock Option Agreement under the 2000 Equity
Incentive Plan.
10.4* Form of 2000 Employee Stock Purchase Plan.
10.4.1* Form of Subscription Agreement under the 2000 Employee Stock
Purchase Plan.
10.5*+ Agreement, dated March 25, 1999, by and between the
registrant and Level (3) Communications and addendum to
Terms and Conditions.
10.6*+ Agreement, dated May 29, 1998, by and between the registrant
and Digex Business Internet.
10.7*+ Agreement, dated February 5, 1999, by and between the
registrant and Sprint Communications
10.8*+ Agreement, dated February , 1998, by and between the
registrant and Verio, Inc.
10.9 Akamai FreeFlow Services Order Form, dated March 20, 2000
between the registrant and Akamai Technologies, Inc.
10.10 Employment Agreement, dated June 24, 1999, by and between
the registrant and Blaise P. Barrelet.
10.11 Employment Agreement, dated June 24, 1999, by and between
the registrant and Agnes L. Barrelet.
10.12 Noncompetition Agreement, dated June 24, 1999, by and
between the registrant and Blaise P. Barrelet.
10.13 Noncompetition Agreement, dated June 24, 1999, by and
between the registrant and Agnes L. Barrelet.
10.14 Employment Agreement, dated February 28, 2000, by and
between the registrant and John J. Hentrich, as amended on
April 15, 2000.
10.15 Proprietary Information and Inventions Agreement, dated
November 19, 1999, by and between the registrant and John J.
Hentrich.
10.16 Stock Option Agreement, dated December 20, 1999, by and
between the registrant and John J. Hentrich.
10.17 Promissory Note, dated January 3, 2000, by John J. Hentrich
in favor of the registrant.
</TABLE>
II-3
<PAGE> 91
<TABLE>
<S> <C>
10.18 Promissory Note, dated February 28, 2000, by John J.
Hentrich in favor of the registrant.
10.19 Secured, Non-Recourse Promissory Note, dated March 23, 2000,
by John J. Hentrich in favor of the registrant.
10.20 Stock Pledge Agreement, dated March 23, 2000, by John J.
Hentrich in favor of the registrant.
10.21 Employment Agreement, dated April 10, 2000, by and between
the registrant and Terance Kinninger.
10.22* Employment Agreement, dated April 7, 2000 by and between the
registrant and Meyar Sheik.
10.23* Employment Agreement, dated February 22, 2000, by and
between the registrant and Thomas Stigler.
10.24* Incentive Stock Option Agreement, dated February 28, 2000,
between the registrant and Thomas Stigler.
10.25* Employment Agreement, dated April 14, 2000, by and between
the registrant and Randall K. Broberg.
10.26* Employment Agreement, dated June 24, 1999, between the
registrant and Michael Christian.
10.27* Noncompetition Agreement, dated June 24, 1999, between the
registrant and Michael Christian.
10.28* Nonstatutory Stock Option Agreement, dated ,
between the registrant and Michael C. Christian.
10.29* Incentive Stock Option Agreement, dated April 10, 2000,
between the registrant and Meyar Sheik.
10.30* Incentive Stock Option Agreement, dated April 14, 2000,
between the registrant and Randall K. Broberg.
10.31 Office lease, dated November 4, 1998, by and between the
registrant and PS Business Parks, Inc. and an amendment
thereto dated February 14, 2000.
10.32 Office lease, dated August 23, 1999, by and between the
registrant and LNR Seaview, Inc.
10.33 Credit Agreement, dated August 4, 1999, by and between the
registrant and Imperial Bank.
10.33.1 Intellectual Property Security Agreement, by and between the
registrant and Imperial Bank.
10.34 Credit Agreement, dated March 27, 2000, by and between the
registrant and Imperial Bank.
10.35 Stockholders Agreement, dated June 18, 1999, by and among
the registrant, and certain investors set forth on Exhibit A
to the Agreement.
10.36 Registration Rights Agreement, dated June 18, 1999, by and
among the registrant and certain of its stockholders.
10.37 WebsideStory, Inc. 401(k) Plan.
10.38 Form of Indemnification Agreement as currently in effect
between the registrant and each of its directors, officers
and certain additional personnel.
10.39 Form of Indemnity Agreement to be entered into by the
registrant and each of its directors, officers and certain
additional personnel following the reincorporation of the
registrant.
10.40 Warrant to Purchase Common Stock, dated March 27, 2000, in
favor of Imperial Bank.
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.2* Consent of Gray Cary Ware & Freidenrich LLP. Reference is
made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-6.
27 Financial Data Schedule.
</TABLE>
- ------------
* To be filed 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.
II-4
<PAGE> 92
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 14 of this registration
statement, 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 a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 93
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California, on April 18, 2000.
WebsideStory, Inc.
By: /s/ JOHN J. HENTRICH
------------------------------------
John J. Hentrich
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints John J. Hentrich and Terance A.
Kinninger, and each of them, as his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place, and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments, exhibits thereto and other
documents in connection therewith) to this Registration Statement and any
subsequent registration statement filed by the registrant pursuant to Rule
462(b) of the Securities Act of 1933, as amended, which relates to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, 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 their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JOHN J. HENTRICH President and Chief Executive Officer, April 18, 2000
- --------------------------------------------- Director
John J. Hentrich
/s/ BLAISE P. BARRELET Chairman of the Board, Chief Internet April 18, 2000
- --------------------------------------------- Architect and Director
Blaise P. Barrelet
/s/ TERANCE A. KINNINGER Senior Vice President and Chief April 18, 2000
- --------------------------------------------- Financial Officer (Principal Financial
Terance A. Kinninger Officer)
/s/ JOHN T. BURKE Corporate Controller (Principal April 18, 2000
- --------------------------------------------- Accounting Officer)
John T. Burke
/s/ KURT R. JAGGERS Director April 18, 2000
- ---------------------------------------------
Kurt R. Jaggers
</TABLE>
II-6
<PAGE> 94
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ WALTER G. KORTSCHAK Director April 18, 2000
- ---------------------------------------------
Walter G. Kortschak
/s/ BENJAMIN H. BALL Director April 18, 2000
- ---------------------------------------------
Benjamin H. Ball
</TABLE>
II-7
<PAGE> 95
EXHIBIT INDEX
<TABLE>
<S> <C>
1.1* Form of Underwriting Agreement.
3.1.1 Amended and Restated Articles of Incorporation.
3.1.2 Certificate of Amendment of Amended and Restated Articles of
Incorporation.
3.1.3* Form of Certificate of Incorporation of WebSideStory, Inc.,
to be filed immediately prior to and to become effective
upon closing of this offering.
3.2.1 Amended and Restated Bylaws of WebSideStory, Inc.
3.2.2* Form of By-laws of WebSideStory, Inc. to be in effect after
the closing of this offering.
4.1 Reference is made to Exhibits 3.1.1, 3.1.2, 3.2.1 and 3.2.2
for provisions of the charter documents defining the rights
of securityholders.
4.2* Specimen common stock certificate.
5.1* Opinion of Gray Cary Ware & Freidenrich LLP.
10.1 1998 Stock Option Plan, as amended.
10.1.1 Form of Nonstatutory Stock Option Agreement under the 1998
Stock Option Plan.
10.1.2 Form of Incentive Stock Option Agreement under the 1998
Stock Option Plan.
10.2 1999 Stock Option Plan, as amended.
10.2.1 Form of Nonstatutory Stock Option Agreement under the 1999
Stock Option Plan.
10.2.2 Form of Incentive Stock Option Agreement under the 1999
Stock Option Plan.
10.3 2000 Equity Incentive Plan, as amended.
10.3.1 Form of Omnibus Stock Option Agreement under the 2000 Equity
Incentive Plan.
10.4* Form of 2000 Employee Stock Purchase Plan.
10.4.1* Form of Subscription Agreement under the 2000 Employee Stock
Purchase Plan.
10.5*+ Agreement, dated March 25, 1999, by and between the
registrant and Level (3) Communications and addendum to
Terms and Conditions.
10.6*+ Agreement, dated May 29, 1998, by and between the registrant
and Digex Business Internet.
10.7*+ Agreement, dated February 5, 1999, by and between the
registrant and Sprint Communications
10.8*+ Agreement, dated February , 1998, by and between the
registrant and Verio, Inc.
10.9 Akamai FreeFlow Services Order Form, dated March 20, 2000
between the registrant and Akamai Technologies, Inc.
10.10 Employment Agreement, dated June 24, 1999, by and between
the registrant and Blaise P. Barrelet.
10.11 Employment Agreement, dated June 24, 1999, by and between
the registrant and Agnes L. Barrelet.
10.12 Noncompetition Agreement, dated June 24, 1999, by and
between the registrant and Blaise P. Barrelet.
10.13 Noncompetition Agreement, dated June 24, 1999, by and
between the registrant and Agnes L. Barrelet.
10.14 Employment Agreement, dated February 28, 2000, by and
between the registrant and John J. Hentrich, as amended on
April 15, 2000.
10.15 Proprietary Information and Inventions Agreement, dated
November 19, 1999, by and between the registrant and John J.
Hentrich.
10.16 Stock Option Agreement, dated December 20, 1999, by and
between the registrant and John J. Hentrich.
10.17 Promissory Note, dated January 3, 2000, by John J. Hentrich
in favor of the registrant.
10.18 Promissory Note, dated February 28, 2000, by John J.
Hentrich in favor of the registrant.
10.19 Secured, Non-Recourse Promissory Note, dated March 23, 2000,
by John J. Hentrich in favor of the registrant.
10.20 Stock Pledge Agreement, dated March 23, 2000, by John J.
Hentrich in favor of the registrant.
10.21 Employment Agreement, dated April 10, 2000, by and between
the registrant and Terance Kinninger.
</TABLE>
<PAGE> 96
<TABLE>
<S> <C>
10.22* Employment Agreement, dated April 7, 2000, by and between
the registrant and Meyar Sheik.
10.23* Employment Agreement, dated February 22, 2000, by and
between the registrant and Thomas Stigler.
10.24* Incentive Stock Option Agreement, dated February 28, 2000,
between the registrant and Thomas Stigler.
10.25* Employment Agreement, dated April 14, 2000, by and between
the registrant and Randall K. Broberg.
10.26* Employment Agreement, dated June 24, 1999, between the
registrant and Michael Christian.
10.27* Noncompetition Agreement, dated June 24, 1999, between the
registrant and Michael Christian.
10.28* Nonstatutory Stock Option Agreement, dated ,
between the registrant and Michael C. Christian.
10.29* Incentive Stock Option Agreement, dated April 10, 2000,
between the registrant and Meyar Sheik.
10.30* Incentive Stock Option Agreement, dated April 14, 2000,
between the registrant and Randall K. Broberg.
10.31 Office lease, dated November 4, 1998, by and between the
registrant and PS Business Parks, Inc. and an amendment
thereto dated February 14, 2000.
10.32 Office lease, dated August 23, 1999, by and between the
registrant and LNR Seaview, Inc.
10.33 Credit Agreement, dated August 4, 1999, by and between the
registrant and Imperial Bank.
10.33.1 Intellectual Property Security Agreement, by and between the
registrant and Imperial Bank.
10.34 Credit Agreement, dated March 27, 2000, by and between the
registrant and Imperial Bank.
10.35 Stockholders Agreement, dated June 18, 1999, by and among
the registrant, and certain investors set forth on Exhibit A
to the Agreement.
10.36 Registration Rights Agreement, dated June 18, 1999, by and
among the registrant and certain of its stockholders.
10.37 WebsideStory, Inc. 401(k) Plan.
10.38 Form of Indemnification Agreement as currently in effect
between the registrant and each of its directors, officers
and certain additional personnel.
10.39 Form of Indemnity Agreement to be entered into by the
registrant and each of its directors, officers and certain
additional personnel following the reincorporation of the
registrant.
10.40 Warrant to Purchase Common Stock, dated March 27, 2000, in
favor of Imperial Bank.
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.2* Consent of Gray Cary Ware & Freidenrich LLP. Reference is
made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-6.
27 Financial Data Schedule.
</TABLE>
- ------------
* To be filed 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> 1
EXHIBIT 3.1.1
SECRETARY OF STATE
I, BILL JONES, Secretary of State of the State of California, hereby
certify:
That the attached transcript of 23 page(s) has been compared with the
record on file in this office, of which it purports to be a copy, and that it
is full, true and correct.
IN WITNESS WHEREOF, I execute this
certificate and affix the Great Seal of
the State of California this day of
JUNE 22, 1999
-----------------------------------------
BILL JONES
Secretary of State
Sec. State Form CE 107 (rev. 9/98)
<PAGE> 2
ENDORSED-FILED
in the office of the Secretary
of State of the State
of California
June 18 1999
BILL JONES, Secretary of State
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
WEBSIDESTORY, INC.,
a California corporation
The undersigned, Blaise Barrelet, hereby certifies that:
1. He is the President and Secretary of WebSideStory, Inc., a
California corporation (the "Corporation").
2. The Articles of Incorporation of the Corporation are amended and
restated to read in full as follows:
ARTICLE I
The name of the corporation is WebSideStory, Inc. (the "Corporation").
ARTICLE II
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
The total number of shares of capital stock which the Corporation shall
have authority to issue is One Hundred Fifty Million (150,000,000), of which (a)
Fifteen Million Thirty-Four Thousand Eight Hundred Twelve (15,034,812) shares
shall be preferred stock ("Preferred Stock"), consisting of Fifteen Million
Thirty-Four Thousand Seven Hundred Twelve (15,034,712) shares of Convertible
Stock (as hereinafter defined) and One Hundred (100) shares of Redeemable
Preferred Stock (as hereinafter defined), and (b) One Hundred Thirty-Four
Million Nine Hundred Sixty-Five Thousand One Hundred Eighty-Eight (134,965,188)
shares shall be common stock ("Common Stock").
Except as otherwise restricted by these Amended and Restated Articles of
Incorporation, the Corporation is authorized to issue, from time to time, all or
any portion of the capital stock of the Corporation which may have been
authorized but not issued, to such person or persons and for such lawful
consideration as it may deem appropriate, and generally in its absolute
discretion to determine the terms and manner of any disposition of such
authorized but unissued capital stock.
Any and all such shares issued for which the full consideration has been
paid or delivered shall be deemed fully paid shares of capital stock, and the
holder of such shares shall not be liable for any further call or assessment or
any other payment thereon.
<PAGE> 3
The voting powers, designations, preferences, privileges and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions of each class of capital stock of the Corporation,
shall be as provided in this Article III.
The Corporation may issue fractional shares of Convertible Stock (as
defined below), Redeemable Preferred Stock (as defined below) and Common Stock.
Fractional shares shall be entitled to dividends (on a pro rata basis), and the
holders of fractional shares shall be entitled to all rights as shareholders of
the Corporation to the extent provided herein and under applicable law in
respect of such fractional shares. Fractional shares may, but need not, be
represented by share certificates. Such shares, or fractions thereof, not
represented by share certificates ("Uncertificated Shares") shall be registered
in the stock records book of the Corporation. The Corporation at any time at its
sole option may deliver to any registered holder of such shares share
certificates to represent Uncertificated Shares previously issued (or deemed
issued) to such holder.
A. CONVERTIBLE REDEEMABLE PARTICIPATING PREFERRED STOCK
1. Designation. A total of Fifteen Million Thirty-Four Thousand Seven
Hundred Twelve (15,034,712) shares of the Corporation's Preferred Stock shall be
designated as a series known as Convertible Redeemable Participating Preferred
Stock ("Convertible Stock"). All of the preferential amounts to be paid to the
holders of the Convertible Stock as provided in this Section A shall be paid or
set apart for payment before the payment or setting apart for payment of any
amount for, or the distribution of any property of the Corporation to, the
holders of any other equity securities of the Corporation, whether now or
hereafter authorized, other than the Redeemable Preferred Stock which shall rank
senior to the Convertible Stock in connection with any event referred to in
Section A.4 or A.5.
2. Election of Directors, Voting.
(a) Election of Directors. The number of authorized directors of
the Corporation shall not be less than five (5) nor greater than nine (9) and
the exact number shall be determined by resolution of the Board of Directors of
the Corporation (the "Board of Directors"). So long as the holders of the
outstanding shares of Convertible Stock hold of record at least Four Million
(4,000,000) shares of Convertible Stock (adjusted appropriately for stock
splits, stock dividends, recapitalizations and the like with respect to the
Convertible Stock), such holders, voting together as a separate class, shall be
entitled to elect two (2) directors of the Corporation; provided, however, that,
if the holders of the outstanding shares of Convertible Stock hold of record
less than Four Million (4,000,000), but at least Two Million (2,000,000), shares
of Convertible Stock (adjusted appropriately for stock splits, stock dividends,
recapitalizations and the like with respect to the Convertible Stock), then such
holders, voting together as a separate, class, shall be entitled to elect one
(1) director of the Corporation. If any director elected by the Convertible
Stock should cease to be a director of the Corporation for any reason, then,
subject to the foregoing restrictions, the vacancy shall only be filled by the
vote or written consent of the holders of the outstanding shares of Convertible
Stock, voting together as a separate class.
(b) Voting Generally. Each share of Convertible Stock shall be
entitled to the number of votes equal to the largest number of shares of Common
Stock (as described in Section
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C.1) into which such share of Convertible Stock could be converted pursuant to
Section A.6 hereof on the record date for the vote or written consent of
shareholders, if applicable, with fractional votes for fractional shares and
appropriate adjustments for stock splits, stock dividends, recapitalizations and
the like. Each holder of shares of Convertible Stock shall be entitled to notice
of any shareholders' meeting in accordance with the by-laws of the Corporation
and, except as provided in Section A.2(a) with respect to the election of no
more than two (2) directors, shall vote with holders of the Common Stock, voting
together as single class, upon all matters submitted to a vote of shareholders,
excluding those matters required to be submitted to a class or series vote
pursuant to the terms hereof (including, without limitation, Section A.2(a) and
Section A.8) or by law.
3. Dividends. The holders of Convertible Stock shall be entitled to
receive dividends out of funds legally available therefor at such times and in
such amounts as the Board of Directors may determine in its sole discretion;
provided, however, that no such dividend may be declared or paid on any shares
of Convertible Stock unless at the same time a dividend is declared or paid on
all outstanding shares of Common Stock and vice versa, with holders of
Convertible Stock and Common Stock sharing in any such dividends as if they
constituted a single class of stock and with each holder of shares of
Convertible Stock entitled to receive such dividends based on the number of
shares of Common Stock into which such shares of Convertible Stock are then
convertible in accordance with Section A.6 hereof.
4. Liquidation; Extraordinary Transaction.
(a) Liquidation Preference. Upon any liquidation, dissolution or
winding up of the Corporation and its subsidiaries, whether voluntary or
involuntary (a "Liquidation Event"), the assets of the Corporation shall be
distributed, subject to the prior payment of the Redeemable Liquidation
Preference Amount to the holder of each outstanding share of Redeemable
Preferred Stock pursuant to Section B.4 below, as follows:
(i) If the amount (the "Distribution Amount") computed by
dividing (x) the Distributable Assets (as defined below) by (y) the aggregate
number of outstanding shares of Common Stock (assuming full conversion of all
outstanding shares of Convertible Stock), is less than five (5) times the
Convertible Liquidation Preference Amount (as defined below), then:
(A) each holder of outstanding shares of Convertible
Stock first shall be entitled to be paid out of the assets of the Corporation
available for distribution to shareholders (after the aggregate payment of the
Redeemable Liquidation Preference Amount pursuant to Section B.4), whether such
assets are capital, surplus or earnings (collectively, the "Distributable
Assets"), and before any amount shall be paid or distributed to the holders of
Common Stock or of any other stock ranking on liquidation junior to the
Convertible Stock, an amount in cash, equal to $0.9977 per share of Convertible
Stock held by such holder (adjusted appropriately for stock splits, stock
dividends, recapitalizations and the like with respect to the Convertible Stock)
(the "Convertible Liquidation Preference Amount"), plus any declared but unpaid
dividends; and
(B) the remainder of the Distributable Assets then
shall be distributed (1) first, among the holders of Convertible Stock and
Common Stock pro-rata based
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on the number of shares of Common Stock held by each (assuming full conversion
of all such Convertible Stock) until such time as such holders have received
four (4) times the Convertible Liquidation Preference Amount pursuant to this
Section A.4(a)(i)(B), and (2) second, ratably among the holders of Common Stock
pro-rata based on the number of shares of Common Stock held by each.
(ii) If the Distribution Amount is greater than or equal to
five (5) times the Convertible Liquidation Preference Amount, then the
Distributable Assets shall be distributed among the holders of Convertible Stock
and Common Stock pro-rata based on the number of shares of Common Stock held by
each (assuming full conversion of all such Convertible Stock).
(b) Extraordinary Transactions.
(i) The following transactions shall be deemed
"Extraordinary Transactions" under this Article III: (A) a merger or
consolidation of the Corporation with or into another corporation (with respect
to which less than a majority of the outstanding voting power of the surviving
or consolidated corporation is held by persons who are shareholders of the
Corporation immediately prior to such event); (B) the sale or transfer of all or
substantially all of the properties and assets of the Corporation and its
subsidiaries; (C) any purchase by any party (or group of affiliated parties) of
shares of capital stock of the Corporation (either through a negotiated stock
purchase or a tender for such shares), the effect of which is that such party
(or group of affiliated parties) that did not beneficially own a majority of
the voting power of the outstanding shares of capital stock of the Corporation
immediately prior to such purchase beneficially owns at least a majority of such
voting power immediately after such purchase; (D) the redemption or repurchase
of shares representing a majority of the voting power of the outstanding shares
of capital stock of the Corporation; or (E) of any other change of control of
50% or more of the outstanding voting power of the Corporation in a single
transaction or series of related transactions, but in all cases excluding a
public offering by the Corporation of shares of Common Stock or other
securities.
(ii) An Extraordinary Transaction shall be deemed a
Liquidation Event solely for purposes of this Section A.4. Upon the occurrence
of an Extraordinary Transaction, each of the holders of Convertible Stock shall
be entitled to receive all amounts specified in Section A4(a) hereof. All
amounts due to the holders of Convertible Stock pursuant to Section A.4(a)(i)(A)
above shall be payable in cash or, at the election of the holders of not less
than two-thirds of the outstanding shares of Convertible Stock, all amounts due
to the holders of Convertible Stock pursuant to Sections A.4(a)(ii) and Section
AA(a)(i)(B) above may be payable in the same form of consideration as is paid to
the holders of Common Stock. Any securities to be paid to the holders of
Convertible Stock shall be valued as set forth in Section A.4(d).
(c) Notice. Prior to the occurrence of any Liquidation Event or
any Extraordinary Transaction, the Corporation will furnish to each holder of
Convertible Stock notice in accordance with Section A.9 hereof, together with a
certificate prepared by the chief financial officer of the Corporation
describing in detail the facts of such Liquidation Event.
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(d) Valuation of Distribution Securities. Any securities or other
consideration to be delivered to the holders of the Convertible Stock in
accordance with the terms hereof shall be valued as follows:
(i) If traded on a nationally recognized securities exchange
or inter-dealer quotation system, the value shall be deemed to be the average of
the closing prices of the securities on such exchange or system over the thirty
(30) calendar day period ending three (3) business days prior to the closing;
(ii) If traded over-the-counter, the value shall be deemed to
be the average of the closing prices over the thirty (30) calendar day period
ending three (3) business days prior to the closing; and
(iii) If there is no active public market, the value shall be
the fair market value thereof, as mutually determined by the Corporation and the
holders of not less than two-thirds of the outstanding shares of Convertible
Stock; provided that, if the Corporation and such holders are unable to reach
agreement, then by independent appraisal by a mutually agreed to investment
banker, the fees of which shall be paid by the Corporation; provided, further,
that, if the Corporation and such holders are unable to agree mutually to such
investment banker, then by calculating the average of three appraisals conducted
by three independent investment bankers, such that (A) the Corporation shall
select and pay the fees of the first investment banker, (B) such holders shall
select and pay the fees of the second investment banker and (C) the first two
investment bankers selected shall select a third investment banker, the fees of
which shall be paid equally by the Corporation, on the one hand, and such
holders, on the other hand.
5. Redemption.
(a) On or after June 18, 2005.
(i) At any time on or after June 18, 2005, but within ninety
(90) days after the receipt by the Corporation of a written request from the
holders of not less than two-thirds of the then outstanding shares of
Convertible Stock that all or, if less than all, a specified percentage of such
holders' shares of Convertible Stock be redeemed and concurrently with surrender
by such holders of the certificates representing such shares, the Corporation
shall, to the extent it may lawfully do so, redeem in three (3) equal annual
installments (each payment date being referred to herein as a "Redemption Date")
the shares specified in such request by paying in cash therefor a sum equal to
$0.9977 per share of Convertible Stock (as adjusted for any stock splits, stock
dividends, recapitalizations or the like) plus all declared but unpaid dividends
on such share (the "Convertible Redemption Price"). The number of shares of
Convertible Stock that the Corporation shall be required to redeem on any one
Redemption Date shall be equal to the amount determined by dividing (i) the
aggregate number of shares of Convertible Stock outstanding immediately prior to
such Redemption Date that have been requested to be redeemed pursuant to this
Section 5(a)(i) by (ii) the number of remaining Redemption Dates (including the
Redemption Date to which such calculation applies). Any redemption of
Convertible Stock effected pursuant to this Section 5(a)(i) shall be made on a
pro rata basis among the holders of the Convertible Stock in proportion to the
number of shares of Convertible Stock proposed to be redeemed by such holders.
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(ii) At least fifteen (15) but no more than thirty (30) days
prior to each Redemption Date, written notice shall be mailed, first class
postage prepaid, to each holder of record (at the close of business on the
business day next preceding the day on which notice is given) of the Convertible
Stock to be redeemed, at the address last shown on the records of the
Corporation for such holder, notifying such holder of the redemption to be
effected on the applicable Redemption Date, specifying the number of shares to
be redeemed from such holder, the Redemption Date, the Convertible Redemption
Price, the place at which payment may be obtained and calling upon such holder
to surrender to the Corporation, in the manner and at the place designated, the
certificate or certificates representing the shares to be redeemed (the
"Redemption Notice"). Except as provided in Section 5(a)(iii), on or after each
Redemption Date, each holder of Convertible Stock to be redeemed on such
Redemption Date shall surrender to the Corporation the certificate or
certificates representing such shares, in the manner and at the place designated
in the Redemption Notice, and thereupon the applicable Convertible Redemption
Price of such shares shall be payable to the order or the person whose name
appears on such certificate or certificates as the owner thereof and each
surrendered certificate shall be cancelled. In the event less than all the
shares represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares.
(iii) From and after each Redemption Date, unless there shall
have been a default in payment of the Convertible Redemption Price, all rights
of the holders of shares of Convertible Stock designated for redemption on such
Redemption Date in the Redemption Notice as holders of Convertible Stock (except
the right to receive the applicable Convertible Redemption Price without
interest upon surrender of their certificate or certificates) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever. If the funds of the Corporation legally available for redemption of
shares of Convertible Stock on a Redemption Date are insufficient to redeem the
total number of shares of Convertible Stock to be redeemed on such date, those
funds that are legally available will be used to redeem the maximum possible
number of such shares ratably among the holders of such shares to be redeemed
such that each holder of a share of Convertible Stock receives the same
percentage of the applicable Convertible Redemption Price. The shares of
Convertible Stock not redeemed shall remain outstanding and entitled to all the
rights and preferences provided herein. At any time thereafter when additional
funds of the Corporation are legally available for the redemption of shares of
Convertible Stock, such funds will immediately be used to redeem the balance of
the shares that the Corporation has become obliged to redeem on any Redemption
Date but that it has not redeemed.
(b) Purchase Date. At any time on or after June 18, 2005, upon the
election of the holders of not less than two-thirds of the outstanding
Convertible Stock to cause the Corporation to redeem Convertible Stock, each
holder of Convertible Stock shall be deemed to have elected to cause the
applicable percentage of such shares held by such holder to be so redeemed. If
at a Redemption Date shares of Convertible Stock are unable to be redeemed (as
contemplated by Section A.5(c) below), then holders of Convertible Stock shall
also be entitled to interest and dividends pursuant to Sections A.5(c) and (d)
below. The aggregate Convertible Redemption Price elected to be payable in cash
pursuant to Section A.5(a) shall be payable in cash in immediately available
funds to the respective holders on the Redemption Date (subject to Section
A.5(c)). Until the aggregate Convertible Redemption Price has been paid in cash
for all
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shares of Convertible Stock being redeemed or acquired: (A) no dividend
whatsoever shall be paid or declared, and no distribution shall be made, on
any capital stock of the Corporation; and (B) except as permitted by Section
A.8(d) and B.8(d), no shares of capital stock of the Corporation (other than
Redeemable Preferred Stock or Convertible Stock in accordance with this Section
A.5) shall be purchased, redeemed or acquired by the Corporation and no monies
shall be paid into or set aside or made available for a sinking fund for the
purchase, redemption or acquisition thereof.
(c) Redemption Prohibited. If, at a Redemption Date, the
Corporation is prohibited by law from redeeming all shares of Convertible Stock
for which redemption is required hereunder, then it shall redeem such shares on
a pro-rata basis among the holders of Convertible Stock in proportion to the
full respective redemption amounts to which they are entitled hereunder to the
extent possible and shall redeem the remaining shares to be redeemed as soon as
the Corporation is not prohibited by law from redeeming some or all of such
shares. Any shares of Convertible Stock not redeemed shall remain outstanding
and entitled to all of the rights and preferences provided in this Article III.
The Corporation shall take such reasonable action as shall be necessary or
appropriate to review and promptly remove any impediment to its ability to
redeem Convertible Stock under the circumstances contemplated by this Section
A.5(c). In the event that the Corporation fails for any reason to redeem shares
for which redemption is required pursuant to this Section. A.5, including,
without limitation, due to a prohibition of such redemption by law, then, during
the period from the applicable Redemption Date through the date on which such
shares are redeemed, the applicable Convertible Redemption Price and any
dividend accumulating after the Redemption Date shall bear interest at the rate
equal to the lesser of twelve percent (12%) per annum and the maximum rate
permitted by law with such interest to accrue daily in arrears and to be
compounded annually.
(d) Dividend After Redemption Date. From and after a Redemption
Date, no shares of Convertible Stock subject to redemption shall be entitled to
dividends, if any, as contemplated by Section A.3; provided, however that in
the event that shares of Convertible Stock are unable to be redeemed and
continue to be outstanding in accordance with Section A.5(c), such shares shall
continue to be entitled to dividends and interest thereon as provided in
Sections A.3 and A.5(c) until the date on which such shares are actually
redeemed by the Corporation.
(e) Surrender of Certificates. Upon receipt of the applicable
Convertible Redemption Price by certified check or wire transfer, each holder of
shares of Convertible Stock to be redeemed shall surrender the certificate or
certificates representing such shares to the Corporation, duly assigned or
endorsed for transfer (or accompanied by duly executed stock powers relating
thereto), or, in the event the certificate or certificates are lost, stolen or
missing, shall deliver an affidavit or agreement satisfactory to the Corporation
to indemnify the Corporation from any loss incurred by it in connection
therewith (an "Affidavit of Loss") with respect to such certificates at the
principal executive office of the Corporation or the office of the transfer
agent for the Convertible Stock or such office or offices in the continental
United States of an agent for redemption as may from time to time be designated
by notice to the holders of Convertible Stock, and each surrendered certificate
shall be canceled and retired.
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6. Conversion. The holders of the Convertible Stock shall have the
following conversion rights:
(a) Conversion Upon Election of Holders. Each holder of a share of
Convertible Stock shall be entitled at any time, upon the written election of
such holder without the payment of any additional consideration, to convert such
share of Convertible Stock into the number of fully paid and nonassessable
shares of Common Stock, which results from dividing the Conversion Value (as
defined in this Section A.6(a)) per share in effect for the Convertible Stock at
the time of conversion, as the numerator, by the per share Conversion Price (as
defined in this Section A.6(a)) of the Convertible Stock, as the denominator.
The number of shares of Common Stock into which a share of a Convertible Stock
is convertible is hereinafter referred to as the "Conversion Rate." In addition,
the holders of shares of Convertible Stock shall be entitled at any time, upon
the written election of two-thirds of the outstanding shares of Convertible
Stock without the payment of any additional consideration, to cause all (but not
less than all) of the outstanding shares of Convertible Stock to be
automatically converted into shares of Common Stock at the Conversion Rate. Upon
the filing of these Amended and Restated Articles of Incorporation with the
Secretary of State of the State of California, the "Conversion Price" per share
of Convertible Stock shall be $0.9977, and the per share "Conversion Value" of
Convertible Stock shall be $0.9977. The Conversion Price per share of
Convertible Stock and the Conversion Rate shall be subject to adjustment from
time to time as provided in Section A.7 hereof. If any share of Convertible
Stock is converted at a time when there are any declared but unpaid dividends or
other amounts due on or in respect of such shares, such declared but unpaid
dividends and other amounts shall be paid in full in cash by the Corporation in
connection with such conversion.
(b) Automatic Conversion Upon QPO. Each share of Convertible Stock
shall automatically be converted, without the payment of any additional
consideration, into shares of Common Stock as of, and in all cases subject to,
the closing of the Corporation's first underwritten offering to the public
pursuant to an effective registration statement under the Securities Act of
1933, as amended, provided that (i) such registration statement covers the offer
and sale of Common Stock for which the aggregate proceeds attributable to sales
for the account of the Corporation, net of underwriting discounts of
commissions, exceed $30 million, (ii) the value of the Corporation immediately
prior to the offering is equal to or greater than $350,000,000, as determined by
multiplying the public offering price per share by the number of outstanding
shares of Common Stock of the Corporation immediately prior to the offering
(assuming exercise or conversion of all outstanding securities exercisable for
or convertible into the Corporation's Common Stock), (iii) such Common Stock is
listed for trading on either the New York Stock Exchange or the Nasdaq National
Market, and (iv) all outstanding shares of Redeemable Preferred Stock and all
declared but unpaid dividends thereon are paid in full (a "QPO" or a "Qualified
Public Offering"); provided that if a closing of a QPO occurs, all outstanding
shares of Convertible Stock shall be deemed to have been converted into shares
of Common Stock immediately prior to such closing. Any such conversion shall be
at the Conversion Rate in effect upon the closing of a QPO, as applicable.
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If the holders of shares of Convertible Stock are required to convert the
outstanding shares of Convertible Stock pursuant to this Section A.6(b) at a
time when there are any declared but unpaid dividends or other amounts due on or
in respect of such shares, such dividends and other amounts shall be paid in
full in cash by the Corporation in connection with such conversion.
(c) Procedure for Voluntary Conversion. Upon election to convert
pursuant to Section A.6(a), the relevant holder of Convertible Stock shall
surrender the certificate or certificates representing the Convertible Stock
being converted, duly assigned or endorsed for transfer to the Corporation (or
accompanied by duly executed stock powers relating thereto), at the principal
executive office of the Corporation or the offices of the transfer agent for the
Convertible Stock or such office or offices in the continental United States of
an agent for conversion as may from time to time be designated by notice to the
holders of the Convertible Stock by the Corporation, or shall deliver an
Affidavit of Loss with respect to such certificates. The issuance by the
Corporation of Common Stock upon a conversion of Convertible Stock pursuant to
Section A.6(a) hereof shall be effective as of the surrender of the certificate
or certificates for the Convertible Stock to be converted, duly assigned or
endorsed for transfer to the Corporation (or accompanied by duly executed stock
powers relating thereto), or as of the delivery of an Affidavit of Loss. Upon
surrender of a certificate representing Convertible Stock for conversion, or
delivery of an Affidavit of Loss, the Corporation shall issue and send by hand
delivery, by courier or by first class mail (postage prepaid) to the holder
thereof or to such holder's designee, at the address designated by such holder,
certificates for the number of shares of Common Stock to which such holder shall
be entitled upon conversion plus a cash payment in the amount of any declared
but unpaid dividends and other amounts as contemplated by Section A.6(a) in
respect of the shares of Convertible Stock. The issuance of certificates for
Common Stock upon conversion of Convertible Stock will be made without charge to
the holders of such shares for any issuance tax in respect thereof or other
costs incurred by the Corporation in connection with such conversion and the
related issuance of such stock. In the event of any public offering constituting
a QPO, the provisions of Section A.6(d) shall apply.
(d) Procedure for Automatic Conversion. As of, and in all cases
subject to, the closing of a QPO (the "Automatic Conversion Date"), all
outstanding shares of Convertible Stock shall be converted automatically into
shares of Common Stock at the Conversion Rate and without any further action by
the holders of such shares and whether or not the certificates representing such
shares of Convertible Stock are surrendered to the Corporation or its transfer
agent. On the Automatic Conversion Date, all rights with respect to the
Convertible Stock so converted shall terminate, except any of the rights of the
holders thereof upon surrender of their certificate or certificates therefor or
delivery of an Affidavit of Loss thereof to receive certificates for the number
of shares of Common Stock into which such Convertible Stock has been converted
plus all declared but unpaid dividends and other amounts as contemplated by
Section A.6(b). Certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or by
his, her or its attorney duly authorized in writing. Upon surrender of such
certificates or Affidavit of Loss, the Corporation shall issue and deliver to
such holder, promptly (and in any event in such time as is sufficient to enable
such holder to participate in such QPO, as applicable) at such office and in its
name as shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of
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Common Stock into which the shares of the Convertible Stock surrendered are
convertible on the Automatic Conversion Date and shall pay all declared but
unpaid dividends and other amounts as contemplated by Section A.6(b) in respect
of the shares of Convertible Stock which are converted.
(e) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of Convertible Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of Convertible Stock. If at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all of the then outstanding shares of Convertible Stock, the Corporation will
take such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
(f) No Closing of Transfer Books. The Corporation shall not close
its books against the transfer of shares of Convertible Stock in any manner
which would interfere with the timely conversion of any shares of Convertible
Stock.
7. Adjustments. The Conversion Price in effect from time to time shall
be subject to adjustment from and after June 18, 1999 and regardless of whether
any shares of Convertible Stock are then issued and outstanding as follows:
(a) Dividends and Stock Splits. If the number of shares of Common
Stock outstanding at any time after the date hereof is increased by a stock
dividend payable in shares of Common Stock or by a subdivision or split-up of
shares of Common Stock, then, on the date such payment is made or such change is
effective, the Conversion Price shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of any shares of
Convertible Stock shall be increased in proportion to such increase of
outstanding shares of Common Stock.
(b) Reverse Stock Splits. If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination or
reverse split of the outstanding shares of Common Stock, then, on the effective
date of such combination or reverse split, the Conversion Price shall be
appropriately increased so that the number, of shares of Common Stock issuable
on conversion of any shares of Convertible Stock shall be decreased in
proportion to such decrease in outstanding shares of Common Stock.
(c) Sale of Common Stock. In the event the Corporation shall at
any time, or from time to time, issue, sell or exchange any shares of Common
Stock (including shares held in the Corporation's treasury, but excluding up to
Nine Million Six Hundred Twenty-Nine Thousand Seventy-Four (9,629,074) shares of
Common Stock (as appropriately adjusted for stock splits, stock dividends and
the like), which number shall include the shares of Common Stock issuable
pursuant to options outstanding as of the date hereof, issued to officers,
directors or employees of the Corporation upon the exercise of options or other
rights issued to such officers, directors or employees pursuant to the
Corporation's stock option plan and shares of Common Stock issued as
consideration for acquisitions approved by a majority of the members
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of the Board of Directors (collectively, the "Excluded Shares")), for a
consideration per share less than the Conversion Price in effect immediately
prior to the issuance, sale or exchange of such shares, then, and thereafter
successively upon each such issuance, sale or exchange, the Conversion Price in
effect immediately prior to the issuance, sale or exchange of such shares shall
forthwith be reduced to an amount determined by multiplying such Conversion
Price by a fraction:
(i) the numerator of which shall be (X) the number of shares
of Common Stock of all classes outstanding immediately prior to the issuance of
such additional shares of Common Stock (excluding treasury shares but including
all shares of Common Stock issuable upon conversion or exercise of any
outstanding Convertible Stock, options, warrants, rights or convertible
securities), plus (Y) the number of shares of Common Stock which the net
aggregate consideration received by the Corporation for the total number of such
additional shares of Common Stock so issued would purchase at the Conversion
Price (prior to adjustment), and
(ii) the denominator of which shall be (X) the number of
shares of Common Stock of all classes outstanding immediately prior to the
issuance of such additional shares of Common Stock (excluding treasury shares
but including all shares of Common Stock issuable upon conversion or exercise of
any outstanding Convertible Stock, options, warrants, rights or convertible
securities), plus (Y) the number of such additional shares of Common Stock so
issued.
(d) Sale of Options, Rights or Convertible Securities. In the
event the Corporation shall at any time or from time to time, issue options,
warrants or rights to subscribe for shares of Common Stock, or issue any
securities convertible into or exchangeable for shares of Common Stock (other
than any options or warrants for Excluded Shares), for a consideration per share
(determined by dividing the Net Aggregate Consideration (as determined below) by
the aggregate number of shares of Common Stock that would be issued if all such
options, warrants, rights or convertible securities were exercised or converted
to the fullest extent permitted by their terms) less than the Conversion Price
in effect immediately prior to the issuance of such options or rights or
convertible or exchangeable securities, the Conversion Price in effect
immediately prior to the issuance of such options, warrants or rights or
securities shall be reduced to an amount determined by multiplying such
Conversion Price by a fraction:
(i) the numerator of which shall be (X) the number of shares
of Common Stock of all classes outstanding immediately prior to the issuance of
such options, rights or convertible securities (excluding treasury shares but
including all shares of Common Stock issuable upon conversion or exercise of any
outstanding Convertible Stock, options, warrants, rights or convertible
securities), plus (Y) the number of shares of Common Stock which the total
amount of consideration received by the Corporation for the issuance of such
options, warrants, rights or convertible securities plus the minimum amount set
forth in the terms of such security as payable to the Corporation upon the
exercise or conversion thereof (the "Net Aggregate Consideration") would
purchase at the Conversion Price prior to adjustment, and
(ii) the denominator of which shall be (X) the number of
shares of Common Stock of all classes outstanding immediately prior to the
issuance of such options,
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warrants, rights or convertible securities (excluding treasury shares but
including all shares of Common Stock issuable upon conversion or exercise of any
outstanding Convertible Stock, options, warrants, rights or convertible
securities), plus (Y) the aggregate number of shares of Common Stock that would
be issued if all such options, warrants, rights or convertible securities were
exercised or converted.
(e) Expiration or Change in Price. If the consideration per share
provided for in any options or rights to subscribe for shares of Common Stock or
any securities exchangeable for or convertible into shares of Common Stock,
changes at any time, the Conversion Price in effect at the time of such change
shall be readjusted to the Conversion Price which would have been in effect at
such time had such options or convertible securities provided for such changed
consideration per share (determined as provided in Section A.7(d) hereof), at
the time initially granted, issued or sold; provided, that such adjustment of
the Conversion Price will be made only as and to the extent that the Conversion
Price effective upon such adjustment remains less than or equal to the
Conversion Price that would be in effect if such options, rights or securities
had not been issued. No adjustment of the Conversion Price shall be made under
this Section A.7 upon the issuance of any additional shares of Common Stock
which are issued pursuant to the exercise of any warrants, options or other
subscription or purchase rights or pursuant to the exercise of any conversion or
exchange rights in any convertible securities if an adjustment shall previously
have been made upon the issuance of such warrants, options or other rights. Any
adjustment of the Conversion Price shall be disregarded if, as, and when the
rights to acquire shares of Common Stock upon exercise or conversion of the
warrants, options, rights or convertible securities which gave rise to such
adjustment expire or are canceled without having been exercised, so that the
Conversion Price effective immediately upon such cancellation or expiration
shall be equal to the Conversion Price in effect at the time of the issuance of
the expired or canceled warrants, options, rights or convertible securities,
with such additional adjustments as would have been made to that Conversion
Price had the expired or canceled warrants, options, rights or convertible
securities not been issued.
(f) Other Adjustments. In the event the Corporation shall make or
issue, or fix a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, then and in each such event
lawful and adequate provision shall be made so that the holders of Convertible
Stock shall receive upon conversion thereof in addition to the number of shares
of Common Stock receivable thereupon, the number of securities of the
Corporation which they would have received had their Convertible Stock been
converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the date of
conversion, retained such securities receivable by them as aforesaid during such
period, giving application to all adjustments called for during such period
under this Section A.7 as applied to such distributed securities.
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(g) Reclassification, etc. If the Common Stock issuable upon the
conversion of the Convertible Stock shall be changed into the same or different
number of shares of any class or classes of stock, whether by reclassification
or otherwise (other than a subdivision or combination of shares or stock
dividend provided for above, or a reorganization, merger, consolidation or sale
of assets provided for elsewhere in this Section A.7), then and in each such
event the holder of each share of Convertible Stock shall have the right
thereafter to convert such share into the kind and amount of shares of stock and
other securities and property receivable upon such reclassification or other
change, by holders of the number of shares of Common Stock into which such
shares of Convertible Stock might have been converted immediately prior to such
reclassification or change, all subject to further adjustment as provided
herein.
(h) Mergers and Other Reorganizations. Unless such transaction is
an Extraordinary Transaction, if at any time or from time to time there shall be
a capital reorganization of the Common Stock (other than a subdivision,
combination, reclassification or exchange of shares provided for elsewhere in
this Section A.7) or a merger or consolidation of the Corporation with or into
another corporation, then, as part of and as a condition to the effectiveness of
such reorganization, merger or consolidation, lawful and adequate provision
shall be made so that the holders of the Convertible Stock shall thereafter be
entitled to receive upon conversion of the Convertible Stock the number of
shares of stock or other securities or property of the Corporation, or of the
successor corporation resulting from such merger or consolidation or sale, to
which a holder of Common Stock would have been entitled in connection with such
capital reorganization, merger, consolidation, or sale. In any such case,
appropriate provisions shall be made with respect to the rights of the holders
of the Convertible Stock after the reorganization, merger, consolidation or sale
to the end that the provisions of this Section A.7 (including, without
limitation, provisions for adjustment of the applicable Conversion Price and the
number of shares purchasable upon conversion of the Convertible Stock) shall
thereafter be applicable, as nearly as may be, with respect to any shares of
stock, securities or assets to be deliverable thereafter upon the conversion of
the Convertible Stock.
(i) Certificate. Upon the occurrence of each adjustment or
readjustment pursuant to this Section A.7, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof. The Corporation shall, upon written request at any time of any holder of
Convertible Stock, prepare, furnish or cause to be furnished to such holder a
certificate setting forth: (i) such adjustment or readjustment, showing in
detail the facts upon which such adjustments or readjustment is based; (ii) the
Conversion Price before and after such adjustment or readjustment; and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of such holder's shares of
Convertible Stock.
8. Covenants. So long as any shares of Convertible Stock shall be
outstanding, the Corporation shall not, without first having provided written
notice of such proposed action to each holder of outstanding shares of
Convertible Stock and having obtained the affirmative vote or written consent of
the holders of not less than two-thirds of the outstanding shares of Convertible
Stock, voting as a single class, with each share of Convertible Stock entitling
the holder thereof to one vote per share of Convertible Stock held by such
holder:
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<PAGE> 15
(a) amend, alter or repeal any provision of, or add any provision
to, Article III of these Amended and Restated Articles of Incorporation, or
otherwise amend, alter or repeal any provision of, or add any provision to,
these Amended and Restated Articles of Incorporation or the Corporation's
by-laws, if such latter action would alter or change the preferences, rights,
privileges or powers of, or the restrictions provided for the benefit of, any of
the Convertible Stock;
(b) create, obligate itself to create, authorize or issue any new
class or classes of stock or new series of common stock or preferred stock or
any security convertible into or evidencing the right to purchase shares of any
new class or series of common stock or preferred stock or any new capital stock
of the Corporation having preference over or being on parity with the
Convertible Stock in any respect;
(c) declare or pay any dividends or apply any of its assets to the
redemption, retirement, purchase or other acquisition, directly or indirectly,
through subsidiaries or otherwise, except for (i) the redemption of Convertible
Stock or Redeemable Preferred Stock pursuant to and as provided in these Amended
and Restated Articles of Incorporation, and (ii) the redemption at cost of
shares of Common Stock from employees, officers or directors of, or consultants,
advisors or independent contractors to, the Corporation or any of its
subsidiaries pursuant to a stock option plan approved by the Board of Directors
or a committee thereof; or
(d) notwithstanding anything herein to the contrary, so long as at
least four million (4,000,000) shares of Convertible Stock (adjusted
appropriately for stock splits, stock dividends, recapitalizations and the like
with respect to the Convertible Stock) shall be outstanding, effect any: (i)
Liquidation Event; (ii) merger or consolidation of the Corporation with or into
another corporation (with respect to which less than a majority of the
outstanding voting power of the surviving or consolidated corporation is held by
persons who are shareholders of the Corporation immediately prior to such
event); (iii) sale or transfer of all or substantially all of the properties and
assets of the Corporation and its subsidiaries; or (iv) redemption or repurchase
of shares representing a majority of the voting power of the outstanding shares
of capital stock of the Corporation; but in all cases excluding: (x) a public
offering by the Corporation of shares of Common Stock or other securities; and
(y) any transaction pursuant to which the holders of Convertible Stock and
Redeemable Preferred Stock would receive in exchange for all shares of
Convertible Stock (including shares of Common Stock resulting from the
conversion of Convertible Stock) and Redeemable Preferred Stock then held by
them an aggregate amount equal to not less than $90 million with respect to,
such transaction that occurs before June 18, 2000, or, thereafter, an aggregate
amount equal to not less than $120 million; provided, however, that in each case
such aggregate amount thresholds shall be reduced by any amounts previously paid
by the Corporation pursuant to a redemption of any Convertible Stock or
Redeemable Preferred Stock.
Further, the Corporation shall not, by amendment of these Amended and
Restated Articles of Incorporation or through any Extraordinary Transaction or
other reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities, agreement or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation but shall at all times in good faith
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<PAGE> 16
assist in the carrying out of all the provisions of this Article III and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holders of the Convertible Stock against impairment. Any
successor to the Corporation shall agree, as a condition to such succession, to
carry out and observe the obligations of the Corporation hereunder with respect
to the Convertible Stock.
9. Notice.
(a) Liquidation Events, Extraordinary Transactions, Etc. In the
event (i) the Corporation establishes a record date to determine the holders of
any class of securities who are entitled to receive any dividend or other
distribution or who are entitled to vote at a meeting (or by written consent) in
connection with any of the transactions identified in clause (ii) hereof, or
(ii) any Liquidation Event (as defined in Section A.4), any Extraordinary
Transaction (as defined in Section A.4), any QPO (as defined in Section A.6) or
any other public offering becomes reasonably likely to occur, the Corporation
shall mail or cause to be mailed by first class mail (postage prepaid) to each
holder of Convertible Stock at least twenty (20) days prior to such record date
specified therein or the expected effective date of any such transaction,
whichever is earlier, a notice specifying (A) the date of such record date for
the purpose of such dividend or distribution or meeting or consent and a
description of such dividend or distribution or the action to be taken at such
meeting or by such consent, (B) the date on which any such Liquidation Event,
Extraordinary Transaction, QPO or other public offering is expected to become
effective, and (C) the date on which the books of the Corporation shall close or
a record shall be taken with respect to any such event.
(b) Waiver of Notice. The holder or holders of not less than
two-thirds of the outstanding shares of Convertible Stock may, at any time upon
written notice to the Corporation, waive any notice provisions specified herein
for the benefit of such holders, and any such waiver shall be binding upon all
holders of such securities.
(c) General. In the event that the Corporation provides any
notice, report or statement to any holder of Common Stock, the Corporation shall
at the same time provide a copy of any such notice, report or statement to each
holder of outstanding shares of Convertible Stock.
10. No Reissuance of Convertible Stock. No share or shares of
Convertible Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
canceled, retired and eliminated from the shares which the Corporation shall be
authorized to issue.
11. Contractual Rights of Holders. The various provisions set forth
herein for the benefit of the holders of the Convertible Stock shall be deemed
contract rights enforceable by them, including without limitation, one or more
actions for specific performance.
B. REDEEMABLE PREFERRED STOCK
1. Designation. A total of One Hundred (100) shares of the
Corporation's Preferred Stock shall be designated as a series known as
Redeemable Preferred Stock ("Redeemable Preferred Stock"). All of the
preferential amounts to be paid to the holders of the Redeemable
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<PAGE> 17
Preferred Stock as provided in this Section B shall be paid or set apart for
payment before the payment or setting apart for payment of any amount for, or
the distribution of any property of the Corporation to, the holders of any other
equity securities of the Corporation, whether now or hereafter authorized.
2. Voting. The Redeemable Preferred Stock shall not be entitled to vote
on any matters except to the extent otherwise required under California law.
3. Dividends. The holders of Redeemable Preferred Stock shall not be
entitled to receive dividends.
4. Liquidation; Extraordinary Transaction.
(a) Liquidation Preference. Upon any Liquidation Event, each
holder of outstanding shares of Redeemable Preferred Stock shall be entitled to
be paid out of the assets of the Corporation available for distribution to
shareholders, whether such assets are capital, surplus, or earnings, and before
any amount shall be paid or distributed to the holders of Common Stock or of any
other stock ranking on liquidation junior to the Redeemable Preferred Stock
(including the Convertible Stock), an amount in cash equal to $150,000 per share
of Redeemable Preferred Stock held by such holder (with no adjustment for any
stock split, stock dividend, recapitalization or the like with respect to any of
the Corporation's equity securities) (the "Redeemable Liquidation Preference
Amount").
(b) Extraordinary Transaction. An Extraordinary Transaction shall
be deemed a Liquidation Event. Upon the occurrence of an Extraordinary
Transaction, each of the holders of Redeemable Preferred Stock shall be entitled
to receive all amounts specified in Section B.4(a) hereof. All amounts due to
the holders of Redeemable Preferred Stock pursuant to Section B.4(a) above shall
be payable in cash or, at the election of the holders of not less than
two-thirds of the outstanding shares of Redeemable Preferred Stock, all amounts
due to the holders of Redeemable Preferred Stock pursuant to Section A.4(a)
above may be payable in the same form of consideration as is paid to the holders
of Common Stock. Any securities to be paid to the holders of Redeemable
Preferred Stock shall be valued as set forth in Section A.4(d).
5. Redemption.
(a) Redemption Events.
(i) Automatic. Immediately upon and as of, and in all cases
subject to, the closing of any offering by the Corporation of its capital stock
for sale to the public pursuant to an effective registration statement under
Section 5 of the Securities Act of 1933, as amended, the Corporation shall
redeem all (and not less than all) of the outstanding shares of Redeemable
Preferred Stock at the Redeemable Preferred Redemption Price specified in
Section B.5(a)(ii).
(ii) On or after June 18, 2005.
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<PAGE> 18
(A) At any time on or after June 18, 2005, but within
ninety (90) days after the receipt by the Corporation of a written request from
the holders of not less than two-thirds of the then outstanding Redeemable
Preferred Stock that all or, if less than all, a specified percentage of such
holders' shares of Redeemable Preferred Stock be redeemed and concurrently with
surrender by such holders of the certificates representing such shares, the
Corporation shall, to the extent it may lawfully do so, redeem in three (3)
annual installments (each payment date being referred to herein as "Redemption
Date") the shares specified in such request by paying in cash therefor a sum
equal to $150,000 per share of Redeemable Preferred Stock (the "Redeemable
Preferred Redemption Price"). The number of shares of Redeemable Preferred Stock
that the Corporation shall be required to redeem on any one Redemption Date
shall be equal to the amount determined by dividing (i) the aggregate number of
shares of Redeemable Preferred Stock outstanding immediately prior to such
Redemption Date that have been requested to be redeemed pursuant to this Section
B.5(a)(ii)(A) by (ii) the number of remaining Redemption Dates (including the
Redemption Date to which such calculation applies). Any redemption of Redeemable
Preferred Stock effected pursuant to this Section B.5(a)(ii)(A) shall be made
on a pro rata basis among the holders of the Redeemable Preferred Stock in
proportion to the number of shares of Redeemable Preferred Stock proposed to be
redeemed by such holders.
(B) At least fifteen (15) but no more than thirty (30)
days prior to each Redemption Date, written notice shall be mailed, first class
postage prepaid, to each holder of record (at the close of business on the
business day next preceding the day on which notice is given) of the Redeemable
Preferred Stock to be redeemed, at the address last shown on the records of the
Corporation for such holder, notifying such holder of the redemption to be
effected on the applicable Redemption Date, specifying the number of shares to
be redeemed from such holder, the Redemption Date, the Redeemable Preferred
Redemption Price, the place at which payment may be obtained and calling upon
such holder to surrender to the Corporation, in the manner and at the place
designated, the certificate or certificates representing the shares to be
redeemed (the "Redemption Notice"). Except as provided in Section B.5(a)(ii)(C),
on or after each Redemption Date, each holder of Redeemable Preferred Stock to
be redeemed on such Redemption Date shall surrender to the Corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the applicable
Redeemable Preferred Redemption Price of such shares shall be payable to the
order of the person whose name appears on such certificate or certificates as
the owner thereof and each surrendered certificate shall be cancelled. In the
event less than all the shares represented by any such certificate are redeemed,
a new certificate shall be issued representing the unredeemed shares.
(C) From and after each Redemption Date, unless there
shall have been a default in payment of the Redeemable Preferred Redemption
Price, all rights of the holders of shards of Redeemable Preferred Stock
designated for redemption on such Redemption Date in the Redemption Notice as
holders of Redeemable Preferred Stock (except the right to receive the
applicable Redeemable Preferred Redemption Price without interest upon surrender
of their certificate or certificates) shall cease with respect to such shares,
and such shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever. If the
funds of the Corporation legally available for redemption of shares of
Redeemable Preferred Stock on a Redemption Date are insufficient to redeem the
total
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<PAGE> 19
number of shares of Redeemable Preferred Stock to be redeemed on such date,
those funds that are legally available will be used to redeem the maximum
possible number of such shares ratably among the holders of such shares to be
redeemed such that each holder of a share of Redeemable Preferred Stock
receives the same percentage of the applicable Redeemable Preferred Redemption
Price. The shares of Redeemable Preferred Stock not redeemed shall remain
outstanding and entitled to all the rights and preferences provided herein. At
any time thereafter when additional funds of the Corporation are legally
available for the redemption of shares of Redeemable Preferred Stock, such funds
will immediately be used to redeem the balance of the shares that the
Corporation has become obliged to redeem on any Redemption Date but that it has
not redeemed.
(b) Purchase Date. At any time on or after June 18, 2005, upon the
election of the holders of not less than two-thirds of the outstanding
Redeemable Preferred Stock to cause the Corporation to redeem the Redeemable
Preferred Stock, each holder of Redeemable Preferred Stock shall be deemed to
have elected to cause the Redeemable Preferred Stock subject to such election to
be so redeemed. If at a Redemption Date shares of Convertible Stock are unable
to be redeemed (as contemplated by Section B.5(c) below) then holders of the
Redeemable Preferred Stock shall also be entitled to interest pursuant to
Section B.5(c). The aggregate Redeemable Preferred Redemption Price shall be
payable in cash in immediately available funds on the Redemption Date (subject
to Section B.5(c)). Until the aggregate Redeemable Preferred Redemption Price
has been paid in cash for all shares of Redeemable Preferred Stock being
redeemed or acquired: (A) no dividend whatsoever shall be paid or declared, and
no distribution shall be made, on any capital stock of the Corporation; and (B)
except as permitted in Section A.8(d) and B.8(d), no shares of capital stock of
the Corporation (other than Convertible Stock or the Redeemable Preferred Stock
in accordance with this Section B.5) shall be purchased, redeemed or acquired by
the Corporation and no monies shall be paid into or set aside or made available
for a sinking fund for the purchase, redemption or acquisition thereof.
(c) Redemption Prohibited. If, at a Redemption Date, the
Corporation is prohibited by law from redeeming all shares of Redeemable
Preferred Stock for which redemption is required hereunder, then it shall redeem
such shares on a pro-rata basis among the holders of Redeemable Preferred Stock
in proportion to the full respective redemption amounts to which they are
entitled hereunder to the extent possible and shall redeem the remaining shares
to be redeemed as soon as the Corporation is not prohibited by law from
redeeming some or all of such shares. Any shares of Redeemable Preferred Stock
not redeemed shall remain outstanding and entitled to all of the rights and
preferences provided in this Article III. The Corporation shall take such
reasonable action as shall be necessary or appropriate to review and promptly
remove any impediment to its ability to redeem the Redeemable Preferred Stock
under the circumstances contemplated by this Section B.5(c). In the event that
the Corporation fails for any reason to redeem shares for which redemption is
required pursuant to this Section B.5, including, without limitation, due to a
prohibition of such redemption under law, then during the period from the
applicable Redemption Date through the date on which such shares are redeemed,
the Redeemable Preferred Redemption Price of such shares shall bear interest at
the rate equal to the lesser of twelve percent (12%) per annum and the maximum
rate permitted by law, with such interest to accrue daily in arrears and to be
compounded annually.
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(d) Surrender of Certificates. Upon receipt of the applicable
Redeemable Preferred Redemption Price by certified check or wire transfer, each
holder of shares of Redeemable Preferred Stock to be redeemed shall surrender
the certificate or certificates representing such shares to the Corporation,
duly assigned or endorsed for transfer (or accompanied by duly executed stock
powers relating thereto), or shall deliver an Affidavit of Loss with respect to
such certificates at the principal executive office of the Corporation or the
office of the transfer agent for the Redeemable Preferred Stock or such office
or offices in the continental United States of an agent for redemption as may
from time to time be designated by notice to the holders of Redeemable Preferred
Stock, and each surrendered certificate shall be canceled and retired.
6. Covenants. So long as any shares of Redeemable Preferred Stock shall
be outstanding, the Corporation shall not, without first having provided written
notice of such proposed action to each holder of outstanding shares of
Redeemable Preferred Stock and having obtained the affirmative vote or written
consent of the holders of not less than two-thirds of the outstanding shares of
Redeemable Preferred Stock, voting as a single class, with each share of
Redeemable Preferred Stock entitling the holder thereof to one vote per share of
Redeemable Preferred Stock held by such holder:
(a) amend, alter or repeal any provision of, or add any provision
to, Article III of these Amended and Restated Articles of Incorporation, or
otherwise amend, alter or repeal any provision of, or add any provision to,
these Amended and Restated Articles of Incorporation or the Corporation's
by-laws if such latter action would alter or change the preferences, rights,
privileges or powers of, or the restrictions provided for the benefit of, any of
the Redeemable Preferred Stock;
(b) create, obligate itself to create, authorize or issue any new
class or classes of stock or new series of common stock or preferred stock or
any security convertible into or evidencing the right to purchase shares of any
new class or series of common stock or preferred stock or any new capital stock
of the Corporation having preference over or being on parity with the Redeemable
Preferred Stock in any respect; or
(c) declare or pay any dividends or apply any of its assets to the
redemption, retirement, purchase or other acquisition, directly or indirectly,
through subsidiaries or otherwise, except for (i) the redemption of Convertible
Stock or Redeemable Preferred Stock pursuant to and as provided in these Amended
and Restated Articles of Incorporation, and (ii) the redemption at cost of
shares of Common Stock from employees, officers or directors of, or consultants,
advisors or independent contractors to, the Corporation or any of its
subsidiaries pursuant to a stock option plan approved by the Board of Directors
or a committee thereof.
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Further, the Corporation shall not, by amendment of these Amended and
Restated Articles of Incorporation or through any Extraordinary Transaction or
other reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities, agreement or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation but shall at all times in good faith
assist in the carrying out of all the provisions of this Article III and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holders of the Redeemable Preferred Stock against impairment.
Any successor to the Corporation shall agree, as a condition to such succession,
to carry out and observe the obligations of the Corporation hereunder with
respect to the Redeemable Preferred Stock.
7. Notices. In the event (i) the Corporation establishes a record date
to determine the holders of any class of securities who are entitled to receive
any dividend or other distribution or who are entitled to vote at a meeting (or
by written consent) in connection with any of the transactions identified in
clause (ii) hereof, or (ii) any Liquidation Event (as defined in Section A.4),
any Extraordinary Transaction (as defined in Section A.5), any QPO (as defined
in Section A.6) or any other public offering becomes reasonably likely to occur,
the Corporation shall mail or cause to be mailed by first class mail (postage
prepaid) to each holder of Redeemable Preferred Stock at least twenty (20) days
prior to such record date specified therein or the expected effective date of
any such transaction, whichever is earlier, a notice specifying (A) the date of
such record date for the purpose of such dividend or distribution or meeting or
consent and a description of such dividend or distribution or the action to be
taken at such meeting or by such consent, (B) the date on which any such
Liquidation Event, Extraordinary Transaction, QPO or other public offering is
expected to become effective, and (C) the date on which the books of the
Corporation shall close or a record shall be taken with respect to any such
event.
In the event that the Corporation provides or is required to provide
notice to any holder of Convertible Stock and Common Stock in accordance with
the provisions of these Amended and Restated Articles of Incorporation
(including the provisions of Sections A.5(c) and A.9) and/or the Corporation's
by-laws, the Corporation shall at the same time provide a copy of any such
notice to each holder of outstanding shares of Redeemable Preferred Stock.
The holder or holders of not less than two-thirds of the outstanding
shares of Redeemable Preferred Stock may, at any time upon written notice to the
Corporation, waive, any notice provisions specified herein for the benefit of
such holders, and any such waiver shall be binding upon all holders of such
securities.
8. No Reissuance of Redeemable Preferred Stock. No share or shares of
Redeemable Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion, exchange or otherwise shall be reissued, and all such
shares shall be canceled, retired and eliminated from the shares which the
Corporation shall be authorized to issue.
9. Contractual Rights of Holders. The various provisions set forth
herein for the benefit of the holders of the Convertible Stock shall be deemed
contract rights enforceable by them, including without limitation, one or more
actions for specific performance.
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C. COMMON STOCK
1. Voting.
(a) Election of Directors. The holders of Common Stock voting as a
separate class shall be entitled to elect any directors not authorized to be
elected by the holders of Convertible Stock.
The holder of each share of Common Stock shall be entitled to one vote for
each such share as determined on the record date for the vote or consent of
shareholders. The holders of the Common Stock shall vote together with the
holders of the Convertible Stock as a single class upon any items submitted to a
vote of shareholders as long as any shares of Convertible Stock are outstanding,
except as otherwise provided herein or by law.
2. Dividends. The holders of Common Stock and Convertible Stock shall
be entitled to receive dividends out of funds legally available therefor on a
pari passu basis as if a single class at such times and in such amounts as the
Board of Directors may determine in its sole discretion, as contemplated by
Section A.3.
3. Liquidation. Upon any Liquidation Event, the holders of Common Stock
shall be entitled to share in the assets of the Corporation available for
distribution as set forth in Sections A.4(a) and BA(a).
ARTICLE IV
DIRECTORS' LIABILITY AND INDEMNIFICATION OF AGENTS
The liability of the directors of the Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
The Corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, agreements with agents, vote of shareholders or disinterested
directors or otherwise, to the fullest extent permissible under California law.
Any amendment, repeal or modification of any provision of this Article
IV shall not adversely affect any right or protection of an agent of the
Corporation existing at the time of such amendment, repeal or modification.
* * * *
3. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the Board of Directors of the
Corporation.
4. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the holders of the requisite number of
shares of the Corporation in accordance with Sections 902 and 903 of the
California General Corporation Law. The total number of outstanding shares of
the Corporation entitled to vote with respect to the foregoing
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amendment was 100,000,000 shares of Common Stock. The number of shares of stock
voting in favor of the amendment equaled or exceeded the vote required, such
required vote being a majority of the outstanding shares of Common Stock.
The undersigned certifies under penalty of perjury under the laws of the
State of California that he has read the foregoing amendment and restatement of
the Articles of Incorporation and knows the contents thereof, and that the
statements therein are true and correct of his own knowledge.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned has executed these Amended and Restated
Articles of Incorporation on June 18 1999, executed at San Diego, California.
WEBSIDESTORY, INC.
By: /s/ BLAISE BARRELET
-----------------------------------
Name: Blaise Barrelet
Title: President and Secretary
[SEAL OF THE
SECRETARY OF
STATE]
[SIGNATURE PAGE TO THE AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF WEBSIDESTORY, INC.]
<PAGE> 1
EXHIBIT 3.1.2
STATE OF CALIFORNIA
[SEAL]
[SEAL OF THE
SECRETARY OF
STATE]
SECRETARY OF STATE
I, BILL JONES, Secretary of State of the State of California, hereby
certify:
That the attached transcript of 4 pages has been compared with the record
on file in this office, of which it purports to be a copy, and that it is full,
true and correct.
IN WITNESS WHEREOF, I execute this
[CALIFORNIA STATE certificate and affix the Great Seal of
SEAL] the State of California this day of
FEB 28 2000
-----------------------------------------
/s/ BILL JONES
-----------------------------------------
Secretary of State
<PAGE> 2
A0539983
ENDORSED-FILED
in the office of the Secretary of State
of the State of California
FEB 23 2000
BILL JONES, Secretary of State
CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
WEBSIDESTORY, INC.
The undersigned certify that:
1. They are the President and the Secretary, respectively, Of
WEBSIDESTORY, INC., a California corporation.
2. The first sentence of Article III of the Amended and Restated
Articles of Incorporation of this corporation is amended to read in full as
follows:
"The total number of shares of capital stock which the Corporation shall
have authority to issue is Two Hundred Million (200,000,000), of which (a)
Fifteen Million Thirty-Four Thousand Eight Hundred Twelve (15,034,812)
shares shall be preferred stock ("Preferred Stock "), consisting of
Fifteen Million Thirty-Four Thousand Seven Hundred Twelve (15,034,712)
shares of Convertible Stock (as hereinafter defined), (b) and One Hundred
Eighty-Four Million Nine Hundred Sixty-Five-Thousand One Hundred
Eighty-Eight (184,965,188) shares shall be common stock ("Common Stock")."
3. Article IIIA.6(a) and (b) of the Amended and Restated Articles of
Incorporation of this corporation is amended to read in full as follows:
"(a) CONVERSION UPON ELECTION OF HOLDERS. Each holder of a share of
Convertible Stock shall be entitled at any time, upon the written
election of such holder without the payment of any additional
consideration, to convert such share of Convertible Stock into the
number of fully paid and nonassessable shares of Common Stock, which
results from dividing the Conversion Value (as defined in this
Section A.6(a)) per share in effect for the Convertible Stock at the
time of conversion, as the numerator, by the per share Conversion
Price (as defined in this Section A.6(a)) of the Convertible Stock,
as the denominator. The number of shares of Common Stock into which
a share of a Convertible Stock is convertible is hereinafter
referred to as the "Conversion Rate." In addition, the holders of
shares of Convertible Stock shall be entitled at any time, upon the
written election of two-thirds of the outstanding shares of
Convertible Stock without the payment of any additional
consideration, to cause all (but not less than all) of the
outstanding shares of Convertible Stock to be automatically
converted into shares of Common Stock at the Conversion Rate. Upon
the filing of this Certificate of Incorporation with the Secretary
of State of the State of California, the "Conversion Price" per
share of Convertible Stock shall be $0.3538676, and the per share
"Conversion Value" of Convertible Stock shall be $0.9977. The
Conversion Price per share of Convertible Stock and the Conversion
Rate shall be subject to adjustment hereafter from time to time (but
no adjustment shall be made to account for issuances or other events
prior to the date of the filing hereof) as provided in Section A.7
hereof. If any share of Convertible Stock is converted
1
<PAGE> 3
at a time when there are any declared but unpaid dividends or other
amounts due on or in respect of such shares, such declared but
unpaid dividends and other amounts shall be paid in full in cash by
the Corporation in connection with such conversion.
(b) AUTOMATIC CONVERSION UPON QPO. Each share of Convertible Stock
shall automatically be converted, without the payment of any
additional consideration, into shares of Common Stock as of, and in
all cases subject to, the closing of the Corporation's first
underwritten offering to the public pursuant to an effective
registration statement under the Securities Act of 1933, as amended,
provided that (i) such registration statement covers the offer and
sale of Common Stock for which the aggregate proceeds attributable
to sales for the account of the Corporation, net of underwriting
discounts of commissions, exceed $20 million, (ii) the value of the
Corporation immediately prior to the offering is equal to or greater
than $150,000,000, as determined by multiplying the public offering
price per share by the number of outstanding shares of Common Stock
of the Corporation immediately prior to the offering (assuming
exercise or conversion of all outstanding securities exercisable for
or convertible into the Corporation's Common Stock), (iii) such
Common Stock is listed for trading on either the New York Stock
Exchange or the Nasdaq National Market, and (iv) all outstanding
shares of Redeemable Preferred Stock and all declared but unpaid
dividends thereon are paid in full (a "QPO" or a "Qualified Public
Offering"); provided that if a closing of a QPO occurs, all
outstanding shares of Convertible Stock shall be deemed to have been
converted into shares of Common Stock immediately prior to such
closing. Any such conversion shall be at the Conversion Rate in
effect upon the closing of a QPO, as applicable.
If the holders of shares of Convertible Stock are required to
convert the outstanding shares of Convertible Stock pursuant to this
Section A.6(b) at a time when there are any declared but unpaid
dividends or other amounts due on or in respect of such shares, such
dividends and other amounts shall be paid in full in cash by the
Corporation in connection with such conversion."
4. The forepart. of Article IIIA.7 of the Amended and Restated
Articles of Incorporation of this corporation is amended to read in full as
follows:
"ADJUSTMENTS. The Conversion Price in effect from time to time shall be
subject to adjustment from and after January 1, 2000 and regardless of
whether any shares of Convertible Stock are then issued and outstanding as
follows:"
5. Article IIIA.7(c) of the Amended and Restated Articles of
Incorporation of this corporation is amended to read in full as follows:
"SALE OF COMMON STOCK. In the event the Corporation shall at any time, or
from time to time, issue, sell or exchange any shares of Common Stock
including shares held in the Corporation's treasury other than (i)
Thirty-One Million Six
2
<PAGE> 4
Hundred Fifty-Two Thousand Thirty (31,652,030) shares of Common Stock (as
appropriately adjusted for stock splits, stock dividends, and the like),
which number shall include the shares of Common Stock issuable pursuant to
options or warrants outstanding at any time, issued to officers, directors
or employees of the Corporation upon the exercise of options or other
rights issued to such officers, directors or employees pursuant to the
Corporation's stock option plan or otherwise and (ii) shares of Common
Stock issued as consideration for acquisitions approved by a majority of
the members of the Board Of Directors (collectively, the "Excluded
Shares")), for a consideration per share 1ess than the Conversion Price in
effect immediately prior to the issuance, sale or exchange of such shares,
then, and thereafter successively upon each such issuance, sale or
exchange, the Conversion Price in effect immediately prior to the
issuance, sale or exchange of such shares shall forthwith be reduced to an
amount determined by multiplying such Conversion Price by a fraction:
(i) the numerator of which shall be (X) the number of shares of Common
Stock of all classes outstanding immediately prior to the issuance of such
additional shares of Common Stock (excluding treasury shares but including
all shares of Common Stock issuable upon conversion or exercise of any
outstanding Convertible Stock, options, warrants, rights or convertible
securities), plus (Y) the number of shares of Common Stock which the net
aggregate consideration received by the Corporation for the total number
of such additional shares of Common Stock so issued would purchase at the
Conversion Price (prior to adjustment), and
(ii) the denominator of which shall be (X) the number of shares of Common
Stock of all classes outstanding immediately prior to the issuance of such
additional shares of Common Stock (excluding treasury shares but including
all shares of Common Stock issuable upon conversion or exercise of any
outstanding Convertible Stock, options, warrants, rights or convertible
securities), plus (Y) the number of such additional shares of Common Stock
so issued."
6. The foregoing amendment of Articles of Incorporation has been duly
approved by the Board of Directors.
7. The foregoing amendment of Articles of Incorporation has been duly
approved by the required vote of shareholders in accordance with Section 902 of
the California Corporations Code. The total number of outstanding shares of the
corporation is 88,096,545 shares of Common Stock, 15,034,712 shares of
Convertible Redeemable Participating Preferred Stock and 100 shares of
Redeemable Preferred Stock. The number of shares voting in favor of the
amendment equaled or exceeded the vote required. The percentage vote required
was more than 50% of the outstanding shares of Common Stock, more than 50% of
the Convertible Redeemable Participating Preferred Stock and more than 50% of
the outstanding shares of Redeemable Preferred Stock.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
3
<PAGE> 5
Date: January 30, 2000
/s/ JOHN J. HENTRICH
------------------------------------------
JOHN J. HENTRICH
President
/s/ MICHAEL CHRISTIAN
-----------------------------------------
MICHAEL CHRISTIAN
Secretary
[SEAL OF THE
SECRETARY OF
STATE]
4
<PAGE> 1
EXHIBIT 3.2.1
AMENDED AND RESTATED
BY-LAWS
OF
WEBSIDESTORY, INC.
<PAGE> 2
AMENDED AND RESTATED BY-LAWS
OF
WEBSIDESTORY, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I............................................................................... 1
Section 1.1 Principal Offices..................................................... 1
Section 1.2 Other Offices......................................................... 1
ARTICLE II.............................................................................. 1
Section 2.1 Annual Meetings of Shareholders....................................... 1
Section 2.2 Special Meetings...................................................... 1
Section 2.3 Place of Meetings..................................................... 2
Section 2.4 Notice of Shareholders' Meetings...................................... 2
Section 2.5 Manner of Giving Notice; Affidavit of Notice.......................... 3
Section 2.6 Adjourned Notice Thereof.............................................. 3
Section 2.7 Quorum................................................................ 4
Section 2.8 Voting................................................................ 4
Section 2.9 Waiver of Notice or Consent by Absent Shareholders.................... 4
Section 2.10 Shareholder Action by Written Consent Without a Meeting............... 5
Section 2.11 Record Date for Shareholder Notice, Voting, and Giving Consents....... 6
Section 2.12 Proxies............................................................... 6
Section 2.13 Inspectors of Election................................................ 7
ARTICLE III............................................................................. 7
Section 3.1 Powers................................................................ 7
Section 3.2 Number and Qualification of Directors................................. 8
Section 3.3 Election and Term of Office of Directors.............................. 8
Section 3.4 Vacancies............................................................. 9
Section 3.5 Place of Meetings and Telphonic Meetings.............................. 10
Section 3.6 Annual Meetings....................................................... 10
Section 3.7 Other Regular Meetings................................................ 10
Section 3.8 Special Meetings...................................................... 10
Section 3.9 Waiver of Notice...................................................... 11
Section 3.10 Quorum................................................................ 11
Section 3.11 Adjournment........................................................... 11
Section 3.12 Adjournment........................................................... 11
Section 3.13 Action Without Meeting................................................ 11
Section 3.14 Fees and Compensation of Directors.................................... 12
ARTICLE IV ............................................................................. 12
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C>
Section 4.1 Committees of Directors............................................... 12
Section 4.2 Meetings and Action of Committees..................................... 13
ARTICLE V............................................................................... 13
Section 5.1 Officers.............................................................. 13
Section 5.2 Election of Officers.................................................. 13
Section 5.3 Subordinate Officers, etc............................................. 14
Section 5.4 Removal and Resignation of Officers................................... 14
Section 5.5 Inability to Act...................................................... 14
Section 5.6 Vacancies in Offices.................................................. 14
Section 5.7 Chairman of the Board................................................. 14
Section 5.8 President............................................................. 14
Section 5.9 Vice Presidents....................................................... 15
Section 5.10 Secretary............................................................. 15
Section 5.11 Chief Financial Officer............................................... 15
Section 5.12 Salaries.............................................................. 16
ARTICLE VI.............................................................................. 16
ARTICLE VII............................................................................. 16
Section 7.1 Maintenance and Inspection of Share Register.......................... 17
Section 7.2 Maintenance and Inspection of By-laws................................. 17
Section 7.3 Maintenance and Inspection of Other Corporate Records................. 18
Section 7.4 Inspection by Directors............................................... 18
Section 7.5 Annual Report to Shareholders......................................... 18
Section 7.6 Financial Statements.................................................. 18
Section 7.7 Annual Statement of General Information............................... 19
ARTICLE VIII............................................................................ 19
Section 8.1 Record Date for Purposes Other Than Notice and Voting................. 19
Section 8.2 Check, Drafts, Evidences of Indebtedness.............................. 20
Section 8.3 Corporate Contracts and Instruments; How Executed..................... 20
Section 8.4 Certificates for Shares............................................... 20
Section 8.5 Lost Certificates..................................................... 20
Section 8.6 Representation of Shares of Other Corporations........................ 21
ARTICLE IX.............................................................................. 21
Section 9.1 Amendment by Shareholders................................................ 21
Section 9.2 Amendment by Directors................................................... 21
ARTICLE X............................................................................... 21
Section 10.1 Governing Law........................................................... 22
Section 10.2 Construction and Definitions............................................ 22
</TABLE>
iii
<PAGE> 4
AMENDED AND RESTATED
BY-LAWS
OF
WEBSIDESTORY, INC.
ARTICLE I
OFFICES
Section 1.1 Principal Offices. The principal executive office of
WebSideStory, Inc. (the "Corporation"), will be at such place inside or outside
the State of California as the Board of Directors may determine from time to
time.
Section 1.2 Other Offices. The Corporation may also have offices at such
other places as the Board of Directors may from time to time designate, or as
the business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.1 Annual Meetings of Shareholders. The annual meeting of
shareholders of the Corporation for the election of directors to succeed those
whose terms expire and for transaction of such other business as may properly
come before the meeting will be held between 30 and 120 days following the end
of the fiscal year of the Corporation (the first such meeting to be held after
the end of the fiscal year of the Corporation) and at such place as may be
determined by the Board of Directors. If the annual meeting of the shareholders
be not held as prescribed in these By-laws, the election of directors may be
held at any meeting thereafter called pursuant to these By-laws.
Section 2.2 Special Meetings. A special meeting of the shareholders, for
any purpose whatsoever, unless otherwise prescribed by statute may be called at
any time by the Board of Directors, the Chairman of the Board, the President, or
by one or more shareholders of the Corporation holding not less than ten percent
(10%) of the voting power of the Corporation.
1
<PAGE> 5
If a special meeting is called by any person or persons other than the
Board of Directors, the request will be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
will be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board, the President, any
Vice President or the Secretary of the Corporation. The officer receiving such
request forthwith will cause notice to be given to the shareholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.5, that a meeting
will be held at the time requested by the person or persons calling the meeting,
not less than thirty-five (35) nor more than sixty (60) days after the receipt
of the request. If the notice is not given within twenty (20) days after receipt
of the request, the person or persons requesting the meeting may give the
notice. Nothing contained in this paragraph of this Section 2.3 will be
construed as limiting, fixing or affecting the time when a meeting of
shareholders called by action of the Board of Directors may be held.
Section 2.3 Place of Meetings. All meetings of the shareholders will be
at any place within or outside the State of California designated by either the
Board of Directors or by written consent of the holders of a majority of the
shares entitled to vote at the meeting, given either before or after the
meeting. In the absence of any such designation, shareholders' meetings will be
held at the principal executive office of the Corporation.
Section 2.4 Notice of Shareholders' Meetings. All notices of meetings of
shareholders of the Corporation will be sent or otherwise given in accordance
with Section 2.5 not less than ten (10) days (or if sent by third-class mail, 30
days) nor more than sixty (60) days before the date of the meeting being
noticed. The notice will specify the place, date and hour of the meeting and (i)
in the case of a special meeting, the general nature of the business to be
transacted, and no other business may be transacted or (ii) in the case of the
annual meetings, those matters which the Board of Directors, at the time of
giving the notice, intends to present for action by the shareholders, but
subject to Section 601(f) of the California Corporations Code any proper matter
may be presented at the meeting for shareholder action, and (iii) in the case of
any meeting at which directors are to be elected, the names of the nominees
intended at the time of giving of the notice to be presented by management for
election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California, (ii)
an amendment of the Articles of Incorporation, pursuant to Section 902 of such
Code, (iii) a reorganization of the Corporation, pursuant to Section 1201 of
such Code, (iv) a voluntary dissolution of the Corporation, pursuant to Section
1900 of such Code, or (v) a distribution in dissolution other than in accordance
with the rights of outstanding preferred shares pursuant to Section 2007 of such
Code, the notice will also state the general nature of such proposal.
2
<PAGE> 6
Section 2.5 Manner of Giving Notice; Affidavit of Notice. Notice of any
meeting of shareholders of the Corporation will be given in writing to each
shareholder entitled to vote, either personally or by first-class mail (unless
the Corporation has 500 or more shareholders determined as provided by the
California Corporations Code on the record date of the meeting in which case
notice may be sent by third-class mail), facsimile or telegraphic or other
written communication, charges prepaid, addressed to the shareholder at the
address of such shareholder appearing on the books of the Corporation or given
by the shareholder to the Corporation for the purpose of notice. If no such
address appears on the Corporation's books or has been so given, notice will be
deemed to have been given if sent by first-class mail or telegraphic or other
written communication to the Corporation's principal executive office, or if
published at least once in a newspaper of general circulation in the county
where such office is located. Notice will be deemed to have been given at the
time when delivered personally or deposited in the mail or sent by telegram or
other means of written communication.
If any notice addressed to a shareholder at the address of such
shareholder appearing on the books of the Corporation is returned to the
Corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at such address, all future notices or reports will be deemed to have been duly
given without further mailing if the same will be available to the shareholder
upon written demand of the shareholder at the principal executive office of the
Corporation for a period of one year from the date of the giving of such notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting will be executed by the Secretary, Assistant Secretary or
any transfer agent of the Corporation giving such notice, and will be filed and
maintained in the minute book of the Corporation.
Section 2.6 Adjourned Meeting and Notice Thereof. Any shareholders'
meeting, annual or special, whether or not a quorum, is present, may be
adjourned from time to time by the vote of the holders of a majority of the
voting shares represented at such meeting, either in person or by proxy, but in
the absence of a quorum, no other business may be transacted at such meeting,
except as provided in Section 2.6.
When any meeting of shareholders, either annual or special, is adjourned
to another time or place, notice need not be given of the adjourned meeting if
the time and place thereof are announced at a meeting at which the adjournment
is taken, unless a new record date for the adjourned meeting is fixed, or unless
the adjournment is for more than forty-five (45) days from the date set for the
original meeting, in which case the Board of Directors will set a new record
date. Notice of any such adjourned meeting, if required, will be given to each
shareholder of record entitled to vote at the adjourned meeting in accordance
with the provisions of Sections 2.4 and 2.5. At any adjourned meeting the
Corporation may transact any business which might have been transacted at the
original meeting.
3
<PAGE> 7
Section 2.7 Quorum. The presence in person or by proxy of the persons
entitled to vote a majority of the shares entitled to vote at any meeting of
shareholders will constitute a quorum for the transaction of business. The
shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.
Section 2.8 Voting. The shareholders entitled to vote at any meeting of
shareholders will be determined in accordance with the provisions of Section
2.11, subject to the provisions of Sections 702 to 704, inclusive, of the
Corporations Code of California (relating to voting shares held by a fiduciary,
in the name of a Corporation or in joint ownership). Such vote may be by voice
vote or by ballot; provided, however, that all elections for directors must be
by ballot upon demand by a shareholder at any election and before the voting
begins. Any shareholder entitled to vote on any matter (other than the election
of directors) may vote part of the shares in favor of the proposal and refrain
from voting the remaining shares or vote them against the proposal, but, if the
shareholder fails to specify the number of shares such shareholder is voting
affirmatively, it will be conclusively presumed that the shareholder's approving
vote is with respect to all shares such shareholder is entitled to vote. If a
quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and voting on any matter (other than the election of
directors), provided that the shares voting affirmatively must also constitute
at least a majority of the required quorum, will be the act of the shareholders,
unless the vote of a greater number or voting by classes is required by the
California General Corporation Law or the Articles of Incorporation.
At a shareholders' meeting involving the election of directors, no
shareholder will be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of the shareholder's shares) unless such
candidate or candidates' names have been placed in nomination prior to
commencement of the voting and a shareholder has given notice prior to
commencement of the voting of the shareholder's intention to cumulate votes. If
any shareholder has given such notice, then every shareholder entitled to vote
may cumulate such shareholder's votes for candidates in nomination and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such shareholder's shares are
entitled, or distribute the shareholder's votes on the same principle among as
many candidates as the shareholder will think fit. The candidates receiving the
highest number of votes of the shares entitled to be voted for them, up to the
number of directors to be elected by such shares are elected.
Section 2.9 Waiver of Notice or Consent by Absent Shareholders. The
transactions of any meeting of shareholders, either annual or special, however
called and noticed, and wherever held, will be as valid as though had at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each of the
persons entitled to vote, not present in person or by proxy, signs a written
waiver of notice, or
4
<PAGE> 8
a consent to the holding of the meeting, or an approval of the minutes thereof.
The waiver of notice or consent need not specify either the business to be
transacted or the purpose of any annual or special meeting of shareholders,
except that if action is taken or proposed to be taken for approval of any of
those matters specified in the second paragraph of Section 2.4, the waiver of
notice or consent will state the general nature of such proposal. All such
waivers, consents or approvals will be filed with the corporate records or made
a part of the minutes of the meeting.
Attendance of a person at a meeting will also constitute a waiver of
notice of such meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if such objection is expressly made at the meeting.
Section 2.10 Shareholder Action by Written Consent Without a Meeting. Any
action which may be taken at any annual or special meeting of shareholders may
be taken without a meeting and without prior notice, if a consent in writing,
setting forth the action so taken, will be signed by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. In the case of election of directors, such
consent will be effective only if signed by the holders of all outstanding
shares entitled to vote for the election of directors; provided, however, that a
director may be elected at any time to fill a vacancy not filled by the
directors by the written consent of the holders of a majority of the outstanding
shares entitled to vote for the election of directors. All such consents will be
filed with the Secretary of the Corporation and will be maintained in the
corporate records.
Any shareholder giving a written consent, or the shareholder's proxy
holders, or a transferee of the shares or a personal representative of the
shareholder or their respective proxy holder, may revoke the consent by a
writing received by the Secretary of the Corporation prior to the time that
written consents of the number of shares required to authorize the proposed
action have been filed with the Secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing, and if the unanimous written consent of all such
shareholders will not have been received, the Secretary will give prompt notice
of the corporate action approved by the shareholders without a meeting. Such
notice will be given in the manner specified in Section 2.5. In the case of
approval of (i) contracts or transactions in which a director has a direct or
indirect financial interest, pursuant to Section 310 of the Corporations Code of
California, (ii) indemnification of agents of the Corporation, pursuant to
Section 317 of such Code, (iii) a reorganization of the Corporation, pursuant to
Section 1201 of such Code, or (iv) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares pursuant to Section
2007 of such Code, such notice will be given at least ten (10) days before the
consummation of any such action authorized by any such approval.
5
<PAGE> 9
Section 2.11 Record Date for Shareholder Notice, Voting, and Giving
Consents. For purposes of determining the shareholders entitled to notice of any
meeting or to vote or entitled to give consent to corporate action without a
meeting, the Board of Directors may fix, in advance, a record date, which will
not be more than sixty (60) days nor less than ten (10) days prior to the date
of any such meeting nor more than sixty (60) days prior to such action without a
meeting, and in such case only shareholders of the Corporation of record at the
close of business on the date so fixed are entitled to notice and to vote or to
give consents, as the case may be, notwithstanding any transfer of any shares on
the books of the Corporation after the record date fixed as aforesaid, except as
otherwise provided in California General Corporation Law.
If the Board of Directors does not so fix a record date:
(a) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders will be at the close of
business on the business day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the business
day next preceding the day on which the meeting is held.
(b) The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i) when no
prior action by the Board has been taken, will be the day on which the
first written consent is given, or (ii) when prior action of the Board of
Directors has been taken, will be at the close of business on the day on
which the Board of Directors adopts the resolution relating thereto, or
the sixtieth (60th) day prior to the date of such other action, whichever
is later.
Section 2.12 Proxies. Every person entitled to vote for directors or on
any other matter will have the right to do so either in person or by one or more
agents authorized by a written proxy signed by the person and filed with the
Secretary of the Corporation. A proxy will be deemed signed if the shareholder's
name is placed on the proxy (whether if by manual signature, typewriting,
telegraphic transmission or otherwise) by the shareholder or the shareholder's
attorney in fact. A validly executed proxy which does not state that it is
irrevocable will continue in full force and effect unless (i) revoked by the
person executing it, prior to the vote pursuant thereto, by a writing delivered
to the Corporation stating that the proxy is revoked or by a subsequent proxy
presented to the meeting and executed by, or attendance at the meeting and
voting in person by, the person executing the proxy; or (ii) written notice of
the death or incapacity of the maker of such proxy is received by the
Corporation before the vote pursuant thereto is counted; provided, however, that
no such proxy will be valid after the expiration of eleven (11) months from the
date of such proxy, unless otherwise provided in the proxy. The revocability of
a proxy that states on its face that it is irrevocable will be governed by the
provisions of Section 705(e) and (f) of the Corporations Code of California.
6
<PAGE> 10
Section 2.13 Inspectors of Election. Before any meeting of shareholders,
the Board of Directors may appoint any persons other than nominees for office to
act as inspectors of election at the meeting or its adjournment. If no
inspectors of election are so appointed, the chairman of the meeting may, and on
the request of any shareholder or a shareholders proxy will, appoint inspectors
of election at the meeting. The number of inspectors will be either one (1) or
three (3). If inspectors are appointed at a meeting on the request of one or
more shareholders or proxies, the holders of a majority of shares or their
proxies present at the meeting will determine whether one (1) or three (3)
inspectors are to be appointed. If any person appointed as inspector fails to
appear or fails or refuses to act, the chairman of the meeting may, and upon the
request of any shareholder or a shareholder's proxy will, appoint a person to
fill such vacancy.
The duties of these inspectors will be as follows:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls will close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
Section 3.1 Powers. Subject to the provisions of the California General
Corporation Law and any limitations in the Articles of Incorporation or these
By-laws relating to action required to be approved by the shareholders or by the
outstanding shares, the business and affairs of the Corporation will be managed
and all corporate powers will be exercised by or under the direction of the
Board of Directors.
Without prejudice to such general powers, but subject to the same
limitations, it is hereby expressly declared that the directors will have the
power and authority to:
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(a) Select and remove all officers, agents, and employees of the
Corporation, prescribe such powers and duties for them as may not be
inconsistent with law, the Articles of Incorporation or these By-laws, fix
their compensation, and require from them security for faithful service.
(b) Change the principal executive office or the principal
business office in the State of California from one location to another;
cause the Corporation to be qualified to do business in any other state,
territory, dependency, or foreign country and conduct business within or
outside the State of California; designate any place within or without the
State for the holding of any shareholders' meeting or meetings, including
annual meetings; adopt, make and use a corporate seal, and prescribe the
forms of certificates of stock, and alter the form of such seal and of
such certificates from time to time as in their judgment they may deem
best, provided that such forms will at all times comply with the
provisions of law.
(c) Authorize the issuance of shares of stock of the Corporation
from time to time, upon such terms as may be lawful, in consideration of
money paid, labor done or services actually rendered, debts or securities
canceled or tangible or intangible property actually received.
(d) Borrow money and incur indebtedness for the purposes of the
Corporation, and cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations, or other evidences of debt and
securities therefor.
Section 3.2 Number and Qualification of Directors. The authorized number
of directors of the Corporation will be a range of not less than five (5) nor
greater than nine (9) with the initial number set at five (5) until changed by a
duly adopted amendment to these By-laws adopted by the vote or written consent
of holders of a majority of the outstanding shares entitled to vote; provided,
however, that an amendment reducing the number of directors to a number less
than five (5) cannot be adopted if the votes cast against its adoption at a
meeting, or the shares not consenting in the case of action by written consent,
are equal to more than 16-2/3% of the outstanding shares entitled to vote.
Section 3.3 Election and Term of Office of Directors. Directors will be
elected at each annual meeting of the shareholders to hold office until the next
annual meeting. Each director, including a director elected to fill a vacancy,
will hold office until the expiration of the term for which elected and until a
successor has been elected and qualified. Directors need not be Shareholders.
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Section 3.4 Vacancies. Vacancies in the Board of Directors may be filled
by a majority of the remaining directors, though less than a quorum, or by a
sole remaining director, except that a vacancy created by the removal of a
director by the vote or written consent of the shareholders or by court order
may be filled only by the vote of a majority of the shares represented and
voting at a duly held meeting at which a quorum is present, or by the written
consent of holders of all outstanding shares entitled to vote. Each director so
elected will hold office until the next annual meeting of the shareholders and
until a successor has been elected and qualified.
A vacancy or vacancies in the Board of Directors will be deemed to exist
in the case of the death, resignation or removal of any director, or if the
Board of Directors by resolution declares vacant the office of a director who
has been declared of unsound mind by an order of court or convicted of a felony,
or if the authorized number of directors be increased, or if the shareholders
fail, at any meeting of shareholders at which any director or directors are
elected, to elect the full authorized number of directors to be voted for at
that meeting.
The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors, but any such election by
written consent will require the consent of a majority of the outstanding shares
entitled to vote.
Any director may resign upon giving written notice to the Chairman of the
Board, the President, the Secretary or the Board of Directors. A resignation
will be effective upon the giving of the notice, unless the notice specifies a
later time for its effectiveness. If the resignation of a director is effective
at a future time, the Board of Directors may elect a successor to take office
when the resignation becomes effective.
No reduction of the authorized number of directors will have the effect of
removing any director prior to the expiration of his or her term of office.
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Section 3.5 Place of Meetings and Telephonic Meetings. Regular meetings of
the Board of Directors may be held at any place within or without the State that
has been designated from time to time by resolution of the Board of Directors.
In the absence of such designation, regular meetings will be held at the
principal executive office of the Corporation. Special meetings of the board
will be held at any place within or without the State that has been designated
in the notice of the meeting or, if not stated in the notice or there is no
notice, at the principal executive office of the Corporation. Any meeting,
regular or special, may be held by (i) conference telephone or similar
communications equipment so long as all directors participating in such meeting
can hear one another, or (ii) such other communications equipment permitted by
Section 305 of the California General Corporation Law, and all such directors
will be deemed to be present in person at such meeting.
Section 3.6 Annual Meetings. Immediately following each annual meeting of
shareholders, the Board of Directors will hold a regular meeting for the purpose
of organization, any desired election of officers and the transaction of other
business. Notice of this meeting will not be required.
Section 3.7 Other Regular Meetings. Other regular meetings of the Board of
Directors will be held without call at such time as will from time to time be
fixed by the Board of Directors. Such regular meetings may be held without
notice.
Section 3.8 Special Meetings. Special meetings of the Board of Directors
for any purpose or purposes may be called at any time by the Chairman of the
Board, President, any Vice President, Secretary or any two (2) directors.
Written notice of the time and place of special meeting will be delivered
personally or by telephone to each director or sent by first-class mail,
facsimile, or telegram, charges prepaid, addressed to each director at his or
her address as it is shown upon the records of the Corporation. In case such
notice is mailed, it will be deposited in the United States mail at least four
(4) days prior to the time of the holding of the meeting. In case such notice is
delivered personally, or by telephone or telegram, it will be delivered
personally or by telephone or to the telegraph company at least forty-eight (48)
hours prior to the time of the holding of the meeting. Any oral notice given
personally or by telephone may be communicated to either the director or to a
person at the office of the director who the person giving the notice has reason
to believe will promptly communicate it to the director. The notice need not
specify the purpose of the meeting nor the place if the meeting is to be held at
the principal executive office of the Corporation.
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Section 3.9 Waiver of Notice. The transactions of any meeting of the Board
of Directors, however called and noticed or wherever held, will be as valid as
though they had been conducted at a meeting duly held after regular call and
notice if a quorum is present and if, either before or after the meeting, each
of the directors not present signs a written waiver of notice, a consent to
holding the meeting, or an approval of the minutes thereof. The waiver of notice
or consent need not specify the purpose of the meeting. All such waivers,
consents and approvals will be filed with the corporate records or made a part
of the minutes of the meeting. Notice of a meeting need not be given to any
director who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director.
Section 3.10 Quorum. A majority of the authorized number of directors will
constitute a quorum for the transaction of business, except to adjourn as
hereinafter provided. Every act or decision done or made by a majority of the
directors present at a meeting duly held at which a quorum is present will be
regarded as the act of the Board of Directors, subject to the provisions of
Section 310 of the Corporations Code of California (approval of contracts or
transactions in which a director has a direct or indirect material financial
interest), Section 311 (appointment of committees), and Section 317(e)
(indemnification of directors). A meeting at which a quorum is initially present
may continue to transact business notwithstanding the withdrawal of directors,
if any action taken is approved by at least a majority of the required quorum
for such meeting.
Section 3.11 Adjournment. A majority of the directors present, whether or
not constituting a quorum, may adjourn any meeting to another time and place.
Section 3.12 Notice of Adjournment. Notice of the time and place of
holding an adjourned meeting need not be given, unless the meeting is adjourned
for more than twenty-four (24) hours, in which case notice of such time and
place will be given prior to the time of the adjourned meeting, in the manner
specified in Section 3.8, to the directors who were not present at the time of
the adjournment.
Section 3.13 Action Without Meeting. Any action required or permitted to
be taken by the Board of Directors may be taken without a meeting, if all
members of the Board of Directors will individually or collectively consent in
writing to such action. Such action by written consent will have the same force
and effect as a unanimous vote by the Board of Directors. Such written consent
or consents will be filed with the minutes of the proceedings of the Board.
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Section 3.14 Fees and Compensation of Directors. Directors and members of
committees may receive such compensation, if any, for their services, and such
reimbursement of expenses, as may be fixed or determined by resolution of the
Board of Directors. Nothing in these By-laws contained will be construed to
preclude any director from serving the Corporation in any other capacity as an
officer, agent, employee, or otherwise, and receiving compensation for such
services.
ARTICLE IV
COMMITTEES
Section 4.1 Committees of Directors. The Board of Directors may, by
resolution adopted by a majority of the authorized number of directors,
designate one or more committees, each consisting of two (2) or more directors,
to serve at the pleasure of the Board of Directors. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent member at any meeting of the committee. Any such committee,
to the extent provided in the resolution of the Board of Directors, will have
all the authority of the Board of Directors, except with respect to:
(a) The approval of any action which, under the General
Corporation Law of California, also requires shareholders' approval or
approval of the outstanding shares;
(b) The filling of vacancies on the Board of Directors or in any
committee;
(c) The fixing of compensation of the directors for serving on the
Board or on any committee;
(d) The adoption, amendment or repeal of By-laws;
(e) The amendment or repeal of any resolution of the Board of
Directors which by its express terms is not so amendable or repealable;
(f) A distribution to the shareholders of the Corporation, except
at a rate or in a period amount or within a price range determined by the
Board of Directors; or
(g) The appointment of any other committees of the Board of
Directors or the members thereof.
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Section 4.2 Meetings and Action of Committees. Meetings and action of
committees will be governed by, and held and taken in accordance with, the
provisions of Article III of these By-laws, Sections 3.5 (place of meetings),
3.7 (regular meetings), 3.8 (special meetings and notice), 3.9 (dispensing with
notice), 3.10 (quorum), 3.11 (adjournment), 3.12 (notice of adjournment) and
3.13 (action without meeting), with such changes in the context of those By-laws
as are necessary to substitute the committee and its members for the Board of
Directors and its members, except that the time of regular meetings of
committees may be determined by resolution of the Board of Directors as well as
the committee, special meetings of committees may also be called by resolution
of the Board of Directors and notice of special meetings of committees will also
be given to all alternate members, who will have the right to attend all
meetings of the committee. The Board of Directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
By-laws.
ARTICLE V
OFFICERS
Section 5.1 Officers. The officers of the Corporation will be a President,
a Secretary and a Chief Financial Officer all of which will be chosen by the
Board of Directors. The Corporation may also have, at the discretion of the
Board of Directors, a Chairman of the Board, one or more Vice Presidents, one or
more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 5.3.
Any number of offices may be held by the same person.
Section 5.2 Election of Officers. The officers of the Corporation, except
such officers as may be appointed in accordance with the provisions of Section
5.3, will be chosen by the Board of Directors, and each will serve at the
pleasure of the Board, subject to the rights, if any, of an officer under any
contract of employment.
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Section 5.3 Subordinate Officers, etc. The Board of Directors may appoint,
and may empower the President to appoint, such other officers as the business
of the Corporation may require, each of whom will hold office for such period,
have such authority and perform such duties as are provided in the By-laws or as
the Board of Directors may from time to time determine.
Section 5.4 Removal and Resignation of Officers. Subject to the rights, if
any, of an officer under any contract of employment, any officer may be removed
at any time, with or without cause, by the affirmative vote of a majority of all
of the members of the Board of Directors, at any regular or special meeting
thereof, or, except in case of an officer chosen by the Board of Directors, by
any officer upon whom such power of removal may be conferred by the Board of
Directors.
Any officer may resign at any time by giving written notice of said
resignation to the Corporation. Any such resignation will take effect at the
date of the receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation will not
be necessary to make it effective. Any such resignation is without prejudice to
the rights, if any, of the Corporation under any contract to which the officer
is a party.
Section 5.5 Inability to Act. In the case of absence or inability to act
of any officer of the Corporation and of any person in these By-laws authorized
to act in his or her place, the Board of Directors may from time to time
delegate the powers or duties of such officer to any other officer or any
director or other person whom it may select.
Section 5.6 Vacancies in Offices. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause will be filled
in the manner prescribed in these By-laws for regular appointments to such
office.
Section 5.7 Chairman of the Board. The Chairman of the Board, if such an
officer be elected, will, if present, preside at all meetings of the Board of
Directors and exercise and perform such other powers and duties as may be from
time to time assigned to him or her by the Board of Directors or prescribed by
the By-laws. If there is no President, the Chairman of the Board will in
addition be the Chief Executive Officer of the Corporation and will have the
powers and duties prescribed in Section 5.8.
Section 5.8 President. Subject to such supervisory powers, if any, as may
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President will be the Chief Executive Officer of the
Corporation and will, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers of
the Corporation. He or she will preside at all meetings of the shareholders
and, in the absence of the Chairman of the board, or if there be none, at all
meetings of the Board of Directors. He or she will have the general powers and
duties of management usually vested in
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the office of President of a Corporation, and will have such other powers and
duties as may be prescribed by the Board of Directors or the By-laws.
Section 5.9 Vice Presidents. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a Vice President designated by the Board
of Directors, will perform all the duties of the President, and when so acting
will have all the powers of, and be subject to all the restrictions upon, the
President. The Vice Presidents will have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, will perform all the duties of the President, and when so
acting will have all the powers of, and be subject to all the restrictions upon,
the President. The Vice Presidents will have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or the By-laws, the President or the Chairman of the Board if
there is no President.
Section 5.10 Secretary. The Secretary will keep or cause to be kept, at
the principal executive office or such other place as the Board of Directors may
order, a book of minutes of all meetings and actions of directors, committees of
directors and shareholders, with the time and place of holding, whether or
regular or special, and, if special, how authorized, the notice thereof given,
the names of those present at directors' and committee meetings, the number of
share present or represented at shareholders' meetings, and the proceedings
thereof.
The Secretary will keep, or cause to be kept, at the principal executive
office or at the office of the Corporation's transfer agent or registrar, as
determined by resolution of the Board of Directors, a share register, or a
duplicate share register, showing the names of all shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary will give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required by the By-laws or by law
to be given, and he will keep the seal of the Corporation, if one be adopted, in
safe custody, and will have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by the By-laws.
The Assistant Secretary or the Assistant Secretaries, in the order of
their seniority, will, in the absence of disability of the Secretary, or in the
event of such officer's refusal to act, perform the duties and exercise the
powers and discharge such duties as may be assigned from time to time by the
President or by the Board of Directors.
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Section 5.11 Chief Financial Officer. The Chief Financial Officer will
keep and maintain, or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and business transactions of the
Corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and shares. The books
of account will be open at all reasonable times to inspection by any director.
The Chief Financial Officer will deposit all moneys and other valuables in
the name and to the credit of the Corporation with such depositaries as may be
designated by the Board of Directors. He or she will disburse the funds of the
Corporation as may be ordered by the Board of Directors, will render to the
President and directors, whenever they request it, an account of all of his or
her transactions as Chief Financial Officer and of the financial condition of
the Corporation, and will have other powers and perform such other duties as may
be prescribed by the Board of Directors or the By-laws.
The Assistant Chief Financial Officer or the Assistant Chief Financial
Officers, in the order of their seniority, will, in the absence or disability of
the Chief Financial Officer, or in the event of such officer's refusal to act,
perform the duties and exercise the powers of the Chief Financial Officer, and
will have such powers and discharge such duties as may be assigned from time to
time by the President or by the Board of Directors.
Section 5.12 Salaries. The salaries of the officers will be fixed from
time to time by the Board of Directors and no officer will be prevented from
receiving such salary by reason of the fact that such officer is also a director
of the Corporation.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS
The Corporation will, to the maximum extent permitted by the General
Corporation Law of California, indemnify each of its directors, officers or
employees against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceedings arising by
reason of the fact any such person is or was a director or officer of the
Corporation and will advance to such director or officer expenses incurred in
defending any such proceeding to the maximum extent permitted by such law. For
purposes of this Article VI, a "director" or "officer" of the Corporation
includes any person who is or was a director or officer of the Corporation, or
is or was serving at the request of the Corporation as a director or officer of
another corporation, or other enterprise, or was a director or officer of a
corporation which was a predecessor corporation of the Corporation or of another
enterprise at the request of such predecessor corporation. The Board of
Directors may in its discretion provide by resolution for such indemnification
of, or advance of expenses to, other agents of the Corporation, and likewise may
refuse to provide for such indemnification or
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advance of expenses except to the extent such indemnification is mandatory under
the California General Corporation law.
ARTICLE VII
RECORDS AND REPORTS
Section 7.1 Maintenance and Inspection of Share Register. The Corporation
will keep at its principal executive office, or at the office of its transfer
agent or registrar, if either be appointed and as determined by resolution of
the Board of Directors, a record of its shareholders, giving the names and
addresses of all shareholders and the number and class of shares held by each
shareholder.
A shareholder or shareholders of the Corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
Corporation may (i) inspect and copy the records of shareholders' names and
addresses and shareholdings during usual business hours upon five days' prior
written demand upon the Corporation, and/or (ii) obtain from the transfer agent
of the Corporation, upon written demand and upon the tender of such transfer
agent's usual charges for such list, a list of the shareholders' names and
addresses, who are entitled to vote for the election of directors, and their
shareholdings, as of the most recent record date for which such list has been
compiled or as of a date specified by the shareholder subsequent to the date of
demand. Such list will be made available to such shareholder or shareholders by
the transfer agent on or before the later of five (5) days after the demand is
received or the date specified therein as the date as of which the list is to be
compiled. The record of shareholders will also be open to inspection upon the
written demand of any shareholder or holder of a voting trust certificate, at
any time during usual business hours, for a purpose reasonably related to such
holder's interests as a shareholder or as the holder of a voting trust
certificate. Any inspection and copying under this Section 7.1 may be made in
person or by an agent or attorney of the shareholder or holder of a voting trust
certificate making such demand.
Section 7.2 Maintenance and Inspection of By-laws. The Corporation will
keep at its principal executive office, or if its principal executive office is
not in the State of California at its principal business office in this state,
the original or a copy of the By-laws as amended to date, which will be open to
inspection by the shareholders at all reasonable times during office hours. If
the principal executive office of the Corporation is outside this state and the
Corporation has no principal business office in this state, the Secretary will,
upon the written request of any shareholder, furnish to such shareholder a copy
of the By-laws as amended to date.
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Section 7.3 Maintenance and Inspection of Other Corporate Records. The
accounting books and records and minutes of proceedings of the shareholders and
the Board of Directors and any committee or committees of the Board of Directors
will be kept at such place or places designated by the Board of Directors, or,
in the absence of such designation, at the principal executive office of the
Corporation. The minutes will be kept in written form and the accounting books
and records will be kept either in written form or in any other form capable of
being converted into written form. Such minutes and accounting books and records
will be open to inspection upon the written demand of any shareholder or holder
of a voting trust certificate, at any reasonable time during usual business
hours, for a purpose reasonably related to such holder's interests as a
shareholder or as the holder of a voting trust certificate. Such inspection may
be made in person or by an agent or attorney, and will include the right to copy
and make extracts. The foregoing rights of inspection will extend to the records
of each subsidiary Corporation of the Corporation.
Section 7.4 Inspection by Directors. Every director will have the absolute
right at any reasonable time to inspect all books, records and documents of
every kind and the physical properties of the Corporation and each of its
subsidiary Corporations. Such inspection by a director may be made in person or
by agent or attorney and the right of inspection includes the right to copy and
make extracts.
Section 7.5 Annual Report to Shareholders. The annual report to
shareholders referred to in Section 1501 of the General Corporation Law is
expressly dispensed with, but nothing in these By-laws will be interpreted as
prohibiting the Board of Directors from issuing annual or other periodic reports
to the shareholders of the Corporation as they deem appropriate.
Section 7.6 Financial Statements. A copy of any annual financial statement
and any income statement of the Corporation for each quarterly period of each
fiscal year, and any accompanying balance sheet of the Corporation as of the end
of each such period, that has been prepared by the Corporation will be kept on
file in the principal executive office of the Corporation for twelve (12) months
and each such statement will be exhibited at all reasonable times to any
shareholder demanding an examination of any such statement or a copy will be
mailed to any such shareholder.
If a shareholder or shareholders holding at least five percent (5%) of the
outstanding shares of any class of stock of the Corporation make a written
request to the Corporation for an income statement of the Corporation for the
three-month, six-month or nine-month period of the current fiscal year ended
more than thirty (30) days prior to the date of the request, and a balance sheet
of the Corporation as of the end of such period, the Chief Financial Officer
will cause such statement to be prepared, if not already prepared, and will
deliver personally or mail such statement or statements to the person making the
request within thirty (30) days after the receipt of such request. If the
Corporation has not sent to the shareholders its annual report for the last
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fiscal year, this report will likewise be delivered or mailed to such
shareholder or shareholders within thirty (30) days after such request.
The Corporation also will, upon the written request of any shareholder,
mail to the shareholder a copy of the last annual, semi-annual or quarterly
income statement which it has prepared and a balance sheet as of the end of such
period.
The quarterly income statements and balance sheets referred to in this
section will be accompanied by the report thereon, if any, of any independent
accountants engaged by the Corporation or the certificate of an authorized
officer of the Corporation that such financial statements were prepared without
audit from the books and records of the Corporation.
Section 7.7 Annual Statement of General Information. The Corporation will
each year during the calendar month in which its Articles of Incorporation were
originally filed with the California Secretary of State, or at any time during
the immediately preceding five (5) calendar months, file with the Secretary of
State of the State of California, on the prescribed form, a statement setting
forth the authorized number of directors, the names and complete business or
residence addresses of all incumbent directors, the names and complete business
or residence addresses of the Chief Executive Officer, Secretary and Chief
Financial Officer, the street address of its principal executive office or
principal business office in this state and the general type of business
constituting the principal business activity of the Corporation, together with a
designation of the agent of the Corporation for the purpose of service of
process, all in compliance with Section 1502 of the Corporations Code of
California.
ARTICLE VIII
GENERAL CORPORATE MATTERS
Section 8.1 Record Date for Purposes Other Than Notice and Voting. For
purposes of determining the shareholders 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 other lawful action, (other than action by
shareholders by written consent without a meeting) the Board of Directors may
fix, in advance, a record date, which will not be more than sixty (60) nor less
than ten (10) days prior to any such action, and in such case only shareholders
of record on the date so fixed are entitled to receive the dividend,
distribution or allotment of rights or to exercise the rights, as the case may
be, notwithstanding any transfer of any shares on the books of the Corporation
after the record date fixed as aforesaid, except as otherwise provided in the
California General Corporation Law.
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If the Board of Directors does not fix a record date, the record date for
determining shareholders for any such purpose will be at the close of business
on the day on which the Board of Directors adopts the resolution relating
pursuant to these By-laws, or the sixtieth (60th) day prior to the date of such
action, whichever is later.
Section 8.2 Checks, Drafts, Evidences of Indebtedness. All checks, drafts
or other orders for payment of money, notes or other evidences of indebtedness,
issued in the name of or payable to the Corporation, will be signed or endorsed
by such person or persons and in such manner as, from time to time, will be
determined by resolution of the Board of Directors.
Section 8.3 Corporate Contracts and Instruments; How Executed. The Board
of Directors, except as otherwise provided in these By-laws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances; and, unless so authorized or
ratified by the Board of Directors or within the agency power of an officer, no
officer, agent or employee will have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or to any amount.
Section 8.4 Certificates for Shares. A certificate or certificates for
shares of the capital stock of the Corporation will be issued to each
shareholder when any such shares are fully paid, and the Board of Directors may
authorize the issuance of certificates or shares as partly paid provided that
such certificates will state the amount of the consideration to be paid therefor
and the amount paid thereon. All certificates will be signed in the name of the
Corporation by the Chairman of the Board or the President or Vice President and
by the Chief Financial Officer or an Assistant Treasurer or the Secretary or any
Assistant Secretary, certifying the number of shares and the class or series of
shares owned by the shareholder. Any or all of the signatures on the certificate
may be facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate will have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if such
person were an officer, transfer agent or registrar at the date of issue.
Section 8.5 Lost Certificates. Except as provided in this Section 8.5, no
new certificates for shares will be issued in lieu of an old certificate unless
the matter is surrendered to the Corporation and canceled at the same time. The
Board of Directors may in case any share certificate or certificate for any
other security is lost, stolen or destroyed, authorize the issuance of a new
certificate in lieu thereof, upon such terms and conditions as the Board may
require, including provision for indemnification of the Corporation secured by a
bond or other adequate security sufficient to protect the Corporation against
any claim that may be made against it, including any expense or liability, on
account of the alleged loss, theft or destruction of such certificate or the
issuance of such new certificate.
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Section 8.6 Representation of Shares of Other Corporations. The Chairman
of the Board, the President, or any Vice President, or any other person
authorized by resolution of the Board of Directors or by any of the foregoing
designated officers, is authorized to vote on behalf of the Corporation any and
all shares of any other Corporation or Corporations, foreign or domestic,
standing in the name of the Corporation. The authority in these By-laws granted
to said officers to vote or represent on behalf of the Corporation any and all
shares held by the Corporation in any other Corporation or Corporations may be
exercised by any such officer in person or by any person authorized to do so by
proxy duly executed by said officer.
ARTICLE IX
AMENDMENTS
Section 9.1 Amendment by Shareholders. New By-laws may be adopted or these
By-laws may be amended or repealed by the vote or written consent of holders of
a majority of the outstanding shares entitled to vote; provided, however, that
if the Articles of Incorporation of the Corporation set forth the number of
authorized directors of the Corporation, the authorized number of directors may
be changed only by an amendment of the Articles of Incorporation.
Section 9.2 Amendment by Directors. Subject to the rights of the
shareholders as provided in Section 9.1, By-laws, other than a Bylaw or an
amendment thereof changing the authorized number of directors, may be adopted,
amended or repealed by the Board of Directors.
ARTICLE X
GENERAL
Section 10.1 Governing Law. This Corporation is organized under the
provisions of the California General Corporation Law (Corporation Code Sections
100-2319) as in effect on the date of filing of its original Articles of
Incorporation, namely September 17, 1996. Upon such filing the California
Secretary of State assigned the following Corporation number to this
Corporation: 1989074. The corporate affairs of this Corporation will be governed
by and conducted in accordance with the provisions of the California General
Corporation Law, as the same presently exist and are from time to time hereafter
amended or superseded, except in those instances where the Articles of
Incorporation or By-laws of this Corporation, now or through subsequent
amendment, may adopt alternative rules which are permissible under the
California General Corporation Law. Any provision (or portion thereof) in these
By-laws which is not permissible under the California General Corporation Law or
is inconsistent with the Articles of Incorporation of this Corporation (as they
may from time to time be amended and supplemented) is void, but the balance of
these By-laws will nevertheless be valid and effective.
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Section 10.2 Construction and Definitions. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions in the
California General Corporation Law will govern the construction of these
By-laws. Without limiting the generality of the foregoing, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a Corporation and a natural person.
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CERTIFICATE OF SECRETARY
I, Blaise Barrelet, Secretary of WebSideStory, Inc., a California
corporation, do hereby certify that the foregoing By-laws of the Corporation are
the duly adopted By-laws of said Corporation as they are in effect on the date
of these By-laws.
IN WITNESS WHEREOF, I have subscribed my name this 24th day of June, 1999.
/s/ BLAISE BARRELET
-------------------------------
Blaise Barrelet, Secretary
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EXHIBIT 10.1
WEBSIDESTORY
1998 STOCK OPTION PLAN
1. PURPOSE. The WebSideStory 1998 Stock Option Plan (the "Plan") is
intended to provide to officers, directors, key employees, and consultants of
the Corporation an opportunity to acquire a proprietary interest in the
Corporation, to encourage such key individuals to remain in the employ of or to
contract with the Corporation, and to attract and retain new employees,
consultants, and directors with outstanding qualifications. Pursuant to the
Plan, the Corporation may grant to officers, directors, consultants, and key
employees of the corporation options to purchase shares of common stock of the
Corporation upon the terms and conditions provided the Plan.
2. DEFINITIONS.
(a) "Affiliate" means any corporation (other than the
Corporation) in an unbroken chain of corporations that includes the Corporation
if each of such corporations, other than the last corporation in the chain, owns
at least 50% of the total voting power of one of the other corporations.
(b) "Board" means the board of directors of the Corporation.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the committee appointed by the Board to
administer the Plan, or if no such committee is appointed, the Board.
(e) "Common Stock" means the voting common stock of the
Corporation.
(f) "Consultant" means any person who, or any employee of any
firm which, is engaged by the Company or any Affiliate to render consulting
services and is compensated for such consulting services, and any non-employee
director of the Company whether compensated for such services or not.
(g) "Corporation" means WebSideStory, Inc., a California
corporation.
(h) "Effective Date" means August 1, 1998.
(i) "Employee" means any individual who is employed, within the
meaning of Section 3401 of the Code and the regulations thereunder, by the
Corporation or by any Affiliate. For purposes of the Plan and only for purposes
of the Plan, and in regard to Nonstatutory Stock
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Options but not for Incentive Stock Options, a Consultant or director of the
Corporation or any Affiliate will be deemed to be an Employee, and service as a
Consultant or director with the Corporation or any Affiliate will be deemed to
be employment, but no Incentive Stock Option will be granted to a Consultant or
director who is not an employee of the Corporation or any Affiliate within the
meaning of Section 3401 of the Code and the regulations thereunder. In the case
of a non-employee director or Consultant, the provisions governing when a
termination of employment has occurred for purposes of the Plan will be set
forth in the written Stock Option Agreement between the Optionee and the
Corporation, or, if not so set forth, the Committee will have the discretion to
determine when a termination of "employment" has occurred for purposes of the
Plan.
(j) "Escrow Agent" means the person selected by the Corporation,
if any, to hold the stock certificates representing Shares issued in the name of
an Optionee pursuant to such Optionee's exercise of an Option.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "Exercise Price" means the price per Share at which an Option
may be exercised, as determined by the Committee and as specified in the
Optionee's Stock Option Agreement.
(m) "Fair Market Value" means the value of each Share as
determined by the Board.
(n) "Incentive Stock Option" means an Option of the type
described in Section 422(b) of the Code.
(o) "Joint Escrow Instructions" means joint escrow instructions
entered into between Optionee and the Corporation in such form as may be
approved by the Committee from time to time.
(p) "Nonstatutory Stock Option" means an Option of the type not
described in Section 422(b) or 423(b) of the Code.
(q) "Option" means an option to purchase Common Stock granted
pursuant to the Plan.
(r) "Optionee" means any person who holds an Option pursuant to
the Plan.
(s) "Plan" means this stock option plan as it may be amended from
time to time.
(t) "Purchase Price" means at any particular time the Exercise
Price times the number of Shares for which an Option is being exercised.
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(u) "Share" means one share of authorized Common Stock.
3. ADMINISTRATION.
(a) The Committee.
(i) The Board may administer the Plan or appoint a
Committee to administer the Plan. The Committee will consist of not less than
two members who may also be members of the Board. Members of the Board or the
Committee who are either eligible for Options or have been granted Options may
vote on any matters affecting the administration of the Plan or the grant of any
Options pursuant to the Plan, except that no such member will act upon the
granting of an Option to himself or herself, but any such member may be counted
in determining the existence of a quorum at any meeting of the Committee and
will be excluded in determining unanimity of an act in writing, for any action
which is taken with respect to the granting of an Option to such member.
(ii) If the Corporation registers any class of any equity
security pursuant to Section 12 of the Exchange Act, from the effective date of
such registration until six months after the termination of such registration,
the Plan will be administered by a Committee of directors which will consist of
not less than two members, who during the one year prior to service as an
administrator of the Plan, will not have been granted or awarded equity
securities pursuant to the Plan or any other plan of the Corporation or any of
its Affiliates except as permitted under Rule 16b-3 under the Exchange Act which
provides that participation in a formula plan meeting the conditions of Rule
16(b)(3)(c)(2)(ii) or in an ongoing securities acquisition plan meeting the
conditions in Rule 16(b)(3)(d)(2)(i) will not disqualify a member of the
Committee from serving as an administrator of the Plan. In addition, an election
to receive an annual retainer fee in either cash or an equivalent amount of
securities, or partly in cash and partly in securities, will not disqualify a
member of the Committee from serving as an administrator of the Plan. The Board
may from time to time designate individuals as ineligible to participate in the
Plan for a specified period in order to become eligible to be a member of the
Committee.
(b) Powers of the Committee. Subject to the provisions of the
Plan, the Committee will have the authority, in its discretion and on behalf of
the Corporation:
(i) to grant Options;
(ii) to determine the Exercise Price per Share of Options
to be granted;
(iii) to determine the Employees to whom, and the time or
times at which, Options will be granted and the number of Shares for which an
Option will be exercisable;
(iv) to interpret the Plan;
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(v) to prescribe, amend, and rescind rules and regulations
relating to the Plan;
(vi) to determine the terms and provisions of each Option
granted and, with the consent of the holder thereof, modify or amend each
Option;
(vii) to accelerate or defer, with the consent of the
Optionee, the exercise date of any Option;
(viii) to authorize any person to execute on behalf of the
Corporation any instrument required to effectuate the grant of an Option
previously granted by the Committee;
(ix) with the consent of the Optionee, to reprice, cancel
and regrant, or otherwise adjust the Exercise Price of an Option previously
granted by the Committee; and
(x) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(c) Board's Determination of Fair Market Value. The Board will
have the authority to determine, upon review of relevant information, the Fair
Market Value of the Common Stock, subject to the provisions of the Plan and
irrespective of whether the Board has appointed a Committee to administer the
Plan. The Board may delegate this authority to the Committee.
(d) Committee's Interpretation of the Plan. The interpretation
and construction by the Committee of any provision of the Plan or of any Option
granted hereunder will be final and binding on all parties claiming an interest
in an Option granted under the Plan. No member of the Committee will be liable
for any action or determination made in good faith with respect to the Plan or
any Option.
(e) All Committee Actions to be in Writing. Any and all actions
of the Committee taken in exercise of the powers granted to it in this Section 3
will be in writing.
4. PARTICIPATION.
(a) Eligibility. The Optionees will be such persons as the
Committee may select from among the Employees, provided that Consultants are not
eligible to receive Incentive Stock Options.
(b) Ten Percent Shareholders. Any Employee who owns Stock
possessing more than 10% of the total combined voting power of all classes of
outstanding stock of the Corporation or any Affiliate will not be eligible to
receive an Option unless:
(i) the Exercise Price of the Shares subject to such
Option when granted
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is at least 110% of the Fair Market Value of such Shares, and
(ii) such Option by its terms is not exercisable after the
expiration of five years from the date of grant.
(c) Stock Ownership. For purposes of Section 4(b), in determining
stock ownership, an Employee will be considered as owning the stock owned,
directly or indirectly, by or for his or her brothers and sisters, spouse,
ancestors, and lineal descendants. Stock owned, directly or indirectly, by or
for a corporation, partnership, estate, or trust will be considered as being
owned proportionately by or for its shareholders, partners, or beneficiaries,
respectively. Stock with respect to which such Employee or any other person
holds an Option will be disregarded.
(d) Outstanding Stock. For purposes of Section 4(b), the term
"outstanding stock" will include all stock actually issued and outstanding
immediately after the grant of the Option to the Optionee but will not include
any share for which an Option is exercisable by any person.
5. SHARES.
(a) Shares Subject to This Plan. The aggregate number of Shares
that may be issued upon exercise of Options under the Plan will not exceed
5,000,000 subject to adjustment pursuant to Section 9.
(b) Options Not to Exceed Shares Available. The number of Shares
for which an Option is exercisable at any time will not exceed the number of
Shares remaining available for issuance under the Plan. If any Option expires or
is terminated, the number of Shares for which such Option was exercisable may be
made exercisable pursuant to other Options under the Plan. If the Corporation
reacquires any Shares pursuant to Sections 11 or 12, such Shares may again be
made exercisable pursuant to an Option. The limitations established by this
Section 5(b) will be subject to adjustment in the manner provided in Section 9
upon the occurrence of an event specified therein.
6. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreements. Options will be evidenced by written
Stock Option Agreements between the Optionee and the Corporation in such form as
the Committee will from time to time determine. No Option or purported Option
will be a valid and binding obligation of the Corporation unless so evidenced in
writing.
(b) Number of Shares. Each Stock Option Agreement will state the
number of Shares for which the Option is exercisable and will provide for the
adjustment thereof in accordance with Section 9.
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(c) Vesting. An Optionee may not exercise his or her Option for
any Shares until the Option, in regard to such Shares, has vested. Each Stock
Option Agreement will include a vesting schedule which will show when the Option
becomes exercisable provided, each Option will vest at a rate of at least 20%
per year over a period of at most five years. The vesting schedule will not
impose upon the Corporation or any Affiliate any obligation to retain the
Optionee in its employ or under contract for any period or otherwise change the
employment-at-will status of an Optionee who is an employee of the Corporation
or any Affiliate.
(d) Lapse of Options. Each Stock Option Agreement will state the
time or times when the Option covered thereby lapses and becomes unexercisable
in part or in full. An Option will lapse and become unexercisable in full on the
earliest of the following events (unless otherwise determined by the Committee
and reflected in an option agreement):
(i) The tenth anniversary of the date of granting the
Option;
(ii) Six months from the date of the Optionee's death;
(iii) The first anniversary of the date the Optionee
ceases to be an Employee due to total and permanent disability;
(iv) On the date provided in Section 6(h)(i), unless with
respect to a Nonstatutory Stock Option, the Committee otherwise extends such
period before the applicable expiration date;
(v) On the date provided in Section 9 for a transaction
described in such Section;
(vi) The date the Optionee files or has filed against him
or her a petition in bankruptcy; or
(vii) The expiration date specified in an Optionee's Stock
Option Agreement.
(e) Exercise Price. Each Stock Option Agreement will state the
Exercise Price for the Shares for which the Option is exercisable. Subject to
Section 4(b), the Exercise Price of an Incentive Stock Option and a Nonstatutory
Stock Option will, when granted, be not less than 100% and 85% of the Fair
Market Value of the Shares for which the Option is exercisable, respectively,
and not less than the par value of the Shares.
(f) Medium and Time of Payment. The Purchase Price will be
payable in full in cash upon the exercise of an Option but the Committee may
allow the Optionee to pay the Purchase Price:
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(i) by surrendering Shares in good form for transfer,
owned by the Optionee for more than 12 months and having a Fair Market Value on
the date of exercise equal to the Purchase Price;
(ii) by delivery of a full recourse promissory note
("Note") made by the Optionee in the amount of the Purchase Price, bearing
interest, compounded semiannually, at a rate not less than the rate determined
under Section 7872 of the Code to insure that no "foregone interest", as defined
in such section, will accrue, together with the delivery of a duly executed
standard form security agreement securing the Note by a pledge of the Shares
purchased; or
(iii) in any combination of such consideration or such
other consideration and method of payment for the issuance of Shares to the
extent permitted under applicable law as long as the sum of the cash so paid,
the Fair Market Value of the Shares so surrendered and the amount of any Note
equals the Purchase Price.
(iv) The Committee or a Stock Option Agreement may
prescribe requirements with respect to the exercise of Options, including the
submission by the Optionee of such forms and documents as the Committee may
require and, the delivery by the Optionee of cash sufficient to satisfy
applicable withholding requirements. The Committee may vary the exercise
requirements and procedures from time to time to facilitate, for example, the
broker-assisted exercise of Options.
(g) Nontransferability of Options. During the lifetime of the
Optionee, the Option will be exercisable only by the Optionee or the Optionee's
conservator or legal representative and will not be assignable or transferable
except pursuant to a qualified domestic relations order as defined by the Code.
In the event of the Optionee's death, the Option will not be transferable by the
Optionee other than by will or the laws of descent and distribution.
(h) Termination of Employment Other than by Death or Disability.
(i) If an Optionee ceases to be an Employee for any reason
other than his or her death or disability, the Optionee will have the right,
subject to the provisions of this Section 6, to exercise any Option held by the
Optionee at any time at least 10 but within 30 days after his or her termination
of employment, but not beyond the otherwise applicable term of the Option and
only to the extent that on such date of termination of employment the Optionee's
right to exercise such Option had vested.
(ii) For purposes of this Section 6(h), the employment
relationship will be treated as continuing intact while the Optionee is an
active employee of the Corporation or any Affiliate, or is on military leave,
sick leave, or other bona fide leave of absence to be determined in the sole
discretion of the Committee. The preceding sentence notwithstanding, in the case
of an Incentive Stock Option, employment will be deemed to terminate on the date
the Optionee ceases active employment with the Corporation or any Affiliate,
unless the Optionee's reemployment
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rights are guarantied by statute or contract.
(i) Death of Optionee. If an Optionee dies while an Employee, or
after ceasing to be an Employee but during the period while he or she could have
exercised an Option under Section 6(h), any Option granted to the Optionee may
be exercised, to the extent it had vested at the time of death and subject to
the Plan, at any time within six months after the Optionee's death, by the
executors or administrators of his or her estate or by any person or persons who
acquire the Option by will or the laws of descent and distribution, but not
beyond the otherwise applicable term of the Option.
(j) Disability of Optionee. If an Optionee ceases to be an
Employee due to becoming totally and permanently disabled within the meaning of
Section 22(e)(3) of the Code, any Option granted to the Optionee may be
exercised to the extent it had vested at the time of cessation and, subject to
the Plan, at any time within 12 months after the Optionee's termination of
employment, but not beyond the otherwise applicable term of the Option.
(k) Rights as a Shareholder. An Optionee, or a transferee of an
Optionee, will have no rights as a shareholder of the Corporation with respect
to any Shares for which his or her Option is exercisable until the date of the
issuance of a stock certificate for such Shares. No adjustment will be made for
dividends, ordinary or extraordinary or whether in currency, securities, or
other property, distributions, or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Section 9.
(l) Modification, Extension, and Renewal of Options. Within the
limitations of the Plan, the Committee may modify, extend, or renew outstanding
Options or accept the cancellation of outstanding Options for the granting of
new Options in substitution therefor. Notwithstanding the preceding sentence, no
modification of an Option will, without the consent of the Optionee, alter or
impair any rights or obligations under any Option previously granted.
(m) Other Provisions. The Stock Option Agreements authorized
under the Plan may contain such other provisions which are not inconsistent with
the terms of the Plan, including, without limitation, restrictions upon the
exercise of the Option, as the Committee deems advisable.
7. $100,000 PER YEAR LIMITATION ON VESTING OF ISOs. To the extent that
the Fair Market Value of Shares (determined for each Share as of the date of
grant of the Option covering such Share) subject to Options granted under this
Plan (or any other plan of the Corporation or any Affiliate) which are
designated as Incentive Stock Options and which become exercisable by an
Optionee for the first time during a single calendar year exceeds $100,000, the
Options (or portion thereof) covering such Shares will be recharacterized (to
the extent of such excess over $100,000) as a Nonstatutory Stock Option. In
determining which Options will be treated as Nonstatutory Stock Options under
the preceding sentence, the Options will be taken into account in the order
granted, with the result that a later granted Option will be recharacterized as
a Nonstatutory Stock Option prior to such recharacterization of a previously
granted Option.
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8. TERM OF PLAN. Options may be granted pursuant to the Plan until a
date no more than 10 years from the date the Plan is adopted by the Board or
approved by the shareholders of the Corporation, whichever is earlier, and all
Options which are outstanding on such date will remain in effect until they are
exercised or expire by their terms.
9. RECAPITALIZATION, TAKEOVERS, AND LIQUIDATIONS.
(a) Reorganizations. The number of Shares covered by the Plan, as
provided in Section 5, and the number of Shares for which each Option is
exercisable will be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from the payment of a stock split, a reverse
stock split, a stock dividend, recapitalization, combination, or
reclassification of the Corporation's stock, and the Exercise Price will be
proportionately increased in the event the number of Shares subject to such
Option are decreased and will be proportionately decreased in the event the
number of Shares subject to such Option are increased. For the purposes of this
subsection 9(a), grant or exercise of any options to buy securities of the
Corporation and conversion of any convertible securities of the Corporation will
not be deemed to have been "effected without receipt of consideration."
Adjustments will be made by the Board, whose determination in that respect will
be final, binding, and conclusive. Except as expressly provided in this Plan, no
issuance by the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, will affect, and no adjustment by
reason thereof will be made with respect to, the number or price of Shares
subject to an Option.
(b) Liquidation. In the event of the dissolution or liquidation
of the Corporation, each Option will terminate immediately prior to the
consummation of such action. The Committee will notify the Optionee not less
than 15 days prior to the proposed consummation of a pending dissolution or
liquidation, and the Option will be exercisable as to all Shares which are
vested prior to expiration until immediately prior to the consummation of such
action.
(c) Merger. In the event of (i) a proposed merger of the
Corporation with or into another corporation, as a result of which the
Corporation is not the surviving corporation and (ii) the Option is not assumed
or an equivalent option substituted by the successor corporation or a parent or
subsidiary of the successor corporation, then in such case each Option will
become fully vested and exercisable immediately prior to the consummation of
such transaction. The Committee will notify the Optionee not less than 15 days
prior to the proposed consummation of such transaction, and the Option will be
exercisable as to all Shares which are vested prior to expiration and until
immediately prior to the consummation of such transaction.
(d) Determination by Committee. All adjustments described in this
Section 9 will be made by the Committee, whose determination will be conclusive
and binding on all persons.
(e) Limitation on Rights of Optionee. Except as expressly
provided in this Section 9, no Optionee will have any rights by reason of any
payment of any stock dividend, stock
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split or reverse stock split or any other increase or decrease in the number of
shares of stock of any class, or by reason of any reorganization, consolidation,
dissolution, liquidation, merger, exchange, split-up or reverse split-up, or
spin-off of assets or stock of another corporation. Any issuance by the
Corporation of Shares, Options or securities convertible into Shares or Options
will not affect, and no adjustment by reason thereof will be made with respect
to, the number or Exercise Price of the Shares for which an Option is
exercisable. Notwithstanding the foregoing, if the Corporation enters into a
transaction affecting the Corporation's capital stock or distributions to the
holders of its capital stock for which a revision in the terms of each Option is
not required pursuant to this Section 9, the Committee will have the right, but
not the obligation, to revise the terms of each Option in a manner the
Committee, in its sole discretion, deems fair and reasonable given the
transaction involved. If necessary or appropriate in connection with such
transaction, the Committee may declare that any Option will terminate as of a
date fixed by the Committee and give each Optionee the right to exercise his or
her Option in whole or in part, including exercise as to Shares to which the
Option would not otherwise be exercisable.
(f) No Restriction on Rights of Corporation. The grant of an
Option will not affect or restrict in any way the right or power of the
Corporation to make adjustments, reclassifications, reorganizations, or changes
of its capital or business structure, or to merge or consolidate, or to
dissolve, liquidate, sell, or transfer all or any part of its business or
assets.
10. SECURITIES LAW REQUIREMENTS.
(a) Legality of Issuance. No Share will be issued upon the
exercise of any Option unless and until the Corporation has determined that:
(i) The Corporation and the Optionee have taken all
actions required to exempt the issuance of the Shares from the registration
requirements under the Securities Act of 1933, as amended (the "Act"), or the
Corporation and the Optionee will determine that the registration requirements
of the Act do not apply to such exercise;
(ii) Any applicable listing requirement of any stock
exchange on which the Common Stock is listed has been satisfied; and
(iii) Any other applicable provision of state or Federal
law has been satisfied.
(b) Restrictions on Transfer; Representations of Optionee;
Legends. Regardless of whether the offering and sale of Shares has been
registered under the Act or has been registered or qualified under the
securities laws of any state, the Corporation may impose restrictions upon the
sale, pledge, or other transfer of the Shares, including the placement of
appropriate legends on stock certificates, if, in the judgment of the
Corporation and its counsel, such restrictions are necessary or desirable in
order to achieve compliance with the provisions of the Act, the securities laws
of any state, or any other law. If the sale of Shares is not registered under
the Act and the Corporation
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determines that the registration requirements of the Act apply to such sale, but
an exemption is available which requires an investment representation or other
representation, the Optionee will be required, as a condition to purchasing
Shares by exercise of his or her Option, to represent that such Shares are being
acquired for investment, and not with a view to the sale or distribution
thereof, except in compliance with the Act, and to make such other
representations as are deemed necessary or appropriate by the Corporation and
its counsel. Stock certificates evidencing Shares acquired pursuant to an
unregistered transaction to which the Act applies will bear a restrictive legend
substantially in the following form and such other restrictive legends as are
required or deemed advisable under the Plan or the provisions of any applicable
law:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR QUALIFIED
UNDER THE SECURITIES LAWS OF ANY STATE. THESE SHARES HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY
DISTRIBUTION THEREOF, AND MAY NOT BE SOLD, MORTGAGED, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
UNDER THE ACT AND/OR QUALIFICATION UNDER ANY APPLICABLE STATE SECURITIES
LAWS, OR WITHOUT AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION AND
ITS COUNSEL THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED."
The Corporation will also place legends on stock certificates representing its
right of repurchase under Section 11 and the right of first refusal under
Section 12. Any determination by the Corporation and its counsel in connection
with any of the matters set forth in this Section 10 will be conclusive and
binding on all persons.
(c) Registration or Qualification of Securities. The Corporation
may, but will not be obligated to, register or qualify the sale of Shares under
the Act or any other applicable law. In connection with any such registration or
qualification, the Corporation will provide each Optionee with information
required pursuant to all applicable laws and regulations.
(d) Exchange of Certificates. If, in the opinion of the
Corporation and its counsel, any legend placed on a stock certificate
representing Shares sold hereunder is no longer required, the Optionee or the
holder of such certificate will be entitled to exchange such certificate for a
certificate representing the same number of Shares but lacking such legend.
11. RIGHT OF REPURCHASE.
(a) Repurchase Right. At the Committee's discretion, Shares
issued pursuant
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<PAGE> 12
to the exercise of an Option may be subject to a right, but not an obligation,
of repurchase by the Corporation (the "Right of Repurchase"), at the price
specified in Section 11(b), if the Optionee ceases to be an Employee for any
reason ("Employment Termination") at any time after the grant of the Option
pursuant to which such Shares were issued. Shares issued by the Corporation will
only be transferable by the Optionee subject to the Right of Repurchase, and the
Corporation will legend the Right of Repurchase on the stock certificates
evidencing such Shares and will take such other steps as it deems necessary to
ensure compliance with this restriction. The Corporation's rights under this
Section 11(a) will be freely assignable, in whole or in part.
(b) Repurchase Price. The price per Share at which the
Corporation may exercise the Right of Repurchase under Section 11(a) (the
"Repurchase Price") will be the higher of the Exercise Price of each Share as
paid by the Optionee, or Fair Market Value of the Shares on the date the
Corporation sends the notice to the Optionee of its exercise of its Right of
Repurchase pursuant to Section 11(a).
(c) Repurchase Procedure. The Corporation may exercise its Right
of Repurchase by sending a written notice to the Optionee and to the Escrow
Agent, if any, of its taking such action and specifying the number of Shares
being repurchased. The Corporation's Right of Repurchase will terminate if not
exercised by written notice from the Corporation to the Optionee within 90 days
of the date on which the Corporation learns of the Employment Termination or the
last date any Option granted to such Optionee is exercised, which ever is later.
If the Corporation exercises its Right of Repurchase, the Optionee, or if
applicable, the Escrow Agent, will deliver to the Corporation every stock
certificate representing the Shares being repurchased, together with appropriate
Assignments Separate from Certificates, and the Corporation will then promptly
pay the total Repurchase Price in cash (or cancellation of purchase money
indebtedness for the Shares, if applicable) to the Optionee, or if applicable,
to the Escrow Agent, for delivery to the Optionee.
(d) Election to Defer Purchase of Incentive Stock Option Shares.
(i) Notwithstanding the preceding provisions of this
Section 11, an Optionee whose Shares were issued pursuant to an Incentive Stock
Option may elect to defer the Corporation's repurchase of such Shares pursuant
to this Section 11 until the holding period requirements of Section 422(a) of
the Code are met. Such election will be in writing in such form as the Committee
may require and will be delivered to the Corporation and to the Escrow Agent by
certified mail no later than seven days after the date on which the Optionee
receives notice that the Corporation elects to exercise its Right of Repurchase.
Such election will pertain to all such Shares issued to the Optionee and will be
irrevocable.
(ii) With respect to an Optionee who makes the election
described in subsection 11(d)(i), the Corporation will repurchase such Shares on
or before the date which is 90 days following the earlier of the date on which
the Optionee dies or the date on which the holding period requirements of
Section 422(a) of the Code are met. The Repurchase Price of each such
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<PAGE> 13
Share determined under Section 11(b) will be calculated by substituting for the
Optionee's Employment Termination date the earlier of the date on which the
Optionee dies or the date on which such holding period requirements are met.
(e) Escrow. To facilitate the consummation of the Corporation's
Right of Repurchase under this Section 11, at the request of the Committee, the
Optionee and the Corporation will execute Joint Escrow Instructions and the
Optionee will deliver and deposit with the Escrow Agent named in the Joint
Escrow Instructions two "Assignments Separate from Certificate," together with
all certificates evidencing the Shares of Common Stock issued to the Optionee
pursuant to the Plan, duly endorsed in blank. The Escrow Agent will hold such
documents and deliver the same to the Corporation pursuant to the Joint Escrow
Instructions and in accordance with the terms of this Section 11, as applicable.
(f) Binding Effect. The Corporation's Right of Repurchase will
inure to the benefit of its successors and assigns and will be binding on any
representative, executor, administrator, heir, or legatee of the Optionee.
(g) Payment of Net Amount Owing. Notwithstanding anything to the
contrary contained herein, if the Corporation determines to exercise its Rights
of Repurchase pursuant to this Section before any Shares have been issued as a
result of an exercise of an Option, in lieu of issuing any Shares, the
Corporation will have the right, but not the obligation, to pay to the Optionee
the net amount owing to the Optionee.
(h) Termination of Right of Repurchase. Notwithstanding any other
provision of this Section 11, in the event that the Common Stock is listed on
any United States securities exchange or traded on any formal over-the-counter
market in general use in the United States at the time the Optionee would
otherwise be required to transfer his or her Shares, the Corporation will no
longer have the Right of Repurchase, and the Optionee will have no obligation to
comply with this Section 11.
12. RIGHT OF FIRST REFUSAL.
(a) Right of First Refusal. At the Committee's discretion, shares
issued pursuant to the exercise of an Option may be subject to a requirement
that if an Optionee proposes to sell, pledge, or otherwise transfer any Shares
acquired pursuant to exercise of an Option, or any interest in such Shares, to
any person or entity, the Corporation will have a right of first refusal (the
"Right of First Refusal") with respect to such Shares. Any Optionee desiring to
transfer Shares subject to the Right of First Refusal will give a written notice
(the "Transfer Notice") to the Corporation describing fully the proposed
transfer, including the number of Shares proposed to be transferred, the
proposed transfer price, and the name and address of the proposed transferee.
The Transfer Notice will be signed both by the Optionee and by the proposed
transferee and must constitute a binding commitment of both parties to the
transfer of the Shares. The Corporation will have the right to purchase the
Shares subject to the Transfer Notice on the terms of the proposal
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<PAGE> 14
referred to in the Transfer Notice, subject to any change in such terms
permitted under Section 12(b), by delivery of a notice of exercise of the Right
of First Refusal within 30 days after the date the Transfer Notice is received
by the Corporation. The Corporation's rights under this Section 12(a) will be
freely assignable, in whole or in part.
(b) Transfer of Shares. If the Corporation fails to exercise the
Right of First Refusal within 30 days after the date on which it receives the
Transfer Notice, the Optionee may, not later than six months following receipt
of the Transfer Notice by the Corporation, consummate a transfer of the Shares
subject to the Transfer Notice on the terms and conditions described in the
Transfer Notice. Any proposed transfer on terms and conditions different from
those described in the Transfer Notice, as well as any subsequent proposed
transfer by the Optionee, will again be subject to the Right of First Refusal
and will again require compliance with the procedure described in Section 12(a).
If the Corporation exercises its Right of First Refusal, the Optionee will
immediately endorse and deliver to the Corporation every stock certificate
representing the Shares being purchased, and the Corporation will then promptly
pay the purchase price in accordance with the terms set forth in the Transfer
Notice.
(c) Repurchase Payment. The amount payable to an Optionee
pursuant to the Corporation's exercise of the Right of First Refusal will be
paid to the Optionee in accordance with the terms and conditions of the Transfer
Notice or may, at the election of the Corporation, be paid in full in cash.
(d) Binding Effect. The Corporation's Right of First Refusal will
inure to the benefit of its successors and assigns and will be binding upon any
transferee of the Shares, other than a transferee acquiring Shares in a
transaction with respect to which the Corporation failed to exercise its Right
of First Refusal (a "Free Transferee") or a transferee of a Free Transferee.
(e) Termination of Right of First Refusal. Notwithstanding any
other provision of this Section 12, if the Common Stock is listed on any United
States securities exchange or traded on any formal over-the-counter market in
general use in the United States at the time the Optionee desires to transfer
his or her Shares, the Corporation will no longer have the Right of First
Refusal, and the Optionee will have no obligation to comply with this Section
12.
13. EXERCISE OF UNVESTED OPTIONS. The Committee may grant any Optionee
the right to exercise any Option prior to the complete vesting of such Option.
Without limiting the generality of the foregoing, the Committee may provide that
if an Option is exercised prior to having completely vested, the Shares issued
upon such exercise will remain subject to vesting at the same rate as under the
Option so exercised and will be subject to a right, but not an obligation, of
repurchase by the Corporation with respect to all unvested Shares if the
Optionee ceases to be an Employee for any reason. For the purposes of
facilitating the enforcement of any such right of repurchase, at the request of
the Committee, the Optionee will enter into the Joint Escrow Instructions with
the Corporation and deliver every certificate for his or her unvested Shares
with a stock power executed in blank by the Optionee and by the Optionee's
spouse, if required for
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<PAGE> 15
transfer.
14. AMENDMENT OF THE PLAN. The Board or the Committee may, from time to
time, terminate, suspend or discontinue the Plan, in whole or in part, or revise
or amend it in any respect whatsoever including, but not limited to, the
adoption of any amendment(s) deemed necessary or advisable to qualify the
Options under rules and regulations promulgated by the Securities and Exchange
Commission with respect to Employees who are subject to the provisions of
Section 16 of the Securities Exchange Act of 1934, as amended, or to correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any Option granted thereunder, without approval of the shareholders of the
Corporation, but without the approval of the Corporation's shareholders, no such
revision or amendment will:
(i) Increase the number of Shares subject to the Plan,
other than any increase pursuant to Section 9;
(ii) Materially modify the requirements as to eligibility
for participation in the Plan;
(iii) Materially increase the benefits accruing to
Optionees under the Plan;
(iv) Extend the term of the Plan; or
(v) Amend this Section 14 to defeat its purpose.
No amendment, termination, or modification of the Plan will affect any Option
theretofore granted in any material adverse way without the consent of the
Optionee.
15. APPLICATION OF FUNDS. The proceeds received by the Corporation from
the sale of Common Stock pursuant to the exercise of an Option will be used for
general corporate purposes.
16. APPROVAL OF SHAREHOLDERS. The Plan will be subject to approval by
the affirmative vote of the holders of a majority of all classes of the
outstanding shares present and entitled to vote at the first meeting of
shareholders of the Corporation following the adoption of the Plan or by written
consent, and in no event later than one year following the Effective Date. Prior
to such approval, Options may be granted but will not be exercisable. Any
amendment described in Section 14 (i) to (iv) will also be subject to approval
by the Corporation's shareholders.
17. WITHHOLDING OF TAXES. In the event the Corporation or an Affiliate
determines that it is required to withhold federal, state, or local taxes in
connection with the exercise of an Option or the disposition of Shares issued
pursuant to the exercise of an Option, the Optionee or any person succeeding to
the rights of the Optionee, as a condition to such exercise or
15
<PAGE> 16
disposition, may be required to make arrangements satisfactory to the
Corporation or the Affiliate to enable it to satisfy such withholding
requirements. Alternatively, the Corporation may issue or transfer Shares net of
the number of Shares sufficient to satisfy withholding tax requirements. For
withholding tax purposes, the Shares will be valued on the date the withholding
obligation is incurred.
18. RIGHTS AS AN EMPLOYEE. Neither the Plan nor any Option granted
pursuant thereto will be construed to give any person the right to remain in the
employ of the Corporation or any Affiliate, or to affect the right of the
Corporation or any Affiliate to terminate such individual's employment at any
time with or without cause. The grant of an Option will not entitle the Optionee
to, or disqualify the Optionee from, participation in the grant of any other
Option under the Plan or participation in any other benefit plan maintained by
the Corporation or any Affiliate.
19. DISAVOWAL OF REPRESENTATIONS, UNDERTAKINGS OR CREATION OF IMPLIED
RIGHTS. In adopting and maintaining this Plan and granting options hereunder,
neither the Corporation nor any Affiliate makes any representations or
undertakings with respect to the initial qualification or treatment of Options
under federal or state tax or securities laws. The Corporation and each
Affiliate expressly disavows the creation of any rights in Employees, Optionees,
or beneficiaries of any obligations on the part of the Corporation, any
Affiliate or the Committee, except as expressly provided herein.
20. INSPECTION OF RECORDS. Copies of the Plan, records reflecting each
Optionee's Option, and any other documents and records which an Optionee is
entitled by law to inspect will be open to inspection by the Optionee and his or
her duly authorized representative at the office of the Committee at any
reasonable business hour.
21. INFORMATION TO OPTIONEES. Each Optionee will be provided with such
information regarding the Corporation as the Committee from time to time deems
necessary or appropriate; provided however, that each Optionee will at all times
be provided with such information as is required to be provided from time to
time pursuant to applicable regulatory requirements, including, but not limited
to, any applicable requirements of the Securities and Exchange Commission, the
California Department of Corporations and other state securities agencies.
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<PAGE> 1
EXHIBIT 10.1.1
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
NONSTATUTORY STOCK OPTION AGREEMENT
This Stock Option Agreement is made and entered into this day of _____,
pursuant to the WebSideStory 1998 Stock Option Plan (the "Plan"). Any terms not
defined in this Agreement will have the meanings given to them in the Plan. The
Committee administering the Plan has decided to make the following grant of a
nonstatutory stock option ("Stock Option") to purchase shares of the common
stock of the Corporation to (the "Optionee"), on the terms and conditions set
forth below to which Optionee accepts and agrees:
1. Stock Options Granted:
<TABLE>
<S> <C>
Number of Shares Subject to Option _______________
Date of Grant _______________
Vesting Commencement Date January 1, 1999
Exercise Price Per Share $1.00
Expiration Date January 1, 2009
</TABLE>
2. The Stock Option is granted pursuant to the Plan to purchase the
number of shares of authorized but unissued common stock of the Corporation
specified in Section 1 (the "Shares"). The Stock Option will expire, and all
rights to exercise it will terminate on the Expiration Date, except that the
Stock Option may expire earlier as provided in the Plan. The number of shares
subject to the Stock Option granted pursuant to this Agreement will be adjusted
as provided in the Plan. This Stock Option is intended by the Corporation and
the Optionee to be a Nonstatutory Stock Option and does not qualify for any
special tax benefits to the Optionee and is not subject to Section 7 of the
Plan.
3. This Stock Option will be exercisable in all respects in accordance
with the terms of the Plan which are incorporated herein by this reference and
will be exercised by Optionee delivering to the Corporation a fully executed
copy of the attached Notice of Exercise/Stock Purchase Agreement and the
Purchase Price. Optionee acknowledges having received and read a copy of the
Plan. All shares of the Corporation's common stock issued pursuant to the
exercise of
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this Stock Option will be subject to the Corporation's Right of Repurchase and
Right of First Refusal as set forth in Sections 11 and 12 of the Plan.
4. Optionee will have the right to exercise the Stock Option in
accordance with the following schedule:
(a) The Stock Option may not be exercised in whole or in part at
any time prior to the first anniversary of the Vesting Commencement Date.
(b) Optionee may exercise the Stock Option as to one third of the
Shares on or after the first anniversary of the Vesting Commencement Date.
(c) Optionee may exercise the Stock Option as to an additional
1/12th of the Shares at the end of each of the full calendar quarter commencing
with the 5th full calendar quarter following the Vesting Commencement Date.
(d) The right to exercise the Stock Option will be cumulative.
Optionee may buy all, or from time to time any part, of the maximum number of
shares which are exercisable under the Stock Option, but in no case may Optionee
exercise the Stock Option with regard to a fraction of a share, or for any share
for which the Stock Option is not exercisable.
5. The Optionee agrees to comply with all laws, rules, and regulations
applicable to the grant and exercise of the Stock Option and the sale or other
disposition of the common stock of the Corporation received pursuant to the
exercise of such Stock Option.
6. The Stock Option will not become exercisable unless and until the
shares exercisable under the Stock Option have been qualified under the
California Corporate Securities Law of 1968 pursuant to a permit application
filed with the California Department of Corporations or unless the exercise is
otherwise exempt from the qualification requirements of such law. The Stock
Option is conditioned on the Optionee's representation, which Optionee hereby
confirms as of the date of this Agreement and which Optionee must confirm as of
the date of any exercise of all or any part of the Stock Option, that:
(a) Optionee understands that both this Stock Option and any
shares purchased upon its exercise are securities, the issuance of which require
compliance with state and federal securities laws;
(b) Optionee understands that neither the Options nor the Shares
have been registered under the Securities Act of 1933 (the "Act") in reliance
upon a specific exemption contained in the Act which depends on Optionee's bona
fide investment intention in acquiring these securities; that Optionee's
intention is to hold these securities for Optionee's own benefit for an
indefinite period; that Optionee has no present intention of selling or
transferring any part thereof (recognizing that the Stock Option is not
transferable) and that certain restrictions may exist on
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<PAGE> 3
transfer of the shares issued upon exercise of the Stock Option;
(c) Optionee understands that the Shares issued upon exercise of
this Stock Option, in addition to other restrictions on transfer, must be held
indefinitely unless subsequently registered under the Act, or unless an
exemption from registration is available; that Rule 701 and Rule 144, two
exemptions from registration which may be available, are only available after
the satisfaction of certain conditions and require the presence of a U.S. public
market for such Shares; that no certainty exists that a U.S. public market for
the Shares will exist, and that otherwise Optionee may have to sell the Shares
pursuant to another exemption from registration which exemption may be difficult
to satisfy; and
(d) The Corporation will not be under any obligation to issue any
Shares upon the exercise of this Stock Option unless and until the Corporation
has determined that:
(i) it and Optionee have taken all actions required to
register such Shares under the Securities Act, or to perfect an exemption from
the registration requirements thereof;
(ii) any applicable listing requirement of any stock
exchange on which such Shares are listed has been satisfied; and
(iii) all other applicable provisions of state and federal
law have been satisfied.
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<PAGE> 4
IN WITNESS WHEREOF, each of the parties hereto has executed this Stock Option
Agreement, in the case of the Corporation by its duly authorized officer, as of
the date and year written above.
OPTIONEE WEBSIDESTORY, INC.
By:
- ------------------------------- ----------------------------
(signature) (signature)
Its:
- ------------------------------- ---------------------------
(Type or Print Name)
Address:
----------------------
----------------------
----------------------
[SIGNATURE PAGE TO WEBSIDESTORY
NONSTATUTORY STOCK OPTION AGREEMENT]
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<PAGE> 5
WEBSIDESTORY
NOTICE OF EXERCISE AND STOCK PURCHASE AGREEMENT
(NONSTATUTORY)
THIS NOTICE OF EXERCISE AND STOCK PURCHASE AGREEMENT (the "Stock Purchase
Agreement") is delivered pursuant to a Non-Statutory Stock Option Agreement (the
"Option Agreement") dated ______________, 19__, between WebSideStory, Inc., a
California corporation (the "Corporation"), and the undersigned ("Purchaser").
The capitalized terms used in this Stock Purchase Agreement and not otherwise
defined have the meanings specified for such terms in the Corporation's 1998
Stock Option Plan (the "Plan").
1. Notice of Exercise. Purchaser has a Nonstatutory Option (the
"Option") to acquire shares of Common Stock, pursuant to the Option Agreement.
Purchaser hereby elects to purchase the number of shares of Common Stock set
forth opposite the undersigned's name below, at the exercise price per share
specified in the Option Agreement, for an aggregate purchase price in an amount
equal to the amount set forth opposite the undersigned's name below, and hereby
so notifies the Corporation. Purchaser understands that the Option may only be
exercised to the extent the Option is exercisable in accordance with Section 4
of the Option Agreement, and acknowledges that this exercise is subject to the
limitations and conditions on exercise set forth in the Option Agreement and in
the Plan.
2. Purchase and Sale. Subject to the terms and conditions set forth in
this Purchase Agreement, the Option Agreement, and the Plan, the Corporation
hereby sells to Purchaser and Purchaser hereby acquires from the Corporation the
number of shares set forth opposite the undersigned's name below (the "Purchased
Shares") of the Common Stock represented by the Option, at the exercise price
per share specified in the Option Agreement, for an aggregate purchase price in
an amount equal to the amount set forth opposite the undersigned's name below.
Purchaser hereby delivers to the Corporation cash, a check or such other
consideration permitted under the Plan in the amount of such purchase price and
the amount of the estimated withholding taxes which apply to the exercise. The
number of Shares that may be acquired pursuant to the Option is reduced by the
number of Purchased Shares hereby purchased and sold.
3. Representations and Warranties of Purchaser. In connection with its
purchase of the Purchased Shares, Purchaser hereby represents, acknowledges, and
warrants to the Corporation as follows:
(a) VESTING OF SHARES PURSUANT TO SECTION 4 OF THE OPTION
AGREEMENT IS EARNED ONLY BY CONTINUING AS AN EMPLOYEE OR AS A CONSULTANT OF THE
CORPORATION AT THE WILL OF THE CORPORATION (NOT THROUGH THE ACT OF BEING HIRED,
ENGAGED, BEING GRANTED AN OPTION, OR BEING SOLD SHARES HEREUNDER). THIS STOCK
PURCHASE AGREEMENT, THE TRANSACTIONS CONTEMPLATED UNDER IT AND THE VESTING
SCHEDULE SET
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<PAGE> 6
FORTH IN THE OPTION AGREEMENT DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED ENGAGEMENT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL.
(b) Purchaser acknowledges receipt of a copy of the Plan, which
is attached to the Option Agreement, and represents that Purchaser has reviewed
the Plan, the Option Agreement and this Purchase Agreement in their entirety,
has had an opportunity to obtain the advice of counsel prior to executing this
Purchase Agreement, fully understands all provisions of this Purchase Agreement,
the Option Agreement, and the Plan.
(c) Purchaser hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Board or the Committee, if one has
been appointed by the Board, regarding any questions arising under the Plan.
4. Entire Agreement. This Agreement, together with the Plan and the
Option Agreement, constitutes the entire agreement among the parties relating to
the subject matter of this Agreement.
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<PAGE> 7
IN WITNESS WHEREOF, this Stock Purchase Agreement is entered into and effective
as of the date first set forth above.
PURCHASER WebSideStory, Inc.
By: By:
------------------------------- ------------------------------------
No. of Shares: Name:
-------------------- ----------------------------------
Total Purchase Price: Title:
------------- ---------------------------------
Print Name:
----------------------- Date of Acceptance:
Address: --------------------
--------------------------
--------------------------
Soc. Sec. No.
---------------------
[SIGNATURE PAGE TO WEBSIDESTORY NONSTATUTORY OPTION
NOTICE OF EXERCISE AND STOCK PURCHASE AGREEMENT]
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<PAGE> 8
CONSENT OF SPOUSE
The undersigned spouse of Purchaser has read and hereby approves the Option
Agreement and the foregoing Stock Purchase Agreement. In consideration of the
Corporation's granting my spouse the right to purchase the shares of the
Corporation's Common Stock as set forth in the Option Agreement and the Stock
Purchase Agreement, the undersigned hereby agrees to be irrevocably bound by the
Option Agreement and the Stock Purchase Agreement and further agrees that any
community property interest will be similarly bound by the Option Agreement and
the Stock Purchase Agreement. I hereby appoint my spouse as my attorney-in-fact
with respect to any amendment or exercise of any rights under the Option
Agreement and the Stock Purchase Agreement.
------------------------------
Spouse of Purchaser
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<PAGE> 1
EXHIBIT 10.1.2
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
INCENTIVE STOCK OPTION AGREEMENT
This Stock Option Agreement is made and entered into this __ day of _______,
pursuant to the WebSideStory 1998 Stock Option Plan (the "Plan"). Any terms not
defined in this Agreement will have the meanings given to them in the Plan. The
Committee administering the Plan has decided to make the following grant of an
incentive stock option ("Stock Option") to purchase shares of the common stock
of the Corporation to ____________ (the "Optionee"), on the terms and conditions
set forth below to which Optionee accepts and agrees:
1. Stock Options Granted:
Number of Shares Subject to Option _______________
Date of Grant _______________
Vesting Commencement Date January 1, 1999
Exercise Price Per Share $1.00
Expiration Date January 1, 2009
2. The Stock Option is granted pursuant to the Plan to purchase the
number of shares of authorized but unissued common stock of the Corporation
specified in Section 1 (the "Shares"). The Stock Option will expire, and all
rights to exercise it will terminate on the Expiration Date, except that the
Stock Option may expire earlier as provided in the Plan. The number of shares
subject to the Stock Option granted pursuant to this Agreement will be adjusted
as provided in the Plan.
3. This Stock Option will be exercisable in all respects in accordance
with the terms of the Plan which are incorporated herein by this reference and
will be exercised by Optionee delivering to the Corporation a fully executed
copy of the attached Notice of Exercise/Stock Purchase Agreement and the
Purchase Price. Optionee acknowledges having received and read a copy of the
Plan. All shares of the Corporation's common stock issued pursuant to the
exercise of this Stock Option will be subject to the Corporation's Right of
Repurchase and Right of First Refusal as set forth in Sections 11 and 12 of the
Plan.
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4. Optionee will have the right to exercise the Stock Option in
accordance with the following schedule:
(a) The Stock Option may not be exercised in whole or in part at
any time prior to the first anniversary of the Vesting Commencement Date.
(b) Optionee may exercise the Stock Option as to one third of the
Shares on or after the first anniversary of the Vesting Commencement Date.
(c) Optionee may exercise the Stock Option as to an additional
1/12th of the Shares at the end of each of the full calendar quarter commencing
with the 5th full calendar quarter following the Vesting Commencement Date.
(d) The right to exercise the Stock Option will be cumulative.
Optionee may buy all, or from time to time any part, of the maximum number of
shares which are exercisable under the Stock Option, but in no case may Optionee
exercise the Stock Option with regard to a fraction of a share, or for any share
for which the Stock Option is not exercisable.
5. The Optionee agrees to comply with all laws, rules, and regulations
applicable to the grant and exercise of the Stock Option and the sale or other
disposition of the common stock of the Corporation received pursuant to the
exercise of such Stock Option.
6. The Stock Option will not become exercisable unless and until the
shares exercisable under the Stock Option have been qualified under the
California Corporate Securities Law of 1968 pursuant to a permit application
filed with the California Department of Corporations or unless the exercise is
otherwise exempt from the qualification requirements of such law. The Stock
Option is conditioned on the Optionee's representation, which Optionee hereby
confirms as of the date of this Agreement and which Optionee must confirm as of
the date of any exercise of all or any part of the Stock Option, that:
(a) Optionee understands that both this Stock Option and any
shares purchased upon its exercise are securities, the issuance of which require
compliance with state and federal securities laws;
(b) Optionee understands that neither the Options nor the Shares
have been registered under the Securities Act of 1933 (the "Act") in reliance
upon a specific exemption contained in the Act which depends on Optionee's bona
fide investment intention in acquiring these securities; that Optionee's
intention is to hold these securities for Optionee's own benefit for an
indefinite period; that Optionee has no present intention of selling or
transferring any part thereof (recognizing that the Stock Option is not
transferable) and that certain restrictions may exist on transfer of the shares
issued upon exercise of the Stock Option;
(c) Optionee understands that the Shares issued upon exercise of
this Stock
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<PAGE> 3
Option, in addition to other restrictions on transfer, must be held indefinitely
unless subsequently registered under the Act, or unless an exemption from
registration is available; that Rule 701 and Rule 144, two exemptions from
registration which may be available, are only available after the satisfaction
of certain conditions and require the presence of a U.S. public market for such
Shares; that no certainty exists that a U.S. public market for the Shares will
exist, and that otherwise Optionee may have to sell the Shares pursuant to
another exemption from registration which exemption may be difficult to satisfy;
and
(d) The Corporation will not be under any obligation to issue any
Shares upon the exercise of this Stock Option unless and until the Corporation
has determined that:
(i) it and Optionee have taken all actions required to
register such Shares under the Securities Act, or to perfect an exemption from
the registration requirements thereof;
(ii) any applicable listing requirement of any stock
exchange on which such Shares are listed has been satisfied; and
(iii) all other applicable provisions of state and federal
law have been satisfied.
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<PAGE> 4
IN WITNESS WHEREOF, each of the parties hereto has executed this Stock Option
Agreement, in the case of the Corporation by its duly authorized officer, as of
the date and year written above.
OPTIONEE WEBSIDESTORY, INC.
By:
- ------------------------------- ----------------------------
(signature) (signature)
Its:
- ------------------------------- ---------------------------
(Type or Print Name)
Address:
----------------------
----------------------
----------------------
[SIGNATURE PAGE TO WEBSIDESTORY
INCENTIVE STOCK OPTION AGREEMENT]
B-4
<PAGE> 5
WEBSIDESTORY
NOTICE OF EXERCISE AND STOCK PURCHASE AGREEMENT
(INCENTIVE)
THIS NOTICE OF EXERCISE AND STOCK PURCHASE AGREEMENT (the "Stock Purchase
Agreement") is delivered pursuant to an Incentive Stock Option Agreement (the
"Option Agreement") dated _______________, 19__, between WebSideStory, Inc., a
California corporation (the "Corporation"), and the undersigned ("Purchaser").
The capitalized terms used in this Stock Purchase Agreement and not otherwise
defined have the meanings specified for such terms in the Corporation's 1998
Stock Option Plan (the "Plan").
1. Notice of Exercise. Purchaser has an Incentive Option (the "Option")
to acquire shares of Common Stock, pursuant to the Option Agreement. Purchaser
hereby elects to purchase the number of shares of Common Stock set forth
opposite the undersigned's name below, at the exercise price per share specified
in the Option Agreement, for an aggregate purchase price in an amount equal to
the amount set forth opposite the undersigned's name below, and hereby so
notifies the Corporation. Purchaser understands that the Option may only be
exercised to the extent the Option is exercisable in accordance with Section 4
of the Option Agreement, and acknowledges that this exercise is subject to the
limitations and conditions on exercise set forth in the Option Agreement and in
the Plan.
2. Purchase and Sale. Subject to the terms and conditions set forth in
this Purchase Agreement, the Option Agreement, and the Plan, the Corporation
hereby sells to Purchaser and Purchaser hereby acquires from the Corporation the
number of shares set forth opposite the undersigned's name below (the "Purchased
Shares") of the Common Stock represented by the Option, at the exercise price
per share specified in the Option Agreement, for an aggregate purchase price in
an amount equal to the amount set forth opposite the undersigned's name below.
Purchaser hereby delivers to the Corporation cash, a check or such other
consideration permitted under the Plan in the amount of such purchase price and
the amount of the estimated withholding taxes which apply to the exercise. The
number of Shares that may be acquired pursuant to the Option is reduced by the
number of Purchased Shares hereby purchased and sold.
3. Representations and Warranties of Purchaser. In connection with its
purchase of the Purchased Shares, Purchaser hereby represents, acknowledges, and
warrants to the Corporation as follows:
(a) VESTING OF SHARES PURSUANT TO SECTION 4 OF THE OPTION
AGREEMENT IS EARNED ONLY BY CONTINUING AS AN EMPLOYEE OR AS A CONSULTANT OF THE
CORPORATION AT THE WILL OF THE CORPORATION (NOT THROUGH THE ACT OF BEING HIRED,
ENGAGED, BEING GRANTED AN OPTION, OR BEING SOLD SHARES HEREUNDER). THIS STOCK
PURCHASE AGREEMENT, THE TRANSACTIONS CONTEMPLATED UNDER IT AND THE VESTING
SCHEDULE SET
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<PAGE> 6
FORTH IN THE OPTION AGREEMENT DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED ENGAGEMENT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL.
(b) Purchaser acknowledges receipt of a copy of the Plan, which
is attached to the Option Agreement, and represents that Purchaser has reviewed
the Plan, the Option Agreement, and this Purchase Agreement in their entirety,
has had an opportunity to obtain the advice of counsel prior to executing this
Purchase Agreement, fully understands all provisions of this Purchase Agreement,
the Option Agreement, and the Plan.
(c) Purchaser hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Board or the Committee, if one has
been appointed by the Board, regarding any questions arising under the Plan.
4. Entire Agreement. This Agreement, together with the Plan and the
Option Agreement, constitutes the entire agreement among the parties relating to
the subject matter of this Agreement.
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<PAGE> 7
IN WITNESS WHEREOF, this Stock Purchase Agreement is entered into and effective
as of the date first set forth above.
PURCHASER
By:
-----------------------------------------
No. of Shares:
------------------------------
Total Purchase Price:
-----------------------
Print Name:
---------------------------------
Address:
------------------------------------
Soc. Sec. No.
-------------------------------
WebSideStory, Inc.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Date of Acceptance:
-------------------------
[SIGNATURE PAGE TO WEBSIDESTORY INCENTIVE OPTION
NOTICE OF EXERCISE AND STOCK PURCHASE AGREEMENT]
B-7
<PAGE> 8
CONSENT OF SPOUSE
The undersigned spouse of Purchaser has read and hereby approves the Option
Agreement and the foregoing Stock Purchase Agreement. In consideration of the
Corporation's granting my spouse the right to purchase the shares of the
Corporation's Common Stock as set forth in the Option Agreement and the Stock
Purchase Agreement, the undersigned hereby agrees to be irrevocably bound by the
Option Agreement and the Stock Purchase Agreement and further agrees that any
community property interest will be similarly bound by the Option Agreement and
the Stock Purchase Agreement. I hereby appoint my spouse as my attorney-in-fact
with respect to any amendment or exercise of any rights under the Option
Agreement and the Stock Purchase Agreement.
------------------------------
Spouse of Purchaser
B-8
<PAGE> 1
EXHIBIT 10.2
WEBSIDESTORY, INC.
1999 STOCK OPTION PLAN
1. PURPOSE. The WebSideStory, Inc. 1999 Stock Option Plan (the "Plan")
is intended to provide to officers, directors, key employees and consultants of
the Corporation an opportunity to acquire a proprietary interest in the
Corporation, to encourage such key individuals to remain in the employ of or to
contract with the Corporation, and to attract and retain new officers,
directors, key employees and consultants with outstanding qualifications.
Pursuant to the Plan, the Corporation may grant to officers, directors, key
employees and consultants of the Corporation options to purchase shares of
common stock of the Corporation upon the terms and conditions provided under the
Plan. Options granted under the Plan may include Nonstatutory Stock Options as
well as Incentive Stock Options intended to qualify under Section 422 of the
Code. The Plan is intended to comply in all respects with Rule 16b-3 (or its
successor) under the Exchange Act, to the extent applicable, and to satisfy the
requirements of Rule 701 of the Securities Act.
2. DEFINITIONS.
(a) "Affiliate" means any corporation (other than the
Corporation) in an unbroken chain of corporations that includes the Corporation
if each of such corporations, other than the last corporation in the chain, owns
at least 50% of the total voting power of one of the other corporations.
(b) "Board" means the board of directors of the Corporation.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the committee appointed by the Board to
administer the Plan, or if no such committee is appointed, the Board.
(e) "Common Stock" means the voting common stock of the
Corporation.
(f) "Consultant" means any person who, or any employee of any
firm which, is engaged by the Corporation or any Affiliate to render consulting
services and is compensated for such consulting services, and any non-employee
director of the Corporation whether compensated for such services or not.
(g) "Corporation" means WebSideStory, Inc., a California
corporation.
(h) "Effective Date" means June 16, 1999.
(i) "Employee" means any individual who is employed, within the
meaning of Section 3401 of the Code and the regulations thereunder, by the
Corporation or by any Affiliate. For purposes of the Plan and only for purposes
of the Plan, and in regard to Nonstatutory Stock Options but not for Incentive
Stock Options, a Consultant or director of the Corporation or any Affiliate will
be deemed to be an Employee, and service as a Consultant or
<PAGE> 2
director with the Corporation or any Affiliate will be deemed to be employment,
but no Incentive Stock Option will be granted to a Consultant or director who is
not an employee of the Corporation or any Affiliate within the meaning of
Section 3401 of the Code and the regulations thereunder. In the case of a
non-employee director or Consultant, the provisions governing when a termination
of employment has occurred for purposes of the Plan will be set forth in a Stock
Option Agreement, or, if not so set forth, the Committee will have the
discretion to determine when a termination of "employment" has occurred for
purposes of the Plan.
(j) "Escrow Agent" means the person selected by the Corporation,
if any, to hold the stock certificates representing Shares issued in the name of
an Optionee pursuant to such Optionee's exercise of an Option.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "Exercise Price" means the price per Share at which an Option
may be exercised, as determined by the Committee and as specified in the
Optionee's Stock Option Agreement.
(m) "Fair Market Value" means the value of each Share as
determined by the Board.
(n) "Incentive Stock Option" means an Option of the type
described in Section 422(b) of the Code.
(o) "Joint Escrow Instructions" means joint escrow instructions
entered into between Optionee and the Corporation in such form as may be
approved by the Committee from time to time.
(p) "Nonemployee Director" shall mean a member of the Board who
(i) is not currently an officer or Employee of the Corporation or a parent or
Subsidiary of the Corporation, (ii) has not received compensation for serving as
a Consultant or in any other non-director capacity or had an interest in any
transaction with the Corporation or a parent or Subsidiary of the Corporation
that would exceed the $60,000 threshold for which disclosure would be required
under Item 404(a) of Regulation S-K, or (iii) has not been engaged through
another party in a business relationship with the Corporation which would be
disclosable under Item 404(b) of Regulation S-K. If the Board determines that
compliance with Section 162(m) of the Code is desirable, then the term
"Nonemployee Director" shall also be interpreted to satisfy the definition of
"outside director" under Section 162(m) and applicable regulations issued
pursuant thereto.
(q) "Nonstatutory Stock Option" means an Option of the type not
described in Section 422(b) or 423(b) of the Code.
(r) "Option" means an option to purchase Shares granted pursuant
to the Plan.
(s) "Optionee" means any person who holds an Option pursuant to
the Plan.
(t) "Plan" means this stock option plan as it may be amended from
time to time.
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<PAGE> 3
(u) "Purchase Price" means at any particular time the Exercise
Price times the number of Shares for which an Option is being exercised.
(v) "Securities Act" means the Securities Act of 1933, as
amended.
(w) "Share" means one share of authorized Common Stock.
(x) "Stock Option Agreement" means the written stock option
agreement between the Optionee and the Corporation in connection with an Option
granted under the Plan.
3. ADMINISTRATION.
(a) The Committee.
(i) The Board may administer the Plan or appoint a
Committee to administer the Plan. The Committee will consist of not less than
two members who may also be members of the Board. Members of the Board or the
Committee who are either eligible for Options or have been granted Options may
vote on any matters affecting the administration of the Plan or the grant of any
Options pursuant to the Plan, except that no such member will act upon the
granting of an Option to himself or herself, but any such member may be counted
in determining the existence of a quorum at any meeting of the Committee and
will be excluded in determining unanimity of an act in writing, for any action
which is taken with respect to the granting of an Option to such member.
(ii) If the Corporation registers any class of any equity
security pursuant to Section 12 of the Exchange Act, from the effective date of
such registration until six months after the termination of such registration,
the Plan will be administered by a Committee of directors which will consist of
Nonemployee Directors. The Board may appoint a separate committee of the Board,
composed of two or more directors of the Corporation who need not be Nonemployee
Directors, who may administer the Plan with respect to Employees or Consultants
who are not officers or directors of the Corporation or incoming new directors
of the Corporation, may grant Options under the Plan to such persons and may
determine the timing, number of Shares subject to such Options and other terms
of such grants.
(b) Powers of the Committee. Subject to the provisions of the
Plan, the Committee will have the authority, in its discretion and on behalf of
the Corporation:
(i) to grant Options;
(ii) to determine the Exercise Price per Share of Options
to be granted;
(iii) to determine the Employees to whom, and the time or
times at which, Options will be granted and the number of Shares for which an
Option will be exercisable;
(iv) to interpret the Plan;
3
<PAGE> 4
(v) to prescribe, amend, and rescind rules and regulations
relating to the Plan;
(vi) to determine the terms and provisions of each Option
granted and, with the consent of the holder thereof, modify or amend each
Option;
(vii) to accelerate or defer, with the consent of the
Optionee, the exercise date of any Option;
(viii) to authorize any person to execute on behalf of the
Corporation any instrument required to effectuate the grant of an Option
previously granted by the Committee;
(ix) with the consent of the Optionee, to reprice, cancel
and regrant, or otherwise adjust the Exercise Price of an Option previously
granted by the Committee; and
(x) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(c) Board's Determination of Fair Market Value. The Board will
have the authority to determine, upon review of relevant information, the Fair
Market Value of the Common Stock, subject to the provisions of the Plan and
irrespective of whether the Board has appointed a Committee to administer the
Plan. The Board may delegate this authority to the Committee.
(d) Committee's Interpretation of the Plan. The interpretation
and construction by the Committee of any provision of the Plan or of any Option
granted hereunder will be final and binding on all parties claiming an interest
in an Option granted under the Plan. No member of the Committee will be liable
for any action or determination made in good faith with respect to the Plan or
any Option.
(e) All Committee Actions to be in Writing. Any and all actions
of the Committee taken in exercise of the powers granted to it in this Section 3
will be in writing.
4. PARTICIPATION.
(a) Eligibility. The Optionees will be such persons as the
Committee may select from among the Employees, provided that Consultants are not
eligible to receive Incentive Stock Options.
(b) Ten Percent Shareholders. Any Employee who owns Stock
possessing more than 10% of the total combined voting power of all classes of
outstanding stock of the Corporation or any Affiliate will not be eligible to
receive an Option unless:
(i) the Exercise Price of the Shares subject to such
Option when granted is at least 110% of the Fair Market Value of such Shares,
and
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<PAGE> 5
(ii) such Option by its terms is not exercisable after the
expiration of five years from the date of grant.
(c) Stock Ownership. For purposes of Section 4(b), in determining
stock ownership, an Employee will be considered as owning the stock owned,
directly or indirectly, by or for his or her brothers and sisters, spouse,
ancestors, and lineal descendants. Stock owned, directly or indirectly, by or
for a corporation, partnership, estate, or trust will be considered as being
owned proportionately by or for its shareholders, partners, or beneficiaries,
respectively. Stock with respect to which such Employee or any other person
holds an Option will be disregarded.
(d) Outstanding Stock. For purposes of Section 4(b), the term
"outstanding stock" will include all stock actually issued and outstanding
immediately after the grant of the Option to the Optionee but will not include
any share for which an Option is exercisable by any person.
(e) Maximum Number of Options to One Person. No single Optionee
shall be entitled to receive more than Three Hundred Fifty Thousand (350,000)
Options in any year pursuant to this Plan.
5. SHARES.
(a) Shares Subject to the Plan. The aggregate number of Shares
that may be issued upon exercise of Options under the Plan will not exceed
3,807,000 Shares, subject to adjustment pursuant to Section 9.
(b) Options Not to Exceed Shares Available. The number of Shares
for which an Option is exercisable at any time will not exceed the number of
Shares remaining available for issuance under the Plan. If any Option expires or
is terminated, the number of Shares for which such Option was exercisable may be
made exercisable pursuant to other Options under the Plan. If the Corporation
reacquires any Shares pursuant to Sections 11 or 12, such Shares may again be
made exercisable pursuant to an Option. The limitations established by this
Section 5(b) will be subject to adjustment in the manner provided in Section 9
upon the occurrence of an event specified therein.
6. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreements. Options will be evidenced by Stock
Option Agreements in such form as the Committee will from time to time
determine. No Option or purported Option will be a valid and binding obligation
of the Corporation unless so evidenced by a Stock Option Agreement.
(b) Number of Shares. Each Stock Option Agreement will state the
number of Shares for which the Option is exercisable and will provide for the
adjustment thereof in accordance with Section 9.
(c) Vesting. An Optionee may not exercise his or her Option for
any Shares until the Option, in regard to such Shares, has vested. Each Stock
Option Agreement will
5
<PAGE> 6
include a vesting schedule which will show when the Option becomes exercisable
provided, each Option will vest at a rate of at least 20% per year over a period
of at most five years. The vesting schedule will not impose upon the Corporation
or any Affiliate any obligation to retain the Optionee in its employ or under
contract for any period or otherwise change the employment-at-will status of an
Optionee who is an employee of the Corporation or any Affiliate.
(d) Lapse of Options. Each Stock Option Agreement will state the
time or times when the Option covered thereby lapses and becomes unexercisable
in part or in full. An Option will lapse and become unexercisable in full on the
earliest of the following events (unless otherwise determined by the Committee
and reflected in an option agreement):
(i) The tenth anniversary of the date of granting the
Option;
(ii) Six months from the date of the Optionee's death;
(iii) The first anniversary of the date the Optionee
ceases to be an Employee due to total and permanent disability;
(iv) On the date provided in Section 6(h)(i), unless with
respect to a Nonstatutory Stock Option, the Committee otherwise extends such
period before the applicable expiration date;
(v) On the date provided in Section 9 for a transaction
described in such Section;
(vi) The date the Optionee files or has filed against him
or her a petition in bankruptcy; or
(vii) The expiration date specified in an Optionee's Stock
Option Agreement.
(e) Exercise Price. Each Stock Option Agreement will state the
Exercise Price for the Shares for which the Option is exercisable. Subject to
Section 4(b), the Exercise Price of an Incentive Stock Option and a Nonstatutory
Stock Option will, when granted, be not less than 100% and 85% of the Fair
Market Value of the Shares for which the Option is exercisable, respectively,
and not less than the par value of the Shares.
(f) Medium and Time of Payment. The Purchase Price will be
payable in full in cash upon the exercise of an Option but the Committee may
allow the Optionee to pay the Purchase Price:
(i) by surrendering Shares in good form for transfer,
owned by the Optionee for more than 12 months and having a Fair Market Value on
the date of exercise equal to the Purchase Price;
(ii) by delivery of a full recourse promissory note
("Note") made by the Optionee in the amount of the Purchase Price, bearing
interest, compounded semiannually, at a rate not less than the rate determined
under Section 7872 of the Code to insure that no
6
<PAGE> 7
"foregone interest", as defined in such section, will accrue, together with the
delivery of a duly executed standard form security agreement securing the Note
by a pledge of the Shares purchased; or
(iii) in any combination of such consideration or such
other consideration and method of payment for the issuance of Shares to the
extent permitted under applicable law as long as the sum of the cash so paid,
the Fair Market Value of the Shares so surrendered and the amount of any Note
equals the Purchase Price.
(iv) The Committee or a Stock Option Agreement may
prescribe requirements with respect to the exercise of Options, including the
submission by the Optionee of such forms and documents as the Committee may
require and, the delivery by the Optionee of cash sufficient to satisfy
applicable withholding requirements. The Committee may vary the exercise
requirements and procedures from time to time to facilitate, for example, the
broker-assisted exercise of Options.
(g) Nontransferability of Options. During the lifetime of the
Optionee, the Option will be exercisable only by the Optionee or the Optionee's
conservator or legal representative and will not be assignable or transferable
except pursuant to a qualified domestic relations order as defined by the Code.
In the event of the Optionee's death, the Option will not be transferable by the
Optionee other than by will or the laws of descent and distribution.
(h) Termination of Employment Other than by Death or Disability.
(i) If an Optionee ceases to be an Employee for any reason
other than his or her death or disability, the Optionee will have the right,
subject to the provisions of this Section 6, to exercise any Option held by the
Optionee at any time at least 10 but within 30 days after his or her termination
of employment, but not beyond the otherwise applicable term of the Option and
only to the extent that on such date of termination of employment the Optionee's
right to exercise such Option had vested.
(ii) For purposes of this Section 6(h), the employment
relationship will be treated as continuing intact while the Optionee is an
active employee of the Corporation or any Affiliate, or is on military leave,
sick leave, or other bona fide leave of absence to be determined in the sole
discretion of the Committee. The preceding sentence notwithstanding, in the case
of an Incentive Stock Option, employment will be deemed to terminate on the date
the Optionee ceases active employment with the Corporation or any Affiliate,
unless the Optionee's reemployment rights are guarantied by statute or contract.
(i) Death of Optionee. If an Optionee dies while an Employee, or
after ceasing to be an Employee but during the period while he or she could have
exercised an Option under Section 6(h), any Option granted to the Optionee may
be exercised, to the extent it had vested at the time of death and subject to
the Plan, at any time within six months after the Optionee's death, by the
executors or administrators of his or her estate or by any person or persons who
acquire the Option by will or the laws of descent and distribution, but not
beyond the otherwise applicable term of the Option.
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<PAGE> 8
(j) Disability of Optionee. If an Optionee ceases to be an
Employee due to becoming totally and permanently disabled within the meaning of
Section 22(e)(3) of the Code, any Option granted to the Optionee may be
exercised to the extent it had vested at the time of cessation and, subject to
the Plan, at any time within 12 months after the Optionee's termination of
employment, but not beyond the otherwise applicable term of the Option.
(k) Rights as a Shareholder. An Optionee, or a transferee of an
Optionee, will have no rights as a shareholder of the Corporation with respect
to any Shares for which his or her Option is exercisable until the date of the
issuance of a stock certificate for such Shares. No adjustment will be made for
dividends, ordinary or extraordinary or whether in currency, securities, or
other property, distributions, or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Section 9.
(l) Modification, Extension, and Renewal of Options. Within the
limitations of the Plan, the Committee may modify, extend, or renew outstanding
Options or accept the cancellation of outstanding Options for the granting of
new Options in substitution therefor. Notwithstanding the preceding sentence, no
modification of an Option will, without the consent of the Optionee, alter or
impair any rights or obligations under any Option previously granted.
(m) Other Provisions. The Stock Option Agreements authorized
under the Plan may contain such other provisions which are not inconsistent with
the terms of the Plan, including, without limitation, restrictions upon the
exercise of the Option, as the Committee deems advisable.
7. $100,000 PER YEAR LIMITATION ON VESTING OF ISOs. To the extent that
the Fair Market Value of Shares (determined for each Share as of the date of
grant of the Option covering such Share) subject to Options granted under this
Plan (or any other plan of the Corporation or any Affiliate) which are
designated as Incentive Stock Options and which become exercisable by an
Optionee for the first time during a single calendar year exceeds $100,000, the
Options (or portion thereof) covering such Shares will be recharacterized (to
the extent of such excess over $100,000) as a Nonstatutory Stock Option. In
determining which Options will be treated as Nonstatutory Stock Options under
the preceding sentence, the Options will be taken into account in the order
granted, with the result that a later granted Option will be recharacterized as
a Nonstatutory Stock Option prior to such recharacterization of a previously
granted Option.
8. TERM OF PLAN. Options may be granted pursuant to the Plan until a
date no more than 10 years from the date the Plan is adopted by the Board or
approved by the shareholders of the Corporation, whichever is earlier, and all
Options which are outstanding on such date will remain in effect until they are
exercised or expire by their terms.
9. RECAPITALIZATION, TAKEOVERS, AND LIQUIDATIONS.
(a) Reorganizations. The number of Shares covered by the Plan, as
provided in Section 5, and the number of Shares for which each Option is
exercisable will be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from the payment of a stock split, a reverse
stock split, a stock dividend, recapitalization,
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<PAGE> 9
combination, or reclassification of the Corporation's stock, and the Exercise
Price will be proportionately increased in the event the number of Shares
subject to such Option are decreased and will be proportionately decreased in
the event the number of Shares subject to such Option are increased. For the
purposes of this subsection 9(a), grant or exercise of any options to buy
securities of the Corporation and conversion of any convertible securities of
the Corporation will not be deemed to have been "effected without receipt of
consideration." Adjustments will be made by the Board, whose determination in
that respect will be final, binding, and conclusive. Except as expressly
provided in this Plan, no issuance by the Corporation of shares of stock of any
class, or securities convertible into shares of stock of any class, will affect,
and no adjustment by reason thereof will be made with respect to, the number or
price of Shares subject to an Option.
(b) Liquidation. In the event of the dissolution or liquidation
of the Corporation, each Option will terminate immediately prior to the
consummation of such action. The Committee will notify the Optionee not less
than 15 days prior to the proposed consummation of a pending dissolution or
liquidation, and the Option will be exercisable as to all Shares which are
vested prior to expiration until immediately prior to the consummation of such
action.
(c) Merger. In the event of (i) a proposed merger of the
Corporation with or into another corporation, as a result of which the
Corporation is not the surviving corporation and (ii) the Option is not assumed
or an equivalent option substituted by the successor corporation or a parent or
subsidiary of the successor corporation, then in such case each Option will
become fully vested and exercisable immediately prior to the consummation of
such transaction. The Committee will notify the Optionee not less than 15 days
prior to the proposed consummation of such transaction, and the Option will be
exercisable as to all Shares which are vested prior to expiration and until
immediately prior to the consummation of such transaction.
(d) Determination by Committee. All adjustments described in this
Section 9 will be made by the Committee, whose determination will be conclusive
and binding on all persons.
(e) Limitation on Rights of Optionee. Except as expressly
provided in this Section 9, no Optionee will have any rights by reason of any
payment of any stock dividend, stock split or reverse stock split or any other
increase or decrease in the number of shares of stock of any class, or by reason
of any reorganization, consolidation, dissolution, liquidation, merger,
exchange, split-up or reverse split-up, or spin-off of assets or stock of
another corporation. Any issuance by the Corporation of Shares, Options or
securities convertible into Shares or Options will not affect, and no adjustment
by reason thereof will be made with respect to, the number or Exercise Price of
the Shares for which an Option is exercisable. Notwithstanding the foregoing, if
the Corporation enters into a transaction affecting the Corporation's capital
stock or distributions to the holders of its capital stock for which a revision
in the terms of each Option is not required pursuant to this Section 9, the
Committee will have the right, but not the obligation, to revise the terms of
each Option in a manner the Committee, in its sole discretion, deems fair and
reasonable given the transaction involved. If necessary or appropriate in
connection with such transaction, the Committee may declare that any Option will
terminate as of a date fixed by the Committee and give each Optionee the right
to exercise his or
9
<PAGE> 10
her Option in whole or in part, including exercise as to Shares to which the
Option would not otherwise be exercisable.
(f) No Restriction on Rights of Corporation. The grant of an
Option will not affect or restrict in any way the right or power of the
Corporation to make adjustments, reclassifications, reorganizations, or changes
of its capital or business structure, or to merge or consolidate, or to
dissolve, liquidate, sell, or transfer all or any part of its business or
assets.
10. SECURITIES LAW REQUIREMENTS.
(a) Legality of Issuance. No Share will be issued upon the
exercise of any Option unless and until the Corporation has determined that:
(i) The Corporation and the Optionee have taken all
actions required to exempt the issuance of the Shares from the registration
requirements under the Securities Act, or the Corporation and the Optionee will
determine that the registration requirements of the Securities Act do not apply
to such exercise;
(ii) Any applicable listing requirement of any stock
exchange on which the Common Stock is listed has been satisfied; and
(iii) Any other applicable provision of state or Federal
law has been satisfied.
(b) Restrictions on Transfer; Representations of Optionee;
Legends. Regardless of whether the offering and sale of Shares has been
registered under the Securities Act or has been registered or qualified under
the securities laws of any state, the Corporation may impose restrictions upon
the sale, pledge, or other transfer of the Shares, including the placement of
appropriate legends on stock certificates, if, in the judgment of the
Corporation and its counsel, such restrictions are necessary or desirable in
order to achieve compliance with the provisions of the Securities Act, the
securities laws of any state, or any other law. If the sale of Shares is not
registered under the Securities Act and the Corporation determines that the
registration requirements of the Securities Act apply to such sale, but an
exemption is available which requires an investment representation or other
representation, the Optionee will be required, as a condition to purchasing
Shares by exercise of his or her Option, to represent that such Shares are being
acquired for investment, and not with a view to the sale or distribution
thereof, except in compliance with the Securities Act, and to make such other
representations as are deemed necessary or appropriate by the Corporation and
its counsel. Stock certificates evidencing Shares acquired pursuant to an
unregistered transaction to which the Securities Act applies will bear a
restrictive legend substantially in the following form and such other
restrictive legends as are required or deemed advisable under the Plan or the
provisions of any applicable law:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. THESE SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN
CONNECTION WITH ANY
10
<PAGE> 11
DISTRIBUTION THEREOF, AND MAY NOT BE SOLD, MORTGAGED, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION UNDER THE ACT AND/OR QUALIFICATION UNDER ANY APPLICABLE
STATE SECURITIES LAWS, OR WITHOUT AN OPINION OF COUNSEL ACCEPTABLE TO
THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION OR
QUALIFICATION IS NOT REQUIRED."
The Corporation also will place legends on stock certificates representing its
right of repurchase under Section 11 and the right of first refusal under
Section 12. Any determination by the Corporation and its counsel in connection
with any of the matters set forth in this Section 10 will be conclusive and
binding on all persons.
(c) Registration or Qualification of Securities. The Corporation
may, but will not be obligated to, register or qualify the sale of Shares under
the Act or any other applicable law. In connection with any such registration or
qualification, the Corporation will provide each Optionee with information
required pursuant to all applicable laws and regulations.
(d) Exchange of Certificates. If, in the opinion of the
Corporation and its counsel, any legend placed on a stock certificate
representing Shares sold hereunder is no longer required, the Optionee or the
holder of such certificate will be entitled to exchange such certificate for a
certificate representing the same number of Shares but lacking such legend.
11. RIGHT OF REPURCHASE.
(a) Repurchase Right. At the Committee's discretion, Shares
issued pursuant to the exercise of an Option may be subject to a right, but not
an obligation, of repurchase by the Corporation (the "Right of Repurchase"), at
the price specified in Section 11(b), if the Optionee ceases to be an Employee
for any reason ("Employment Termination") at any time after the grant of the
Option pursuant to which such Shares were issued. Shares issued by the
Corporation will only be transferable by the Optionee subject to the Right of
Repurchase, and the Corporation will legend the Right of Repurchase on the stock
certificates evidencing such Shares and will take such other steps as it deems
necessary to ensure compliance with this restriction. The Corporation's rights
under this Section 11(a) will be freely assignable, in whole or in part.
(b) Repurchase Price. The price per Share at which the
Corporation may exercise the Right of Repurchase under Section 11(a) (the
"Repurchase Price") will be the higher of the Exercise Price of each Share as
paid by the Optionee, or Fair Market Value of the Shares on the date the
Corporation sends the notice to the Optionee of its exercise of its Right of
Repurchase pursuant to Section 11(a).
(c) Repurchase Procedure. The Corporation may exercise its Right
of Repurchase by sending a written notice to the Optionee and to the Escrow
Agent, if any, of its taking such action and specifying the number of Shares
being repurchased. The Corporation's Right of Repurchase will terminate if not
exercised by written notice from the Corporation to the Optionee within 90 days
of the date on which the Corporation learns of the Employment Termination or the
last date any Option granted to such Optionee is exercised, which ever is
11
<PAGE> 12
later. If the Corporation exercises its Right of Repurchase, the Optionee, or if
applicable, the Escrow Agent, will deliver to the Corporation every stock
certificate representing the Shares being repurchased, together with appropriate
Assignments Separate from Certificates, and the Corporation will then promptly
pay the total Repurchase Price in cash (or cancellation of purchase money
indebtedness for the Shares, if applicable) to the Optionee, or if applicable,
to the Escrow Agent, for delivery to the Optionee.
(d) Election to Defer Purchase of Incentive Stock Option Shares.
(i) Notwithstanding the preceding provisions of this
Section 11, an Optionee whose Shares were issued pursuant to an Incentive Stock
Option may elect to defer the Corporation's repurchase of such Shares pursuant
to this Section 11 until the holding period requirements of Section 422(a) of
the Code are met. Such election will be in writing in such form as the Committee
may require and will be delivered to the Corporation and to the Escrow Agent by
certified mail no later than seven days after the date on which the Optionee
receives notice that the Corporation elects to exercise its Right of Repurchase.
Such election will pertain to all such Shares issued to the Optionee and will be
irrevocable.
(ii) With respect to an Optionee who makes the election
described in subsection 11(d)(i), the Corporation will repurchase such Shares on
or before the date which is 90 days following the earlier of the date on which
the Optionee dies or the date on which the holding period requirements of
Section 422(a) of the Code are met. The Repurchase Price of each such Share
determined under Section 11(b) will be calculated by substituting for the
Optionee's Employment Termination date the earlier of the date on which the
Optionee dies or the date on which such holding period requirements are met.
(e) Escrow. To facilitate the consummation of the Corporation's
Right of Repurchase under this Section 11, at the request of the Committee, the
Optionee and the Corporation will execute Joint Escrow Instructions and the
Optionee will deliver and deposit with the Escrow Agent named in the Joint
Escrow Instructions two "Assignments Separate from Certificate," together with
all certificates evidencing the Shares of Common Stock issued to the Optionee
pursuant to the Plan, duly endorsed in blank. The Escrow Agent will hold such
documents and deliver the same to the Corporation pursuant to the Joint Escrow
Instructions and in accordance with the terms of this Section 11, as applicable.
(f) Binding Effect. The Corporation's Right of Repurchase will
inure to the benefit of its successors and assigns and will be binding on any
representative, executor, administrator, heir, or legatee of the Optionee.
(g) Payment of Net Amount Owing. Notwithstanding anything to the
contrary contained herein, if the Corporation determines to exercise its Rights
of Repurchase pursuant to this Section before any Shares have been issued as a
result of an exercise of an Option, in lieu of issuing any Shares, the
Corporation will have the right, but not the obligation, to pay to the Optionee
the net amount owing to the Optionee.
(h) Termination of Right of Repurchase. Notwithstanding any other
provision of this Section 11, in the event that the Common Stock is listed on
any United States securities
12
<PAGE> 13
exchange or traded on any formal over-the-counter market in general use in the
United States at the time the Optionee would otherwise be required to transfer
his or her Shares, the Corporation will no longer have the Right of Repurchase,
and the Optionee will have no obligation to comply with this Section 11.
12. RIGHT OF FIRST REFUSAL.
(a) Right of First Refusal. At the Committee's discretion, shares
issued pursuant to the exercise of an Option may be subject to a requirement
that if an Optionee proposes to sell, pledge, or otherwise transfer any Shares
acquired pursuant to exercise of an Option, or any interest in such Shares, to
any person or entity, the Corporation will have a right of first refusal (the
"Right of First Refusal") with respect to such Shares. Any Optionee desiring to
transfer Shares subject to the Right of First Refusal will give a written notice
(the "Transfer Notice") to the Corporation describing fully the proposed
transfer, including the number of Shares proposed to be transferred, the
proposed transfer price, and the name and address of the proposed transferee.
The Transfer Notice will be signed both by the Optionee and by the proposed
transferee and must constitute a binding commitment of both parties to the
transfer of the Shares. The Corporation will have the right to purchase the
Shares subject to the Transfer Notice on the terms of the proposal referred to
in the Transfer Notice, subject to any change in such terms permitted under
Section 12(b), by delivery of a notice of exercise of the Right of First Refusal
within 30 days after the date the Transfer Notice is received by the
Corporation. The Corporation's rights under this Section 12(a) will be freely
assignable, in whole or in part.
(b) Transfer of Shares. If the Corporation fails to exercise the
Right of First Refusal within 30 days after the date on which it receives the
Transfer Notice, the Optionee may, not later than six months following receipt
of the Transfer Notice by the Corporation, consummate a transfer of the Shares
subject to the Transfer Notice on the terms and conditions described in the
Transfer Notice. Any proposed transfer on terms and conditions different from
those described in the Transfer Notice, as well as any subsequent proposed
transfer by the Optionee, will again be subject to the Right of First Refusal
and will again require compliance with the procedure described in Section 12(a).
If the Corporation exercises its Right of First Refusal, the Optionee will
immediately endorse and deliver to the Corporation every stock certificate
representing the Shares being purchased, and the Corporation will then promptly
pay the purchase price in accordance with the terms set forth in the Transfer
Notice.
(c) Repurchase Payment. The amount payable to an Optionee
pursuant to the Corporation's exercise of the Right of First Refusal will be
paid to the Optionee in accordance with the terms and conditions of the Transfer
Notice or may, at the election of the Corporation, be paid in full in cash.
(d) Binding Effect. The Corporation's Right of First Refusal will
inure to the benefit of its successors and assigns and will be binding upon any
transferee of the Shares, other than a transferee acquiring Shares in a
transaction with respect to which the Corporation failed to exercise its Right
of First Refusal (a "Free Transferee") or a transferee of a Free Transferee.
(e) Termination of Right of First Refusal. Notwithstanding any
other provision of this Section 12, if the Common Stock is listed on any United
States securities
13
<PAGE> 14
exchange or traded on any formal over-the-counter market in general use in the
United States at the time the Optionee desires to transfer his or her Shares,
the Corporation will no longer have the Right of First Refusal, and the Optionee
will have no obligation to comply with this Section 12.
13. EXERCISE OF UNVESTED OPTIONS. The Committee may grant any Optionee
the right to exercise any Option prior to the complete vesting of such Option.
Without limiting the generality of the foregoing, the Committee may provide that
if an Option is exercised prior to having completely vested, the Shares issued
upon such exercise will remain subject to vesting at the same rate as under the
Option so exercised and will be subject to a right, but not an obligation, of
repurchase by the Corporation with respect to all unvested Shares if the
Optionee ceases to be an Employee for any reason. For the purposes of
facilitating the enforcement of any such right of repurchase, at the request of
the Committee, the Optionee will enter into the Joint Escrow Instructions with
the Corporation and deliver every certificate for his or her unvested Shares
with a stock power executed in blank by the Optionee and by the Optionee's
spouse, if required for transfer.
14. AMENDMENT OF THE PLAN. The Board or the Committee may, from time to
time, terminate, suspend or discontinue the Plan, in whole or in part, or revise
or amend it in any respect whatsoever including, but not limited to, the
adoption of any amendment(s) deemed necessary or advisable to qualify the
Options under rules and regulations promulgated by the Securities and Exchange
Commission with respect to Employees who are subject to the provisions of
Section 16 of the Securities Exchange Act of 1934, as amended, or to correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any Option granted thereunder, without approval of the shareholders of the
Corporation, but without the approval of the Corporation's shareholders, no such
revision or amendment will:
(i) Increase the number of Shares subject to the Plan,
other than any increase pursuant to Section 9;
(ii) Materially modify the requirements as to eligibility
for participation in the Plan;
(iii) Materially increase the benefits accruing to
Optionees under the Plan;
(iv) Extend the term of the Plan; or
(v) Amend this Section 14 to defeat its purpose.
No amendment, termination, or modification of the Plan will affect any Option
theretofore granted in any material adverse way without the consent of the
Optionee.
15. APPLICATION OF FUNDS. The proceeds received by the Corporation from
the sale of Common Stock pursuant to the exercise of an Option will be used for
general corporate purposes.
14
<PAGE> 15
16. APPROVAL OF SHAREHOLDERS. The Plan will be subject to approval by
the affirmative vote of the holders of a majority of all classes of the
outstanding shares present and entitled to vote at the first meeting of
shareholders of the Corporation following the adoption of the Plan or by written
consent, and in no event later than one year following the Effective Date. Prior
to such approval, Options may be granted but will not be exercisable. Any
amendment described in Section 14 (i) to (iv) will also be subject to approval
by the Corporation's shareholders.
17. WITHHOLDING OF TAXES. In the event the Corporation or an Affiliate
determines that it is required to withhold federal, state, or local taxes in
connection with the exercise of an Option or the disposition of Shares issued
pursuant to the exercise of an Option, the Optionee or any person succeeding to
the rights of the Optionee, as a condition to such exercise or disposition, may
be required to make arrangements satisfactory to the Corporation or the
Affiliate to enable it to satisfy such withholding requirements. Alternatively,
the Corporation may issue or transfer Shares net of the number of Shares
sufficient to satisfy withholding tax requirements. For withholding tax
purposes, the Shares will be valued on the date the withholding obligation is
incurred.
18. RIGHTS AS AN EMPLOYEE. Neither the Plan nor any Option granted
pursuant thereto will be construed to give any person the right to remain in the
employ of the Corporation or any Affiliate, or to affect the right of the
Corporation or any Affiliate to terminate such individual's employment at any
time with or without cause. The grant of an Option will not entitle the Optionee
to, or disqualify the Optionee from, participation in the grant of any other
Option under the Plan or participation in any other benefit plan maintained by
the Corporation or any Affiliate.
19. DISAVOWAL OF REPRESENTATIONS, UNDERTAKINGS OR CREATION OF IMPLIED
RIGHTS. In adopting and maintaining this Plan and granting options hereunder,
neither the Corporation nor any Affiliate makes any representations or
undertakings with respect to the initial qualification or treatment of Options
under federal or state tax or securities laws. The Corporation and each
Affiliate expressly disavows the creation of any rights in Employees, Optionees,
or beneficiaries of any obligations on the part of the Corporation, any
Affiliate or the Committee, except as expressly provided herein.
20. INSPECTION OF RECORDS. Copies of the Plan, records reflecting each
Optionee's Option, and any other documents and records which an Optionee is
entitled by law to inspect will be open to inspection by the Optionee and his or
her duly authorized representative at the office of the Committee at any
reasonable business hour.
21. INFORMATION TO OPTIONEES. Each Optionee will be provided with such
information regarding the Corporation as the Committee from time to time deems
necessary or appropriate; provided however, that each Optionee will at all times
be provided with such information as is required to be provided from time to
time pursuant to applicable regulatory requirements, including, but not limited
to, any applicable requirements of the Securities and Exchange Commission, the
California Department of Corporations and other state securities agencies.
15
<PAGE> 1
EXHIBIT 10.2.1
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WebSideStory, Inc.
NONSTATUTORY STOCK OPTION AGREEMENT
This Stock Option Agreement is made and entered into this day of _____, pursuant
to the WebSideStory, Inc. 1999 Stock Option Plan (the "Plan"). Any terms not
defined in this Agreement will have the meanings given to them in the Plan. The
Committee administering the Plan has decided to make the following grant of a
nonstatutory stock option ("Stock Option") to purchase shares of the common
stock of the Corporation to (the "Optionee"), on the terms and conditions set
forth below to which Optionee accepts and agrees:
1. Stock Options Granted:
<TABLE>
<S> <C>
Number of Shares Subject to Option _______________
Date of Grant _______________
Vesting Commencement Date _______________
Exercise Price Per Share $______________
Expiration Date _______________
</TABLE>
2. The Stock Option is granted pursuant to the Plan to purchase the
number of shares of authorized but unissued common stock of the Corporation
specified in Section 1 (the "Shares"). The Stock Option will expire, and all
rights to exercise it will terminate on the Expiration Date, except that the
Stock Option may expire earlier as provided in the Plan. The number of shares
subject to the Stock Option granted pursuant to this Agreement will be adjusted
as provided in the Plan. This Stock Option is intended by the Corporation and
the Optionee to be a Nonstatutory Stock Option and does not qualify for any
special tax benefits to the Optionee and is not subject to Section 7 of the
Plan.
3. This Stock Option will be exercisable in all respects in accordance
with the terms of the Plan which are incorporated herein by this reference and
will be exercised by Optionee delivering to the Corporation a fully executed
copy of the attached Notice of Exercise/Stock Purchase Agreement and the
Purchase Price. Optionee acknowledges having received and read a copy of the
Plan. All shares of the Corporation's common stock issued pursuant to the
exercise
<PAGE> 2
of this Stock Option will be subject to the Corporation's Right of Repurchase
and Right of First Refusal as set forth in Sections 11 and 12 of the Plan.
4. Optionee will have the right to exercise the Stock Option in
accordance with the following schedule:
(a) The Stock Option may not be exercised in whole or in part at
any time prior to the first anniversary of the Vesting Commencement Date.
(b) Optionee may exercise the Stock Option as to one third of the
Shares on or after the first anniversary of the Vesting Commencement Date.
(c) Optionee may exercise the Stock Option as to an additional
1/12th of the Shares at the end of each of the full calendar quarter commencing
with the 5th full calendar quarter following the Vesting Commencement Date.
(d) The right to exercise the Stock Option will be cumulative.
Optionee may buy all, or from time to time any part, of the maximum number of
shares which are exercisable under the Stock Option, but in no case may Optionee
exercise the Stock Option with regard to a fraction of a share, or for any share
for which the Stock Option is not exercisable.
5. The Optionee agrees to comply with all laws, rules, and regulations
applicable to the grant and exercise of the Stock Option and the sale or other
disposition of the common stock of the Corporation received pursuant to the
exercise of such Stock Option.
6. The Stock Option will not become exercisable unless and until the
shares exercisable under the Stock Option have been qualified under the
California Corporate Securities Law of 1968 pursuant to a permit application
filed with the California Department of Corporations or unless the exercise is
otherwise exempt from the qualification requirements of such law. The Stock
Option is conditioned on the Optionee's representation, which Optionee hereby
confirms as of the date of this Agreement and which Optionee must confirm as of
the date of any exercise of all or any part of the Stock Option, that:
(a) Optionee understands that both this Stock Option and any
shares purchased upon its exercise are securities, the issuance of which require
compliance with state and federal securities laws;
(b) Optionee understands that neither the Options nor the Shares
have been registered under the Securities Act of 1933 (the "Securities Act") in
reliance upon a specific exemption contained in the Securities Act which depends
on Optionee's bona fide investment intention in acquiring these securities; that
Optionee's intention is to hold these securities for Optionee's own benefit for
an indefinite period; that Optionee has no present intention of selling or
transferring any part thereof (recognizing that the Stock Option is not
transferable) and that certain restrictions may exist on transfer of the shares
issued upon exercise of the Stock Option;
(c) Optionee understands that the Shares issued upon exercise of
this Stock Option, in addition to other restrictions on transfer, must be held
indefinitely unless subsequently registered under the Securities Act, or unless
an exemption from registration is available; that
<PAGE> 3
Rule 701 and Rule 144, two exemptions from registration which may be available,
are only available after the satisfaction of certain conditions and require the
presence of a U.S. public market for such Shares; that no certainty exists that
a U.S. public market for the Shares will exist, and that otherwise Optionee may
have to sell the Shares pursuant to another exemption from registration which
exemption may be difficult to satisfy; and
(d) The Corporation will not be under any obligation to issue any
Shares upon the exercise of this Stock Option unless and until the Corporation
has determined that:
(i) it and Optionee have taken all actions required to
register such Shares under the Securities Act, or to perfect an exemption from
the registration requirements thereof;
(ii) any applicable listing requirement of any stock
exchange on which such Shares are listed has been satisfied; and
(iii) all other applicable provisions of state and federal
law have been satisfied.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 4
IN WITNESS WHEREOF, each of the parties hereto has executed this Stock Option
Agreement, in the case of the Corporation by its duly authorized officer, as of
the date and year written above.
OPTIONEE WebSideStory, Inc.
By:
- ------------------------------- ----------------------------
(signature) (signature)
Its:
- ------------------------------- ---------------------------
(Type or Print Name)
Address:
----------------------
[SIGNATURE PAGE TO WebSideStory, Inc.
NONSTATUTORY STOCK OPTION AGREEMENT]
<PAGE> 5
WebSideStory, Inc.
NOTICE OF EXERCISE AND STOCK PURCHASE AGREEMENT
(NONSTATUTORY)
THIS NOTICE OF EXERCISE AND STOCK PURCHASE AGREEMENT (the "Stock Purchase
Agreement") is delivered pursuant to a Non-Statutory Stock Option Agreement (the
"Option Agreement") dated ______________, 19__, between WebSideStory, Inc., a
California corporation (the "Corporation"), and the undersigned ("Purchaser").
The capitalized terms used in this Stock Purchase Agreement and not otherwise
defined have the meanings specified for such terms in the Corporation's 1999
Stock Option Plan (the "Plan").
1. Notice of Exercise. Purchaser has a Nonstatutory Option (the
"Option") to acquire shares of Common Stock, pursuant to the Option Agreement.
Purchaser hereby elects to purchase the number of shares of Common Stock set
forth opposite the undersigned's name below, at the exercise price per share
specified in the Option Agreement, for an aggregate purchase price in an amount
equal to the amount set forth opposite the undersigned's name below, and hereby
so notifies the Corporation. Purchaser understands that the Option may only be
exercised to the extent the Option is exercisable in accordance with Section 4
of the Option Agreement, and acknowledges that this exercise is subject to the
limitations and conditions on exercise set forth in the Option Agreement and in
the Plan.
2. Purchase and Sale. Subject to the terms and conditions set forth in
this Purchase Agreement, the Option Agreement, and the Plan, the Corporation
hereby sells to Purchaser and Purchaser hereby acquires from the Corporation the
number of shares set forth opposite the undersigned's name below (the "Purchased
Shares") of the Common Stock represented by the Option, at the exercise price
per share specified in the Option Agreement, for an aggregate purchase price in
an amount equal to the amount set forth opposite the undersigned's name below.
Purchaser hereby delivers to the Corporation cash, a check or such other
consideration permitted under the Plan in the amount of such purchase price and
the amount of the estimated withholding taxes which apply to the exercise. The
number of Shares that may be acquired pursuant to the Option is reduced by the
number of Purchased Shares hereby purchased and sold.
3. Representations and Warranties of Purchaser. In connection with its
purchase of the Purchased Shares, Purchaser hereby represents, acknowledges, and
warrants to the Corporation as follows:
(a) VESTING OF SHARES PURSUANT TO SECTION 4 OF THE OPTION
AGREEMENT IS EARNED ONLY BY CONTINUING AS AN EMPLOYEE OR AS A CONSULTANT OF THE
CORPORATION AT THE WILL OF THE CORPORATION (NOT THROUGH THE ACT OF BEING HIRED,
ENGAGED, BEING GRANTED AN OPTION, OR BEING SOLD SHARES HEREUNDER). THIS STOCK
PURCHASE AGREEMENT, THE TRANSACTIONS CONTEMPLATED UNDER IT AND THE VESTING
SCHEDULE SET FORTH IN THE OPTION AGREEMENT DO NOT CONSTITUTE AN EXPRESS OR
<PAGE> 6
IMPLIED PROMISE OF CONTINUED ENGAGEMENT FOR THE VESTING PERIOD, FOR ANY PERIOD,
OR AT ALL.
(b) Purchaser acknowledges receipt of a copy of the Plan, which
is attached to the Option Agreement, and represents that Purchaser has reviewed
the Plan, the Option Agreement and this Purchase Agreement in their entirety,
has had an opportunity to obtain the advice of counsel prior to executing this
Purchase Agreement, fully understands all provisions of this Purchase Agreement,
the Option Agreement, and the Plan.
(c) Purchaser hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Board or the Committee, if one has
been appointed by the Board, regarding any questions arising under the Plan.
4. Entire Agreement. This Agreement, together with the Plan and the
Option Agreement, constitutes the entire agreement among the parties relating to
the subject matter of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 7
IN WITNESS WHEREOF, this Stock Purchase Agreement is entered into and effective
as of the date first set forth above.
PURCHASER
By:
-----------------------------------------
No. of Shares:
------------------------------
Total Purchase Price:
-----------------------
Print Name:
---------------------------------
Address:
------------------------------------
Soc. Sec. No.
-------------------------------
WebSideStory, Inc.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Date of Acceptance:
-------------------------
[SIGNATURE PAGE TO WebSideStory, INC. NONSTATUTORY OPTION
NOTICE OF EXERCISE AND STOCK PURCHASE AGREEMENT]
<PAGE> 8
CONSENT OF SPOUSE
The undersigned spouse of Purchaser has read and hereby approves the Option
Agreement and the foregoing Stock Purchase Agreement. In consideration of the
Corporation's granting my spouse the right to purchase the shares of the
Corporation's Common Stock as set forth in the Option Agreement and the Stock
Purchase Agreement, the undersigned hereby agrees to be irrevocably bound by the
Option Agreement and the Stock Purchase Agreement and further agrees that any
community property interest will be similarly bound by the Option Agreement and
the Stock Purchase Agreement. I hereby appoint my spouse as my attorney-in-fact
with respect to any amendment or exercise of any rights under the Option
Agreement and the Stock Purchase Agreement.
- ------------------------------
Spouse of Purchaser
<PAGE> 1
EXHIBIT 10.2.2
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WebSideStory, Inc.
INCENTIVE STOCK OPTION AGREEMENT
This Stock Option Agreement is made and entered into this day of _______,
pursuant to the WebSideStory, Inc. 1999 Stock Option Plan (the "Plan"). Any
terms not defined in this Agreement will have the meanings given to them in the
Plan. The Committee administering the Plan has decided to make the following
grant of an incentive stock option ("Stock Option") to purchase shares of the
common stock of the Corporation to (the "Optionee"), on the terms and conditions
set forth below to which Optionee accepts and agrees:
1. Stock Options Granted:
<TABLE>
<S> <C>
Number of Shares Subject to Option _______________
Date of Grant _______________
Vesting Commencement Date _______________
Exercise Price Per Share $______________
Expiration Date _______________
</TABLE>
2. The Stock Option is granted pursuant to the Plan to purchase the
number of shares of authorized but unissued common stock of the Corporation
specified in Section 1 (the "Shares"). The Stock Option will expire, and all
rights to exercise it will terminate on the Expiration Date, except that the
Stock Option may expire earlier as provided in the Plan. The number of shares
subject to the Stock Option granted pursuant to this Agreement will be adjusted
as provided in the Plan.
3. This Stock Option will be exercisable in all respects in accordance
with the terms of the Plan which are incorporated herein by this reference and
will be exercised by Optionee delivering to the Corporation a fully executed
copy of the attached Notice of Exercise/Stock Purchase Agreement and the
Purchase Price. Optionee acknowledges having received and read a copy of the
Plan. All shares of the Corporation's common stock issued pursuant to the
exercise of this Stock Option will be subject to the Corporation's Right of
Repurchase and Right of First Refusal as set forth in Sections 11 and 12 of the
Plan.
<PAGE> 2
4. Optionee will have the right to exercise the Stock Option in
accordance with the following schedule:
(a) The Stock Option may not be exercised in whole or in part at
any time prior to the first anniversary of the Vesting Commencement Date.
(b) Optionee may exercise the Stock Option as to one third of the
Shares on or after the first anniversary of the Vesting Commencement Date.
(c) Optionee may exercise the Stock Option as to an additional
1/12th of the Shares at the end of each of the full calendar quarter commencing
with the 5th full calendar quarter following the Vesting Commencement Date.
(d) The right to exercise the Stock Option will be cumulative.
Optionee may buy all, or from time to time any part, of the maximum number of
shares which are exercisable under the Stock Option, but in no case may Optionee
exercise the Stock Option with regard to a fraction of a share, or for any share
for which the Stock Option is not exercisable.
5. The Optionee agrees to comply with all laws, rules, and regulations
applicable to the grant and exercise of the Stock Option and the sale or other
disposition of the common stock of the Corporation received pursuant to the
exercise of such Stock Option.
6. The Stock Option will not become exercisable unless and until the
shares exercisable under the Stock Option have been qualified under the
California Corporate Securities Law of 1968 pursuant to a permit application
filed with the California Department of Corporations or unless the exercise is
otherwise exempt from the qualification requirements of such law. The Stock
Option is conditioned on the Optionee's representation, which Optionee hereby
confirms as of the date of this Agreement and which Optionee must confirm as of
the date of any exercise of all or any part of the Stock Option, that:
(a) Optionee understands that both this Stock Option and any
shares purchased upon its exercise are securities, the issuance of which require
compliance with state and federal securities laws;
(b) Optionee understands that neither the Options nor the Shares
have been registered under the Securities Act of 1933 (the "Securities Act") in
reliance upon a specific exemption contained in the Securities Act which depends
on Optionee's bona fide investment intention in acquiring these securities; that
Optionee's intention is to hold these securities for Optionee's own benefit for
an indefinite period; that Optionee has no present intention of selling or
transferring any part thereof (recognizing that the Stock Option is not
transferable) and that certain restrictions may exist on transfer of the shares
issued upon exercise of the Stock Option;
(c) Optionee understands that the Shares issued upon exercise of
this Stock Option, in addition to other restrictions on transfer, must be held
indefinitely unless subsequently registered under the Securities Act, or unless
an exemption from registration is available; that Rule 701 and Rule 144, two
exemptions from registration which may be available, are only available after
the satisfaction of certain conditions and require the presence of a U.S. public
market for such Shares; that no certainty exists that a U.S. public market for
the Shares will exist,
<PAGE> 3
and that otherwise Optionee may have to sell the Shares pursuant to another
exemption from registration which exemption may be difficult to satisfy; and
(d) The Corporation will not be under any obligation to issue any
Shares upon the exercise of this Stock Option unless and until the Corporation
has determined that:
(i) it and Optionee have taken all actions required to
register such Shares under the Securities Act, or to perfect an exemption from
the registration requirements thereof;
(ii) any applicable listing requirement of any stock
exchange on which such Shares are listed has been satisfied; and
(iii) all other applicable provisions of state and federal
law have been satisfied.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 4
IN WITNESS WHEREOF, each of the parties hereto has executed this Stock Option
Agreement, in the case of the Corporation by its duly authorized officer, as of
the date and year written above.
OPTIONEE WebSideStory, Inc.
By:
- ------------------------------- ----------------------------
(signature) (signature)
Its:
- ------------------------------- ---------------------------
(Type or Print Name)
Address:
----------------------
[SIGNATURE PAGE TO WebSideStory, inc.
INCENTIVE STOCK OPTION AGREEMENT]
<PAGE> 5
WebSideStory, Inc.
NOTICE OF EXERCISE AND STOCK PURCHASE AGREEMENT
(INCENTIVE)
THIS NOTICE OF EXERCISE AND STOCK PURCHASE AGREEMENT (the "Stock Purchase
Agreement") is delivered pursuant to an Incentive Stock Option Agreement (the
"Option Agreement") dated _______________, 19__, between WebSideStory, Inc., a
California corporation (the "Corporation"), and the undersigned ("Purchaser").
The capitalized terms used in this Stock Purchase Agreement and not otherwise
defined have the meanings specified for such terms in the Corporation's 1999
Stock Option Plan (the "Plan").
1. Notice of Exercise. Purchaser has an Incentive Option (the "Option")
to acquire shares of Common Stock, pursuant to the Option Agreement. Purchaser
hereby elects to purchase the number of shares of Common Stock set forth
opposite the undersigned's name below, at the exercise price per share specified
in the Option Agreement, for an aggregate purchase price in an amount equal to
the amount set forth opposite the undersigned's name below, and hereby so
notifies the Corporation. Purchaser understands that the Option may only be
exercised to the extent the Option is exercisable in accordance with Section 4
of the Option Agreement, and acknowledges that this exercise is subject to the
limitations and conditions on exercise set forth in the Option Agreement and in
the Plan.
2. Purchase and Sale. Subject to the terms and conditions set forth in
this Purchase Agreement, the Option Agreement, and the Plan, the Corporation
hereby sells to Purchaser and Purchaser hereby acquires from the Corporation the
number of shares set forth opposite the undersigned's name below (the "Purchased
Shares") of the Common Stock represented by the Option, at the exercise price
per share specified in the Option Agreement, for an aggregate purchase price in
an amount equal to the amount set forth opposite the undersigned's name below.
Purchaser hereby delivers to the Corporation cash, a check or such other
consideration permitted under the Plan in the amount of such purchase price and
the amount of the estimated withholding taxes which apply to the exercise. The
number of Shares that may be acquired pursuant to the Option is reduced by the
number of Purchased Shares hereby purchased and sold.
3. Representations and Warranties of Purchaser. In connection with its
purchase of the Purchased Shares, Purchaser hereby represents, acknowledges, and
warrants to the Corporation as follows:
(a) VESTING OF SHARES PURSUANT TO SECTION 4 OF THE OPTION
AGREEMENT IS EARNED ONLY BY CONTINUING AS AN EMPLOYEE OR AS A CONSULTANT OF THE
CORPORATION AT THE WILL OF THE CORPORATION (NOT THROUGH THE ACT OF BEING HIRED,
ENGAGED, BEING GRANTED AN OPTION, OR BEING SOLD SHARES HEREUNDER). THIS STOCK
PURCHASE AGREEMENT, THE TRANSACTIONS CONTEMPLATED UNDER IT AND THE VESTING
SCHEDULE SET FORTH IN THE OPTION AGREEMENT DO NOT CONSTITUTE AN EXPRESS OR
<PAGE> 6
IMPLIED PROMISE OF CONTINUED ENGAGEMENT FOR THE VESTING PERIOD, FOR ANY PERIOD,
OR AT ALL.
(b) Purchaser acknowledges receipt of a copy of the Plan, which
is attached to the Option Agreement, and represents that Purchaser has reviewed
the Plan, the Option Agreement, and this Purchase Agreement in their entirety,
has had an opportunity to obtain the advice of counsel prior to executing this
Purchase Agreement, fully understands all provisions of this Purchase Agreement,
the Option Agreement, and the Plan.
(c) Purchaser hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Board or the Committee, if one has
been appointed by the Board, regarding any questions arising under the Plan.
4. Entire Agreement. This Agreement, together with the Plan and the
Option Agreement, constitutes the entire agreement among the parties relating to
the subject matter of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 7
IN WITNESS WHEREOF, this Stock Purchase Agreement is entered into and effective
as of the date first set forth above.
By:
-----------------------------------------
No. of Shares:
------------------------------
Total Purchase Price:
-----------------------
Print Name:
---------------------------------
Address:
------------------------------------
Soc. Sec. No.
-------------------------------
WebSideStory, Inc.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Date of Acceptance:
-------------------------
[SIGNATURE PAGE TO WEBSIDESTORY, INC. INCENTIVE OPTION
NOTICE OF EXERCISE AND STOCK PURCHASE AGREEMENT]
<PAGE> 8
\ CONSENT OF SPOUSE
The undersigned spouse of Purchaser has read and hereby approves the Option
Agreement and the foregoing Stock Purchase Agreement. In consideration of the
Corporation's granting my spouse the right to purchase the shares of the
Corporation's Common Stock as set forth in the Option Agreement and the Stock
Purchase Agreement, the undersigned hereby agrees to be irrevocably bound by the
Option Agreement and the Stock Purchase Agreement and further agrees that any
community property interest will be similarly bound by the Option Agreement and
the Stock Purchase Agreement. I hereby appoint my spouse as my attorney-in-fact
with respect to any amendment or exercise of any rights under the Option
Agreement and the Stock Purchase Agreement.
- ------------------------------
Spouse of Purchaser
<PAGE> 1
EXHIBIT 10.3
WEBSIDESTORY, INC.
2000 EQUITY INCENTIVE PLAN
Originally Effective as the 1998 Stock Option Plan August 1, 1998
Also Originally Effective as the 1999 Stock Option Plan on June 16, 1999
Amended and Restated December 20, 1999
Approved By Stockholders December 20,1999
Termination Date: December 19,2009
1. PURPOSES.
(a) AMENDMENT AND RESTATEMENT. The Plan amends and restates the
WebSideStory 1998 Stock Option Plan effective August 1, 1998 and the
WebSideStory 1999 Stock Option Plan effective June 16, 1999 (the "Prior Plans").
All outstanding options granted under the Prior Plans also shall be amended.
(b) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(c) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(d) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).
(e) "COMMON STOCK" means the common stock of the Company.
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<PAGE> 2
(f) "COMPANY" means WebSideStory, Inc., a California corporation.
(g) "CONSULTANT" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors who are not compensated by the Company for their services as Directors
or Directors who are merely paid a director's fee by the Company for their
services as Directors.
(h) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.
(i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board of Directors of the Company.
(k) "DISABILITY" means (i) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person's position with the Company or an
Affiliate of the Company because of the sickness or injury of the person and
(ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "EMPLOYEE" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no
2
<PAGE> 3
sales were reported) as quoted on such exchange or market (or the exchange or
market with the greatest volume of trading in the Common Stock) on the last
market trading day prior to the day of determination, as reported in The Wall
Street Journal or such other source as the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(iii) Prior to the Listing Date, the value of the Common Stock shall
be determined in a manner consistent with Section 260.140.50 of Title 10 of the
California Code of Regulations.
(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(q) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K"), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(s) "OFFICER" means (i) before the Listing Date, any person designated
by the Company as an officer and (ii) on and after the Listing Date, a person
who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.
(t) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
3
<PAGE> 4
(u) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(v) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.
(w) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(x) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(y) "PLAN" means this WebSideStory, Inc. 2000 Equity Incentive Plan.
(z) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(aa) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(bb) "STOCK AWARD" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
(cc) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(dd) "TEN PERCENT SHAREHOLDER" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what
4
<PAGE> 5
type or combination of types of Stock Award shall be granted; the provisions of
each Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive Common Stock pursuant to a
Stock Award; and the number of shares of Common Stock with respect to which a
Stock Award shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section 12.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) DELEGATION TO COMMITTEE.
(i) GENERAL. The Board may delegate administration of the Plan to
a Committee or Committees of one (1) or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
(ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY TRADED. At
such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (2)
delegate to a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.
(d) EFFECT OF BOARD'S DECISION. All determinations,
interpretations and constructions made by the Board in good faith shall not be
subject to review by any person and shall be Final, binding and conclusive on
all persons.
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<PAGE> 6
4. SHARES SUBJECT TO THE PLAN.
(a) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate Twenty-Three Million
Eight Hundred Forty Three Thousand Seven Hundred Eighty-Five (23,843,785) shares
of Common Stock.
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the shares of Common Stock not acquired under
such Stock Award shall revert to and again become available for issuance under
the Plan.
(c) SOURCE OF SHARES. The shares of Common Stock subject to the Plan may
be unissued shares or reacquired shares, bought on the market or otherwise.
(d) SHARE RESERVE LIMITATION. Prior to the Listing Date and to the
extent then required by Section 260.140.45 of Title 10 of the California Code of
Regulations, the total number of shares of Common Stock issuable upon exercise
of all outstanding Options and the total number of shares of Common Stock
provided for under any stock bonus or similar plan of the Company shall not
exceed the applicable percentage as calculated in accordance with the conditions
and exclusions of Section 260.140.45 of Title 10 of the California Code of
Regulations, based on the shares of Common Stock of the Company that are
outstanding at the time the calculation is made.
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options may
be granted only to Employees. Stock Awards other than Incentive Stock Options
may be granted to Employees, Directors and Consultants.
(b) TEN PERCENT SHAREHOLDERS.
(i) A Ten Percent Shareholder shall not be granted an Incentive
Stock Option unless the exercise price of such Option is at least one hundred
ten percent (110%) of the Fair Market Value of the Common Stock at the date of
grant and the Option is not exercisable after the expiration of five (5) years
from the date of grant.
(ii) Prior to the Listing Date, a Ten Percent Shareholder shall not
be granted a Nonstatutory Stock Option unless the exercise price of such Option
is at least (i) one hundred ten percent (110%) of the Fair Market Value of the
Common Stock at the date of grant or (ii) such lower percentage of the Fair
Market Value of the Common Stock at the date of grant as is permitted by Section
260.140.41 of Title 10 of the California Code of Regulations at the time of the
grant of the Option.
(iii) Prior to the Listing Date, a Ten Percent Shareholder shall not
be granted a restricted stock award unless the purchase price of the restricted
stock is at feast (i) one hundred
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<PAGE> 7
percent (100%) of the Fair Market Value of the Common Stock at the date of
grant or (ii) such lower percentage of the Fair Market Value of the Common Stock
at the date of grant as is permitted by Section 260.140.41 of Title 10 of the
California Code of Regulations at the time of the grant of the Option.
(c) SECTION 162(m) LIMITATION. Subject to the provisions of Section 11
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than Eight Million
(8,000,000) shares of Common Stock during any calendar year. This subsection
5(c) shall not apply prior to the Listing Date and, following the Listing Date,
this subsection 5(c) shall not apply until (i) the earliest of: (1) the first
material modification of the Plan (including any increase in the number of
shares of Common Stock reserved for issuance under the Plan in accordance with
Section 4); (2) the issuance of all of the shares of Common Stock reserved for
issuance under the Plan; (3) the expiration of the Plan; or (4) the first
meeting of shareholders at which Directors are to be elected that occurs after
the close of the third calendar year following the calendar year in which
occurred the first registration of an equity security under Section 12 of the
Exchange Act; or (ii) such other date required by Section 162(m) of the Code and
the rules and regulations promulgated thereunder.
(d) CONSULTANTS.
(i) Prior to the Listing Date, a Consultant shall not be eligible
for the grant of a Stock Award if, at the time of grant, either the offer or the
sale of the Company's securities to such Consultant is not exempt under Rule 701
of the Securities Act ("Rule 701") because of the nature of the services that
the Consultant is providing to the Company, or because the Consultant is not a
natural person, or as otherwise provided by Rule 701, unless the Company
determines that such grant need not comply with the requirements of Rule 701 and
will satisfy another exemption under the Securities Act as well as comply with
the securities laws of all other relevant jurisdictions.
(ii) From and after the Listing Date, a Consultant shall not be
eligible for the grant of a Stock Award if, at the time of grant, a Form S-8
Registration Statement under the Securities Act ("Form S-8") is not available to
register either the offer or the sale of the Company's securities to such
Consultant because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a natural person, or
as otherwise provided by the rules governing the use of Form S-8, unless the
Company determines both (i) that such grant (A) shall be registered in another
manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or
(B) does not require registration under the Securities Act in order to comply
with the requirements of the Securities Act, if applicable, and (ii) that such
grant complies with the securities laws of all other relevant jurisdictions.
(iii) Rule 701 and Form S-8 generally are available to consultants
and advisors only if (i) they are natural persons; (ii) they provide bona fide
services to the issuer, its parents, its majority owned subsidiaries or
majority-owned subsidiaries of the issuer's parent; and (iii) the services are
not in connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for
the issuer's securities.
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<PAGE> 8
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:
(a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Shareholders, no Option granted prior to the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted,
and no Incentive Stock Option granted on or after the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted.
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Incentive Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise
price of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than eighty-five percent (85%) of the Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted. The
exercise price of each Nonstatutory Stock Option granted on or after the Listing
Date shall be not less than eighty-five percent (85%) of the Fair Market Value
of the Common Stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with
an exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(d) CONSIDERATION. The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) in any other form of legal
consideration that may be acceptable to the Board. Unless otherwise specifically
provided in the Option, the purchase price of Common Stock acquired pursuant to
an Option that is paid by delivery to the Company of other Common Stock
acquired, directly or indirectly from the Company, shall be paid only by shares
of the Common Stock of the Company that have been held for more than six (6)
months
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(or such longer or shorter period of time required to avoid a charge to earnings
for financial accounting purposes). At any time that the Company is incorporated
in Delaware, payment of the Common Stock's "par value," as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only BY the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory Stock
Option granted prior to the Listing Date shall not be transferable except by
will or by the laws of descent and distribution and, to the extent provided in
the Option Agreement, to such further extent as permitted by Section
260.140.41(d) of Title 10 of the California Code of Regulations at the time of
the grant of the Option, and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. A Nonstatutory Stock Option granted on or
after the Listing Date shall be transferable to the extent provided in the
Option Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.
(g) VESTING GENERALLY. The total number OF shares OF Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.
(h) MINIMUM VESTING PRIOR TO THE LISTING DATE. Notwithstanding the
foregoing subsection 6(g), to the extent that the following restrictions on
vesting are required by Section 260.140.41(f) of Title 10 of the California Code
of Regulations at the time of the grant of the Option, then:
(i) Options granted prior to the Listing Date to an Employee who
is not an Officer, Director or Consultant shall provide for vesting of the total
number of shares of
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<PAGE> 10
Common Stock at a rate of at least twenty percent (20%) per year over five (5)
years from the date the Option was granted, subject to reasonable conditions
such as continued employment; and
(ii) Options granted prior to the Listing Date to Officers,
Directors or Consultants may be made fully exercisable, subject to reasonable
conditions such as continued employment, at any time or during any period
established by the Company.
(i) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement, which period shall not be less than thirty (30) days for Options
granted prior to the Listing Date unless such termination is for cause), or (ii)
the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionholder does not exercise his or her Option
within the time specified in the Option Agreement, the Option shall terminate.
(j) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder's Continuous Service (other than upon the Optionholder's death
or Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 6(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(k) DISABILITY OF OPTIONHOLDER. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement, which period shall not be less than six (6) months for
Options granted prior to the Listing Date) or (ii) the expiration of the term of
the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.
(l) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder's death
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pursuant to subsection 6(e) or 6(f), but only within the period ending on the
earlier of (1) the date six (6) months following the date of death (or such
longer or shorter period specified in the Option Agreement, which period shall
not be less than six (6) months for Options granted prior to the Listing Date)
or (2) the expiration of the term of such Option as set forth in the Option
Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.
(m) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the full vesting of
the Option. Subject to the "Repurchase Limitation" in subsection 10(h), any
unvested shares of Common Stock so purchased may be subject to a repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate. Provided that the "Repurchase Limitation" in subsection 10(h)
is not violated, the Company will not exercise its repurchase option until at
least six (6) months (or such longer or shorter period of time required to avoid
a charge to earnings for financial accounting purposes) have elapsed following
exercise of the Option unless the Board otherwise specifically provides in the
Option.
(n) RIGHT OF REPURCHASE. Subject to the "Repurchase Limitation" in
subsection 10(h), the Option may, but need not, include a provision whereby the
Company may elect, prior to the Listing Date, to repurchase ALL or any part of
the vested shares of Common Stock acquired by the Optionholder pursuant to the
exercise of the Option. Provided that the "Repurchase Limitation" in subsection
10(h) is not violated, the Company will not exercise its repurchase option until
at least six (6) months (or such longer or shorter period of time required to
avoid a charge to earnings for financial accounting purposes) have elapsed
following exercise of the Option unless the Board otherwise specifically
provides in the Option.
(o) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares of Common Stock received
upon the exercise of the Option. Except as expressly provided in this subsection
6(o), such right of first refusal shall otherwise comply with any applicable
provisions of the Bylaws of the Company.
(p) RE-LOAD OPTIONS.
(i) Without in any way limiting the authority of the Board to make
or not to make grants of Options hereunder, the Board shall have the authority
(but not an obligation) to include as part of any Option Agreement a provision
entitling the Optionholder to a further Option (a "Re-Load Option") in the event
the Optionholder exercises the Option evidenced by the Option Agreement, in
whole or in part, by surrendering other shares of Common Stock in accordance
with this Plan and the terms and conditions of the Option Agreement. Unless
otherwise specifically provided in the Option, the Optionholder shall not
surrender shares of Common Stock acquired, directly or indirectly from the
Company, unless such shares have been
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held for more than six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes).
(ii) Any such Re-Load Option shall (1) provide for a number of
shares of Common Stock equal to the number of shares of Common Stock surrendered
as part or all of the exercise price of such Option; (2) have an expiration date
which is the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option; and (3) have an exercise price which is equal
to one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option shall be subject to the same
exercise price and term provisions heretofore described for Options under the
Plan.
(iii) Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on the exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and the "Section 162(m) Limitation" on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:
(i) CONSIDERATION. A stock bonus may be awarded in consideration
for past services actually rendered to the Company or an Affiliate for its
benefit.
(ii) VESTING. Subject to the "Repurchase Limitation" in subsection
10(h), shares of Common Stock awarded under the stock bonus agreement may, but
need not, be subject to a share repurchase option in favor of the Company in
accordance with a vesting schedule to be determined BY the Board.
(iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject to
the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of the
date of termination under the terms of the stock bonus agreement.
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(iv) TRANSFERABILITY. For a stock bonus award made before the
Listing Date, rights to acquire shares of Common Stock under the stock bonus
agreement shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. For a stock bonus award made on or after the Listing
Date, rights to acquire shares of Common Stock under the stock bonus agreement
shall be transferable by the Participant only upon such terms and conditions as
are set forth in the stock bonus agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the stock bonus agreement
remains subject to the terms of the stock bonus agreement.
(b) RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time and the terms and conditions of
separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(i) PURCHASE PRICE. Subject to the provisions of subsection 5(b)
regarding Ten Percent Shareholders, the purchase price under each restricted
stock purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. For restricted stock
awards made prior to the Listing Date, the purchase price shall not be less
than eighty-five percent (85%) of the Common Stock's Fair Market Value on the
date such award is made or at the time the purchase is consummated. For
restricted stock awards made on or after the Listing Date, the purchase price
shall not be less than eighty-five percent (85%) of the Common Stock's Fair
Market Value on the date such award is made or at the time the purchase is
consummated.
(ii) CONSIDERATION. The purchase price of Common Stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other similar arrangement with the Participant; or (iii)
in any other form of legal consideration that may be acceptable to the Board in
its discretion; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock's "par value," as
de-fined in the Delaware General Corporation Law, shall not be made by deferred
payment.
(iii) VESTING. Subject to the "Repurchase Limitation" in subsection
10(h), shares of Common Stock acquired under the restricted stock purchase
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.
(iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject to
the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the restricted stock
purchase agreement.
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(v) TRANSFERABILITY. For a restricted stock award made before the
Listing Date, rights to acquire shares of Common Stock under the restricted
stock purchase agreement shall not be transferable except by will or by the laws
of descent and distribution and shall be exercisable during the lifetime of the
Participant only by the Participant. For a restricted stock award made on or
after the Listing Date, rights to acquire shares of Common Stock under the
restricted stock purchase agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the restricted stock
purchase agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the restricted stock purchase agreement remains
subject to the terms of the restricted stock purchase agreement.
8. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.
10. MISCELLANEOUS.
(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) SHAREHOLDER RIGHTS. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
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(c) No EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant's own
account and not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (1) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.
(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under a Stock Award by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Stock Award, provided, however, that no
shares of Common Stock are
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withheld with a value exceeding the minimum amount of tax required to be
withheld by law; or (iii) delivering to the Company owned and unencumbered
shares of Common Stock.
(g) INFORMATION OBLIGATION. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to Participants at
least annually. This subsection 10(g) shall not apply to key Employees whose
duties in connection with the Company assure them access to equivalent
information.
(h) REPURCHASE LIMITATION. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at the time
of repurchase or at not less than the original purchase price. To the extent
required by Section 260.140.41 and Section 260.140.42 of Title 10 of the
California Code of Regulations at the time a Stock Award is made, any repurchase
option contained in a Stock Award granted prior to the Listing Date to a person
who is not an Officer, Director or Consultant shall be upon the terms described
below:
(i) FAIR MARKET VALUE. If the repurchase option gives the Company
the right to repurchase the shares of Common Stock upon termination of
employment at not less than the Fair Market Value of the shares of Common Stock
to be purchased on the date of termination of Continuous Service, then (i) the
right to repurchase shall be exercised for cash or cancellation of purchase
money indebtedness for the shares of Common Stock within ninety (90) days of
termination of Continuous Service (or in the case of shares of Common Stock
issued upon exercise of Stock Awards after such date of termination, within
ninety (90) days after the date of the exercise) or such longer period as may be
agreed to by the Company and the Participant (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock") and (ii) the right terminates when the shares
of Common Stock become publicly traded.
(ii) ORIGINAL PURCHASE PRICE. If the repurchase option gives the
Company the right to repurchase the shares of Common Stock upon termination of
Continuous Service at the original purchase price, then (i) the right to
repurchase at the original purchase price shall lapse at the rate of at least
twenty percent (20%) of the shares of Common Stock per year over five (5) years
from the date the Stock Award is granted (without respect to the date the Stock
Award was exercised or became exercisable) and (ii) the right to repurchase
shall be exercised for cash or cancellation of purchase money indebtedness for
the shares of Common Stock within ninety (90) days of termination of Continuous
Service (or in the case of shares of Common Stock issued upon exercise of
Options after such date of termination, within ninety (90) days after the date
of the exercise) or such longer period as may be agreed to by the Company and
the Participant (for example, for purposes of satisfying the requirements of
Section 1202(c)(3) of the Code regarding "qualified small business stock").
(i) REPURCHASE LIMITATION. Notwithstanding any other provisions
contained herein, Options granted pursuant to this Plan shall be subject to the
following conditions:
(i) REPURCHASE RIGHT. At the Committee's discretion, Common Stock
issued pursuant to the exercise of an Option may be subject to a right, but not
an obligation, of
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repurchase by the Corporation (the "Right of Repurchase"), at the price
specified in subsection 10(i)(h), if the Optionholder ceases to be an Employee
for any reason ("Employment Termination") at any time after the grant of the
Option pursuant to which such Common Stock was issued. Common Stock issued by
the Company will only be transferable by the Optionholder subject to the Right
of Repurchase, and the Company will legend the Right of Repurchase on the stock
certificates evidencing such shares of Common Stock and will take such other
steps as it deems necessary to ensure compliance with this restriction. The
Company's rights under this subsection 10(i)(i) will be freely assignable, in
whole or in part.
(ii) REPURCHASE PRICE. The price per share of Common Stock at which
the Company may exercise the Right of Repurchase under subsection 10(i)(i) (the
"Repurchase Price") will be the higher of the exercise price of each share of
Common Stock as paid by the Optionholder, or Fair Market Value of the shares of
Common Stock on the date the Company sends the notice to the Optionholder of its
exercise of its Right of Repurchase pursuant to subsection 10(i)(i).
(iii) REPURCHASE PROCEDURE. The Company may exercise its Right of
Repurchase by sending a written notice to the Optionholder and to the Escrow
Agent, if any, of its taking such action and specifying the number of shares of
Common Stock being repurchased. The Company's Right of Repurchase will terminate
if not exercised by written notice from the Company to the Optionholder within
90 days of the date on which the Company learns of the Employment Termination or
the last date any Option granted to such Optionholder is exercised, which ever
is later. If the Company exercises its Right of Repurchase, the Optionholder, or
if applicable, the Escrow Agent, will deliver to the Company every stock
certificate representing the shares of Common Stock being repurchased, together
with appropriate Assignments Separate from Certificates, and the Company will
then promptly pay the total Repurchase Price in cash (or cancellation of
purchase money indebtedness for the Common Stock, if applicable) to the
Optionholder, or if applicable, to the Escrow Agent, for delivery to the
Optionholder.
(iv) ELECTION TO DEFER PURCHASE OF INCENTIVE STOCK OPTION SHARES.
(A) Notwithstanding the preceding provisions of this
subsection 10(i), an Optionholder whose shares of Common Stock were issued
pursuant to an Incentive Stock Option may elect to defer the Company's
repurchase of such Common Stock pursuant to this subsection 10(i) until the
holding period requirements of Section 422(a) of the Code are met. Such election
will be in writing in such form as the Committee may require and will be
delivered to the Company and to the Escrow Agent by certified mail no later than
seven days after the date on which the Optionholder receives notice that the
Company elects to exercise its Right of Repurchase. Such election will pertain
to all such shares of Common Stock issued to the Optionholder and will be
irrevocable.
(B) With respect to an Optionholder who makes the election
described in subsection 10(i)(iv), the Company will repurchase such Common Stock
on or before the date which is 90 days following the earlier of the date on
which the Optionholder dies or the date on which the holding period requirements
of Section 422(a) of the Code are met. The Repurchase Price of each such share
of Common Stock determined under subsection 10(i)(ii) will be
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calculated by substituting for the Optionholder's Employment Termination date
the earlier of the date on which the Optionholder dies or the date on which such
holding period requirements are met.
(v) ESCROW. To facilitate the consummation of the Company's Right
of Repurchase under this subsection 10(i)(i), at the request of the Committee,
the Optionholder and the Company will execute Joint Escrow Instructions and the
Optionholder will deliver and deposit with the Escrow Agent named in the Joint
Escrow Instructions two "Assignments Separate from Certificate," together with
all certificates evidencing the shares of Common Stock issued to the
Optionholder pursuant to the Plan, duly endorsed in blank. The Escrow Agent will
hold such documents and deliver the same to the Company pursuant to the Joint
Escrow Instructions and in accordance with the terms of this subsection 10(i),
as applicable.
(vi) BINDING EFFECT. The Company's Right of Repurchase will inure
to the benefit of its successors and assigns and will be binding on any
representative, executor, administrator, heir, or legatee of the Optionholder.
(vii) PAYMENT OF NET AMOUNT OWING. Notwithstanding anything to the
contrary contained herein, if the Company determines to exercise its Rights of
Repurchase pursuant to this subsection before any Common Stock has been issued
as a result of an exercise of an Option, in lieu of issuing any Common Stock,
the Company will have the right, but not the obligation, to pay to the
Optionholder the net amount owing to the Optionholder.
(vii) TERMINATION OF RIGHT OF REPURCHASE. Notwithstanding any other
provision of this subsection 10(i)(i), in the event that the Common Stock is
listed on any United States securities exchange or traded on any formal
over-the-counter market in general use in the United States at the time the
Optionholder would otherwise be required to transfer his or her Common Stock,
the Company will no longer have the Right of Repurchase, and the Optionholder
will have no obligation to comply with this Section 10(i)(i).
(j) RIGHT OF FIRST REFUSAL. Notwithstanding any other provisions
contained herein, Options granted pursuant to this Plan shall be subject to the
following conditions:
(i) RIGHT OF FIRST REFUSAL. At the Committee's discretion, Common
Stock issued pursuant to the exercise of an Option may be subject to a
requirement that if an Optionholder proposes to sell, pledge, or otherwise
transfer any Common Stock acquired pursuant to exercise of an Option, or
any interest in such Common Stock, to any person or entity, the Company
will have a right of first refusal (the "Right of First Refusal") with
respect to such Common Stock. Any Optionholder desiring to transfer Common
Stock subject to the Right of First Refusal will give a written notice
(the "Transfer Notice") to the Company describing fully the proposed
transfer, including the number of shares of Common Stock proposed to be
transferred, the proposed transfer price, and the name and address of the
proposed transferee. The Transfer Notice will be signed both by the
Optionholder and by the proposed transferee and must constitute a binding
commitment of both parties to the transfer of the Common Stock. The
Company will have the right to purchase the Common Stock subject to the
Transfer Notice on the
18
<PAGE> 19
terms of the proposal referred to in the Transfer Notice, subject to any
change in such terms permitted under subsection 10(j)(d), by delivery of a
notice of exercise of the Right of First Refusal within 30 days after the
date the Transfer Notice is received by the Company. The Company's rights
under this subsection 10(j)(i) will be freely assignable, in whole or in
part.
(ii) TRANSFER OF SHARES. If the Company fails to exercise the Right
of First Refusal within 30 days after the date on which it receives the
Transfer Notice, the Optionholder may, not later than six months following
receipt of the Transfer Notice by the Company, consummate a transfer of
the Common Stock subject to the Transfer Notice on the terms and
conditions described in the Transfer Notice. Any proposed transfer on
terms and conditions different from those described in the Transfer
Notice, as well as any subsequent proposed transfer by the Optionholder,
will again be subject to the Right of First Refusal and will again require
compliance with the procedure described in Section 10(j)(i). If the
Company exercises its Right of First Refusal, the Optionholder will
immediately endorse and deliver to the Company every stock certificate
representing the Common Stock being purchased, and the Company will then
promptly pay the purchase price in accordance with the terms set forth in
the Transfer Notice.
(iii) REPURCHASE PAYMENT. The amount payable to an Optionholder
pursuant to the Company's exercise of the Right of First Refusal will be
paid to the Optionholder in accordance with the terms and conditions of
the Transfer Notice or may, at the election of the Company, be paid in
full in cash.
(iv) BINDING EFFECT. The Company's Right of First Refusal will
inure to the benefit of its successors and assigns and will be binding
upon any transferee of the Common Stock, other than a transferee acquiring
Common Stock in a transaction with respect to which the Company failed to
exercise its Right of First Refusal (a "Free Transferee") or a transferee
of a Free Transferee.
(v) TERMINATION OF RIGHT OF FIRST REFUSAL. Notwithstanding any
other provision of this subsection 10(j), if the Common Stock is listed on
any United States securities exchange or traded on any formal
over-the-counter market in general use in the United States at the time
the Optionholder desires to transfer his or her Common Stock, the Company
will no longer have the Right of First Refusal, and the Optionholder will
have no obligation to comply with this subsection 10(j).
11. ADJUSTMENTS UPON CHANGES IN STOCK
(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the Common
Stock subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number. of securities subject to the Plan
pursuant to subsection 4(a) and the
19
<PAGE> 20
maximum number of securities subject to award to any person pursuant to
subsection 5(c), and the outstanding Stock Awards will be appropriately adjusted
in the class(es) and number of securities and price per share of Common Stock
subject to such outstanding Stock Awards. The Board shall make such adjustments,
and its determination shall be final, binding and conclusive. (The conversion of
any convertible securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.)
(b) CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to such event. The Committee will notify the
Optionholder not less than 15 days prior to the proposed consummation of a
pending dissolution or liquidation, and the Option will be exercisable as to all
Common Stock which are vested prior to expiration until immediately prior to the
consummation of such action.
(c) CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a merger or consolidation
in which the Company is not the surviving corporation or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then any surviving corporation or acquiring corporation shall assume
any Stock Awards outstanding under the Plan or shall substitute similar stock
awards (including an award to acquire the same consideration paid to the
shareholders in the transaction described in this subsection 11(c) for those
outstanding under the Plan). In the event any surviving corporation or acquiring
corporation refuses to assume such Stock Awards or to substitute similar stock
awards for those outstanding under the Plan, then with respect to Stock Awards
held by Participants whose Continuous Service has not terminated, the vesting of
such Stock Awards (and, if applicable, the time during which such Stock Awards
may be exercised) shall be accelerated in full, and the Stock Awards shall
terminate if not exercised (if applicable) at or prior to such event. With
respect to any other Stock Awards outstanding under the Plan, such Stock Awards
shall terminate if not exercised (if applicable) prior to such event. The
Committee will notify the Optionholder not less than 15 days prior to the
proposed consummation of such transaction, and the Option will be exercisable as
to all Common Stock which are vested prior to expiration and until immediately
prior to the consummation of such transaction.
12. AMENDMENT OF THE PLAN AND STOCK AWARDS
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the shareholders of the Company to the extent shareholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) SHAREHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for shareholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations
20
<PAGE> 21
thereunder regarding the exclusion of performance-based compensation from the
limit on corporate deductibility of compensation paid to certain executive
officers.
(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
(e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the shareholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock Award
shall be exercised (or, in the case of a stock bonus, shall be granted) unless
and until the Plan has been approved by the shareholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is
adopted by the Board.
15. CHOICE OF LAW.
The law of the State of California shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to such
state's conflict of laws rules.
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<PAGE> 1
EXHIBIT 10.3.1
WEBSIDESTORY, INC.
2000 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(INCENTIVE AND NONSTATUTORY STOCK OPTIONS)
Pursuant to your Stock Option Grant Notice ("Grant Notice") and this Stock
Option Agreement, WebSideStory, Inc. (the "Company") has granted you an option
under its 2000 Equity Incentive Plan (the "Plan") to purchase the number of
shares of the Company's Common Stock indicated in your Grant Notice at the
exercise price indicated in your Grant Notice. Defined terms not explicitly
defined in this Stock Option Agreement but defined in the Plan shall have the
same definitions as in the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations contained herein, your option will
vest as provided in your Grant Notice, provided that vesting will cease upon the
termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common
Stock subject to your option and your exercise price per share referenced in
your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.
3. EXERCISE PRIOR TO VESTING ("EARLY EXERCISE"). If permitted in your Grant
Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise" of your
option is permitted) and subject to the provisions of your option, you may elect
at any time that is both (i) during the period of your Continuous Service and
(ii) during the term of your option, to exercise all or part of your option,
including the nonvested portion of your option; provided, however, that:
(a) a partial exercise of your option shall be deemed to cover first
vested shares of Common Stock and then the earliest vesting installment of
unvested shares of Common Stock;
(b) any shares of Common Stock so purchased from installments that have
not vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Company's form of Early Exercise Stock
Purchase Agreement;
(c) you shall enter into the Company's form of Early Exercise Stock
Purchase Agreement with a vesting schedule that will result in the same vesting
as if no early exercise had occurred; and
(d) if your option is an incentive stock option, then, as provided in
the Plan, to the extent that the aggregate Fair Market Value (determined at the
time of grant) of the shares of Common Stock with respect to which your option
plus all other incentive stock options you hold are exercisable for the first
time by you during any calendar year (under all plans of the
<PAGE> 2
Company and its Affiliates) exceeds one hundred thousand dollars ($100,000),
your option(s) or portions thereof that exceed such limit (according to the
order in which they were granted) shall be treated as nonstatutory stock
options.
4. METHOD OF PAYMENT. Payment of the exercise price is due in full upon
exercise of all or any part of your option. You may elect to make payment of the
exercise price in cash or by check or in any other manner PERMITTED BY YOUR
GRANT NOTICE, which may include one or more of the following:
(a) In the Company's sole discretion at the time your option is
exercised and provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in The Wall Street Journal, pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board that,
prior to the issuance of Common Stock, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to pay the
aggregate exercise price to the Company from the sales proceeds.
(b) Provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the Company at the time
you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting the redemption of
the Company's stock.
(c) Pursuant to the following deferred payment alternative:
(i) Not less than one hundred percent (100%) of the aggregate
exercise price, plus accrued interest, shall be due four (4) years from date of
exercise or, at the Company's election, upon termination of your Continuous
Service.
(ii) Interest shall be compounded at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any portion of any
amounts other than amounts stated to be interest under the deferred payment
arrangement.
(iii) At any time that the Company is incorporated in Delaware,
payment of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall be made in cash and not by deferred payment.
(iv) In order to elect the deferred payment alternative, you
must, as a part of your written notice of exercise, give notice of the election
of this payment alternative and,
2
<PAGE> 3
in order to secure the payment of the deferred exercise price to the Company
hereunder, if the Company so requests, you must tender to the Company a
promissory note and a security agreement covering the purchased shares of Common
Stock, both in form and substance satisfactory to the Company, or such other or
additional documentation as the Company may request.
5. WHOLE SHARES. You may exercise your option only for whole shares of
Common Stock.
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
or, if such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the registration
requirements of the Securities Act. The exercise of your option must also comply
with other applicable laws and regulations governing your option, and you may
not exercise your option if the Company determines that such exercise would not
be in material compliance with such laws and regulations.
7. TERM. You may not exercise your option before the commencement of its
term or after its term expires. The term of your option commences on the Date of
Grant and expires upon the EARLIEST of the following:
(a) three (3) months after the termination of your Continuous Service
for any reason other than your Disability or death, provided that if during any
part of such three- (3-) month period your option is not exercisable solely
because of the condition set forth in the preceding paragraph relating to
"Securities Law Compliance," your option shall not expire until the earlier of
the Expiration Date or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of your Continuous Service;
(b) twelve (12) months after the termination of your Continuous Service
due to your Disability;
(c) six (6) months after your death if you die either during your
Continuous Service or within three (3) months after your Continuous Service
terminates;
(d) the Expiration Date indicated in your Grant Notice; or
(e) the day before the tenth (10th) anniversary of the Date of Grant.
If your option is an incentive stock option, note that, to obtain the
federal income tax advantages associated with an "incentive stock option," the
Code requires that at all times beginning on the date of grant of your option
and ending on the day three (3) months before the date of your option's
exercise, you must be an employee of the Company or an Affiliate, except in the
event of your death or Disability. The Company has provided for extended
exercisability of your option under certain circumstances for your benefit but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you continue to provide services to
3
<PAGE> 4
the Company or an Affiliate as a Consultant or Director after your employment
terminates or if you otherwise exercise your option more than three (3) months
after the date your employment terminates.
8. EXERCISE.
(a) You may exercise the vested portion of your option (and the
unvested portion of your option if your Grant Notice so permits) during its term
by delivering a Notice of Exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
(b) By exercising your option you agree that, as a condition to any
exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
your option, (2) the lapse of any substantial risk of forfeiture to which the
shares of Common Stock are subject at the time of exercise, or (3) the
disposition of shares of Common Stock acquired upon such exercise.
(c) If your option is an incentive stock option, by exercising your
option you agree that you will notify the Company in writing within fifteen (15)
days after the date of any disposition of any of the shares of the Common Stock
issued upon exercise of your option that occurs within two (2) years after the
date of your option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of your option.
(d) By exercising your option you agree that the Company (or a
representative of the underwriter(s)) may, in connection with the first
underwritten registration of the offering of any securities of the Company under
the Securities Act, require that you not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, any shares of
Common Stock or other securities of the Company held by you, for a period of
time specified by the underwriter(s) (not to exceed one hundred eighty (180)
days) following the effective date of the registration statement of the Company
filed under the Securities Act. You further agree to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the
underwriter(s) that are consistent with the foregoing or that are necessary to
give further effect thereto. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to your shares of
Common Stock until the end of such period.
9. TRANSFERABILITY. Your option is not transferable, except by will or by
the laws of descent and distribution, and is exercisable during your life only
by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
10. RIGHT OF FIRST REFUSAL. Shares of Common Stock that you acquire upon
exercise of your option are subject to any right of first refusal that may be
described in the
4
<PAGE> 5
Company's bylaws in effect at such time the Company elects to exercise its
right. The Company's right of first refusal shall expire on the Listing Date.
11. RIGHT OF REPURCHASE. To the extent provided in the Company's bylaws as
amended from time to time, the Company shall have the right to repurchase all or
any part of the shares of Common Stock you acquire pursuant to the exercise of
your option.
12. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or an
Affiliate, their respective shareholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.
13. WITHHOLDING OBLIGATIONS.
(a) At the time you exercise your option, in whole or in part, or at
any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise
agree to make adequate provision for (including by means of a "cashless
exercise" pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an Affiliate, if any, which arise in connection
with your option.
(b) Upon your request and subject to approval by the Company, in its
sole discretion, and compliance with any applicable conditions or restrictions
of law, the Company may withhold from fully vested shares of Common Stock
otherwise issuable to you upon the exercise of your option a number of whole
shares of Common Stock having a Fair Market Value, determined by the Company as
of the date of exercise, not in excess of the minimum amount of tax required to
be withheld by law. If the date of determination of any tax withholding
obligation is deferred to a date later than the date of exercise of your option,
share withholding pursuant to the preceding sentence shall not be permitted
unless you make a proper and timely election under Section 83(b) of the Code,
covering the aggregate number of shares of Common Stock acquired upon such
exercise with respect to which such determination is otherwise deferred, to
accelerate the determination of such tax withholding obligation to the date of
exercise of your option. Notwithstanding the filing of such election, shares of
Common Stock shall be withheld solely from fully vested shares of Common Stock
determined as of the date of exercise of your option that are otherwise issuable
to you upon such exercise. Any adverse consequences to you arising in connection
with such share withholding procedure shall be your sole responsibility.
(c) You may not exercise your option unless the tax withholding
obligations of the Company and/or any Affiliate are satisfied. Accordingly, you
may not be able to exercise your option when desired even though your option is
vested, and the Company shall have no
5
<PAGE> 6
obligation to issue a certificate for such shares of Common Stock or release
such shares of Common Stock from any escrow provided for herein.
14. NOTICES. Any notices provided for in your option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by mail by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the last
address you provided to the Company.
15. GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions
of the Plan, the provisions of which are hereby made a part of your option, and
is further subject to all interpretations, amendments, rules and regulations
which may from time to time be promulgated and adopted pursuant to the Plan. In
the event of any conflict between the provisions of your option and those of the
Plan, the provisions of the Plan shall control.
6
<PAGE> 1
EXHIBIT 10.9
[AKAMAI LOGO]
AKAMAI FREEFLOW SERVICES ORDER FORM
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EFFECTIVE 3/30/2000 BILLING 4/14/2000 INITIAL 12 Months CONTRACT
DATE: DATE: TERM: 4/14/2000- REF. NO.:
4/13/2001
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SALES
TYPE: [X] New [ ] Upgrade [ ] Renewal REP: CRAIG SNYDER
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CUSTOMER INFORMATION: CUSTOMER CONTACT FOR NOTICES:
Company: Web Side Story, Inc. Name: Jim Van Baalen, Vice President of
Technology
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Address: 10182 Telesis Court Phone: 858-546-0040
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San Diego, CA 92121 Fax: 858-546-0480
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E-Mail: [email protected]
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BILLING CONTACT: (if different than Customer Contact) TECHNICAL CONTACT:
Name: John Borke, Controller Name: Jim Van Baalen, Vice President of
Technology
------------------------------------- -----------------------------------------
Phone: 858-546-0040 Phone: Same as above
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Fax: 868-546-0480 Fax:
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E-Mail: [email protected] E-Mail:
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UPGRADE/ACCOUNT CHANGE AUTHORITY: (Check contacts with authority to upgrade contract)
[X] Customer Contact [ ] Billing Contact [X] Technical Contact [ ] Other (See Special
Instructions)
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AKAMAI SALES CONTACT: AKAMAI CONTACT FOR NOTICES:
Name: Craig R. Snyder Name: General Counsel
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Address: 1400 Fashion Island Blvd. Suite # 703 Akamai Technologies, Inc.
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Phone: 650-627-5222 Address: 201 Broadway, Cambridge, MA, 02139
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Fax: 781-735-6555 Phone: 617-250-3000
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E-Mail: [email protected] Fax: 617-250-3695
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TOTAL CHARGES SUMMARY: (see attached service configuration and description)
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INITIAL FEE: One-time fee after installation is complete INITIAL FEE: NA
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PRICE PER MBPS: Rate per Mbps for FreeFlow Services PRICE PER MBPS: $1,600
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COMMITTED
INFORMATION RATE Minimum Committed Monthly Usage of FreeFlow
(CIR): Services (in Mbps) CIR: 21
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MONTHLY RECURRING Monthly fees billed in advance (based on CIR), STANDARD
FEES: = Price per Mbps x CIR MONTHLY RECURRING: $33,799
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Customer hereby orders from Akamai Technologies, Inc., a Delaware Corporation
("Akamai"), the Services described in this FreeFlow Services Order Form ("Order
Form"). This Order Form, which is issued pursuant and subject to the attached
FreeFlow Services Terms & Conditions ("Terms & Conditions"), shall become valid
when executed by Customer and accepted by an authorized representative of
Akamai. The Order Form, Terms & Conditions and Service Level Agreement, and any
addenda hereto, shall collectively constitute the "Agreement" between the
parties. This Agreement is effective as of the date set forth on this Order Form
(the "Effective Date"). Billing shall commence two weeks after the Effective
Date (the "Billing Date") and Customer shall be billed monthly. The Initial Term
of this Agreement shall begin on the Billing Date. Capitalized terms used in
this Order Form and not otherwise defined have the meanings ascribed to them in
the Terms & Conditions.
CUSTOMER AND AKAMAI AGREE THAT THE TERMS AND CONDITIONS OF THIS AGREEMENT
SUPERSEDE ANY PROVISIONS OF ANY CUSTOMER DRAFTED PURCHASE ORDER AND SUPERSEDE
ALL PROPOSALS, WRITTEN OR ORAL, AS WELL AS OTHER COMMUNICATIONS BETWEEN CUSTOMER
AND AKAMAI RELATING TO THIS AGREEMENT. IN THE EVENT OF ANY CONFLICT BETWEEN THE
TERMS OF THIS ORDER FORM, SERVICE LEVEL AGREEMENT AND THE TERMS & CONDITIONS,
THE TERMS & CONDITIONS SHALL TAKE PRECEDENCE.
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ACCEPTED BY CUSTOMER: ACCEPTED BY AKAMAI:
- --------------------------------------------------- -------------------------------------------------
SIGNATURE SIGNATURE
Jim Van Baalen 3/30/2000
- --------------------------------------------------- -------------------------------------------------
NAME DATE NAME DATE
Vice President of Technology
- --------------------------------------------------- -------------------------------------------------
TITLE TITLE
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AKAMAI PRODUCTS & SERVICE CONFIGURATION AND DESCRIPTION
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FREEFLOW SERVICE CONFIGURATION
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Initial Recurring
Fees Charges
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FreeFlow Setup and installation fee $21,000
Integration
Details and
Requirements
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Akamai agrees to waive installation fee for Web Side Story ($21,000)
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FreeFlow 21 mbps @ $1,600 per mbps $33,600
Service Geoflow Reporter tool @ $199 per month $199
Network
Utilization
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- Committed Information Rate fees are billed in
advance using the 95th Percentile Method.
- For purposes of this Agreement, the "95th Percentile
Method" shall mean the process of (i) measuring actual
data transmission in Mbps over 5 minute intervals, (ii)
ranking such measurements from largest to smallest,
(iii) discarding the largest 5% of the measurements;
and (iv) billing based on the measurement at the 95th
percentile.
- Bandwidth usage over the CIR is billed in arrears at a
25% premium above standard CIR rates.
- Bandwidth usage in excess of four times the CIR in
the 5% window will be billed at an additional rate of
$0.03 per megabyte transferred during these peak
periods.
-------------- ------------------------------------------------------------ ------------ ---------
SUB-TOTAL: $0 $33,799
ADJUSTMENTS (IF APPLICABLE):
------------------------ -------------------------------------------------- ------------ ---------
------------------------ -------------------------------------------------- ------------ ---------
TOTAL (AT COMMITTED RATE): NA $33,799
------------ ---------
SPECIAL INSTRUCTIONS:
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</TABLE>
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<PAGE> 3
FREEFLOW(SM) SERVICES TERMS & CONDITIONS
1. AKAMAI FREEFLOW SERVICES RESPONSIBILITIES. During the Term, Akamai agrees to
provide the FreeFlow Services ordered by Customer as set forth on the Order
Form. Akamai shall provide, maintain and operate on a twenty-four hour per day,
seven days per week, 365 days per year basis, Akamai's geographically
distributed network of web servers (the "Akamai Network"), all network software
and peripherals, and all Internet connectivity, as necessary to perform the
Services in accordance with these Terms & Conditions. Akamai shall staff its
Network Operating Center ("NOC") twenty-four hours per day, seven days per week,
365 days per year. Akamai shall deliver to Customer one copy of the Software (as
defined in Section 3), together with all user IDs and passwords as necessary for
Customer to access the Akamai Network and utilize the Services in accordance
with these Terms & Conditions. Akamai shall keep in place network security as
reasonably necessary to monitor and protect against unauthorized access to
Customer Content (as defined in Section 2) while on or within the Akamai
Network. Customer acknowledges, however, that the portion of the Akamai Network
through which Customer Content will pass and the web servers on which Customer
Content will be stored will not be segregated or in a separate physical location
from web servers on which Akamai's other customers' content is or will be
transmitted or stored. Akamai shall maintain sufficient capacity on the Akamai
Network during the Term as necessary to meet Customer's committed network usage
as set forth in the Order Form. Akamai shall maintain the service levels set
forth in Section I of the Service Level Agreement attached hereto. Akamai shall
provide Customer with such installation, support, training or other additional
services as may be specified in the Order Form or as may be requested by
Customer from time to time during the Term and set forth in a separate addendum
agreed to and executed by both parties.
2. CUSTOMER RESPONSIBILITIES. Customer is and shall be solely responsible for
the creation, renewal, updating, deletion, editorial content, control and all
other aspects of any files, software, scripts, multimedia images, graphics,
audio, video, text, data or other objects, including any third party content or
materials, originating or transmitted from any web site owned or operated by
Customer, and routed to, passed through and/or stored on or within the Akamai
Network or otherwise transmitted or routed using the Services ("Customer
Content"). Customer owns all right, title, and interest in the Customer Content,
or possesses or shall possess all legally valid rights in the Customer Content
necessary for the uses of the Customer Content contemplated by these Terms &
Conditions. Customer will not transmit or route to the Akamai Network or
otherwise direct via the Services any Customer Content that (a) infringes any
copyright, trade secret, or other intellectual property right, (b) contains any
libelous, defamatory, or obscene material, or (c) otherwise violates any laws or
regulations relating to content or content distribution. Customer shall be
responsible for utilizing (i) the LAUNCHER(sm) Software as provided in the
Documentation (described in Section 3), (ii) the static string(s) provided by
Akamai, or (iii) such other method agreed to by the parties to tag the uniform
resource locator ("URL") of the Customer Content to route such Customer Content
to the Akamai Network (an Akamai tagged URL is hereinafter referred to as an
"ARL"). In the event Customer has actual knowledge that any Customer Content
infringes the intellectual property or other rights of a third party or violates
any applicable laws or regulations (including, without limitation, laws and
regulations relating to indecency or obscenity), Customer shall (a) remove such
Customer Content from Customer's origin server, (b) remove the URL/tag from such
Customer Content, or (c) remove the ARLs for such Customer Content from
Customer's web site(s) or cause such ARLs to be removed from any third party web
site so that it will not be routed to and not pass through the Akamai Network.
Customer shall be solely responsible for maintaining the availability of its web
site(s), the connectivity of its web site(s) to the Internet, and all Customer
Content, IP addresses, domain names, hyperlinks, databases, applications and
other resources as necessary for Customer to operate and maintain its web
site(s) to meet Customer's business purposes and objectives.
3. SOFTWARE; RESTRICTIONS. Akamai possesses the necessary rights, title and
licenses in and to the Software and Documentation (each defined herein)
necessary to license the Software and perform the Services hereunder. Akamai
grants Customer a limited, nontransferable and nonexclusive license to use,
during the Term, the GeoFlow(sm) and LAUNCHER(sm) software (collectively, the
"Software"), together with all related documentation (the "Documentation"), in
object code form only, subject to the following restrictions: (i) Customer shall
use the LAUNCHER(sm) software in accordance with the LAUNCHER(sm) Documentation,
solely for the purpose of renaming the URL of Customer Content. (ii) Customer
shall use the GeoFlow(sm) software for Customer's internal purposes only, solely
in conjunction with analyzing the flow of Customer Content that is delivered
using the Services. (iii) Customer acknowledges that the GeoFlow(sm) software
contains certain third party software elements, including without limitation
software relating to the GeoFlow(sm) mapping functions, and Customer is
prohibited from replicating or distributing such mapping images or otherwise
using the same other than for Customer's internal business purposes. (iv)
Customer shall not, for itself, any affiliate of Customer or any third party
sell, license, assign, or transfer the Software or any Documentation; decompile,
disassemble, or reverse engineer the Software; copy the Software or any
Documentation, except that Customer may make a reasonable number of copies of
the Software for backup purposes (provided Customer reproduces on such copies
all proprietary notices of Akamai or its suppliers); nor remove from the
Software or Documentation any language or designation indicating the
confidential nature thereof or the proprietary rights of Akamai or its
suppliers. In addition, Customer shall not alter or duplicate any aspect of the
Software or Documentation, except as expressly permitted under these Terms &
Conditions; assign, transfer, distribute, or otherwise provide access to the
Software or Services to any third party; provide access to the Software to any
third party or use the Software in connection with any third party content; or
export, re-export or permit any third party to export or re-export the Software
or Documentation as to which such export or re-export is prohibited by U.S. law
without appropriate licenses and clearances.
4. INTELLECTUAL PROPERTY RIGHTS. As between Customer and Akamai, Customer shall
own all right, title and interest in and to any Customer Content. During the
Term, Customer grants to Akamai a limited, non-exclusive license to use the
Customer Content solely for all reasonable and necessary purposes contemplated
by these Terms & Conditions and for Akamai to perform the Services as
contemplated hereunder. These Terms & Conditions do not transfer or convey to
Akamai or any third party any right, title or interest in or to the Customer
Content or any associated intellectual property rights, but only a limited right
of use revocable in accordance with the terms of these Terms & Conditions. As
between Customer and Akamai, Akamai shall own all right, title and interest in
and to the Software, Services and Documentation. These Terms & Conditions do not
transfer or convey to Customer or any third party any right, title or interest
in or to the Software, Documentation or Services or any associated intellectual
property rights, but only a limited right of use revocable in accordance with
these Terms & Conditions.
5. PUBLICITY; TRADEMARKS. With prior consent, which consent shall not be
unreasonably withheld or delayed, either party shall be permitted to identify
the other party as a customer, to use the other party's name in connection with
proposals to prospective customers, to hyperlink from one party's web site to
the other party's home page, to display one party's logo on the other party's
web site, and to otherwise refer to the other party in print or electronic form
for marketing or reference purposes. In addition to the rights granted in this
Section 5, each party may display or refer to the other party's proprietary
indicia, trademarks, service marks, trade names, logos, symbols and/or brand
names (collectively "Marks") upon the advance written approval of that party,
which approval shall not be unreasonably withheld. Neither party may remove,
destroy or alter the other party's Marks. Each party agrees that it shall not
challenge or assist others to challenge the rights of the other party or its
suppliers or licensors in the Marks or the registration of the Marks, or attempt
to register any trademarks, trade names or other proprietary indicia confusingly
similar to the Marks. All use of a party's Marks shall be subject to such
party's logo and trademark usage guide, as provided to the other party and as
the same
-3-
<PAGE> 4
may be updated from time to time. Neither party grants any rights in the Marks
or in any other trademark, trade name, service mark, business name or goodwill
of the other except as expressly permitted hereunder or by separate written
agreement of the parties.
6. FEES; PRICING AND PAYMENT TERMS; TAXES. Akamai's current fees for the
Services (including license fees, installation charges, service usage fees and
other fees) are set forth in the attached Order Form. Akamai reserves the right
to amend the fees payable hereunder at any time during the Term upon sixty (60)
days prior notice to Customer; provided that if Akamai increases the fees,
Customer shall be entitled to terminate this Agreement at the end of such sixty
(60) day notice period by thirty (30) days prior written notice of termination
to Akamai. All prices are in United States dollars and do not include sales,
use, value-added or import taxes, customs duties or similar taxes that may be
assessed by any jurisdiction. Amounts due hereunder are payable upon receipt of
invoice. Customer agrees to pay a late charge of two percent (2%) per month or
the maximum lawful rate, whichever is less, for all amounts not paid within
thirty (30) days of receipt of invoice. All taxes, duties, fees and other
governmental charges of any kind (including sales and use taxes, but excluding
taxes based on the gross revenues or net income of Akamai) which are imposed by
or under the authority of any government or any political subdivision thereof on
the fees for any of the Services provided by Akamai under these Terms &
Conditions shall be borne by Customer and shall not be considered a part of, a
deduction from or an offset against such fees. Customer agrees to pay reasonable
attorneys' fees and court costs incurred by Akamai to collect any unpaid amounts
owed by Customer.
7. CONFIDENTIAL INFORMATION. All written information disclosed by either party
to the other party labeled as proprietary or confidential shall remain the sole
property of the disclosing party. Each party agrees that it shall not disclose,
use, modify, copy, reproduce or otherwise divulge such confidential information
other than to fulfill its obligations under this Agreement. The prohibitions
contained in this Section 7 shall not apply to information (a) already lawfully
known to or independently developed by the receiving party, (b) disclosed in
published materials, (c) generally known to the public, or (d) lawfully obtained
from any third party. Neither party shall disclose to third parties, other than
its agents and representatives on a need-to-know basis, the terms of this
Agreement or any addenda hereto without the prior written consent of the other
party, except either party shall be entitled to disclose (i) such terms to the
extent required by law; and (ii) the existence of this Agreement.
8. TERM AND TERMINATION. These Terms & Conditions shall become effective as of
the Effective Date specified in the Order Form and remain in full force and
effect for a term of two (2) years (the "Initial Term"). Upon the expiration of
the Initial Term, this Agreement shall automatically renew for one or more
additional terms of one (1) year (each, a "Renewal Term") unless and until
either party notifies the other party of its intent to terminate at least sixty
(60) days prior to the expiration of the Initial Term or a Renewal Term. The
Initial Term, together with any and all Renewal Terms, is sometimes collectively
referred to as the "Term." Either party may terminate this Agreement in the
event that the other party materially defaults in performing any obligation
under these Terms & Conditions and such default continues unremedied for a
period of thirty (30) days following written notice of default, except that
Akamai may immediately terminate this Agreement where a delay in terminating
would have a material adverse effect on Akamai; provided, however, that in the
event this Agreement is terminated by Customer due to Akamai's breach of its
obligations with respect to network availability, capacity and operations and
the service levels as set out in Section I of the Service Level Agreement and
failure to cure, Customer's sole remedy shall be its election to terminate the
Agreement without further liability to either party (except for Customer's
obligation to pay all accrued and unpaid fees outstanding at the date of
termination). This Agreement shall terminate, effective upon delivery of written
notice by either party to the other party: (i) upon the institution of
insolvency, receivership or bankruptcy proceedings or any other proceedings for
the settlement of debts of the other party; (ii) upon the making of an
assignment for the benefit of creditors by the other party; or (iii) upon the
dissolution of the other party. Either party may terminate this Agreement during
the first fifteen (15) days of the Initial Term without liability upon written
notice to the other party; provided that if Customer terminates during such
period, Customer agrees to pay Akamai all unpaid fees accrued as of the
termination date, including without limitation, any installation, set-up and
training fees. Customer may cancel the Service at any time after the first
fifteen (15) days of the Initial Term or during any Renewal Term for convenience
upon written notice to Akamai, in which case Customer agrees to pay to Akamai:
(a) all unpaid Service fees accrued as of the cancellation date; plus (b) an
early cancellation fee equal to the minimum usage fees (as set forth in the
Order Form) that will become due during the canceled portion of the Initial
Term, or the Renewal Term, as applicable. The provisions of Sections 2 (with
respect to Customer's responsibility for Customer Content), 3, 6, 7, 8, 9, 10,
11 and 12 (with respect to third party beneficiaries, entire agreement and
waiver, severability, non-disclosure, construction, remedies and binding effect
of the Agreement) shall survive termination of this Agreement. All other rights
and obligations of the parties shall cease upon termination of this Agreement.
The term of any license granted hereunder shall expire upon expiration or
termination of this Agreement.
9. DISPUTE RESOLUTION. In the case of any disputes under this Agreement, the
parties shall first attempt in good faith to resolve their dispute informally,
or by means of commercial mediation, without the necessity of a formal
proceeding. Any controversy or dispute arising out of or relating to this
Agreement, or the breach thereof, which cannot otherwise be resolved as provided
above shall be resolved by arbitration conducted in accordance with the
commercial arbitration rules of the American Arbitration Association ("AAA") and
judgment upon the award rendered by the arbitral tribunal may be entered in any
court having jurisdiction thereof. The arbitration tribunal shall consist of a
single arbitrator mutually agreed upon by the parties, or in the absence of such
agreement within thirty (30) calendar days from the first referral of the
dispute to the AAA, designated by the AAA. The place of arbitration shall be
Boston, Massachusetts, U.S.A, unless the parties shall have agreed to another
location within fifteen (15) calendar days from the first referral of the
dispute to the AAA. The arbitral award shall be final and binding. The parties
waive any right to appeal the arbitral award, to the extent a right to appeal
may be lawfully waived. Each party retains the right to seek judicial
assistance: (i) to compel arbitration; (ii) to obtain interim measures of
protection prior to or pending arbitration, (iii) to seek injunctive relief in
the courts of any jurisdiction as may be necessary and appropriate to protect
the unauthorized disclosure of its proprietary or confidential information, and
(iv) to enforce any decision of the arbitrator, including the final award. The
arbitration proceedings contemplated by this Section shall be as confidential
and private as permitted by law. To that end, the parties shall not disclose the
existence, content or results of any proceedings conducted in accordance with
this Section, and deem that all materials submitted in connection with such
proceedings are for the purpose of settlement and compromise; provided, however,
that this confidentiality provision shall not prevent a petition to vacate or
enforce an arbitral award, and shall not bar disclosures required by law.
10. INDEMNIFICATION. Akamai shall defend, indemnify and hold harmless Customer
from and against any suit, proceeding, assertion, damage, cost, liability, and
expenses (including court costs and reasonable attorneys' fees) incurred as a
result of claims by a third party against Customer and its affiliates,
licensors, suppliers, officers, directors, employees and agents arising from or
connected with a claim that any of the Software infringes any valid patent,
copyright, trade secret, or other intellectual property right under the laws of
the United States. If a claim of infringement under this Section 10 occurs, or
if Akamai determines that a claim is likely to occur, Akamai will have the
right, in its sole discretion, to either: (i) procure for Customer the right or
license to continue to use the Software free of the infringement claim; or (ii)
replace or modify the Software to make it non-infringing provided that the
replacement software substantially conforms to Akamai's then-current
specification for the Software. If these remedies are not reasonably available
to Akamai, Akamai may, at its option, terminate this Agreement and return any
fees
-4-
<PAGE> 5
paid by Customer in advance. Despite the provisions of this Section 10, Akamai
has no obligation with respect to any claim of infringement that is based upon
or arises out of: (i) any modification to the Software, Documentation or
Services if the modification was not made by Akamai; or (ii) the use or
combination of the Software, Documentation or Services with any hardware,
software, products, data or other materials not specified or provided by Akamai;
or (iii) Customer's use of the Services other than in accordance with the
Documentation or Akamai's written directions or policies.
Customer acknowledges that by entering into and performing its obligations under
these Terms & Conditions, Akamai does not assume and should not be exposed to
the business and operational risks associated with Customer's business, or any
aspects of the operation or contents of Customer's web site(s). Accordingly,
Customer shall defend, indemnify, and hold harmless Akamai from and against any
suit, proceeding, assertion damage, cost, liability, and expenses (including
court costs and reasonable attorneys' fees) incurred as a result of claims of
customers or other third parties claim against Akamai and its affiliates,
licensors, suppliers, officers, directors, employees and agents arising from or
connected with any Customer Content or Customer's web site(s) (including without
limitation any activities or aspects thereof or commerce conducted thereon),
Customer's misuse of the Services, unauthorized modification of the Software, or
unauthorized combination of the Software with any hardware, software, products,
data or other materials not specified or provided by Akamai.
THE PROVISIONS OF THIS SECTION 10 STATE THE SOLE AND EXCLUSIVE OBLIGATIONS AND
LIMITATIONS OF LIABILITY OF EITHER PARTY FOR ANY PATENT, COPYRIGHT, TRADEMARK,
TRADE SECRET OR OTHER INTELLECTUAL PROPERTY RIGHTS INFRINGEMENT AND ARE IN LIEU
OF ANY WARRANTIES OF NON-INFRINGEMENT, ALL OF WHICH ARE DISCLAIMED.
EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, EACH PARTY EXPRESSLY
DISCLAIMS ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, TO THE FULLEST EXTENT
PERMITTED BY LAW, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT.
11. LIMITATION OF LIABILITY AND DAMAGES.
EXCEPT FOR EACH PARTY'S LIABILITY ARISING OUT OF ITS INDEMNIFICATION
OBLIGATIONS, LIABILITY FOR ALL CLAIMS ARISING OUT OF THESE TERMS & CONDITIONS,
WHETHER IN CONTRACT, TORT OR OTHERWISE, SHALL NOT EXCEED THE AMOUNT OF FEES PAID
BY CUSTOMER TO AKAMAI UNDER THIS AGREEMENT DURING THE SIX (6) MONTHS PRECEDING
THE CLAIM.
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY LOSS OF DATA, LOSS OF BUSINESS
PROFITS, BUSINESS INTERRUPTION, OR OTHER SPECIAL, INCIDENTAL, CONSEQUENTIAL OR
INDIRECT DAMAGES ARISING FROM OR IN RELATION TO THESE TERMS & CONDITIONS OR THE
USE OF THE SERVICES, HOWEVER CAUSED AND REGARDLESS OF THEORY OF LIABILITY. THIS
LIMITATION WILL APPLY EVEN IF SUCH PARTY HAS BEEN ADVISED OR IS AWARE OF THE
POSSIBILITY OF SUCH DAMAGES.
12. MISCELLANEOUS. Any notice required or permitted hereunder shall be in
writing and shall be delivered to the contact person listed on the Order Form as
follows (with notice deemed given as indicated): (i) by personal delivery when
delivered personally; (ii) by established overnight courier upon written
verification of receipt; (iii) by facsimile transmission when receipt is
confirmed orally; or (iv) by certified or registered mail, return receipt
requested, upon verification of receipt. Either party may change its contact
person for notices and/or address for notice by means of notice to the other
party given in accordance with this Section 12. Customer may not, without the
prior written consent of Akamai, assign this Agreement, in whole or in part,
either voluntarily or by operation of law, and any attempt to do so shall be a
material default of this Agreement and shall be void. These Terms & Conditions
are solely for the benefit of the parties and their successors and permitted
assigns, and does not confer any rights or remedies on any other person or
entity. This Agreement shall be interpreted according to the laws of the
Commonwealth of Massachusetts without regard to or application of choice-of-law
rules or principles. This Agreement and any addenda hereto shall constitute the
entire agreement between Akamai and Customer with respect to the subject matter
hereof and all prior agreements, representations, and statements with respect to
such subject matter are superceded hereby, including without limitation any non
disclosure agreement previously executed between the parties. These Terms &
Conditions shall control in the event of any inconsistency with the terms of the
Order Form or the Service Level Agreement. These Terms & Conditions may be
changed only by written agreement signed by both Akamai and Customer. No failure
of either party to exercise or enforce any of its rights under these Terms &
Conditions shall act as a waiver of subsequent breaches; and the waiver of any
breach shall not act as a waiver of subsequent breaches. In the event any
provision of these Terms & Conditions is held by a court or other tribunal of
competent jurisdiction to be unenforceable, that provision will be enforced to
the maximum extent permissible under applicable law, and the other provisions of
these Terms & Conditions will remain in full force and effect. The parties
further agree that in the event such provision is an essential part of these
Terms & Conditions, they will begin negotiations for a replacement provision. If
either party is prevented from performing any of its obligations under this
Agreement due to any cause beyond the party's reasonable control, including,
without limitation, an act of God, fire, flood, explosion, war, strike, embargo,
government regulation, civil or military authority, acts or omissions of
carriers, transmitters, providers, vandals, or hackers (a "force majeure event")
the time for that party's performance will be extended for the period of the
delay or inability to perform due to such occurrence; provided, however, that
Customer will not be excused from the payment of any sums of money owed by
Customer to Akamai for Services provided prior to the force majeure event; and
provided further, however, that if a party suffering a force majeure event is
unable to cure that event within thirty (30) days, the other party may terminate
this Agreement. These Terms & Conditions shall be construed and interpreted
fairly, in accordance with the plain meaning of its terms, and there shall be no
presumption or inference against the party drafting this Agreement in construing
or interpreting the provisions hereof. Except as provided herein, the rights and
remedies of the parties set forth in this Agreement are not exclusive and are in
addition to any other rights and remedies available to it at law or in equity.
These Terms & Conditions shall be binding upon and shall inure to the benefit of
the respective parties hereto, their respective successors in interest, legal
representatives, heirs and assigns. Each party shall comply with all applicable
laws, regulations, and ordinances relating to their performance hereunder.
-5-
<PAGE> 6
STANDARD SERVICE LEVEL AGREEMENT
I. SERVICE LEVELS AND PENALTIES
Akamai agrees to provide a level of service demonstrating:
(a) Measurable Performance Enhancement: The Akamai FreeFlow service
will deliver content measurably faster than the Customer's web
site.
(b) 100% Uptime: The Akamai FreeFlow service will serve content 100%
of the time without qualification.
(c) Penalties: If the Akamai FreeFlow service fails to meet either of
the above service levels, the Customer will receive a credit
equal to fees for the day in which the failure occurs.
II. SLA MONITORING METHODOLOGY
The following methodology will be employed to measure FreeFlow service
availability and performance enhancement:
Agents and Polling Frequency
(a) From six (6) geographically and network-diverse locations in
major metropolitan areas, Akamai will simultaneously poll a test
file residing on the Customer's production servers and on
Akamai's network. Sites will include the following areas:
Northern Virginia
New Jersey
Chicago
Houston
Los Angeles
Palo Alto
(b) The polling mechanism will perform two (2) simultaneous http GET
operations:
(i) one GET operation will be performed on a test file
residing on the appropriate customer server (e.g.,
http://www.customerxyz.com/images/testgif.gif)
(ii) the other GET operation will be performed from the Akamai
Free Flow Service
http://a564.g.akamaitech.net/7/564/24/2c1db486/
www.customerxyz.com/images/testgif.gif.
(c) The test GIF will be a file of 80 Kbytes or greater in size.
(d) Polling will occur at approximately 12-minute intervals.
(e) Based on the http GET operations described in 1.B. above, the
response times received from the two sources, (a) the Customer
server, and (b) the Akamai network, will be compared for the
purpose of measuring performance metrics and outages.
III. PERFORMANCE METRIC
The performance metric will be based on a daily average of performance
for the FreeFlow service and the Customer's production web server,
computed from data captured across all regions and hits. Each time will
be weighted to reflect peak traffic conditions or "primetime" usage. The
primetime period is 10 AM to 7 PM EST. All times recorded during this
period will be weighted by a factor of three. If on a given day the
Akamai weighted daily average time exceeds the Customer's weighted daily
average time, then the Customer will receive a credit equivalent to fees
for that day of service.
IV. OUTAGES
An outage is defined as a 12-minute period of consecutive failed
attempts by a single agent to "get" a file from the FreeFlow network
while succeeding to "get" the test file from the Customer web site. If
an outage is identified by this method, the customer will receive a
credit equivalent to the fees for the day in which the failure occurred.
-6-
<PAGE> 7
ADDENDUM
This Addendum amends and supersedes certain of the provisions of the
FreeFlow Services Terms & Conditions (the "Terms & Conditions") and Standard
Service Level Agreement (the "SLA") entered into by and between Akamai
Technologies, Inc. and Web Side Story, Inc. dated as of March 30, 2000, to which
this Addendum is attached. This Addendum takes the place and supersedes those
portions of any article or sections of the Terms & Conditions and the SLA that
deal with the subject matter as provided for in this Addendum and if the
provisions of this Addendum and the Terms & Conditions conflict, then the
provisions of this Addendum shall control.
NOW, THEREFORE, in consideration of the following as set forth in this
Addendum, the parties agree as follows:
1. The second sentence of Section 6 of the Terms & Conditions, entitled
"Fees; Pricing and Payment Terms; Taxes," is hereby amended as follows:
Akamai reserves the right to amend the fees payable hereunder at any
time only after the first Renewal Term upon sixty (60) days prior notice to
Customer; provided that if Akamai increases the fees, Customer shall be entitled
to terminate this Agreement at the end of such sixty (60) day notice period by
thirty (30) days prior written notice of termination to Akamai.
2. The first sentence of Section 8 of the Terms & Conditions, entitled
"Term and Termination," is hereby amended as follows:
These Terms & Conditions shall become effective as of the Effective Date
specified in the Order Form and remain in full force and effect for a term of
one (1) year (the "Initial Term").
3. The first sentence of Section 10 of the Terms & Conditions, entitled
"Indemnification," is hereby amended as follows:
Akamai shall defend, indemnify and hold harmless Customer from and
against any suit, proceeding, assertion, damage, cost, liability, and expenses
(including court costs and reasonable attorneys' fees) incurred as a result of
claims by a third party against Customer and its affiliates, licensors,
suppliers, officers, directors, employees and agents arising from or connected
with a claim that any of the Software, Documentation or Services infringes any
valid patent, copyright, trade secret, or other intellectual property right
under the laws of the United States.
4. The Service Level Agreement shall be amended by adding a section V,
entitled "Remedies" and adding the following provision:
V. REMEDIES
A. If five or more Outages are identified in any given day,
the Customer will receive a credit equivalent to the fees
for ten days in the month in which the failure occurred.
B. If Outages are identified in any ten days, in any given
month, whether consecutive or not, the Customer shall have
the option to terminate this Agreement.
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<PAGE> 1
EXHIBIT 10.10
WEBSIDESTORY, INC, EMPLOYMENT AGREEMENT
PLEASE READ THIS AGREEMENT CAREFULLY. THIS AGREEMENT DESCRIBES THE BASIC LEGAL
AND ETHICAL RESPONSIBILITIES THAT YOU ARE REQUIRED TO OBSERVE AS AN EMPLOYEE
EXPOSED TO HIGHLY SENSITIVE TECHNOLOGY AND STRATEGIC INFORMATION IN PERFORMING
RESEARCH AND DEVELOPMENT. WEBSIDESTORY'S RELATIONSHIP WITH ITS EMPLOYEES IS
BASED ON TRUST, AND EACH INDIVIDUAL WHO WORKS FOR WEBSIDESTORY IS EXPECTED TO
MAINTAIN A HIGH DEGREE OF PROFESSIONALISM. WE ARE IN A HIGHLY COMPETITIVE
BUSINESS AND WE WANT TO SUCCEED BY THE RULES, FAIR AND SQUARE.
THIS AGREEMENT, is effective as of the date shown on the signature line:
EMPLOYMENT Your employment with WebSideStory, Inc. (referred to in this
agreement as "WebSideStory," the "Company," or "we") starts on September 16,
1996. Some of the conditions of your employment are on the exhibit attached to
this Agreement.
IF YOU KNOW OF ANY OBLIGATIONS THAT MAY CONFLICT WITH YOUR WORK FOR US, PLEASE
LET US KNOW AS SOON AS POSSIBLE.
NONINTERFERENCE WITH THIRD-PARTY RIGHTS The Company is employing you with the
understanding that (1) you are free to enter into employment with WebSideStory
and (2) only WebSideStory is entitled to the benefit of your work. WebSideStory
has no interest in using any other person's patents, copyrights, trade secrets,
or trademarks in an unlawful manner. You should be careful not to misapply
proprietary rights that WebSideStory has no right to use.
PLEASE OBSERVE THE TERMS OF THIS AGREEMENT, IT IS IMPORTANT.
CONTINUANCE OF EMPLOYMENT The faithful observance of this Agreement by you is,
and will remain, a condition of your employment. Also, your employment is
terminable at will by either you or WebSideStory at any time. WebSideStory asks
that as courtesy, you give at least two weeks' notice in advance of any
termination by you of your employment. WebSideStory reserves the absolute right
to make any changes in assignment, personnel, or employee benefits at any time.
WEBSIDESTORY'S CONFIDENTIAL INFORMATION AND WHATEVER YOU CREATE WHILE WORKING
FOR WEBSIDESTORY, IS OWNED BY WEBSIDESTORY. IN PART, THAT IS WHAT WE ARE PAYING
FOR.
EXISTING PROPRIETARY RIGHTS We are not aware of any patents, patent
applications, copyrights, trade secrets, or trademarks that you own, or have any
claim in. (If there are any, list them here).
<PAGE> 2
OWNERSHIP OF WORK PRODUCT
a. WebSideStory will own all Work Product (as defined in this Agreement ). All
Work Product will be considered work made for hire by you acid owned by
WebSideStory.
b. If any of the Work Product may not, by operation of law, be considered work
made for hire by you for WebSideStory, or if ownership of all right, title, and
interest of the intellectual property rights therein will not otherwise vest
exclusively in WebSideStory, you agree to assign, and upon creation thereof
automatically assign, without further consideration, the ownership of all Trade
Secrets as defined in this Agreement, U.S. and international copyrights,
patentable inventions, and other intellectual property rights therein to
WebSideStory, its successors, and assigns.
c. WebSideStory, its successors, and assigns, will have the right to obtain and
hold in its or their own name copyrights, registrations, and any other
protection available in the foregoing.
d. You agree to perform, upon the reasonable request of WebSideStory, during or
after your employment, such further acts as may be necessary or desirable to
transfer, perfect, and defend WebSideStory's ownership of the Work Product. When
requested, you will;
1. execute, acknowledge, and deliver any requested affidavits and documents of
assignment and conveyance;
2. obtain and aid in the enforcement of copyrights and, if applicable, patents
with respect to the Work Product in any countries;
3. provide testimony in connection with any proceeding affecting the right,
title, or interest of WebSideStory in any Work Product; and
4. perform any other acts as necessary or desirable to carry out the purposes of
this Agreement.
WebSideStory will reimburse all reasonable out-of-pocket expense, incurred by
you at WebSideStory's request, in connection with the above, including (unless
you are otherwise being compensated at the time) a reasonable per diem or hourly
fee for services rendered following termination of your employment.
e. In this Agreement, "Work Product" means all intellectual property rights,
including all confidential information, confidential documents, trade secrets,
works of copyrightable authorship, U.S. and international copyrights, patentable
inventions, US and foreign letters patent, discoveries and improvements, all
trademarks and other intellectual property rights, in any programming,
documentation, technology relating to the business and interests of
WebSideStory, including any such technology that you conceive, develop, or
deliver to WebSideStory at any time during the term of your employment. Work
Product also includes all intellectual property rights in any programming,
documentation, technology, or other work product that is now contained in any of
the products or systems, including development and support systems, of
WebSideStory to the extent you conceived, developed, or delivered such Work
Product to WebSideStory prior to the date of this Agreement while you were
engaged as an independent contractor or an employee of WebSideStory. You
irrevocably give up, for the benefit of WebSideStory and its assigns, any moral
rights in the any works of copyrightable authorship recognized by applicable
law.
2
<PAGE> 3
EXCEPTIONS Except as set forth above, WebSideStory will not make claim to any
invention for which no equipment, supplies, facilities, of WebSideStory
confidential information was used, which was developed entirely on your own
time, and which does not (i) relate to the business of WebSideStory (ii) relate
to WebSideStory's actual or demonstrable anticipated research or development, or
(iii) result from any work performed by you for Employer.
YOU AGREE TO KEEP WEBSIDESTORY CONFIDENTIAL INFORMATION IN STRICT CONFIDENCE.
WEBSIDESTORY CONFIDENTIALITY Your position with WebSideStory requires
considerable responsibility and trust. Relying on your ethical responsibility
and undivided loyalty, WebSideStory expects to entrust you with highly sensitive
confidential, restricted, and proprietary information involving Trade Secrets
(as defined below). It could prove very difficult to isolate these Trade Secrets
from business activities that you might consider pursuing after termination of
your employment, and in some instances, you may not be able to compete with
WebSideStory in certain ways because of the risk that WebSideStory's Trade
Secrets might be compromised. You are legally and ethically responsible for
protecting and preserving WebSideStory's proprietary rights for use only for
WebSideStory's benefit, and these responsibilities may impose unavoidable
limitations on your ability to pursue some kinds of business opportunities that
might interest you during or after your employment.
TRADE SECRETS DEFINED For purposes of this Agreement, a "Trade Secret" is any
information, including, but not limited to, technical or non-technical data,
formulas, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, employee salaries, financial plans, product
plans, or lists of actual or potential customers or suppliers that: (1) derive
economic value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who can obtain
economic value from their disclosure or use; and (2) are the subject of efforts
that are reasonable under the circumstances to maintain their secrecy.
RESTRICTIONS ON USE AND DISCLOSURE OF TRADE SECRETS You agree not to use or
disclose any Trade Secrets of WebSideStory during your employment and for so
long afterwards as the pertinent information or data remain Trade Secrets,
regardless of whether the Trade Secrets are in written or tangible form, except
as required to perform any duties for WebSideStory.
SCREENING OF PUBLIC RELEASES OF INFORMATION In addition, and without any
intention of limiting your other obligations under this Agreement in any way,
you should not, during your employment, reveal any non-public information
concerning the technology pertaining to the proprietary products and
manufacturing processes of WebSideStory (particularly technology under current
development or improvement), unless you have obtained written approval from
WebSideStory in advance. In that connection, you should submit to WebSideStory
for review any proposed scientific and technical articles and the text of any
public speeches relating to work done for WebSideStory before they are released
or delivered. WebSideStory has the right to disapprove and prohibit, or delete
any parts of such articles or speeches that might disclose WebSideStory's Trade
Secrets or other confidential information or otherwise be contrary to
WebSideStory's business interests.
UPON YOUR TERMINATION OF EMPLOYMENT WITH WEBSIDESTORY, YOU AGREE TO TURN OVER
ALL NOTES, DATA, DISKETTES, TAPES, REFERENCE ITEMS, SKETCHES OR DRAWINGS,
MEMORANDA, RECORDS, AND THE MATERIALS IN YOUR POSSESSION OR CONTROL WHICH IN ANY
WAY RELATE TO ANY WEBSIDESTORY CONFIDENTIAL INFORMATION.
3
<PAGE> 4
RETURN OF MATERIALS At the request of WebSideStory and, in any event, upon the
termination of your employment, you must return to WebSideStory and leave at its
disposal all memoranda, notes, records, drawings, manuals, computer programs,
documentation, diskettes, computer tapes, and other documents or media
pertaining to the business of WebSideStory or your specific duties for
WebSideStory, including all copies of such materials. You must also return to
WebSideStory and leave at its disposal all materials involving any Trade Secrets
of WebSideStory. This Section is intended to apply to all materials made or
compiled by you, as well as to all materials furnished to you by anyone else in
connection with your employment.
YOU ARE OBLIGATED TO CONTINUE TO PROTECT WEBSIDESTORY'S CONFIDENTIAL
INFORMATION, AFTER YOU LEAVE OUR EMPLOYMENT.
UNFAIR COMPETITION Employee acknowledges and agrees that the sale or
unauthorized use or disclosure of any of WebSideStory's trade secrets obtained
by Employee during the course of his engagement, including information
concerning WebSideStory's current or any future and proposed work, series or
products, the facts that any such work services, or products are planned, under
consideration, or in production, as well as any descriptions thereof, constitute
unfair competition. Employee promises and agrees not to engage in any unfair
competition with WebSideStory, either during the term of his engagement or at
any time thereafter.
HIRING EMPLOYEES You agree, for a period ending one year after the termination
of your employment with WebSideStory, not to hire or engage, or attempt to hire
or engage, directly or indirectly, any individual who was an employee of
WebSideStory at any time during the one-year period prior to the date of your
termination of employment with WebSideStory, whether for or on behalf of you or
for any entity in which you have a direct or indirect interest, whether as a
proprietor, partner, stockholder, employee, agent, representative, or
otherwise.
IF ANY PART OF THIS AGREEMENT IS NOT LEGAL, THE OTHER LEGAL PARTS WILL REMAIN
IN FORCE.
SEVERABILITY The covenants in this Agreement will be construed as covenants
independent of one another and as obligations distinct from any other contract
between you and WebSideStory. Any claim that you may have against WebSideStory
will not constitute a defense to enforcement by WebSideStory of this Agreement.
SOME OF YOUR OBLIGATIONS WILL SURVIVE THE TERMINATION OF YOUR EMPLOYMENT WITH
WEBSIDESTORY.
SURVIVAL OF OBLIGATIONS The covenants in this Agreement concerning work product,
trade secrets, confidential information, unfair competition and hiring employees
will survive termination of your employment, regardless of who causes the
termination and under what circumstances.
WEBSIDESTORY WILL BE IRREPARABLY HARMED IF YOU BREACH WEBSIDESTORY
CONFIDENTIALITY OR TAKE TRADE SECRETS. TO PROTECT OURSELVES, WE MUST BE ABLE TO
STOP ANY EMPLOYEE IMMEDIATELY WHO MISAPPROPRIATES WEBSIDESTORY CONFIDENTIAL
INFORMATION OR TRADE SECRETS.
SPECIFIC PERFORMANCE AND CONSENT TO INJUNCTIVE RELIEF Irreparable harm will be
presumed if you breach any covenant in this Agreement. The faithful observance
of all covenants in this Agreement is an essential condition to your employment,
and WebSideStory is depending upon absolute compliance. Damages would probably
be very difficult to ascertain if you breached any covenant in this Agreement.
This Agreement is intended to protect the proprietary rights of WebSideStory in
many important ways. Even the threat of any misuse of the technology of
WebSideStory would be extremely harmful, since that technology is essential to
the business of WebSideStory. In light of these facts, you agree that any court
of competent jurisdiction should immediately
4
<PAGE> 5
enjoin any breach of this Agreement upon the request of WebSideStory. Also, you
specifically release WebSideStory from the requirement of posting any bond in
connection with temporary or interlocutory injunctive relief, to the extent
permitted by law.
HOW YOU RECEIVE NOTICES RELATING TO THIS AGREEMENT.
NOTICES All notices required under this Agreement will be made in writing and
will be deemed given when (1) delivered in person, (2) deposited in the U.S.
mail, first class, with proper postage prepaid and properly addressed, or (3)
sent through the interoffice delivery service of WebSideStory, if you are still
employed by WebSideStory at the time.
THIS AGREEMENT APPLIES TO ALL WEBSIDESTORY RELATED PARTIES.
RELATED PARTIES This Agreement will inure to the benefit of, and be binding
upon, WebSideStory and its subsidiaries and its affiliates, together with their
successors and assigns, and you, together with your executor, administrator,
personal representative, heirs, and legatees.
THIS AGREEMENT REFLECTS THE TERMS OF YOUR EMPLOYMENT WITH WEBSIDESTORY. THE
TERMS OF ANY PRIOR LETTERS, NEGOTIATIONS, OR UNDERSTANDINGS THAT CONTRADICT ANY
PROVISION OF THIS AGREEMENT ARE UNENFORCEABLE.
MERGER This Agreement merges and supersedes all prior and contemporaneous
agreements, undertakings, covenants, or conditions, whether oral or written,
express or implied, to the extent that they contradict or conflict with the
terms and conditions hereof. This Agreement is not intended to modify or impair
the effectiveness of the general rules and policies WebSideStory may announce
from time to time.
ARBITRATION The parties agree that they will submit any dispute that arises
under this Agreement to arbitration in San Diego County, California. The parties
hereby agree to use a third party neutral referred by American Arbitration
Association who will conduct the arbitration under the American Arbitration
Association rules for Arbitration. The cost of the arbitration will be shared
equally by both parties.
CHOICE OF LAW This Agreement will be governed by and enforced under the laws of
the State of California, in San Diego County.
IN WITNESS WHEREOF, you, as an employee of WebSideStory, have entered and
executed this Agreement under seal, and WebSideStory has accepted your
undertaking.
5
<PAGE> 6
I HAVE CAREFULLY READ AND CONSIDERED THE PROVISIONS OF THIS AGREEMENT. I
UNDERSTAND AND ACKNOWLEDGE THAT THE TERMS AND CONDITIONS ARE FAIR AND APPEAR
REASONABLY REQUIRED FOR THE PROTECTION OF WEBSIDESTORY AND ITS BUSINESS.
EMPLOYEE:
/s/ Blaise Barrelet
- ---------------------
Name: Blaise Barrelet
Date: June 24, 1999
Social Security No: ___________
Driver's License No: ________ State: _____
Address:
_______________________
_______________________
Accepted:
WEBSIDESTORY, INC.:
/s/ Michael Christian
- ------------------------------------------
Michael Christian, Chief Operating Officer
Date: June 24, 1999
6
<PAGE> 7
EMPLOYMENT CONTRACT
Exhibit A
A1. SALARY
Employee will be paid an annual salary of $300,000. Employee's salary
will be paid in equal installments at regular payroll periods (every two
weeks). Employee's salary will be reviewed periodically by the president
of WebSideStory and may be adjusted from time to time at his sole
discretion.
BONUS
In the event that the Company meets its quarterly projections for
pre-tax income (assuming accrual of the bonus payments contemplated by
this subsection and adjusted for extraordinary expenses), the Company
will pay a quarterly bonus to Blaise Barrelet in the amount of $105,000.
The projections to be used in determining whether a bonus shall be paid
pursuant to this subsection shall be the projections set forth in the
Company's Business Plan Income Statement forecast for 1999 and 2000 as
delivered to the Investors.
A2. DUTIES
Employee will serve as WebSideStory's President and Chief Executive
Officer. Employee's duties may be modified at the discretion of
WebSideStory's Board of Directors. Employee will be under the management
of WebSideStory's Board of Directors. Employee will diligently execute
such duties and will devote substantially all of Employee's time, skill,
and effort during ordinary working hours to such duties.
A3. DEDUCTIONS
WebSideStory will deduct from any compensation payable to Employee the
sums that it is required by law to deduct, including but not limited to
federal and state withholding taxes, social security taxes and state
disability insurance.
A4. BENEFITS
Medical coverage is a benefit that WebSideStory provides for its
employees alone; spouses are excluded from coverage. At your own cost,
however, we do give you the option to include your spouse in the medical
and/or dental plan offered. Since WebSideStory is billed for the spouse
premium, we will in turn deduct the premium from your paycheck. Employee
will be entitled to medical coverage after a period of 30 days.
A5. VACATION, ILLNESS, AND HOLIDAYS
Employee will be entitled each year to vacation time at full pay in
accordance with WebSideStory's vacation policy.
7
<PAGE> 1
EXHIBIT 10.11
WEBSIDESTORY, INC., EMPLOYMENT AGREEMENT
PLEASE READ THIS AGREEMENT CAREFULLY. THIS AGREEMENT DESCRIBES THE BASIC LEGAL
AND ETHICAL RESPONSIBILITIES THAT YOU ARE REQUIRED TO OBSERVE AS AN EMPLOYEE
EXPOSED TO HIGHLY SENSITIVE TECHNOLOGY AND STRATEGIC INFORMATION IN PERFORMING
RESEARCH AND DEVELOPMENT. WEBSIDESTORY'S RELATIONSHIP WITH ITS EMPLOYEES IS
BASED ON TRUST, AND EACH INDIVIDUAL WHO WORKS FOR WEBSIDESTORY IS EXPECTED TO
MAINTAIN A HIGH DEGREE OF PROFESSIONALISM. WE ARE IN A HIGHLY COMPETITIVE
BUSINESS AND WE WANT TO SUCCEED BY THE RULES, FAIR AND SQUARE.
THIS AGREEMENT, is effective as of the date shown on the signature line:
EMPLOYMENT Your employment with WebSideStory, Inc. (referred to in this
agreement as "WebSideStory," the "Company," or "we") starts on September 16,
1996. Some of the conditions of your employment are on the exhibit attached to
this Agreement.
IF YOU KNOW OF ANY OBLIGATIONS THAT MAY CONFLICT WITH YOUR WORK FOR US, PLEASE
LET US KNOW AS SOON AS POSSIBLE.
NONINTERFERENCE WITH THIRD-PARTY RIGHTS The Company is employing you with the
understanding that (1) you are free to enter into employment with WebSideStory
and (2) only WebSideStory is entitled to the benefit of your work. WebSideStory
has no interest in using any other person's patents, copyrights, trade secrets,
or trademarks in an unlawful manner. You should be careful not to misapply
proprietary rights that WebSideStory has no right to use.
PLEASE OBSERVE THE TERMS OF THIS AGREEMENT, IT IS IMPORTANT.
CONTINUANCE OF EMPLOYMENT The faithful observance of this Agreement by you is,
and will remain, a condition of your employment. Also, your employment is
terminable at will by either you or WebSideStory at any time. WebSideStory asks
that as courtesy, you give at least two weeks' notice in advance of any
termination by you of your employment. WebSideStory reserves the absolute night
to make any changes in assignment, personnel, or employee benefits at any time.
WEBSIDESTORY'S CONFIDENTIAL INFORMATION AND WHATEVER YOU CREATE WHILE WORKING
FOR WEBSIDESTORY, IS OWNED BY WEBSIDESTORY. IN PART, THAT IS WHAT WE ARE PAYING
FOR.
EXISTING PROPRIETARY RIGHTS We are not aware of any patents, patent
applications, copyrights, trade secrets, or trademarks that you own, or have any
claim in. (If there are any, list them here).
<PAGE> 2
OWNERSHIP OF WORK PRODUCT
a. WebSideStory will own all Work Product (as defined in this Agreement).
All Work Product will be considered work made for hire by you and owned by
WebSideStory.
b. If any of the Work Product may not, by operation of law, be considered
work made for hire by you for WebSideStory, or if ownership of all right, title,
and interest of the intellectual property rights therein will not otherwise vest
exclusively in WebSideStory, you agree to assign, and upon creation thereof
automatically assign, without further consideration, the ownership of all Trade
Secrets as defined in this Agreement, U.S. and international copyrights,
patentable inventions, and other intellectual property rights therein to
WebSideStory, its successors, and assigns.
c. WebSideStory, its successors, and assigns, will have the right to obtain
and hold in its or their own name copyrights, registrations, and any other
protection available in the foregoing.
d. You agree to perform, upon the reasonable request of WebSideStory, during
or after your employment, such further acts as may be necessary or desirable to
transfer, perfect, and defend WebSideStory's ownership of the Work Product. When
requested, you will:
1. execute, acknowledge, and deliver any requested affidavits and documents
of assignment and conveyance;
2. obtain and aid in the enforcement of copyrights and, if applicable,
patents with respect to the Work Product in any countries;
3. provide testimony in connection with any proceeding affecting the right,
title, or interest of WebSideStory in any Work Product; and
4. perform any other acts as necessary or desirable to carry out the purposes
of this Agreement.
WebSideStory will reimburse all reasonable out-of-pocket expense, incurred by
you at WebSideStory's request, in connection with the above, including (unless
you are otherwise being compensated at the time) a reasonable per diem or hourly
fee for services rendered following termination of your employment.
e. In this Agreement, "Work Product" means all intellectual property rights,
including all confidential information, confidential documents, trade secrets,
works of copyrightable authorship, U.S. and international copyrights, patentable
inventions, US and foreign letters patent, discoveries and improvements, all
trademarks and other intellectual property rights, in any programming,
documentation, technology relating to the business and interests of
WebSideStory, including any such technology that you conceive, develop, or
deliver to WebSideStory at any time during the term of your employment. Work
Product also includes all intellectual property rights in any programming,
documentation, technology, or other work product that is now contained in any of
the products or systems, including development and support systems, of
WebSideStory to the extent you conceived, developed, or delivered such Work
Product to WebSideStory prior to the date of this Agreement while you were
engaged as an independent contractor or an employee of WebSideStory. You
irrevocably give up, for the benefit of WebSideStory and its assigns, any moral
rights in the any works of copyrightable authorship recognized by applicable
law.
2
<PAGE> 3
EXCEPTIONS Except as set forth above, WebSideStory will not make claim to any
invention for which no equipment, supplies, facilities, or WebSideStory
confidential information was used, which was developed entirely on your own
time, and which does not (i) relate to the business of WebSideStory (ii) relate
to WebSideStory's actual or demonstrable anticipated research or development, or
(iii) result from any work performed by you for Employer.
YOU AGREE TO KEEP WEBSIDESTORY CONFIDENTIAL INFORMATION IN STRICT CONFIDENCE.
WEBSIDESTORY CONFIDENTIALITY Your position with WebSideStory requires
considerable responsibility and trust. Relying on your ethical responsibility
and undivided loyalty, WebSideStory expects to entrust you with highly sensitive
confidential, restricted, and proprietary information involving Trade Secrets
(as defined below). It could prove very difficult to isolate these Trade Secrets
from business activities that you might consider pursuing after termination of
your employment, and in some instances, you may not be able to compete with
WebSideStory in certain ways because of the risk that WebSideStory's Trade
Secrets might be compromised. You are legally and ethically responsible for
protecting and preserving WebSideStory's proprietary rights for use only for
WebSideStory's benefit, and these responsibilities may impose unavoidable
limitations on your ability to pursue some kinds of business opportunities that
might interest you during or after your employment.
TRADE SECRETS DEFINED For purposes of this Agreement, a "Trade Secret" is any
information, including, but not limited to, technical or non-technical data,
formulas, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, employee salaries, financial plans, product
plans, or lists of actual or potential customers or suppliers that: (1) derive
economic value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who can obtain
economic value from their disclosure or use; and (2) are the subject of efforts
that are reasonable under the circumstances to maintain their secrecy.
RESTRICTIONS ON USE AND DISCLOSURE OF TRADE SECRETS You agree not to use or
disclose any Trade Secrets of WebSideStory during your employment and for so
long afterwards as the pertinent information or data remain Trade Secrets,
regardless of whether the Trade Secrets are in written or tangible form, except
as required to perform any duties for WebSideStory.
SCREENING OF PUBLIC RELEASES OF INFORMATION In addition, and without any
intention of limiting your other obligations under this Agreement in any way,
you should not, during your employment, reveal any non-public information
concerning the technology pertaining to the proprietary products and
manufacturing processes of WebSideStory (particularly technology under current
development or improvement), unless you have obtained written approval from
WebSideStory in advance. In that connection, you should submit to WebSideStory
for review any proposed scientific and technical articles and the text of any
public speeches relating to work done for WebSideStory before they are released
or delivered. WebSideStory has the right to disapprove and prohibit, or delete
any parts of such articles or speeches that might disclose WebSideStory's Trade
Secrets or other confidential information or otherwise be contrary to
WebSideStory's business interests.
UPON YOUR TERMINATION OF EMPLOYMENT WITH WEBSIDESTORY, YOU AGREE TO TURN OVER
ALL NOTES, DATA, DISKETTES, TAPES, REFERENCE ITEMS, SKETCHES OR DRAWINGS,
MEMORANDA, RECORDS, AND THE MATERIALS IN YOUR POSSESSION OR CONTROL WHICH IN ANY
WAY RELATE TO ANY WEBSIDESTORY CONFIDENTIAL INFORMATION.
3
<PAGE> 4
RETURN OF MATERIALS At the request of WebSideStory and, in any event, upon the
termination of your employment, you must return to WebSideStory and leave at its
disposal all memoranda, notes, records, drawings, manuals, computer programs,
documentation, diskettes, computer tapes, and other documents or media
pertaining to the business of WebSideStory or your specific duties for
WebSideStory, including all copies of such materials. You must also return to
WebSideStory and leave at its disposal all materials involving any Trade Secrets
of WebSideStory. This Section is intended to apply to all materials made or
compiled by you, as well as to all materials furnished to you by anyone else in
connection with your employment. YOU ARE OBLIGATED TO CONTINUE TO PROTECT
WEBSIDESTORY'S CONFIDENTIAL INFORMATION, AFTER YOU LEAVE OUR EMPLOYMENT.
UNFAIR COMPETITION Employee acknowledges and agrees that the sale or
unauthorized use or disclosure of any of WebSideStory's trade secrets obtained
by Employee during the course of his engagement, including information
concerning WebSideStory's current or any future and proposed work, series or
products, the facts that any such work services, or products are planned, under
consideration, or in production, as well as any descriptions thereof, constitute
unfair competition. Employee promises and agrees not to engage in any unfair
competition with WebSideStory, either during the term of his engagement or at
any time thereafter.
HIRING EMPLOYEES You agree, for a period ending one year after the termination
of your employment with WebSideStory, not to hire or engage, or attempt to hire
or engage, directly or indirectly, any individual who was an employee of
WebSideStory at any time during the one-year period prior to the date of your
termination of employment with WebSideStory, whether for or on behalf of you or
for any entity in which you have a direct or indirect interest, whether as a
proprietor, partner, stockholder, employee, agent, representative, or
otherwise.
IF ANY PART OF THIS AGREEMENT IS NOT LEGAL, THE OTHER LEGAL PARTS WILL REMAIN IN
FORCE.
SEVERABILITY The covenants in this Agreement will be construed as covenants
independent of one another and as obligations distinct from any other contract
between you and WebSideStory. Any claim that you may have against WebSideStory
will not constitute a defense to enforcement by WebSideStory of this Agreement.
SOME OF YOUR OBLIGATIONS WILL SURVIVE THE TERMINATION OF YOUR EMPLOYMENT WITH
WEBSIDESTORY.
SURVIVAL OF OBLIGATIONS The covenants in this Agreement concerning work product,
trade secrets, confidential information, unfair competition and hiring employees
will survive termination of your employment, regardless of who causes the
termination and under what circumstances.
WEBSIDESTORY WILL BE IRREPARABLY HARMED IF YOU BREACH WEBSIDESTORY
CONFIDENTIALITY OR TAKE TRADE SECRETS. TO PROTECT OURSELVES, WE MUST BE ABLE TO
STOP ANY EMPLOYEE IMMEDIATELY WHO MISAPPROPRIATES WEBSIDESTORY CONFIDENTIAL
INFORMATION OR TRADE SECRETS.
SPECIFIC PERFORMANCE AND CONSENT TO INJUNCTIVE RELIEF Irreparable harm will be
presumed if you breach any covenant in this Agreement. The faithful observance
of all covenants in this Agreement is an essential condition to your employment,
and WebSideStory is depending upon absolute compliance. Damages would probably
be very difficult to ascertain if you breached any covenant in this Agreement.
This Agreement is intended to protect the proprietary nights of WebSideStory in
many important ways. Even the threat of any misuse of the technology of
WebSideStory would be extremely harmful, since that technology is essential to
the business of WebSideStory. In light of these facts, you agree that any court
of competent jurisdiction should immediately
4
<PAGE> 5
enjoin any breach of this Agreement upon the request of WebSideStory. Also, you
specifically release WebSideStory from the requirement of posting any bond in
connection with temporary or interlocutory injunctive relief, to the extent
permitted by law.
HOW YOU RECEIVE NOTICES RELATING TO THIS AGREEMENT.
NOTICES All notices required under this Agreement will be made in writing and
will be deemed given when (1) delivered in person, (2) deposited in the U.S.
mail, first class, with proper postage prepaid and properly addressed, or (3)
sent through the interoffice delivery service of WebSideStory, if you are still
employed by WebSideStory at the time.
THIS AGREEMENT APPLIES TO ALL WEBSIDESTORY RELATED PARTIES.
RELATED PARTIES This Agreement will inure to the benefit of, and be binding
upon, WebSideStory and its subsidiaries and its affiliates, together with their
successors and assigns, and you, together with your executor, administrator,
personal representative, heirs, and legatees.
THIS AGREEMENT REFLECTS THE TERMS OF YOUR EMPLOYMENT WITH WEBSIDESTORY. THE
TERMS OF ANY PRIOR LETTERS, NEGOTIATIONS, OR UNDERSTANDINGS THAT CONTRADICT ANY
PROVISION OF THIS AGREEMENT ARE UNENFORCEABLE.
MERGER This Agreement merges and supersedes all prior and contemporaneous
agreements, undertakings, covenants, or conditions, whether oral or written,
express or implied, to the extent that they contradict or conflict with the
terms and conditions hereof. This Agreement is not intended to modify or impair
the effectiveness of the general rules and policies WebSideStory may announce
from time to time.
ARBITRATION The parties agree that they will submit any dispute that arises
under this Agreement to arbitration in San Diego County, California. The parties
hereby agree to use a third party neutral referred by American Arbitration
Association who will conduct the arbitration under the American Arbitration
Association rules for Arbitration. The cost of the arbitration will be shared
equally by both parties.
CHOICE OF LAW This Agreement will be governed by and enforced under the laws of
the State of California, in San Diego County.
IN WITNESS WHEREOF, you, as an employee of WebSideStory, have entered and
executed this Agreement under seal, and WebSideStory has accepted your
undertaking.
5
<PAGE> 6
I HAVE CAREFULLY READ AND CONSIDERED THE PROVISIONS OF THIS AGREEMENT. I
UNDERSTAND AND ACKNOWLEDGE THAT THE TERMS AND CONDITIONS ARE FAIR AND APPEAR
REASONABLY REQUIRED FOR THE PROTECTION OF WEBSIDESTORY AND ITS BUSINESS.
EMPLOYEE:
/s/ AGNES BARRELET
- -----------------------------------------------
Name: Agnes Barrelet
Date: June 24, 1999
Social Security No:
----------------------------
Driver's License No: State:
---------------------------
Address:
- ------------------------------------------------
- ------------------------------------------------
Accepted
WEBSIDESTORY INC.:
/s/ MICHAEL CHRISTIAN
- ------------------------------------------------
Michael Christian, Chief Operating Officer
Date: June 24, 2999
-------------------------------------------
6
<PAGE> 7
EMPLOYMENT CONTRACT
Exhibit A
A1. SALARY
Employee will be paid an annual salary of $200,000. Employee's salary will
be paid in equal installments at regular payroll periods (every two
weeks). Employee's salary will be reviewed periodically by the president
of WebSideStory and may be adjusted from time to time at his sole
discretion.
BONUS
In the event that the Company meets its quarterly projections for pre-tax
income (assuming accrual of the bonus payments contemplated by this
subsection and adjusted for extraordinary expenses), the Company will pay
a quarterly bonus to Agnes Barrelet in the amount of $70,000. The
projections to be used in determining whether a bonus shall be paid
pursuant to this subsection shall be the projections set forth in the
Company's Business Plan Income Statement forecast for 1999 and 2000 as
delivered to the Investors.
A2. DUTIES
Employee will serve as WebSideStory's Vice President of Sales. Employee's
duties may be modified at the discretion of WebSideStory's Board of
Directors. Employee will be under the management of WebSideStory's Board
of Directors. Employee will diligently execute such duties and will devote
substantially all of Employee's time, skill, and effort during ordinary
working hours to such duties.
A3. DEDUCTIONS
WebSideStory will deduct from any compensation payable to Employee the
sums that it is required by law to deduct, including but not limited to
federal and state withholding taxes, social security taxes and state
disability insurance.
A4. BENEFITS
Medical coverage is a benefit that WebSideStory provides for its employees
alone; spouses are excluded from coverage. At your own cost, however, we
do give you the option to include your spouse in the medical and/or dental
plan offered. Since WebSideStory is billed for the spouse premium, we will
in turn deduct the premium from your paycheck. Employee will be entitled
to medical coverage after a period of 30 days.
A5. VACATION, ILLNESS, AND HOLIDAYS
Employee will be entitled each year to vacation time at full pay in
accordance with WebSideStory's vacation policy.
7
<PAGE> 1
EXHIBIT 10.12
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (this "Agreement" is made as of June 18,
1998 by and among WebSideStory, Inc., a California corporation (the "Company")
and Blaise Barrelet, an individual resident of the State of California
("Founder")
RECITALS
A. Concurrently with the execution and delivery of this Agreement, the
Company, the Founders and certain investment partnerships and other investors
will enter into a Stock Purchase Agreement, dated as of June 18, 1999 (the
"Stock Purchase Agreement"). These investment partnerships and other investors
(collectively the "Investors," and each individually an "Investor") are named in
Exhibit A attached to the Stock Purchase Agreement.
B. Pursuant to the Stock Purchase Agreement, the Investors will (i)
purchase an aggregate of 12,528,925 shares of Common Stock from the Founders,
and (ii) purchase from the Company, in return for these 12,528,925 shares of
Common Stock and $5,000,000 in cash, (1) an aggregate of 15,034,712 shares of
Convertible Preferred Stock and (2) an aggregate of 100 shares of Redeemable
Preferred Stock, pursuant to the terms and conditions of the Stock Purchase
Agreement (collectively, these transactions are referred to herein as the
"Share Transactions").
C. Section 5.10 of the Stock Purchase Agreement requires that
noncompetition agreements be executed and delivered by each of Blaise Barrelet
and Agnes Barrelet as a condition to the obligations of the Investors to
consummate the Share Transactions.
AGREEMENT
The parties hereto, intending to be legally bound, agree as follows:
1. DEFINITIONS
Capitalized terms not expressly defined in this Agreement shall have the
respective meanings ascribed to them in the Stock Purchase Agreement.
2. ACKNOWLEDGMENTS BY FOUNDER
Founder acknowledges that: (a) Founder has occupied a position of trust
and confidence with the Company prior to the date hereof, and has become, or
will become, familiar with the following, any and all of which constitute
confidential information (collectively, the "Confidential Information") of the
Company: (i) any and all trade secrets concerning the business and affairs of
the Company, technical or non-technical data, formulas, patterns, compilations,
programs, devices, methods, techniques, drawings, processes, financial data,
employee salaries, financial plans, product plans, or lists of actual or
potential customers or
<PAGE> 2
suppliers that: (1) derive economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from their disclosure or use; and
(2) are the subject of efforts that are reasonable under the circumstances to
maintain their secrecy and any other information, however documented, of the
Company that is a trade secret within the meaning of the Uniform Trade Secrets
Act (California Civil Code Sections 3426 through 3426.11); (ii) of particular
importance to the Company is the protection of the confidentiality of its manner
and method of tracking visitor activity at internet websites; as some of the
particular techniques and methods that the Company utilizes are not used by any
other business or entity and are solely the product of research and development
by the Company; (iii) any and all information concerning the business and
affairs of the Company (which includes historical financial statements,
financial projections and budgets, historical and projected sales, capital
spending budgets and plans, the names and backgrounds of key personnel,
personnel training and techniques and materials), however documented; and (iv)
any and all notes, analyses, compilations, studies, summaries and other material
prepared by or for the Company containing or based, in whole or in part, on any
information included in the foregoing; (b) the business of the Company is
national in scope; (c) its products and services are marketed throughout the
United States; (d) the Company competes with other businesses that are or could
be located in any part of the United States; (e) the Investors have required
that Founder make the covenants set forth in Sections 3 and 4 of this Agreement
as a condition to their consummation of the Share Transactions; (f) the
provisions of Sections 3 and 4 of this Agreement are reasonable and necessary to
protect and preserve the Company's business; and (g) the Company would be
irreparably damaged if Founder were to breach the covenants set forth in
Sections 3 and 4 of this Agreement.
3. CONFIDENTIAL INFORMATION
Founder acknowledges and agrees that all Confidential Information known
or obtained by Founder, whether before or after the date of this Agreement, is
the property of the Company. Therefore, Founder agrees that Founder will not, at
any time, disclose to any unauthorized persons or entities or use for his own
account or for the benefit of any third party any Confidential Information,
whether Founder has such information in Founder's memory or embodied in writing
or other physical form, without the Company's written consent, unless and to the
extent that the Confidential Information is or becomes generally known to and
available for use by the public other than as a result of Founder's fault or the
fault of any other person or entity bound by a duty of confidentiality to the
Company. If Founder ceases to be an employee of the Company, Founder agrees to
deliver to the Company upon the Company's request, all documents, memoranda,
notes, plans, records, reports, and other documentation, models, components,
devices, or computer software, whether embodied in a disk or in other form (and
all copies of all of the foregoing), relating to the businesses, operations or
affairs of the Company and any other Confidential Information that Founder may
then possess or have under Founder's control.
2
<PAGE> 3
4. NONCOMPETITION
As an inducement for the Investors to enter into the Stock Purchase
Agreement and as additional consideration for the consideration to be delivered
to Founder under the Stock Purchase Agreement, Founder agrees that:
(a) For a period of two (2) years after the Closing Date (the
"Noncompete Term"):
(i) Founder shall not, directly or indirectly, engage or invest
in, own, manage, operate, finance, control, or participate in the ownership,
management, operation, financing or control of, be employed by, associated with,
or in any manner connected with, lend Founder's name or any similar name to,
lend Founder's credit to, or render services or advice to, any business whose
products or activities compete in whole or in part with the products or
activities of the Company as the products and activities of the Company may
evolve during the Noncompete Term, anywhere within the United States where the
Company is presently doing business or marketing its services in the area of
internet related services; provided, however, that Founder may purchase or
otherwise acquire up to (but not more than) five percent (5%) of any class of
securities of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any national or
regional securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended. Founder acknowledges and agrees
that the Company is currently performing internet related services in a majority
of states and is currently marketing such services throughout the United States.
Founder further agrees that this covenant is reasonable with respect to its
duration, geographical area and scope;
(ii) Founder shall not, directly or indirectly, either for
himself or any other person or entity: (A) induce or attempt to induce any
employee of the Company to leave the employ of the Company; (B) in any way
interfere with the relationship between the Company and any of its employees;
(C) employ, or otherwise engage as an employee, independent contractor, or
otherwise, any employee of the Company; or (D) induce or attempt to induce any
customer, supplier, licensee, or business relation of the Company to cease doing
business with the Company, or in any way interfere with the relationship between
any customer, supplier, licensee or business relation of the Company; and
(iii) Founder shall not, directly or indirectly, either for
himself or any other person or entity, solicit the business of any person or
entity known to Founder to be a customer of the Company, whether or not Founder
had personal contact with such person or entity, with respect to products or
activities which compete in whole or in part with the products or activities of
the Company;
(b) Founder shall not, at any time during or after the Noncompete Term,
disparage the Company, or any of its stockholders, directors, officers,
employees or agents; and
(c) Founder shall, during the Noncompete Term, within ten (10) days
after accepting any employment, advise the Company of the identity of any
employer of Founder. The Company may serve notice upon each such employer that
Founder is bound by this Agreement and furnish each such employer with a copy of
this Agreement or relevant portions thereof.
3
<PAGE> 4
5. REMEDIES
If Founder breaches the covenants set forth in Sections 3 or 4 of this
Agreement, the Company will be entitled to the following remedies:
(a) Damages from Founder;
(b) In addition to its right to damages and any other rights it may
have, to obtain injunctive or other equitable relief to restrain any breach or
threatened breach or otherwise to specifically enforce the provisions of
Sections 3 and 4 of this Agreement, it being agreed that money damages alone
would be inadequate to compensate the Company and would be an inadequate remedy
for such breach; and
(c) The rights and remedies of the Company are cumulative and not
alternative.
6. SUCCESSORS AND ASSIGNS
This Agreement will be binding upon the parties hereto and will inure to
the benefit of their respective affiliates, successors and assigns, heirs and
legal representatives.
7. WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party hereto in
exercising any right, power, or privilege under this Agreement will operate as a
waiver of such right, power or privilege, and no single or partial exercise of
any such right, power or privilege will preclude any other or further exercise
of such right, power or privilege or the exercise of any other right, power or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement can be discharged by one party hereto, in
whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party hereto; (b) no waiver that may be given by a
party hereto will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party hereto will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement.
8. GOVERNING LAW
This Agreement will be governed by the laws of the State of California
without regard to conflicts of laws principles.
9. DISPUTE RESOLUTION
Except as provided below, any dispute arising out of or relating to this
Agreement or the breach, termination or validity hereof shall be finally settled
by binding arbitration conducted expeditiously by one arbitrator in accordance
with the J.A.M.S./Endispute Streamlined Arbitration Rules and Procedures (the
"J.A.M.S. Rules"). The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon the award rendered by
4
<PAGE> 5
the arbitrator may be entered by any court having jurisdiction thereof. The
place of arbitration shall be San Diego, California.
Such proceedings shall be administered by the arbitrator in accordance
with the J.A.M.S. Rules as he/she deems appropriate, however, such proceedings
shall be conducted in accordance with the following agreed upon procedures:
(i) mandatory exchange of all relevant documents, to be
accomplished within forty-five (45) days of the
initiation of the procedure (documents not so exchanged
will be excluded from the evidence considered at the
hearing absent a showing of good cause);
(ii) no other discovery;
(iii) hearings before the arbitrator which shall consist of a
summary presentation by each side of not more than three
(3) hours; such hearings to take place on one or two
days at a maximum; and
(iv) decision to be rendered not more than ten (10) days
following such hearings.
Notwithstanding anything to the contrary contained herein, the
provisions of this Section 9 shall not apply with regard to, any equitable
remedies to which any party may be entitled hereunder.
Each of the parties hereto (a) hereby irrevocably submits to the
personal jurisdiction of any court of competent jurisdiction in the United
States for the purpose of enforcing the award or decision in any such
proceeding, (b) hereby waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any claim that it
is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution (except as
protected by applicable law), that the suit, action or proceeding is brought in
an inconvenient forum, that the venue of the suit, action or proceeding is
improper or that this Agreement or the subject matter hereof may not be enforced
in or by such court, and hereby waives and agrees not to seek any review by any
court of any other jurisdiction which may be called upon to grant an enforcement
of the judgment of any such court. Each of the parties hereto hereby consents to
service of process by registered mail at the address to which notices are to be
given. Each of the parties hereto agrees that its or his submission to
jurisdiction and its or his consent to service of process by mail is made for
the express benefit of the other parties hereto. Final judgment against any
party hereto in any such action, suit or proceeding may be enforced in other
jurisdictions by suit, action or proceeding on the judgment, or in any other
manner provided by or pursuant to the laws of such other jurisdiction.
10. SEVERABILITY
Whenever possible each provision and term of this Agreement will be
interpreted in a manner to be effective and valid but if any provision or term
of this Agreement is held to be prohibited by or invalid, then such provision or
term will be ineffective only to the extent of such prohibition or invalidity,
without invalidating or affecting in any manner whatsoever the
5
<PAGE> 6
remainder of such provision or term or the remaining provisions or terms of.
this Agreement. If any of the covenants set forth in Section 4 of this Agreement
are held to be unreasonable, arbitrary or against public policy, such covenants
will be considered divisible with respect to scope, time and geographic area,
and in such lesser scope, time and geographic area, will be effective, binding
and enforceable against Founder.
11. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
12. SECTION HEADINGS. CONSTRUCTION
The section headings in this Agreement are provided for convenience only
and will not affect its construction or interpretation. All references to
"section" or "sections" refer to the corresponding section or sections of this
Agreement unless otherwise specified. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
13. NOTICES
All notices, consents, waivers, and other communications under this
Agreement shall be in writing and will be deemed to have been duly given when
(a) delivered by hand (with written confirmation of receipt), (b) sent by
facsimile (with written confirmation of receipt), provided that a copy is mailed
by registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party hereto may designate by notice to the other parties):
Founder: Blaise Barrelet
6450 Lusk Blvd., Suite E-205
San Diego, California 92121
Facsimile No.: (619) 546-0480
The Company: WebSideStory, Inc.
6450 Lusk Blvd., Suite E-205
San Diego, California 92121
Attention: President and Chief
Executive Officer
Facsimile No.: (619) 546-0480
With a copy to: Baker & McKenzie
101 West Broadway, Twelfth Floor
San Diego, California 92101
Attention: John J. Hentrich, Esq.
Facsimile No.: (619) 236-0429
6
<PAGE> 7
14. ENTIRE AGREEMENT
This Agreement and the Stock Purchase Agreement constitute the entire
agreement between the parties hereto with respect to the subject matter of this
Agreement and supersede all prior written and oral agreements and understandings
between the Company and Founder with respect to the subject matter of this
Agreement. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
THE COMPANY FOUNDER:
By: /s/ MICHAEL CHRISTIAN /s/ BLAISE BARRELET
----------------------- ----------------------
Michael Christian, Blaise Barrelet
Chief Operating Officer
and General Counsel
8
<PAGE> 1
EXHIBIT 10.13
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (this "Agreement") is made as of June 18,
1998 by and among WebSideStory, Inc. a California corporation (the "Company")
and Agnes Barrelet, an individual resident of the State of California
("Founder").
RECITALS
A. Concurrently with the execution and delivery of this Agreement, the
Company, the Founders and certain investment partnerships and other investors
will enter into a Stock Purchase Agreement, dated as of June 18, 1999 (the
"Stock Purchase Agreement"). These investment partnerships and other investors
(collectively the "Investors," and each individually an "Investor") are named in
Exhibit A attached to the Stock Purchase Agreement.
B. Pursuant to the Stock Purchase Agreement, the Investors will (i)
purchase an aggregate of 12,528,925 shares of Common Stock from the Founders,
and (ii) purchase from the Company, in return for these 12,528,925 shares of
Common Stock and $5,000,000 in cash, (1) an aggregate of 15,034,712 shares of
Convertible Preferred Stock and (2) an aggregate of 100 shares of Redeemable
Preferred Stock, pursuant to the terms and conditions of the Stock Purchase
Agreement (collectively, these transactions are referred to herein as the "
Transactions").
C. Section 5.10 of the Stock Purchase Agreement requires that
noncompetition agreements be executed and delivered by each of Blaise Barrelet
and Agnes Barrelet as a condition to the obligations of the Investors to
consummate the Share Transactions.
AGREEMENT
The parties hereto, intending to be legally bound, agree as follows:
1. DEFINITIONS
Capitalized terms not expressly defined in this Agreement shall have the
respective meanings ascribed to them in the Stock Purchase Agreement.
2. ACKNOWLEDGMENTS BY FOUNDER
Founder acknowledges that: (a) Founder has occupied a position of trust
and confidence with the Company prior to the date hereof, and has become, or
will become, familiar with the following, any and all of which constitute
confidential information (collectively, the "Confidential Information") of the
Company: (i) any and all trade secrets concerning the business and affairs of
the Company, technical or non-technical data, formulas, patterns, compilations,
programs, devices, methods, techniques, drawings, processes, financial data,
employee salaries, financial plans, product plans, or lists of actual or
potential customers or
<PAGE> 2
suppliers that: (1) derive economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from their disclosure or use; and
(2) are the subject of efforts that are reasonable under the circumstances to
maintain their secrecy and any other information, however documented, of the
Company that is a trade secret within the meaning of the Uniform Trade Secrets
Act (California Civil Code Sections 3426 through 3426.11); (ii) of particular
importance to the Company is the protection of the confidentiality of its manner
and method of tracking visitor activity at internet websites; as some of the
particular techniques and methods that the Company utilizes are not used by any
other business or entity and are solely the product of research and development
by the Company; (iii) any and all information concerning the business and
affairs of the Company (which includes historical financial statements,
financial projections and budgets, historical and projected sales, capital
spending budgets and plans, the names and backgrounds of key personnel,
personnel training and techniques and materials), however documented; and (iv)
any and all notes, analyses, compilations, studies, summaries and other material
prepared by or for the Company containing or based, in whole or in part, on any
information included in the foregoing; (b) the business of the Company is
national in scope; (c) its products and services are marketed throughout the
United States; (d) the Company competes with other businesses that are or could
be located in any part of the United States; (e) the Investors have required
that Founder make the covenants set forth in Sections 3 and 4 of this Agreement
as a condition to their consummation of the Share Transactions; (f) the
provisions of Sections 3 and 4 of this Agreement are reasonable and necessary to
protect and preserve the Company's business; and (g) the Company would be
irreparably damaged if Founder were to breach the covenants set forth in
Sections 3 and 4 of this Agreement.
3. CONFIDENTIAL INFORMATION
Founder acknowledges and agrees that all Confidential Information known
or obtained, by Founder, whether before or after the date of this Agreement, is
the property of the Company. Therefore, Founder agrees that Founder will not, at
any time, disclose to any unauthorized persons or entities or use for his own
account or for the benefit of any third party any Confidential Information,
whether Founder has such information in Founder's memory or embodied in writing
or other physical form, without the Company's written consent, unless and to the
extent that the Confidential Information is or becomes generally known to and
available for use by the public other than as a result of Founder's fault or the
fault of any other person or entity bound by a duty of confidentiality to the
Company. If Founder ceases to be an employee of the Company, Founder agrees to
deliver to the Company upon the Company's request, all documents, memoranda,
notes, plans, records, reports, and other documentation, models, components,
devices, or computer software, whether embodied in a disk or in other form (and
all copies of all of the foregoing), relating to the businesses, operations or
affairs of the Company and any other Confidential Information that Founder may
then possess or have under Founder's control.
2
<PAGE> 3
4. NONCOMPETITION
As an inducement for the Investors to enter into the Stock Purchase
Agreement and as additional consideration for the consideration to be delivered
to Founder under the Stock Purchase Agreement, Founder agrees that:
(a) For a period of two (2) years after the Closing Date (the
"Noncompete Term"):
(i) Founder shall not, directly or indirectly, engage or invest
in, own, manage, operate, finance, control, or participate in the ownership,
management, operation, financing or control of, be employed by, associated with,
or in any manner connected with, lend Founder's name or any similar name to,
lend Founder's credit to, or render services or advice to, any business whose
products or activities compete in whole or in part with the products or
activities of the Company as the products and activities of the Company may
evolve during the Noncompete Term, anywhere within the United States where the
Company is presently doing business or marketing its services in the area of
internet related services; provided, however that Founder may purchase or
otherwise acquire up to (but not more than) five percent (5%) of any class of
securities of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any national or
regional securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended. Founder acknowledges and agrees
that the Company is currently performing internet related services in a majority
of states and is currently marketing such services throughout the United States.
Founder further agrees that this covenant is reasonable with respect to its
duration, geographical area and scope;
(ii) Founder shall not, directly or indirectly, either for
himself or any other person or entity: (A) induce or attempt to induce any
employee of the Company to leave the employ of the Company; (B) in any way
interfere with the relationship between the Company and any of its employees;
(C) employ, or otherwise engage as an employee, independent contractor, or
otherwise, any employee of the Company; or (D) induce or attempt to induce any
customer, supplier, licensee, or business relation of the Company to cease doing
business with the Company, or in any way interfere with the relationship
between any customer, supplier, licensee or business relation of the Company;
and
(iii) Founder shall not, directly or indirectly, either for
himself or any other person or entity, solicit the business of any person or
entity known to Founder to be a customer of the Company, whether or not Founder
had personal contact with such person or entity, with respect to products or
activities which compete in whole or in part with the products or activities of
the Company;
(b) Founder shall not, at any time during or after the Noncompete Term,
disparage the Company, or any of its stockholders, directors, officers,
employees or agents; and
(c) Founder shall, during the Noncompete Term, within ten (10) days
after accepting any employment, advise the Company of the identity of any
employer of Founder. The Company may serve notice upon each such employer that
Founder is bound by this Agreement and furnish each such employer with a copy of
this Agreement or relevant portions thereof.
3
<PAGE> 4
5. REMEDIES
if Founder breaches the covenants set forth in Sections 3 or 4 of this
Agreement, the Company will be entitled to the following remedies:
(a) Damages from Founder;
(b) In addition to its right to damages and any other rights it may
have, to obtain injunctive or other equitable relief to restrain any breach or
threatened breach or otherwise to specifically enforce the provisions of
Sections 3 and 4 of this Agreement, it being agreed that money damages alone
would be inadequate to compensate the Company and would be an inadequate remedy
for such breach; and
(c) The rights and remedies of the Company are cumulative and not
alternative.
6. SUCCESSORS AND ASSIGNS
This Agreement will be binding upon the parties hereto and will inure to
the benefit of their respective affiliates, successors and assigns, heirs and
legal representatives.
7. WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party hereto in
exercising any right, power, or privilege under this Agreement will operate as a
waiver of such right, power or privilege, and no single or partial exercise of
any such right, power or privilege will preclude any other or further exercise
of such right, power or privilege or the exercise of any other right, power or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement can be discharged by one party hereto, in
whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party hereto; (b) no waiver that may be given by a
party hereto will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party hereto will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement.
8. GOVERNING LAW
This Agreement will be governed by the laws of the State of California
without regard to conflicts of laws principles.
9. DISPUTE RESOLUTION
Except as provided below, any dispute arising out of or relating to this
Agreement or the breach, termination or validity hereof shall be finally settled
by binding arbitration conducted. expeditiously by one arbitrator in accordance
with the J.A.M.S./Endispute Streamlined Arbitration Rules and Procedures (the
"J.A.M.S. Rules"). The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. sections 1-16, and judgment upon the award rendered by
4
<PAGE> 5
the arbitrator may be entered by any court having jurisdiction thereof. The
place of arbitration shall be San Diego, California.
Such proceedings shall be administered by the arbitrator in accordance
with the J.A.M.S. Rules as he/she deems appropriate, however, such proceedings
shall be conducted in accordance with the following agreed upon procedures:
(i) mandatory exchange of all relevant documents, to be
accomplished within forty-five (45) days of the
initiation of the procedure (documents not so exchanged
will be excluded from the evidence considered at the
hearing absent a showing of good cause);
(ii) no other discovery;
(iii) hearings before the arbitrator which shall consist of a
summary presentation by each side of not more than three
(3) hours; such hearings to take place on one or two
days at a maximum; and
(iv) decision to be rendered not more than ten (10) days
following such hearings.
Notwithstanding anything to the contrary contained herein, the
provisions of this Section 9 shall not apply with regard to any equitable
remedies to which any party may be entitled hereunder.
Each of the parties hereto (a) hereby irrevocably submits to the
personal jurisdiction of any court of competent jurisdiction in the United
States for the purpose of enforcing the award or decision in any such
proceeding, (b) hereby waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any claim that it
is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution (except as
protected by applicable law), that the suit, action or proceeding is brought in
an inconvenient forum, that the venue of the suit, action or proceeding is
improper or that this Agreement or the subject matter hereof may not be enforced
in or by such court, and hereby waives and agrees not to seek any review by any
court of any other jurisdiction which may be called upon to grant an enforcement
of the judgment of any such court. Each of the parties hereto hereby consents to
service of process by registered mail at the address to which notices are to be
given. Each of the parties hereto agrees that its or his submission to
jurisdiction and its or his consent to service of process by mail is made for
the express benefit of the other parties hereto. Final judgment against any
party hereto in any such action, suit or proceeding may be enforced in other
jurisdictions by suit, action or proceeding on the judgment, or in any other
manner provided by or pursuant to the laws of such other jurisdiction.
10. SEVERABILITY
Whenever possible each provision and term of this Agreement will be
interpreted in a manner to be effective and valid but if any provision or term
of this Agreement is held to be prohibited by or invalid, then such provision or
term will be ineffective only to the extent of such prohibition or invalidity,
without invalidating or affecting in any manner whatsoever the
5
<PAGE> 6
remainder of such provision or term or the remaining provisions or terms of this
Agreement. If any of the covenants set forth in Section 4 of this Agreement are
held to be unreasonable, arbitrary or against public policy, such covenants will
be considered divisible with respect to scope, time and geographic area, and in
such lesser scope, time and geographic area, will be effective, binding and
enforceable against Founder.
11. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
12. SECTION HEADINGS, CONSTRUCTION
The section headings in this Agreement are provided for convenience only
and will not affect its construction or interpretation. All references to
"section" or "sections" refer to the corresponding section or sections of this
Agreement unless otherwise specified. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
13. NOTICES
All notices, consents, waivers, and other communications under this
Agreement shall be in writing and will be deemed to have been duly given when
(a) delivered by hand (with written confirmation of receipt), (b) sent by
facsimile (with written confirmation of receipt), provided that a copy is
mailed by registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party hereto may designate by notice to the other parties):
Founder: Agnes Barrelet
6450 Lusk Blvd., Suite E-205
San Diego, California 92121
Facsimile No.: (619) 546-0480
The Company: WebSideStory, Inc.
6450 Lusk Blvd., Suite E-205
San Diego, California 92121
Attention: President and Chief
Executive Officer
Facsimile No.: (619) 546-0480
With a copy to: Baker & McKenzie
101 West Broadway, Twelfth Floor
San Diego, California 92101
Attention: John J. Hentrich, Esq.
Facsimile No.: (619) 236-0429
6
<PAGE> 7
14. ENTIRE AGREEMENT
This Agreement and the Stock Purchase Agreement constitute the entire
agreement between the parties hereto with respect to the subject matter of this
Agreement and supersede all prior written and oral agreements and understandings
between the Company and Founder with respect to the subject matter of this
Agreement. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
THE COMPANY FOUNDER:
By: /s/ MICHAEL CHRISTIAN /s/ AGNES BARRELET
----------------------- ----------------------
Michael Christian, Agnes Barrelet
Chief Operating Officer
and General Counsel
8
<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated February 28, 2000
("Effective Date") is made by and between WebSideStory, Inc. ("the Company"), a
California corporation having its principal offices at 10182 Telesis Court, 6th
Floor, San Diego, CA and John J. Hentrich ("Employee").
AGREEMENT
1. Title and Duties. Employee's title and position with the Company will
be President and Chief Executive Officer.
2. At-will Employment. Employee's employment relationship with the
Company is at-will, terminable at any time and for any reason by either the
Company or Employee. The Company nonetheless reserves the right to discharge
Employee for the reasons defined in Sections 11 and 12 below. While certain
paragraphs of this Agreement describe events that could occur at a particular
time in the future, nothing in this Agreement may be construed as a guarantee of
employment of any length.
3. Policy Compliance. Employee is required to comply with the Company
policy, practice and procedure in effect during his employment. Employee agrees
to comply with the terms and conditions of the Company's Confidentiality and
Inventions Agreement ("Confidentiality Agreement") that is attached to this
Agreement as Exhibit 1 and is incorporated by reference.
4. Compensation.
4.1 Base Salary. Employee's annual Base Salary during his
employment will be Two Hundred Seventy Five Thousand Dollars ($275,000) to be
paid according to the Company's regular payroll practices. Any increase to the
Base Salary is within the sole discretion of the Board of Directors of the
Company (the "Board"). The Base Salary described above is subject to deduction
for applicable federal, state and local income, social security and other
payroll deductions.
4.2 Bonus Compensation. In addition to the Base Salary, in Fiscal
Year 2000 Employee is eligible for an annualized bonus in an amount and based
upon attainment of objectives to be determined by the Board in its discretion.
4.3 Additional Compensation. In addition, Employee shall be
entitled to payment of the additional compensation set forth on "Attachment A".
Payment of this additional compensation to Employee shall be accelerated upon
the events described in "Attachment A".
4.4 Stock Option Exercise and related rights. On the date of this
Agreement, Employee has exercised through "early exercise" all options to
purchase the Company's Common Stock granted to him on December 20, 1999 under
the Company's 2000 Equity Incentive Plan ("Plan"). It is intended that the
repurchase rights of the Company with respect to the shares of Common Stock so
purchased be limited to give Employee the full rights to
<PAGE> 2
accelerated vesting under the conditions described in Employee's original Stock
Option Grant Notice ( the "Grant") and Stock Option Agreement dated December 20,
1999 (the "Stock Option Agreement"), in addition to such other rights as
Employee might enjoy by operation of the the Grant, the Stock Option Agreement
and the Plan. In addition, Employee shall be entitled to the payments referenced
in Section 1(b) of the Stock Option Agreement.
5. Fringe Benefits and Vacation. During his employment, Employee will
receive fringe benefits ("Benefits") at least equal to those generally available
to executive staff. Employee shall be entitled to four weeks vacation per year.
6. Reimbursement of Expenses. During his employment and according to
Company policy and practice, and subject to final approval by the Chief
Executive Officer, Employee shall be entitled to reimbursement of reasonable and
actual expenses incurred on behalf of the Company.
7. Return Of Property. Employee agrees that all documents, records,
apparatus, equipment and other physical property (as more specifically defined
in the Confidentiality Agreement) which is furnished to or obtained by Employee
in the course of his employment with the Company shall be and remain the sole
property of the Company. Employee agrees that upon the termination of his
employment he will return all such property (whether or not it pertains to trade
secret or proprietary information), and will not make or retain copies,
reproductions, or summaries of any such property.
8. Non Competition. During his employment Employee shall not directly or
indirectly, either as an employee, employer, consultant, corporate officer,
director, or in any other individual or representative capacity, engage or
participate in any business that is in competition with the business of the
Company in any location, unless such participation or interest is fully
disclosed to the Company and approved by the Board.
9. Agreement with Previous Employers. Employee confirms he does not have
any agreement with a previous employer that prevents or limits him in performing
under this Agreement. In the event the Company is sued by any previous employer
of Employee as a result of any act by Employee, the Company may recover costs or
attorneys' fees expended in defending against such a lawsuit.
10. Effect of Termination Without Cause or Constructive Termination
following a Change of Control. As set forth in Section 2 above, Employee's
employment with the Company is "at-will". However, in the event of an
involuntary termination of Employee without Cause (as defined in the Stock
Option Agreement) or Constructive Termination of Employee (as defined in the
Stock Option Agreement), Employee shall be entitled to payment of one year's
base salary and an amount equal to the prior year's performance bonus (or
estimated current year bonus), whichever is greater. Employee shall also be
entitled to reimbursement for payment of health insurance premiums during this
period.
11. Dispute Resolution Procedures. Any dispute or claim arising out of
this agreement shall be subject to final and binding arbitration. The
arbitration will be conducted by one arbitrator who is a member of the American
Arbitration Association (AAA) and will be
2
<PAGE> 3
governed by the Model Employment Arbitration rules of AAA. The arbitration shall
be held in San Diego, California. The arbitrator shall have an authority to
determine the arbitrability of any claim and enter a final and binding judgment
at the conclusion of any proceedings in respect of the arbitration. Any final
judgment only may be appealed on the grounds of improper bias or improper
conduct of the arbitrator. The arbitrator will apply California substantive law
in all respects. The arbitrator will decide how the costs of arbitration should
be split. In the event of any arbitration arising out of or relating to this
Agreement, its breach or enforcement, including an action for declaratory
relief, the prevailing party in such action or proceedings shall be entitled to
receive his or its damages, court costs and reasonable out-of-pocket expenses
including reasonable attorneys' fees. Such recovery shall include court costs,
reasonable out-of-pocket expenses, and attorneys' fees on appeal, if any. The
arbitrator or court shall determine who is the prevailing party, whether or not
the dispute or controversy proceeds to final judgment.
12. General Provisions.
12.1 Governing Law. This Agreement will be governed by and
construed according to California law, without regard to principles of conflict
of laws.
12.2 Assignment. Employee may not assign, pledge or encumber his
interest in this Agreement or any part of this Agreement.
12.3 Binding Nature. This Agreement will be binding upon
Employee, his heirs, executors, and administrators and will inure to the benefit
of the Company, its subsidiaries, successors and assigns.
12.4 No Waiver of Breach. The failure to enforce any provision of
this Agreement will not be construed as a waiver of any such provision, nor
prevent a party thereafter from enforcing the provision or any other provision
of this Agreement. The rights granted the parties are cumulative, and the
election of one will not constitute a waiver of such party's right to assert all
other legal and equitable remedies available under the circumstances.
12.5 Severability. The provisions of this Agreement are
severable, and if any provision will be held to be invalid or otherwise
unenforceable, in whole or in part, the remainder of the provisions, or
enforceable parts of this Agreement, will not be affected.
12.6 Entire Agreement. This Agreement, including the
Confidentiality Agreement and any Option Agreements, constitutes the entire
agreement of the parties with respect to the subject matter of this Agreement,
and supersedes all prior and contemporaneous oral or written negotiations,
agreements or understandings between the parties.
12.7 Modification/Waiver. No modification, amendment,
supplementation, termination or attempted waiver of this Agreement will be valid
unless in writing, signed by the party against whom modification, amendment
termination or waiver is sought to be enforced.
12.8 Fees and Expenses. If any proceeding is brought for the
enforcement or interpretation of this Agreement, or because of any alleged
dispute, breach, default or misrepresentation in connection with any provisions
of this Agreement, the successful or prevailing party will be entitled to
recover from the other party reasonable attorneys' fees and
3
<PAGE> 4
other costs incurred in that proceeding (including, in the case of an
arbitration, arbitration fees and expenses), in addition to any other relief to
which such party may be entitled.
12.9 Duplicate Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original. Such counterparts
together constitute one instrument.
12.10 Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.11 Drafting Ambiguities. Each party to this Agreement and his
or its counsel have reviewed and revised this Agreement. The rule of
construction that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any of the
amendments to this Agreement.
WebSideStory, Inc. Employee
By: /s/ Michael C. Christian /s/ John J. Hentrich
------------------------------------------------ ----------------------
Michael C. Christian, Senior Vice President John J. Hentrich
4
<PAGE> 5
ATTACHMENT A TO FEBRUARY 28, 2000 EMPLOYMENT AGREEMENT
JOHN J. HENTRICH/WEBSIDESTORY INC.
1. The monthly payment schedule and amounts shall be pursuant to the schedule
set forth below, commencing on April 1, 2000 (in the amount of $45,139)
declining gradually through March 1, 2002 (in the amount of $40,051).
2. Payment of the amounts set forth in the schedule will be accelerated in full
in the event of (1) a Change of Control or Constructive Termination as
defined in the Stock Option Agreement, or (2) the Company has cash and cash
equivalents equal to or exceeding four million dollars ($4,000,000.00),
provided, however, that if Holder is in registration for or shall have
completed an initial public offering of its equity securities prior to
December 31, 2000, such payments shall not be accelerated by virtue of (2),
above. In the event of such acceleration the lump sum payable will be
reduced by the time value of the payment stream, using a 6.5% simple annual
interest discount rate.
WEBSIDESTORY, INC.
BONUS SCHEDULE
Bonus
Date Amount
-------- -------
04/01/00 45,139
05/01/00 44,756
06/01/00 44,700
07/01/00 44,331
08/01/00 44,260
09/01/00 44,039
10/01/00 43,691
11/01/00 43,600
12/01/00 43,266
-------
397,782
01/01/01 43,159
02/01/01 42,938
03/01/01 42,442
04/01/01 42,500
05/01/01 42,201
06/01/01 42,059
07/01/01 41,776
08/01/01 41,619
09/01/01 41,399
10/01/01 41,136
11/01/01 40,959
5
<PAGE> 6
12/01/01 40,711
-------
502,898
01/01/02 40,518
02/01/02 40,299
03/01/02 40,051
-------
120,868
END OF SCHEDULE A TO FEBRUARY 28, 2000
JOHN J. HENTRICH/WEBSIDESTORY EMPLOYMENT
AGREEMENT
6
<PAGE> 1
EXHIBIT 10.15
WEBSIDESTORY
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
In consideration of my employment or continued employment by WEBSIDESTORY (the
"Company"), and the compensation now and hereafter paid to me, I, JOHN HENTRICH,
hereby agree as follows:
1. NONDISCLOSURE
1.1 RECOGNITION OF COMPANY'S RIGHTS; NONDISCLOSURE. At all times during my
employment and thereafter, I will hold in strictest confidence and will not
disclose, use, lecture upon or publish any of the Company's Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing. I will obtain Company's
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information. I hereby assign to the Company any
rights I may have or acquire in such Proprietary Information and recognize that
all Proprietary Information shall be the sole property of the Company and its
assigns.
1.2 PROPRIETARY INFORMATION. The term "Proprietary Information" shall mean any
and all confidential and/or proprietary knowledge, data or information of the
Company. By way of illustration but not limitation, "Proprietary Information"
includes tangible and intangible information relating to antibodies and other
biological materials, cell lines, samples of assay components, media and/or cell
lines and procedures and formulations for producing any such assay components,
media and/or cell lines, formulations, products, processes, know-how, designs,
formulas, methods, developmental or experimental work, clinical data,
improvements, discoveries, plans for research, new products, marketing and
selling, business plans, budgets and unpublished financial statements, licenses,
prices and costs, suppliers and customers, and information regarding the skills
and compensation of other employees of the Company.
1.3 THIRD PARTY INFORMATION. I understand, in addition, that the Company has
received and in the future will receive from third parties confidential or
proprietary information ("Third Party Information") subject to a duty on the
Company's part to maintain the confidentiality of such information and to use it
only for certain limited purposes. During the term of my employment and
thereafter, I will hold Third Party Information in the strictest confidence and
will not disclose to anyone (other than Company personnel who need to know such
information in connection with their work for the Company) or use, except in
connection with my work for the Company, Third Party Information unless
expressly authorized by an officer of the Company in writing.
1.4 NO IMPROPER USE OF INFORMATION OF PRIOR EMPLOYERS AND OTHERS. During my
employment by the Company I will not improperly use or disclose any confidential
information or trade secrets, if any, of any former employer or any other person
to whom I have an obligation of confidentiality, and I will not bring, onto the
premises of the Company any unpublished documents or any property belonging to
any former employer or any other person to whom I have an obligation of
confidentiality unless consented to in writing by that former employer or
person. I will use in the performance of my duties only information which is
generally known and used by persons with training and experience comparable to
my own, which is common knowledge in the industry or otherwise legally in the
public domain, or which is otherwise provided or developed by the Company.
2. ASSIGNMENT OF INVENTIONS.
2.1 PROPRIETARY RIGHTS. The term "Proprietary Rights" shall mean all trade
secret, patent, copyright, mask work and other intellectual property rights
throughout the world.
2.2 PRIOR INVENTIONS. Inventions, if any, patented or unpatented, which I made
prior to the commencement of my employment with the Company are excluded from
the scope of this Agreement. To preclude any possible uncertainty, I have set
forth on Exhibit-2 (Previous Inventions) attached hereto a complete list of all
Inventions that I have, alone or jointly with others, conceived, developed or
reduced to practice or caused to be conceived, developed or reduced to practice
prior to the commencement of my employment with the Company, that I consider to
be my property or the property of third parties and that I wish to have excluded
from the scope of this Agreement (collectively referred to as "Prior
Inventions"). If disclosure of any such Prior Invention would cause me to
violate any prior confidentiality agreement, I understand that I am not to list
such Prior
1.
<PAGE> 2
Inventions in Exhibit -2 but am only to disclose a cursory name for each such
invention, a listing of the party(ies) to whom it belongs and the fact that full
disclosure as to such inventions has not been made for that reason. A space is
provided on Exhibit -2 for such purpose. If no Such disclosure is attached, I
represent that there are no Prior Inventions. If, in the course of my employment
with the Company, I incorporate a Prior Invention into a Company product,
process or machine, the Company is hereby granted and shall have a nonexclusive,
royalty-free, irrevocable, perpetual, worldwide license (with rights to
sublicense through multiple tiers of sublicensees) to make, have made, modify,
use and sell such Prior Invention. Notwithstanding the foregoing, I agree that I
will not incorporate, or permit to be incorporated, Prior Inventions in any
Company Inventions without the Company's prior written consent.
2.3 ASSIGNMENT OF INVENTIONS. Subject to Sections 2.4 and 2.6, I hereby assign
and agree to assign in the future (when any such Inventions or Proprietary
Rights are first reduced to practice or first fixed in a tangible medium, as
applicable) to the Company all my right, title and interest in and to any and
all Inventions (and all Proprietary Rights with respect thereto) whether or not
patentable or registrable under copyright or similar statutes, made or conceived
or reduced to practice or learned by me, either alone or jointly with others,
during the period of my employment with the Company. Inventions assigned to the
Company, or to a third party as directed by the Company pursuant to this Section
2, are hereinafter referred to as "Company Inventions".
2.4 NONASSIGNABLE INVENTIONS. This Agreement does not apply to an Invention
which qualifies fully as a nonassignable Invention under Section 2870 of the
California Labor Code (hereinafter "Section 2870"). I have reviewed the
notification on Exhibit-1 (Limited Exclusion Notification) and agree that my
signature acknowledges receipt of the notification.
2.5 OBLIGATION TO KEEP COMPANY INFORMED. During the period of my employment
and for six (6) months after termination of my employment with the Company, I
will promptly disclose to the Company fully and in writing all Inventions
authored, conceived or reduced to practice by me, either alone or jointly with
others. In addition, I will promptly disclose to the Company all patent
applications filed by me or on my behalf within a year after termination of
employment. At the time of each such disclosure, I will advise the Company in
writing of any Inventions that I believe fully qualify for protection under
Section 2870; and I will at that time provide to the Company in writing, all
evidence necessary to substantiate that belief. The Company will keep in
confidence and will not use for any purpose or disclose to third parties without
my consent any confidential information disclosed in writing to the Company
pursuant to this Agreement relating to Inventions that qualify fully for
protection under the provisions of Section 2870. I will preserve the
confidentiality of any Invention that does not fully qualify for protection
under Section 2870.
2.6 GOVERNMENT OR THIRD PARTY. I also agree to assign all my right, title and
interest in and to any particular Company Invention to a third party, including
without limitation the United States, as directed by the Company.
2.7 WORKS FOR HIRE. I acknowledge that all original works of authorship which
are made by me (solely or jointly with others) within the scope of my employment
and which are protectable by copyright are "works made for hire", pursuant to
United States Copyright Act (17 U.S.C., Section 101).
2.8 ENFORCEMENT OF PROPRIETARY RIGHTS. I will assist the Company in every
proper way to obtain, and from time to time enforce, United States and foreign
Proprietary Rights relating to Company Inventions in any and all countries. To
that end I will execute, verify and deliver such documents and perform such
other acts (including appearances as a witness) as the Company may reasonably
request for use in applying for, obtaining, perfecting, evidencing, sustaining
and enforcing such Proprietary Rights and the assignment thereof. In addition, I
will execute, verify and deliver assignments of such Proprietary Rights to the
Company or its designee. My obligation to assist the Company with respect to
Proprietary Rights relating to such Company Inventions in any and all countries
shall continue beyond the termination of my employment, but the Company shall
compensate me at a reasonable rate after my termination for the time actually
spent by me at the Company's request on such assistance.
In the event the Company is unable for any reason, after reasonable effort, to
secure my signature on any document needed in connection with the actions
specified in the preceding paragraph, I hereby irrevocably designate and appoint
the Company and its duly authorized officers and agents as my agent and attorney
in fact, which appointment is coupled with an interest, to act for and in my
behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of the preceding paragraph with
the same legal force and
2.
<PAGE> 3
effect as if executed by me. I hereby waive and quitclaim to the Company any and
all claims, of any nature whatsoever, which I now or may hereafter have for
infringement of any Proprietary Rights assigned hereunder to the Company.
3. RECORDS. I agree to keep and maintain adequate and current records (in the
form of notes, sketches, drawings and in any other form that may be required by
the Company) of all Proprietary Information developed by me and all Inventions
made by me during the period of my employment at the Company, which records
shall be available to and remain the sole property of the Company at all times.
4. ADDITIONAL ACTIVITIES. I agree that during the period of my employment by
the Company I will not, without the Company's express written consent, engage in
any employment or business activity which is competitive with, or would
otherwise conflict with, my employment by the Company. I agree further that for
the period of my employment by the Company and for one (1) year after the date
of termination of my employment by the Company I will not induce any employee of
the Company to leave the employ of the Company.
5. NO CONFLICTING OBLIGATION. I represent that my performance of all the
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep in confidence information acquired by me in
confidence or in trust prior to my employment by the Company. I have not entered
into, and I agree I will not enter into, any agreement either written or oral in
conflict herewith.
6. RETURN OF COMPANY DOCUMENTS. When I leave the employ of the Company, I
will deliver to the Company any and all drawings, notes, memoranda,
specifications, devices, formulas, and documents, together with all copies
thereof, and any other material containing or disclosing any Company Inventions,
Third Party Information or Proprietary Information of the Company. I further
agree that any property situated on the Company's premises and owned by the
Company, including disks and other storage media, filing cabinets or other work
areas, is subject to inspection by Company personnel at any time with or without
notice. Prior to leaving, I will cooperate with the Company in completing and
signing the Company's termination statement.
7. LEGAL AND EQUITABLE REMEDIES. Because my services are personal and unique
and because I may have access to and become acquainted with the Proprietary
Information of the Company, the Company shall have the right to enforce this
Agreement and any of its provisions by, injunction specific performance or other
equitable relief, without bond and without prejudice to any other rights and
remedies that the Company may leave for a breach of this Agreement.
8. NOTICES. Any notices required or permitted hereunder shall be given to the
appropriate party at the address specified below or at such other address as the
Party shall specify in writing. Such notice shall be deemed given upon personal
delivery to the appropriate address or if sent by certified or registered mail,
three (3) days after the date of mailing
9. NOTIFICATION OF NEW EMPLOYER. In the event that I leave the employ of the
Company, I hereby consent to the notification of my new employer of my rights
and obligations under this Agreement.
10. GENERAL PROVISIONS.
10.1 GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This Agreement will be
governed by and construed according to the laws of the State of California, as
such laws are applied to agreements entered into and to be performed entirely
within California between California residents. I hereby expressly consent to
the personal jurisdiction of the state and federal courts located in San Diego
County, California for any lawsuit filed there against me by Company arising
from or related to this Agreement.
10.2 SEVERABILITY. In case any one or more of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
the other provisions of this Agreement, and this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had never been contained
herein. If moreover, any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to duration,
Geographical scope, activity or subject, it shall be construed by limiting and
reducing it, so as to be enforceable to the extent compatible with the
applicable taw as it shall then appear.
10.3 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon my heirs,
executors, administrators and other legal representatives and will be for the
benefit of the Company, its successors, and its assigns.
3.
<PAGE> 4
10.4 SURVIVAL. The provisions of this Agreement shall survive the termination
of my employment the assignment of this Agreement by the Company to any
successor in interest or other assignee.
10.5 EMPLOYMENT. I agree and understand that nothing in this Agreement shall
confer any right with respect to continuation of employment by the Company, nor
shall it interfere in any way with my right or the Company's right to terminate
my employment at any time, with or without Cause.
10.6 WAIVER. No waiver by the Company of any breach of this Agreement shall be
a waiver of any preceding or succeeding breach. No waiver by the Company of any
right under this Agreement shall be construed as a waiver of any other right.
The Company shall not be required to give notice to enforce strict adherence to
all terms of this Agreement.
10.7 ENTIRE AGREEMENT. The obligations pursuant to Sections 1 and 2 of this
Agreement shall apply to any time during which I was previously employed, or am
in the future employed, by the Company as a consultant if no other agreement
governs nondisclosure and assignment of inventions during such period. This
Agreement is the final, complete and exclusive agreement of the Parties with
respect to the subject matter hereof and supersedes and merges all prior
discussions between us. No modification of or amendment to this Agreement, nor
any waiver of any rights under this Agreement, will be effective unless in
writing and signed by the Party to be charged. Any subsequent change or changes
in my duties, salary or compensation will not affect the validity or scope of
this Agreement.
This Agreement shall be effective as of the first day of any employment
with the Company, namely:
11/19, 1999
- -------------
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT -1 TO THIS AGREEMENT.
Dated: 11/19/99
----------------------------
/s/ J. HENTRICH
- ----------------------------------
(Signature)
- ----------------------------------
JOHN HENTRICH
ACCEPTED AND AGREED TO:
WEBSIDESTORY
- ----------------------------------
[ILLEGIBLE]
- ----------------------------------
By: /s/ [ILLEGIBLE]
---------------------------
Title: CHIEF OPERATING OFFICER
---------------------------
Dated: NOV. 19, 1999
----------------------------
4.
<PAGE> 5
EXHIBIT 1
LIMITED EXCLUSION NOTIFICATION
THIS IS TO NOTIFY THE EMPLOYEE in accordance with Section 2872 of the California
Labor Code that the foregoing Agreement between the Employee and the Company
does not require the Employee to assign or offer to assign to the Company any
invention that the Employee developed entirely on your own time without using
the Company's equipment, supplies, facilities or trade secret information except
for those inventions that either:
1. RELATE AT THE TIME OF CONCEPTION OR REDUCTION TO PRACTICE OF THE INVENTION
TO THE COMPANY'S BUSINESS, OR ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH
OR DEVELOPMENT OF THE COMPANY;
2. RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE COMPANY.
To the extent a provision in the foregoing Agreement purports to require
the Employee to assign an invention otherwise excluded from the preceding
paragraph, the provision is against the public policy of this state and is
unenforceable.
This limited exclusion does not apply to any patent or invention covered
by a contract between the Company and the United States or any of its agencies
requiring full title to such patent or invention to be in the United States.
I ACKNOWLEDGE RECEIPT of a copy of this notification.
/s/ J. HENTRICH
---------------------------------------
JOHN HENTRICH
Date: 11/19/99
-----------------------------------
WITNESSED BY:
- -----------------------------------
(PRINTED NAME OF REPRESENTATIVE)
5.
<PAGE> 6
EXHIBIT - 2
TO: WEBSIDESTORY
FROM: JOHN HENTRICH
DATE: 11/19, 1999
SUBJECT: PREVIOUS INVENTIONS
1. Except as listed in Section 2 below, the following is a complete
list of all inventions or improvements relevant to the subject matter of my
employment by BAKER & McKENZIE (the "Company") that have been made or conceived
or first reduced to practice by me alone or jointly with others prior to my
engagement by the Company :
[X] No inventions or improvements.
[ ] See below:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[ ] Additional sheets attached.
2. Due to a prior confidentiality agreement, I cannot complete the
disclosure under Section I above with respect to inventions or improvements
generally listed below, the proprietary rights and duty of confidentiality with
respect to which I owe to the following party(ies):
<TABLE>
<CAPTION>
INVENTION OR IMPROVEMENT PARTY(ies) RELATIONSHIP
<S> <C> <C>
1.
----------------------------------- ----------- -------------------------
2.
----------------------------------- ----------- -------------------------
3.
----------------------------------- ----------- -------------------------
</TABLE>
[ ] Additional sheets attached.
6.
<PAGE> 1
EXHIBIT 10.16
WEBSIDESTORY, INC.
2000 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(INCENTIVE AND NONSTATUTORY STOCK OPTIONS)
Pursuant to your Stock Option Grant Notice ("Grant Notice") and this Stock
Option Agreement, WebSideStory, Inc. (the "Company") has granted you an option
("Option") under its 2000 Equity Incentive Plan (the "Plan") to purchase the
number of shares of the Company's Common Stock indicated in your Grant Notice at
the exercise price indicated in your Grant Notice. Defined terms not explicitly
defined in this Stock Option Agreement but defined in the Plan shall have the
same definitions as in the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations contained herein, your option
will vest as provided in your Grant Notice, provided that vesting will cease
upon the termination of your Continuous Service.
(a) SPECIAL EXERCISE PERIOD, ACCELERATION AND VESTING PROVISIONS. In the
event that your Continuous Service terminates due to an involuntary termination
(not including death or Disability) without Cause or due to a Constructive
Termination within three years from the Vesting Commencement Date, then,
notwithstanding anything to the contrary in the Plan, you shall have until the
end of twelve (12) months after the date of such termination to exercise your
Options.
In the event of a Change in Control, the vesting of an additional 500,000
shares of your Option (or remaining unvested shares, whichever is less) shall
immediately accelerate as provided in your Grant Notice and, notwithstanding
anything to the contrary in the Plan, you shall have until the end of twelve
(12) months after the date of a Change in Control to exercise your Options (or
the normal exercise period, if later). In the event that both (i) your
Continuous Service terminates due to an Involuntary termination (not including
death or Disability) without Cause or due to a Constructive Termination and (ii)
such termination occurs within 60 days prior to or any time after a Change in
Control (or agreement to effect a Change in Control) then, notwithstanding
anything to the contrary in the Plan, the vesting of all unvested portions of
your Option shall immediately accelerate and you shall have until the end of
four (4) years after the date of such termination to exercise your Option or any
part of it.
For purposes of this subsection 1(a) only, Change in Control means: (i) a
dissolution or liquidation of the Company; (ii) a sale of all or a majority of
the assets of the Company; (iii) a merger or consolidation in which the Company
is not the surviving corporation and in which beneficial ownership of securities
of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of Directors has changed; (iv) a reverse
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<PAGE> 2
merger in which the Company is the surviving corporation but the shares of
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, and in which beneficial ownership of securities of the
Company representing at least fifty percent (50%) of the combined voting power
entitled to vote in the election of Directors has changed; (v) an acquisition by
any person, entity or group within the meaning of Section 13(d) or 14(d) of the
Exchange Act, or any comparable successor provisions (excluding any employee
benefit plan, or related trust, sponsored or maintained by the Company or
subsidiary of the Company or other entity controlled by the Company) of the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of Directors; or (vi) in the event that the individuals
who, as of the date of adoption of the Plan, are members of the Company's Board
(the "Incumbent Board"), cease for any reason to constitute at least fifty
percent (50%) of the Board. (If the election, or nomination for election by the
Company's stockholders, of any new Director is approved by a vote of at least
fifty percent (50%) of the Incumbent Board, such new Director shall be
considered to be a member of the Incumbent Board in the future.)
For purposes of this subsection 1(a) only, Constructive Termination means:
the occurrence of any of the following events or conditions: (i) (A) a change in
your status, title, position or responsibilities (including reporting
responsibilities) which represents an adverse change from your status, title,
position or responsibilities as in effect at any time within ninety (90) days
preceding the date of a Change in Control (as defined above) or at any time
thereafter; (B) the assignment to you of any duties or responsibilities which
are inconsistent with your status, title, position or responsibilities as in
effect at any time within ninety (90) days preceding the date of a Change in
Control or at any time thereafter; or (C) any removal of you from or failure to
reappoint or reelect you to any of such offices or positions, except in
connection with the termination of your Continuous Service for Cause, as a
result of your Disability or death or by you other than as a result of
Constructive Termination; (ii) a reduction in your annual base compensation or
any failure to pay you any compensation or benefits to which you are entitled
within five (5) days of the date due; (iii) the Company's requiring you to
relocate to any place outside a twenty (20) mile radius of your current work
site, except for reasonably required travel on the business of the Company or
its Affiliates which is not materially greater than such travel requirements
prior to the Change in Control; (iv) the failure by the Company to (A) continue
in effect (without reduction in benefit level and/or reward opportunities) any
material compensation or employee benefit plan in which you were participating
at any time within ninety (90) days preceding the date of a Change in Control or
at any time thereafter, unless such plan is replaced with a plan that provides
substantially equivalent compensation or benefits to you, or (B) provide you
with compensation and benefits, in the aggregate, at least equal (in terms of
benefit levels and/or reward opportunities) to those provided for under each
other employee benefit plan, program and practice in which you were
participating at any time within ninety (90) days preceding the date of a Change
in Control or at any time thereafter; (v) any material breach by the Company of
any provision of an agreement between the Company and you, whether pursuant to
this Plan or otherwise, other than a breach which is cured by the Company within
fifteen (15) days following notice by you of such breach; or (vi) the failure of
the Company to obtain an
2
<PAGE> 3
agreement, satisfactory to you, from any successors and assigns to assume and
agree to perform the obligations created under this Plan.
For purposes of this subsection 1(a) only, Cause means the occurrence of
any of the following (and only the following): (i) your conviction of any felony
involving fraud or act of dishonesty against the Company or its Affiliates; (ii)
conduct by you which, based upon good faith and reasonable factual investigation
and determination of the Company (or, you are an Officer, of the Board),
demonstrates gross unfitness to serve; or (iii) your intentional, material
violation of any statutory or fiduciary duty that you have to the Company or its
Affiliates. In addition, if you are not an Officer, Cause also shall include
your poor performance of services for the Company or its Affiliates as
determined by the Company following (A) written notice to you describing the
nature of such deficiency and (b) your failure to cure such deficiency within
thirty (30) days following receipt of the such written notice.
(b) PARACHUTE PAYMENTS. In the event that the acceleration of the vesting
and exercisability of the Stock Awards and/or the lapse of reacquisition or
repurchase rights with respect to Stock Awards provided for in subsection 1(a)
and benefits otherwise payable to you (i) constitute "parachute payments" within
the meaning of Section 280G of the Code, or any comparable successor provisions,
and (ii) but for this subsection would be subject to the excise tax imposed by
Section 4999 of the Code, or any interest or penalties payable with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then you shall be
entitled to receive from the Company an additional payment (the "Gross-Up
Payment") in an amount such that after payment by you of all taxes (including,
without limitation, any income and employment taxes and any interest and
penalties imposed with respect thereto) and the Excise Tax imposed upon the
Gross-Up Payment, you will retain an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Gross-Up Payment.
The accounting firm engaged by the Company for general audit purposes as
of the day prior to the effective date of the Change in Control shall perform
the foregoing calculations. If the accounting firm so engaged by the Company is
serving as accountant or auditor for the individual, entity or group effecting
the Change in Control, the Company shall appoint a nationally recognized
accounting firm to make the determinations required hereunder. The Company shall
bear all expenses with respect to the determinations by such accounting firm
required to be made hereunder.
The accounting firm engaged to make the determinations hereunder shall
provide its calculations, together with detailed supporting documentation, to
the Company and you within fifteen (15) calendar days after the date on which
your right to a Payment is triggered (if requested at that time by the Company
or you) or such other time as requested by the Company or you. If the accounting
firm determines that no Excise Tax is payable with respect to a Payment, it
shall furnish the Company and you with an opinion reasonably acceptable to you
that no Excise Tax will be imposed with respect to such Payment.
In the event that the excise tax incurred by you is determined by the
Internal Revenue Service to be greater or lesser than the amount so determined
by such accounting firm, then the
3
<PAGE> 4
Company and you agree to promptly make such additional payment, including
interest and any tax penalties, to the other party as the accounting firm
reasonably determine is appropriate to ensure that the net economic effect to
you under this Section, on an after-tax basis, is as if the Code Section 4999
excise tax did not apply to you. For purposes of making the calculations
required by this Section, the accounting firm may make reasonable assumptions
and approximations concerning applicable taxes and may rely on interpretations
of the Code for which there is a "substantial authority" tax reporting position.
The Company and you shall furnish to the accounting firm such information and
documents the accounting firm may reasonably request in order to make a
determination under this Section. The Company shall bear all costs the
accounting firm may reasonably incur in connection with any calculations
contemplated by this Section.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common
Stock subject to your option and your exercise price per share referenced in
your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.
3. EXERCISE PRIOR TO VESTING ("EARLY EXERCISE"). If permitted in your
Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise" of
your option is permitted) and subject to the provisions of your option, you may
elect at any time that is both (i) during the period of your Continuous Service
and (ii) during the term of your option, to exercise all or part of your option,
including the nonvested portion of your option; provided, however, that:
(a) a partial exercise of your option shall be deemed to cover
first vested shares of Common Stock and then the earliest vesting installment of
unvested shares of Common Stock;
(b) any shares of Common Stock so purchased from installments that
have not vested as of the date of exercise shall be subject to the purchase
option in favor of the Company as described in the Company's form of Early
Exercise Stock Purchase Agreement;
(c) you shall enter into the Company's form of Early Exercise
Stock Purchase Agreement with a vesting schedule that will result in the same
vesting as if no early exercise had occurred; and
(d) if your option is an incentive stock option, then, as provided
in the Plan, to the extent that the aggregate Fair Market Value (determined at
the time of grant) of the shares of Common Stock with respect to which your
option plus all other incentive stock options you hold are exercisable for the
first time by you during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), your option(s)
or portions thereof that exceed such limit (according to the order in which they
were granted) shall be treated as nonstatutory stock options.
4. METHOD OF PAYMENT. Payment of the exercise price is due in full upon
exercise of all or any part of your option. You may elect to make payment of the
exercise price in cash or by check or in any other manner PERMITTED BY YOUR
GRANT NOTICE, which may include one or more of the following:
4
<PAGE> 5
(a) In the Company's sole discretion at the time your option is
exercised and provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in The Wall Street Journal, pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board that,,
prior to the issuance of Common Stock, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to pay the
aggregate exercise price to the Company from the sales proceeds.
(b) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the Company at the time
you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting the redemption of
the Company's stock.
(c) Pursuant to the following deferred payment alternative:
(i) Not less than one hundred percent (100%) of the
aggregate exercise price, plus accrued interest, shall be due four (4) years
from date of exercise or, at the Company's election, upon termination of your
Continuous Service for Cause.
(ii) Interest shall be compounded at least annually and shall
be charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any portion of any
amounts other than amounts stated to be interest under the deferred payment
arrangement.
(iii) At any time that the Company is incorporated in
Delaware, payment of the Common Stock's "par value," as defined in the Delaware
General Corporation Law, shall be made in cash and not by deferred payment.
(iv) In order to elect the deferred payment alternative, you
must, as a part of your written notice of exercise, give notice of the election
of this payment alternative and, in order to secure the payment of the deferred
exercise price to the Company hereunder, if the Company so requests, you must
tender to the Company a promissory note and a security agreement covering the
purchased shares of Common Stock, both in form and substance satisfactory to the
Company, or such other or additional documentation as the Company may request.
5. WHOLE SHARES. You may exercise your option only for whole shares of
Common Stock.
5
<PAGE> 6
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
or, if such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the registration
requirements of the Securities Act. The exercise of your option must also comply
with other applicable laws and regulations governing your option, and you may
not exercise your option if the Company determines that such exercise would not
be in material compliance with such laws and regulations.
7. TERM. You may not exercise your option before the commencement of
its term or after its term expires. The term of your option commences on the
Date of Grant and, except as set forth in Section 1(a), above, expires upon the
EARLIEST of the following:
(a) three (3) months after the termination of your Continuous
Service for any reason other than your Disability or death, provided that if
during any part of such three- (3-) month period your option is not exercisable
solely because of the condition set forth in the preceding paragraph relating to
"Securities Law Compliance," your option shall not expire until the earlier of
the Expiration Date or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of your Continuous Service;
(b) twelve (12) months after the termination of your Continuous
Service due to your Disability;
(c) six (6) months after your death if you die either during your
Continuous Service or within three (3) months after your Continuous Service
terminates;
(d) the Expiration Date indicated in your Grant Notice; or
(e) the day before the tenth (10th) anniversary of the Date of
Grant.
If your option is an incentive stock option, note that, to obtain the
federal income tax advantages associated with an "incentive stock option," the
Code requires that at all times beginning on the date of grant of your option
and ending on the day three (3) months before the date of your option's
exercise, you must be an employee of the Company or an Affiliate, except in the
event of your death or Disability. The Company has provided for extended
exercisability of your option under certain circumstances for your benefit but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you continue to provide services to the Company or an Affiliate
as a Consultant or Director after your employment terminates or if you otherwise
exercise your option more than three (3) months after the date your employment
terminates.
8. EXERCISE.
(a) You may exercise the vested portion of your option (and the
unvested portion of your option if your Grant Notice so permits) during its term
by delivering a Notice of Exercise (in a form designated by the Company)
together with the exercise price to the Secretary
6
<PAGE> 7
of the Company, or to such other person as the Company may designate, during
regular business hours, together with such additional documents as the Company
may then require.
(b) By exercising your option you agree that, as a condition to
any exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
your option, (2) the lapse of any substantial risk of forfeiture to which the
shares of Common Stock are subject at the time of exercise, or (3) the
disposition of shares of Common Stock acquired upon such exercise.
(c) If your option is an incentive stock option, by exercising
your option you agree that you will notify the Company in writing within fifteen
(15) days after the date of any disposition of any of the shares of the Common
Stock issued upon exercise of your option that occurs within two (2) years after
the date of your option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of your option.
(d) By exercising your option you agree that the Company (or a
representative of the underwriter(s)) may, in connection with the first
underwritten registration of the offering of any securities of the Company under
the Securities Act, require that you not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, any shares of
Common Stock or other securities of the Company held by you, for a period of
time specified by the underwriters) (not to exceed one hundred eighty (180)
days) following the effective date of the registration statement of the Company
filed under the Securities Act. You further agree to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the
underwriters) that are consistent with the foregoing or that are necessary to
give further effect thereto. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to your shares of
Common Stock until the end of such period.
9. TRANSFERABILITY. Your option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option
10. RIGHT OF FIRST REFUSAL. At the Committee's discretion, Common Stock
issued pursuant to the exercise of an Option may be subject to a requirement
that if you propose to sell, pledge, or otherwise transfer any Common Stock
acquired pursuant to exercise of an Option, or any interest in such Common
Stock, to any person or entity, the Company will have a right of first refusal
(the "Right of First Refusal") with respect to such Common Stock. If you desire
to transfer Common Stock subject to the Right of First Refusal, then you will
give a written notice (the "Transfer Notice") to the Company describing fully
the proposed transfer, including the number of shares of Common Stock proposed
to be transferred, the proposed transfer price, and the name and address of the
proposed transferee. The Transfer Notice will be signed both by you and by the
proposed transferee and must constitute a binding commitment of both parties to
the transfer of the Common Stock. The Company will have the right to purchase
7
<PAGE> 8
the Common Stock subject to the Transfer Notice on the terms of the proposal
referred to in the Transfer Notice, subject to any change in such terms
permitted under subsection 10(a), by delivery of a notice of exercise of the
Right of First Refusal within 30 days after the date the Transfer Notice is
received by the Company. The Company's rights under this Section 10 will be
freely assignable, in whole or in part.
(a) TRANSFER OF SHARES. If the Company fails to exercise the Right
of First Refusal within 30 days after the date on which it receives the Transfer
Notice, then you may, not later than six months following receipt of the
Transfer Notice by the Company, consummate a transfer of the Common Stock
subject to the Transfer Notice on the terms and conditions described in the
Transfer Notice. Any proposed transfer on terms and conditions different from
those described in the Transfer Notice, as well as any subsequent proposed
transfer by you, will again be subject to the Right of First Refusal and will
again require compliance with the procedure described in Section 10(a). If the
Company exercises its Right of First Refusal, then you will immediately endorse
and deliver to the Company every stock certificate representing the Common Stock
being purchased, and the Company will then promptly pay the purchase price in
accordance with the terms set forth in the Transfer Notice.
(b) REPURCHASE PAYMENT. The amount payable to you pursuant to the
Company's exercise of the Right of First Refusal will be paid to you in
accordance with the terms and conditions of the Transfer Notice or may, at the
election of the Company, be paid in full in cash.
(c) BINDING EFFECT. The Company's Right of First Refusal will
inure to the benefit of its successors and assigns and will be binding upon any
transferee of the Common Stock, other than a transferee acquiring Common Stock
in a transaction with respect to which the Company failed to exercise its Right
of First Refusal (a "Free Transferee") or a transferee of a Free Transferee.
(d) TERMINATION OF RIGHT OF FIRST REFUSAL. Notwithstanding any
other provision of this Section 10, if the Common Stock is listed on any United
States securities exchange or traded on any formal over-the-counter market in
general use in the United States at the time you desire to transfer your Common
Stock, the Company will no longer have the Right of First Refusal, and you will
have no obligation to comply with this Section 10.
11. RIGHT OF REPURCHASE. At the Committee's discretion, Common Stock
issued pursuant to the exercise of an Option may be subject to a right, but not
an obligation, of repurchase by the Corporation (the "Right of Repurchase"), at
the price specified in subsection 11(a), if you cease to be an Employee for any
reason ("Employment Termination") at any time after the grant of the Option
pursuant to which such Common Stock was issued. Common Stock issued by the
Company will only be transferable by you subject to the Right of Repurchase, and
the Company will legend the Right of Repurchase on the stock certificates
evidencing such shares of Common Stock and will take such other steps as it
deems necessary to ensure compliance with this restriction. The Company's rights
under this Section 11 will be freely assignable, in whole or in part.
8
<PAGE> 9
(a) REPURCHASE PRICE. The price per share per share of Common
Stock at which the Company may exercise the Right of Repurchase under Section 11
(the "Repurchase Price") will be the higher of the exercise price of each share
of Common Stock as paid by you, or fair market value of the shares of Common
Stock on the date the Company sends the notice to you of its exercise of its
Right of Repurchase pursuant to Section 11, provided, however, that
notwithstanding the definition of "fair market value" in the Plan, if you do not
agree with the determination of fair market value by the Company's Board of
Directors, fair market value shall be determined by the dispute resolution
procedures set forth in Section 12 below independently of any determination of
the Company or its Board of Directors.
(b) REPURCHASE PROCEDURE. The Company may exercise its Right of
Repurchase by sending a written notice to you and to the Escrow Agent, if any,
of its taking such action and specifying the number of shares of Common Stock
being repurchased. The Company's Right of Repurchase will terminate if not
exercised by written notice from the Company to you within 30 days of the date
on which the Company learns of the Employment Termination or the last date any
Option granted to you is exercised, which ever is later. If the Company
exercises its Right of Repurchase, then you, or if applicable, the Escrow Agent,
will deliver to the Company every stock certificate representing the shares of
Common Stock being repurchased, together with appropriate Assignments Separate
from Certificates, and the Company will then promptly pay the total Repurchase
Price in cash (or cancellation of purchase money indebtedness for the Common
Stock, if applicable) to you, or if applicable, to the Escrow Agent, for
delivery to you.
(c) ELECTION TO DEFER PURCHASE OF INCENTIVE STOCK OPTION SHARES.
(i) Notwithstanding the preceding provisions of this
Section 11, if shares of Common Stock were issued to you pursuant to an
Incentive Stock Option, then you may elect to defer the Company's repurchase of
such Common Stock pursuant to this Section 11 until the holding period
requirements of Section 422(a) of the Code are met. Such election will be in
writing in such form as the Committee may require and will be delivered to the
Company and to the Escrow Agent by certified mail no later than seven days after
the date on which you receive notice that the Company elects to exercise its
Right of Repurchase. Such election will pertain to all such Common Stock issued
to you and will be irrevocable.
(ii) If you make the election described in subsection 11(c),
then the Company will repurchase such Common Stock on or before the date which
is 90 days following the earlier of the date on which you die or the date on
which the holding period requirements of Section 422(a) of the Code are met. The
Repurchase Price of each such share of Common Stock determined under subsection
11 (a) will be calculated by substituting for your Employment Termination date
the earlier of the date on which you die or the date on which such holding
period requirements are met.
(d) ESCROW. To facilitate the consummation of the Company's Right
of Repurchase under this Section 11, at the request of the Committee, you and
the Company will execute Joint Escrow Instructions and you will deliver and
deposit with the Escrow Agent named in the Joint Escrow Instructions two
"Assignments Separate from Certificate," together with all
9
<PAGE> 10
certificates evidencing the shares of Common Stock issued to you pursuant to the
Plan, duly endorsed in blank. The Escrow Agent will hold such documents and
deliver the same to the Company pursuant to the Joint Escrow Instructions and in
accordance with the terms of this Section 11, as applicable.
(e) BINDING EFFECT. The Company's Right of Repurchase will inure
to the benefit of its successors and assigns and will be binding on any of your
representatives, executors, administrators, heirs, or legatees.
(f) PAYMENT OF NET AMOUNT OWING. Notwithstanding anything to the
contrary contained herein, if the Company determines to exercise its Rights of
Repurchase pursuant to this subsection before any Common Stock has been issued
as a result of an exercise of an Option, in lieu of issuing any Common Stock,
the Company will have the right, but not the obligation, to pay to you the net
amount owing to you.
(g) TERMINATION OF RIGHT OF REPURCHASE. Notwithstanding any other
provision of this Section 11, in the event that the Common Stock is listed on
any United States securities exchange or traded on any formal over-the-counter
market in general use in the United States at the time you would otherwise be
required to transfer your Common Stock, the Company will no longer have the
Right of Repurchase, and you will have no obligation to comply with this
Section 11.
12. DISPUTE RESOLUTION. In the event of any dispute arising under this
Agreement, authorized representatives of the Parties shall meet or communicate
by phone or otherwise no later than ten working days after receipt of notice by
either Party of request for dispute resolution and shall enter into good faith
negotiations aimed at resolving the dispute.
At the end of such 10 days, if no agreement resolving the dispute has been
reached, any action arising out of or related to this Agreement, excluding
intellectual property disputes, shall be submitted to binding arbitration under
the then-current commercial arbitration rules of the American Arbitration
Association. The arbitration shall be conducted in San Diego California by three
arbitrators, each of whom shall be an expert in the area of the Internet
industry and not associated with either Party. Each party shall have the right
to select one such arbitrator, and the two selected arbitrators shall select the
third. The decision of the arbitrators shall be binding on the Parties, and
judgment in accordance with that decision may be entered in any court having
jurisdiction thereof. If there is any dispute concerning the fair market value
of Common Stock and the arbitrators decide that the fair market value is higher
than determined by the Company, then the Company shall pay all expenses
associated with such arbitration, including the expenses of the neutral
arbitrators. In all other cases, each party shall pay its own expenses
associated with such arbitration, but the Company shall pay 80% of the expenses
of the neutral arbitrators.
13. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or an
Affiliate, their respective shareholders, Boards of Directors, Officers
10
<PAGE> 11
or Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate,
14. WITHHOLDING OBLIGATIONS.
(a) At the time you exercise your option, in whole or in part, or
at any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise
agree to make adequate provision for (including by means of a "cashless
exercise" pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an Affiliate, if any, which arise in connection
with your option.
(b) Upon your request and subject to approval by the Company, in
its sole discretion, and compliance with any applicable conditions or
restrictions of law, the Company may withhold from fully vested shares of Common
Stock otherwise issuable to you upon the exercise of your option a number of
whole shares of Common Stock having a Fair Market Value, determined by the
Company as of the date of exercise, not in excess of the minimum amount of tax
required to be withheld by law. If the date of determination of any tax
withholding obligation is deferred to a date later than the date of exercise of
your option, share withholding pursuant to the preceding sentence shall not be
permitted unless you make a proper and timely election under Section 83(b) of
the Code, covering the aggregate number of shares of Common Stock acquired upon
such exercise with respect to which such determination is otherwise deferred, to
accelerate the determination of such tax withholding obligation to the date of
exercise of your option. Notwithstanding the filing of such election, shares of
Common Stock shall be withheld solely from fully vested shares of Common Stock
determined as of the date of exercise of your option that are otherwise issuable
to you upon such exercise. Any adverse consequences to you arising in connection
with such share withholding procedure shall be your sole responsibility.
(c) You may not exercise your option unless the tax withholding
obligations of the Company and/or any Affiliate are satisfied. Accordingly, you
may not be able to exercise your option when desired even though your option is
vested, and the Company shall have no obligation to issue a certificate for such
shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein.
15. NOTICES. Any notices provided for in your option or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by mail by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the last
address you provided to the Company.
11
<PAGE> 12
16. GOVERNING PLAN DOCUMENT. Except as set forth to the contrary herein,
our option is subject to all the provisions of the Plan, the provisions of which
are hereby made a part of your option, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan.
WEBSIDESTORY, INC. OPTIONHOLDER:
By: /s/ MICHAEL CHRISTIAN /s/ JOHN J. HENTRICH
------------------------------------ -----------------------------------
Signature Signature
Title: Chief Operating Officer Date: 11/19/99
--------------------------------- ------------------------------
Date: November 19, 1999
----------------------------------
12
<PAGE> 13
WEBSIDESTORY, INC.
STOCK OPTION GRANT NOTICE
(2000 EQUITY INCENTIVE PLAN)
WebSideStory, Inc. (the "Company"), pursuant to its 2000 Equity Incentive Plan
(the "Plan"), hereby grants to Optionholder an option to purchase the number of
shares of the Company's Common Stock set forth below. This option is subject to
all of the terms and conditions as set forth herein and in the Stock Option
Agreement, the Plan (except as set forth in the Stock Option Agreement), and the
Notice of Exercise, all of which are attached hereto and incorporated herein in
their entirety.
<TABLE>
<S> <C>
Optionholder: John J. Hentrich
Date of Grant: November 19, 1999
Vesting Commencement Date: November 19, 1999
Number of Shares Subject to Option: 1,500,000
Exercise Price (Per Share): $1.10
Total Exercise Price: $1,650,000
Expiration Date: November 19, 2009
</TABLE>
TYPE OF GRANT: [X] Incentive Stock Option(1) [ ] Nonstatutory Stock Option
EXERCISE SCHEDULE: [X] Same as Vesting Schedule [X] Early Exercise Permitted
VESTING SCHEDULE: 100,000 of the shares vest immediately upon the Vesting
Commencement Date. 1/156th of the remaining shares vest
weekly thereafter over the next three years; provided,
however, that, in the event that the Continuous Service of an
Optionholder terminates due to an involuntary termination (not
including death or Disability) without Cause (as defined in
the Option Agreement) or due to a Constructive Termination (as
defined in the Option Agreement), then the lesser of (a) an
additional 100,000 shares or (b) the total number of unvested
options, shall immediately vest, provided further, that in the
event of a Change in Control (as defined in the Option
Agreement), the lesser of (x) an additional 500,000 shares or
(y) the remaining unvested shares, shall immediately vest;
provided, further, that in the event that the Continuous
Service of Optionholder terminates due to an involuntary
termination (not including death or Disability) without Cause
(as defined in the Option Agreement) or due to a Constructive
Termination (as defined in the Option Agreement) within sixty
days prior to or any time after a Change of Control (or
agreement to effect a Change of Control), then all of the
unvested shares shall become immediately vested.
PAYMENT: By one or a combination of the following items (described in
the Stock Option Agreement):
By cash or check
Pursuant to a Regulation T Program if the Shares are
publicly traded
By delivery of already-owned shares if the Shares are
publicly traded
By deferred payment
ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionholder acknowledges
receipt of, and understands and agrees to, this Grant Notice, the Stock Option
Agreement and the Plan. Optionholder further acknowledges that as of the Date of
Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth the
entire understanding between Optionholder and the Company regarding the
acquisition of stock in the Company and supersede all prior oral and written
agreements on that subject with the exception of (i) options previously granted
and delivered to Optionholder under the Plan.
- -----------------------
(1) If this is an incentive stock option, it (plus your other outstanding
incentive stock options) cannot be first exercisable for more than $100,000 in
any calendar year. Any excess over $100,000 is a nonstatutory stock option.
<PAGE> 1
EXHIBIT 10.17
PROMISSORY NOTE
NEGOTIABLE
US$111,271.00 January 3, 2000
San Diego, California
FOR VALUE RECEIVED, the undersigned ("Maker") promises to pay to the order of
WebSideStory, Inc., a corporation organized under the laws of the state of
California ("Holder"), at 10182 Telesis Court, San Diego, California or at such
other place as the Holder hereof may from time to time designate, the principal
sum of ONE HUNDRED ELEVEN THOUSAND TWO HUNDRED SEVENTY-ONE dollars
($111,271.00), with interest on the unpaid principal balance from time to time
outstanding, computed on the basis of a three hundred sixty (360) day year,
actual days elapsed, at a rate (the "Interest Rate") equal to 6.5% per annum.
Payment of principal and interest shall be made in the lawful money of the
United States which shall be legal tender for public and private debts at the
time of payment. The entire outstanding principal balance and all accrued but
unpaid interest shall be due and payable on the third anniversary of this note
(the "Due Date"). Each payment hereunder shall be credited first to interest
then accrued and the remainder to unpaid principal, and interest shall thereupon
cease upon the principal so credited, Maker shall have the right to repay all or
a portion of the outstanding principal and/or interest hereunder at any time or
times prior to the Due Date, without penalty.
This note shall automatically become due and payable prior to the Due Date,
without notice or demand and without the need for any action or election by the
Holder hereof, upon the occurrence at any time of any of the following events of
default:
(1) The making of an assignment for the benefit of creditors by any
party liable for the payment of this note, whether as maker, endorser,
guarantor, surety, or otherwise, or the voluntary appointment (at the request of
any such party or with the consent of any such party) of a receiver, custodian,
liquidator or trustee in bankruptcy of any such party's property or the filing
by any such party of a petition in bankruptcy or other similar proceeding under
law for relief of debtors; or
(2) The filing (other than by Holder) against any party liable for the
payment of this note, whether as maker, endorser, surety, or otherwise, of a
petition in bankruptcy or other similar proceeding under law for relief of
debtors, or the involuntary appointment of a receiver, custodian, liquidator or
trustee in bankruptcy of the property of any such party, and such petition or
appointment is not vacated or discharged within ninety (90) calendar days after
the filing or making thereof.
-1-
<PAGE> 2
If this note is not paid when due, whether at the Due Date or by acceleration,
the undersigned promises to pay all costs of collection, including without
limitation reasonable attorneys' fees, and all expenses in connection with the
protection or realization of any collateral securing this note incurred by the
Holder hereof on account of such collection, whether or not suit is filed
hereon; such costs and expenses shall include without limitation all costs,
attorneys' fees and expenses incurred by the Holder hereof in connection with
any insolvency, bankruptcy, reorganization, arrangement or other similar
proceedings involving the undersigned or involving any endorser hereof, which in
any way affect the exercise by the Holder hereof of its rights and remedies
under this note or under any security agreement, pledge agreement, cash
collateral agreement or other agreement securing this note.
Presentment, demand, protest, notices of protest, dishonor and non-payment of
this note and all notices of every kind are hereby waived. To the extent
permitted by applicable law, the defense of the statute of limitations is hereby
waived by the undersigned.
No single or partial exercise of any power hereunder or under any security
agreement, pledge agreement, cash collateral agreement or other agreement
securing this note shall preclude other or further exercise thereof or the
exercise of any other power. The Holder hereof shall at all times have the right
to proceed against any portion of the security held for this note in such order
and in such manner as the Holder may deem fit, without waiving any rights with
respect to any other security. No delay or omission on the part of the Holder
hereof in exercising any right hereunder shall operate as a waiver of such right
or of any other right under this note. The release of any party liable on this
note shall not operate to release any other party liable hereon.
This note may be prepaid in whole or in part at any time without premium or
penalty. Partial prepayments of principal shall not postpone or delay the date
of any subsequent payments of principal or change the amount of such payments.
The payment obligations of both principal and interest represented by this note
will be forgiven in full, and this note will be returned to Maker promptly, if
and when any of the following events occurs on or before the Due Date;
1 a voluntary sale by Holder's shareholders of a majority of the Holder's
common stock;
2 a voluntary sale of substantially all assets of Holder;
3 Holder has cash and cash equivalents in aggregate in excess of $4
million;
-2-
<PAGE> 3
4 Constructive Termination as defined in the Stock Option Agreement of
December 20, 1999 between Maker and Holder.
Notwithstanding the fact that Holder has cash and cash equivalents in excess of
$4 million (the "Liquidity Condition"), if Holder is in registration for or
shall have completed an initial public offering of its equity securities prior
to December 31, 2000, forgiveness of such payment obligations shall not be
forgiven upon occurrence of the Liquidity Condition, but rather such
obligations shall be forgiven on a pro-rata basis over twelve months commencing
the date such public offering is completed or January 1, 2001, whichever is
earlier.
Any notices required to be given hereunder shall be deemed delivered five (5)
days after such notice in writing is placed in the United States Mail, postage
prepaid to the following addresse(s):
If to Holder:
WebSideStory
10182 Telesis Court
San Diego, CA 92121
Attn: legal department
If to Maker:
John Hentrich
4778 Keswick Court
San Diego CA 92130
The term "Holder" shall include all of Holder's successors and assigns to whom
the benefits of this note shall inure.
In the event any provision of this note is held to be invalid, illegal or
otherwise unenforceable in any respect, such provision shall be construed as
containing the maximum valid, legal and enforceable terms and conditions, and
all other provisions of this note shall remain in full force and effect to the
maximum extent permitted by law.
Any provision of this note that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this note, and such prohibition or unenforceability in any
jurisdiction shall not invalidate, or render unenforceable such provision in any
other jurisdiction.
-3-
<PAGE> 4
This note has been executed and delivered by the undersigned in the State of
California and is to be governed by and construed in accordance with the laws of
the State of California without regard to its conflicts of laws rules. In any
action brought under or arising out of this note, the undersigned hereby
consents to the jurisdiction of any competent court within the State of
California and consents to service of process by any means authorized by the law
of that State. This note may be modified, amended or terminated only by a
writing signed by both the Holder and the Maker.
"MAKER"
/s/ JOHN HENTRICH
------------------------------
John Hentrich
-4-
<PAGE> 1
EXHIBIT 10.18
PROMISSORY NOTE
$1,390,887.40______________ San Diego, California
February 28, 2000
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to
pay to the order of WEBSIDESTORY, INC., a California corporation (the
"Company"), at 6450 Lusk Blvd., Suite E-205, San Diego, California, or at such
other place as the holder hereof may designate in writing, in lawful money of
the United States of America and in immediately available funds, the principal
sum of One Million Three Hundred Ninety Thousand Eight Hundred Eighty Seven
Dollars and Forty Cents ($1,390,887.40) together with interest accrued from the
date hereof on the unpaid principal at the rate of 6.5% per annum, or the
maximum rate permissible by law (which under the laws of the State of California
shall be deemed to be the laws relating to permissible rates of interest on
commercial loans), whichever is less, as follows:
PRINCIPAL REPAYMENT. The outstanding principal amount hereunder shall be due and
payable in full on February 27, 2004; and
INTEREST PAYMENTS. Interest shall be payable annually in arrears and shall be
calculated on the basis of a 360-day year for the actual number of days elapsed;
provided, however, that one twenty-fourth (1/24th) of the principal payment and
all accrued interest of this Note will be forgiven on a monthly basis commencing
April 1, 2000 through March 1, 2002, unless the undersigned has voluntarily
resigned as an employee of Holder, in which case forgiveness of the payment
obligations shall discontinue and the balance of the Principal of this Note and
shall be payable on February 27, 2004 and Interest thereon shall be payable as
set forth above; provided further, however, that all payment obligations of
Principal and Interest of this Note shall be immediately be forgiven in full,
and this Note will be returned promptly to the undersigned, if and when any of
the following events occur: (1) a Change of Control or Constructive Termination
as defined in the Employment Agreement between Maker and the undersigned dated
February 28, 2000 or (2) the Holder has cash and cash equivalents equal to or
exceeding four million dollars ($4,000,000); provided further, however, that if
Holder is in registration for or shall have completed an initial public offering
of its equity securities prior to December 31, 2000, accelerated forgiveness of
the payment obligations because of (2), above, shall not occur assuming such
offering is completed by such date.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of the
Early Exercise Stock Purchase
1
<PAGE> 2
Agreement and Stock Pledge Agreement of even date herewith between the
undersigned and the Company.
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of
protest, demand for payment, notice of dishonor and all other notices or demands
in connection with the delivery, acceptance, performance, default or endorsement
of this Note.
The holder hereof shall be entitled to recover, and the undersigned
agrees to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted
in accordance with, the laws of the State of California, excluding conflict of
laws principles that would cause the application of laws of any other
jurisdiction.
Signed /s/ JOHN J. HENTRICH
<PAGE> 1
EXHIBIT 10.19
SECURED, NON-RECOURSE PROMISSORY NOTE
NEGOTIABLE
US$69,735.00 March 23, 2000
San Diego, California
FOR VALUE RECEIVED, the undersigned ("Maker") promises to pay to the order of
WebSideStory, Inc., a corporation organized under the laws of the state of
California ("Holder"), at 10182 Telesis Court, San Diego, California or at such
other place as the Holder hereof may from time to time designate, the principal
sum of SIXTY-NINE THOUSAND SEVEN HUNDRED THIRTY-FIVE dollars ($69,735.00), with
interest on the unpaid principal balance from time to time outstanding, computed
on the basis of a three hundred sixty (360) day year, actual days elapsed, at a
rate (the "Interest Rate") equal to 6.5% per annum. Payment of principal and
interest shall be made in the lawful money of the United States which shall be
legal tender for public and private debts at the time of payment. The entire
outstanding principal balance and all accrued but unpaid interest shall be due
and payable on the third anniversary of this note (the "Due Date"). Each payment
hereunder shall be credited first to interest then accrued and the remainder to
unpaid principal, and interest shall thereupon cease upon the principal so
credited. Maker shall have the right to repay all or a portion of the
outstanding principal and/or interest hereunder at any time or times prior to
the Due Date, without penalty.
This note shall automatically become due and payable prior to the Due Date,
without notice or demand and without the need for any action or election by the
Holder hereof, upon the occurrence at any time of any of the following events of
default:
(1) The making of an assignment for the benefit of creditors by any
party liable for the payment of this note, whether as maker, endorser,
guarantor, surety, or otherwise, or the voluntary appointment (at the request of
any such party or with the consent of any such party) of a receiver, custodian,
liquidator or trustee in bankruptcy of any such party's property or the filing
by any such party of a petition in bankruptcy or other similar proceeding under
law for relief of debtors; or
(2) The filing (other than by Holder) against any party liable for the
payment of this note, whether as maker, endorser, surety, or otherwise, of a
petition in bankruptcy or other similar proceeding under law for relief of
debtors, or the involuntary appointment of a receiver, custodian, liquidator or
trustee in bankruptcy of the property of any such party, and such petition or
appointment is not vacated or discharged within ninety (90) calendar days after
the filing or making thereof.
-1-
<PAGE> 2
If this note is not paid when due, whether at the Due Date or by acceleration,
the undersigned promises to pay all costs of collection, including without
limitation reasonable attorneys' fees, and all expenses in connection with the
protection or realization of any collateral securing this note incurred by the
Holder hereof on account of such collection, whether or not suit is filed
hereon; such costs and expenses shall include without limitation all costs,
attorneys' fees and expenses incurred by the Holder hereof in connection with
any insolvency, bankruptcy, reorganization, arrangement or other similar
proceedings involving the undersigned or involving any endorser hereof, which in
any way affect the exercise by the Holder hereof of its rights and remedies
under this note or under any security agreement, pledge agreement, cash
collateral agreement or other agreement securing this note.
Presentment, demand, protest, notices of protest, dishonor and non-payment of
this note and all notices of every kind are hereby waived. To the extent
permitted by applicable law, the defense of the statute of limitations is hereby
waived by the undersigned.
This note is secured by a stock pledge (the "Stock Pledge") of even date
herewith pursuant to which a first priority security interest has been granted
to Holder by Maker in 3,179,171 shares of common stock of Holder. Upon the
occurrence of any event of default under this note, Holder shall be entitled to
exercise its rights under the Stock Pledge, including the exercise of any and
all rights and remedies available to Holder as a secured party under the
California Uniform Commercial Code or other applicable law, including the right
to sell the pledged stock in a public or private sale (in accordance with the
California Uniform Commercial Code) and the right to accept the pledged stock in
discharge of Maker's obligations hereunder. In the event of any recapitalization
of Holder, Holder's security interest shall automatically attach to the shares
into which the pledged stock shall have been converted. If Maker fails to make a
payment due under this note, Holder's only recourse will be against any
collateral securing the obligations represented by this note, including shares
pledged pursuant to the Stock Pledge, and Holder will have no recourse against
other assets of Maker.
No single or partial exercise of any power hereunder or under any security
agreement, pledge agreement, cash collateral agreement or other agreement
securing this note shall preclude other or further exercise thereof or the
exercise of any other power. The Holder hereof shall at all times have the right
to proceed against any portion of the security held for this note in such order
and in such manner as the Holder may deem fit, without waiving any rights with
respect to any other security. No delay or omission on the part of the Holder
hereof in exercising any right hereunder shall operate as a waiver of such right
or of any other right under this note. The release of any party liable on this
note shall not operate to release any other party liable hereon.
-2-
<PAGE> 3
This note may be prepaid in whole or in part at any time without premium or
penalty. Partial prepayments of principal shall not postpone or delay the date
of any subsequent payments of principal or change the amount of such payments.
The payment obligations of both principal and interest represented by this note
will be forgiven in full, and this note will be returned to Maker promptly, if
and when any of the following events occurs on or before the Due Date:
1 a voluntary sale by Holder's shareholders of a majority of the Holder's
common stock;
2 a voluntary sale of substantially all assets of Holder;
3 Holder has cash and cash equivalents in aggregate in excess of $4 million;
4 Constructive Termination as defined in the Stock Option Agreement of
December 20, 1999 between Maker and Holder.
Notwithstanding the fact that Holder has cash and cash equivalents in excess of
$4 million (the "Liquidity Condition"), if Holder is in registration for or
shall have completed an initial public offering of its equity securities prior
to December 31, 2000, forgiveness of such payment obligations shall not be
forgiven upon occurrence of the Liquidity Condition, but rather such obligations
shall be forgiven on a pro-rata basis over twelve months commencing the date
such public offering is completed or January 1, 2001, whichever is earlier.
Any notices required to be given hereunder shall be deemed delivered five (5)
days after such notice in writing is placed in the United States Mail, postage
prepaid to the following addresse(s):
If to Holder:
WebSideStory
10182 Telesis Court
San Diego, CA 92121
Attn: legal department
If to Maker:
John Hentrich
4778 Keswick Court
San Diego CA 92130
The term "Holder" shall include all of Holder's successors and assigns to whom
the benefits of this note shall inure.
In the event any provision of this note is held to be invalid, illegal or
otherwise unenforceable in any respect, such provision shall be construed as
containing the
-3-
<PAGE> 4
maximum valid, legal and enforceable terms and conditions, and all other
provisions of this note shall remain in full force and effect to the maximum
extent permitted by law.
Any provision of this note that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this note, and such prohibition or unenforceability in any
jurisdiction shall not invalidate, or render unenforceable such provision in any
other jurisdiction.
This note has been executed and delivered by the undersigned in the State of
California and is to be governed by and construed in accordance with the laws of
the State of California without regard to its conflicts of laws rules. In any
action brought under or arising out of this note, the undersigned hereby
consents to the jurisdiction of any competent court within the State of
California and consents to service of process by any means authorized by the law
of that State. This note may be modified, amended or terminated only by a
writing signed by both the Holder and the Maker.
"MAKER"
/s/ John Hentrich
------------------------------------
John Hentrich
-4-
<PAGE> 1
EXHIBIT 10.20
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT ("Pledge Agreement") is made by JOHN
HENTRICH; an individual ("Pledgor") in favor of WEBSIDESTORY, INC., a California
corporation, located at 10182 Telesis Court, San Diego, California or at such
other place as may be designated from time to time ("Pledgee").
WHEREAS, Pledgor has concurrently executed that certain Secured,
Non-Recourse Promissory Note (the "Note") in favor of Pledgee in the amount of
sixty-nine thousand seven hundred thirty-five dollars ($69,735); and
WHEREAS, Pledgee is willing to accept the Note from Pledgor, but only
upon the condition, among others, that Pledgor shall have executed and delivered
to Pledgee this Pledge Agreement and the Collateral (as defined below):
NOW, THEREFORE, in consideration of the foregoing recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, Pledgor hereby agrees as
follows:
1. As security for the full, prompt and complete payment and performance
when due (whether by stated maturity, by acceleration or otherwise) of all
indebtedness of Pledgor to Pledgee created under the Note (all such indebtedness
being the "Liabilities"), together with, without limitation, the prompt payment
of all expenses, including, without limitation, reasonable attorneys' fees and
legal expenses, incidental to the collection of the Liabilities and the
enforcement or protection of Pledgee's lien in and to the collateral pledged
hereunder, Pledgor hereby pledges to Pledgee, and grants to Pledgee, a first
priority security interest in all of the following (collectively, the "Pledged
Collateral"):
(a) Three million one hundred seventy nine thousand one hundred
seventy one (3,179,171) shares of Common Stock of Pledgee represented by
Certificate Number 6 (the "Pledged Shares"), and all dividends, cash,
instruments, and other property or proceeds from time to time received,
receivable, or otherwise distributed in respect of or in exchange for any or all
of the Pledged Shares; and
(b) all voting trust certificates held by Pledgor evidencing the
right to vote any Pledged Shares subject to any voting trust.
The term "indebtedness" is used herein in its most comprehensive sense
and includes any and all advances, debts, obligations and Liabilities
heretofore, now or hereafter made, incurred or created, whether voluntary or
involuntary and whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and whether recovery upon such
indebtedness may be or hereafter becomes unenforceable.
2. At any time, without notice, and at the expense of Pledgor, Pledgee
in its name or in the name of its nominee or of Pledgor may, but shall not be
obligated to: (1) collect by legal proceedings or otherwise all dividends
(except cash dividends other than liquidating dividends), interest, principal
payments and other sums now or hereafter payable upon or on account of said
1.
<PAGE> 2
Pledged Collateral; (2) enter into any extension, reorganization, deposit,
merger or consolidation agreement, or any agreement in any way relating to or
affecting the Pledged Collateral, and in connection therewith may deposit or
surrender control of such Pledged Collateral thereunder, accept other property
in exchange for such Pledged Collateral and do and perform such acts and things
as it may deem proper, and any money or property received in exchange for such
Pledged Collateral shall be applied to the indebtedness or thereafter held by it
pursuant to the provisions hereof; (3) insure, process and preserve the Pledged
Collateral; (4) cause the Pledged Collateral to be transferred to its name or to
the name of its nominee; and (5) exercise as to such Pledged Collateral all the
rights, powers and remedies of an owner, except that so long as no default
exists under the Note or hereunder Pledgor shall retain all voting rights as to
the Pledged Shares.
3. Pledgee shall hold as security pursuant to this Pledge Agreement the
certificate or certificates representing the Pledged Shares at its office.
Pledgee shall have no rights to the Pledged Shares except, and then only to the
extent, as may accrue pursuant hereto; and Pledgee shall upon full payment and
performance of the Liabilities and/or the termination of the security interest
created hereby, relinquish said certificate or certificates to Pledgor.
4. Pledgor agrees to pay prior to delinquency all taxes, charges, liens
and assessments against the Pledged Collateral, and upon the failure of Pledgor
to do so, Pledgee at its option may pay any of them and shall be the sole judge
of the legality or validity thereof and the amount necessary to discharge the
same.
5. At the option of Pledgee and without necessity of demand or notice,
all or any part of the indebtedness of Pledgor shall immediately become due and
payable irrespective of any agreed maturity, upon the happening of any of the
following events: (1) failure to keep or perform any of the terms or provisions
of this Pledge Agreement; (2) failure to pay any installment of principal or
interest on the Note when due; (3) the levy of any attachment, execution or
other process against the Pledged Collateral; or (4) the insolvency, commission
of an act of bankruptcy, general assignment for the benefit of creditors,
filing of any petition in bankruptcy or for relief under the provisions of Title
11 of the United States Code of, by, or against Pledgor.
6. In the event of the nonpayment of any indebtedness when due, whether
by acceleration or otherwise, or upon the happening of any of the events
specified in the last preceding paragraph, Pledgee may then, or at any time
thereafter, at its election, apply, set off, collect or sell in one or more
sales, or take such steps as may be necessary to liquidate and reduce to cash in
the hands of Pledgee in whole or in part, with or without any previous demands
or demand of performance or notice or advertisement, the whole or any part of
the Pledged Collateral in such order as Pledgee may elect, and any such sale may
be made either at public or private sale at its place of business or elsewhere,
or at any broker's board or securities exchange, either for cash or upon credit
or for future delivery; provided, however, that if such disposition is at
private sale, then the purchase price of the Pledged Collateral shall be equal
to the public market price then in effect, or, if at the time of sale no public
market for the Pledged Collateral exists, then, in recognition of the fact that
the sale of the Pledged Collateral would have to be registered under the
Securities Act of 1933 and that the expenses of such registration are
commercially unreasonable for the type and amount of collateral pledged
hereunder, Pledgee and Pledgor hereby agree that such private sale shall be at a
purchase price mutually agreed to by
2.
<PAGE> 3
Pledgee and Pledgor or, if the parties cannot agree upon a purchase price, then
at a purchase price established by a majority of three independent appraisers
knowledgeable of the value of such collateral, one named by Pledgor within 10
days after written request by the Pledgee to do so, one named by Pledgee within
such 10 day period, and the third named by the two appraisers so selected, with
the appraisal to be rendered by such body within 30 days of the appointment of
the third appraiser. The cost of such appraisal, including all appraiser's fees,
shall be charged against the proceeds of sale as an expense of such sale.
Pledgee may be the purchaser of any or all Pledged Collateral so sold and hold
the same thereafter in its own right free from any claim of Pledgor or right of
redemption. Demands of performance, notices of sale, advertisements and presence
of property at sale are hereby waived, and Pledgee is hereby authorized to sell
hereunder any evidence of debt pledged to it. Any sale hereunder may be
conducted by any officer or agent of Pledgee.
7. The proceeds of the sale of any of the Pledged Collateral and all
sums received or collected by Pledgee from or on account of such Pledged
Collateral shall be applied by Pledgee to the payment of expenses incurred or
paid by Pledgee in connection with any sale, transfer or delivery of the Pledged
Collateral, to the payment of any other costs, charges, attorneys' fees or
expenses mentioned herein, and to the payment of the indebtedness or any part
hereof, all in such order and manner as Pledgee in its discretion may determine.
Pledgee shall then pay any balance to Pledgor.
8. Upon the transfer of all or any part of the indebtedness Pledgee may
transfer all or any part of the Pledged Collateral and shall be fully discharged
thereafter from all liability and responsibility with respect to such Pledged
Collateral so transferred, and the transferee shall be vested with all the
rights and powers of Pledgee hereunder with respect to such Pledged Collateral
so transferred; but with respect to any Pledged Collateral not so transferred
Pledgee shall retain all rights and powers hereby given.
9. Until all indebtedness shall have been paid in full the power of sale
and all other rights, powers and remedies granted to Pledgee hereunder shall
continue to exist and may be exercised by Pledgee at any time and from time to
time irrespective of the fact that the indebtedness or any part thereof may have
become barred by any statute of limitations, or that the personal liability of
Pledgor may have ceased.
10. Pledgee agrees that so long as no default exists under the Note or
hereunder, the Pledged Shares shall, upon the request of Pledgor, be released
from pledge as the indebtedness is paid. In addition, the Pledged Shares shall
be released from pledge as set forth in the Note.
11. Pledgee may at any time deliver the Pledged Collateral or any part
thereof to Pledgor and the receipt of Pledgor shall be a complete and full
acquittance for the Pledged Collateral so delivered, acrd Pledgee shall
thereafter be discharged from any liability or responsibility therefor.
12. The rights, powers and remedies given to Pledgee by this Pledge
Agreement shall be in addition to all rights, powers and remedies given to
Pledgee by virtue of any statute or rule of law. Any forbearance or failure or
delay by Pledgee in exercising any right, power or remedy hereunder shall not be
deemed to be a waiver of such right, power or remedy, and any single or
3.
<PAGE> 4
partial exercise of any right, power or remedy hereunder shall not preclude the
further exercise thereof; and every right, power and remedy of Pledgee shall
continue in full force and effect until such right, power or remedy is
specifically waived by an instrument in writing executed by Pledgee.
13. If any provision of this Pledge Agreement is held to be
unenforceable for any reason, it shall be adjusted, if possible, rather than
voided in order to achieve the intent of the parties to the extent possible. In
any event, all other provisions of this Pledge Agreement shall be deemed valid
and enforceable to the full extent possible.
14. This Pledge Agreement shall be governed by, and construed in
accordance with, the laws of the State of California as applied to contracts
made and performed entirely within the State of California by residents of such
State.
Dated: March 23, 2000
PLEDGOR
JOHN HENTRICH
/s/ JOHN HENTRICH
-------------------------------------------
Printed Name: J. Hentrich
------------------------------
PLEDGEE
WebSideStory, Inc.
By: /s/ MICHAEL CHRISTIAN
----------------------------------------
Name: Michael Christian
--------------------------------------
Title: Senior Vice President
-------------------------------------
4.
<PAGE> 1
EXHIBIT 10.21
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated April 10, 2000
("Effective Date") is made by and between WebSideStory, Inc. ("the Company"), a
California corporation having its principal offices at 10182 Telesis Court, 6th
Floor, San Diego, CA and Terry Kinninger ("Employee").
AGREEMENT
1. Title and Duties. Employee's title and position with the Company
initially will be Chief Financial Officer. Employee shall devote all of his
business time and attention, energy and skills to the Company during his
employment under this Agreement. Employee's duties will be as assigned by the
Company's President and/or Chief Executive Officer, or his designee. Employee's
employment will commence on April 10, 2000.
2. At-will Employment. Employee's employment relationship with the
Company is at-will, terminable at any time and for any reason by either the
Company or Employee. The Company nonetheless reserves the right to discharge
Employee for the reasons defined in Sections 11 and 12 below. While certain
paragraphs of this Agreement describe events that could occur at a particular
time in the future, nothing in this Agreement may be construed as a guarantee of
employment of any length.
3. Policy Compliance. Employee is required to comply with the Company
policy, practice and procedure in effect during his employment. Employee agrees
to comply with the terms and conditions of the Company's Confidentiality and
Inventions Agreement ("Confidentiality Agreement") that is attached to this
Agreement as Exhibit 1 and is incorporated by reference.
4. Compensation.
4.1 Base Salary. Employee's annual Base Salary during his
employment will be Two Hundred Thousand Dollars ($200,000) to be paid according
to the Company's regular payroll practices. Any increase to the Base Salary is
within the sole discretion of the Chief Executive Officer and the Board of
Directors of the Company (the "Board") and according to the standards utilized
for other executive officers and consistent with his position and duties. The
Base Salary described above is subject to deduction for applicable federal,
state and local income, social security and other payroll deductions.
4.2 Bonus Compensation. In addition to the Base Salary, in Fiscal
Year 2000 Employee is eligible for an annualized bonus of up to Fifty Thousand
Dollars ($50,000) ("Bonus"), contingent upon reasonable goals to be established
by the Chief Executive Officer. Employee will be eligible for a bonus in Fiscal
Year 2001 pursuant to a Fiscal Year 2001 bonus plan to be established by the
Company in its sole discretion.
4.3 Mid-Year Bonus. Employee additionally is entitled to a
mid-year bonus ("Mid-Year Bonus") upon the Company's attainment of its June 30,
2000 financial goals as established by the Company in its sole discretion in the
event that such a bonus is generally
<PAGE> 2
established for other employees of the Company. Employee's Mid-Year Bonus will
be according to the same percentage of compensation calculation that applies to
other employees of the Company.
5. Stock Options.
5.1 Grant of Options. On the Effective Date, the Company will
grant to Employee non-statutory options representing the right to purchase up to
825,000 shares of the Company's Common Stock (collectively the "Options")
pursuant to the Company's 2000 Equity Incentive Plan (the "Plan"), at an
exercise price of $0.34 per share. This grant is further subject to the terms
and conditions of the Stock Option Agreement reflecting that grant (the "Option
Agreements") and to applicable state and federal laws including, but not limited
to, tax and securities laws. Each Option shall entitle Employee to purchase one
share of the Company's Common Stock. The Options shall vest as set forth in
Section 5.2 below.
5.2 Vesting Schedule.
5.2.1 133,334 of the Options will vest on the six (6)
month anniversary of the Effective Date;
5.2.2 666,666 of the Options will vest at the rate of the
2.7778% for each full month of Employee's continuous service from the six-month
anniversary through the third anniversary of the Effective Date such that the
Options will be fully vested three (3) years from the Effective Date.
5.2.3 The remaining Options (25,000) will vest on the
fourth anniversary of the Effective Date.
5.3 Tax Implications. The Company does not make any warranty or
representation with respect to the tax consequence of any of the above grant of
options or tax consequences of any exercise of the options or consequent sale of
the shares purchased. Employee is advised to consult with his own tax advisor as
to the tax treatment of all aspects of the option grant contained in the
Agreement or Option Agreements.
6. Fringe Benefits. During his employment, Employee will receive fringe
benefits ("Benefits") then generally available to executive staff.
7. Reimbursement of Expenses. During his employment and according to
Company policy and practice, and subject to final approval by the Chief
Executive Officer, Employee shall be entitled to reimbursement of reasonable and
actual expenses incurred on behalf of the Company.
8. Return Of Property. Employee agrees that all documents, records,
apparatus, equipment and other physical property (as more specifically defined
in the Confidentiality Agreement) which is furnished to or obtained by Employee
in the course of his employment with the Company shall be and remain the sole
property of the Company. Employee agrees that upon the termination of his
employment he will return all such property (whether or not it pertains to
2
<PAGE> 3
trade secret or proprietary information), and will not make or retain copies,
reproductions, or summaries of any such property.
9. Non Competition. During his employment Employee shall not directly or
indirectly, either as an employee, employer, consultant, corporate officer,
director, or in any other individual or representative capacity, engage or
participate in any business that is in competition with the business of the
Company in any location, unless such participation or interest is fully
disclosed to the Company and approved by the Board.
10. Agreement with Previous Employers. Employee confirms he does not
have any agreement with a previous employer that prevents or limits him in
performing under this Agreement. In the event the Company is sued by any
previous employer of Employee as a result of any act by Employee, the Company
may recover costs or attorneys' fees expended in defending against such a
lawsuit.
11. Effect of Termination Without Cause or Resignation for Good Reason
Following a Change of Control. As set forth in Section 2 above, employment with
the Company is "at-will". However, if, within one year following a Change of
Control as defined in Section 11.1 below, the Company terminates Employee's
employment relationship without cause ("Cause") as defined in Section 11.2 below
or Employee resigns his employment with Good Reason ("Resignation for Good
Reason") as defined in Section 11.3 below, Employee may be entitled to
accelerated vesting of Options as follows:
11.1 Change of Control Defined. For purposes of this Agreement,
"Change of Control" is defined to have occurred if, and only if, during
Employee's employment:
11.1.1 any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity or person, or
any syndicate or group deemed to be a person under Section 14(d)(2) of the
Exchange Act is or becomes the "Beneficial Owner" (as defined in Rule 13d-3 of
the General Rules and Regulations under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding securities entitled to
vote in the election of directors of the Company;
11.1.2 there occurs a reorganization, merger,
consolidation or other corporate transaction involving the Company
("Transaction"), in each case, with respect to which the stockholders of the
Company immediately prior to such Transaction do not, immediately after the
Transaction, own more than fifty (50) percent of the combined voting power of
the Company or other corporation resulting from such Transaction; or
11.1.3 all or substantially all of the assets of the
Company are sold, liquidated or distributed.
11.2 Cause Defined. For purposes of this Agreement, "Cause" is
defined as (i) Employee's personal dishonesty; (ii) Employee's willful
misconduct; (iii) Employee's intentional failure to perform stated duties; (iv)
Employee's breach of fiduciary duty involving personal profit; (v) Employee's
willful violation of any law, rule, or regulation (other than traffic violations
or similar offenses) that has an adverse impact on the reputation of the
Company;
3
<PAGE> 4
(vi) any material breach by Employee of any provision of this Agreement or any
Company policy or practice; (vii) Employee's death; or (viii) if Employee has a
disability which cannot be reasonably accommodated and which renders him unable
to perform the essential functions of his position.
11.3 Resignation for Good Reason Defined. "Resignation for Good
Reason" shall mean the voluntary resignation by Employee of his employment with
the Company within one year following a Change of Control and within three (3)
months of the following Good Reasons:
11.3.1 any reduction in Employee's Base Salary or Benefits
as they exists at the Change of Control; or
11.3.2 any reduction in Employee's title as it exists at
the Change of Control; or
11.3.3 any significant reduction in Employee's
responsibilities and authority as of the Change of Control; or
11.3.4 a relocation by the Company of Employee's place of
Employment outside a forty (40) mile radius of Employee's current place of
employment.
An event described in Section 11.3.1 through 11.3.4 will
not constitute Good Reason unless Employee provides written notice to the
Company of his intention to resign for Good Reason and unless the Company does
not cure the Good Reason within ten (10) days of the Company's receipt of the
written notice.
11.4 Accelerated Vesting of Options. If, within one (1) year
immediately following a Change of Control, Employee's employment is terminated
without Cause or Employee resigns his employment for Good Reason, vesting of
one-half of Employee's unvested Options will be accelerated to the effective
date of termination ("Termination Date").
11.5 Release. The accelerated vesting schedule set forth in
Section 11.4 above is in exchange for, and contingent upon Employee's execution
of a release of all claims as of the effective date of the Resignation for Good
Reason, in substantially the form attached to this Agreement as Exhibit 1.
12. Effect of Termination Without Cause or Resignation for Good Reason
During the First Year of Employment.
12.1 Accelerated Vesting of Options. As set forth in Section 2
above, employment with the Company is "at-will". However, in the event the
Company terminates Employee's employment relationship with the Company prior to
the first anniversary of the Effective Date for any reason other than Cause or
Employee Resigns for Good Reason prior to the first anniversary of the Effective
Date, the Options which otherwise would have vested had Employee completed one
year of employment (up to 266,666 Options) will vest as of the Termination Date;
provided, however, Employee is not entitled to the accelerated vesting rights
4
<PAGE> 5
described in this Section 12 if he becomes entitled to the accelerated vesting
rights described in and pursuant to Section 11 above.
12.2 Release. The accelerated vesting schedule set forth in
Section 12.1 above is in exchange for, and contingent upon, Employee's execution
of a release of all claims as of the effective date of the Termination Without
Cause, in substantially the form attached to this Agreement as Exhibit 1.
13. Dispute Resolution Procedures. Any dispute or claim arising out of
this agreement shall be subject to final and binding arbitration. The
arbitration will be conducted by one arbitrator who is a member of the American
Arbitration Association (AAA) and will be governed by the Model Employment
Arbitration rules of AAA. The arbitration shall be held in San Diego,
California. The arbitrator shall have an authority to determine the
arbitrability of any claim and enter a final and binding judgment at the
conclusion of any proceedings in respect of the arbitration. Any final judgment
only may be appealed on the grounds of improper bias or improper conduct of the
arbitrator. The arbitrator will apply California substantive law in all
respects. The arbitrator will decide how the costs of arbitration should be
split. In the event of any arbitration arising out of or relating to this
Agreement, its breach or enforcement, including an action for declaratory
relief, the prevailing party in such action or proceedings shall be entitled to
receive his or its damages, court costs and reasonable out-of-pocket expenses
including reasonable attorneys' fees. Such recovery shall include court costs,
reasonable out-of-pocket expenses, and attorneys' fees on appeal, if any. The
arbitrator or court shall determine who is the prevailing party, whether or not
the dispute or controversy proceeds to final judgment.
14. General Provisions.
14.1 Governing Law. This Agreement will be governed by and
construed according to California law, without regard to principles of conflict
of laws.
14.2 Assignment. Employee may not assign, pledge or encumber his
interest in this Agreement or any part of this Agreement.
14.3 Binding Nature. This Agreement will be binding upon
Employee, his heirs, executors, and administrators and will inure to the benefit
of the Company, its subsidiaries, successors and assigns.
14.4 No Waiver of Breach. The failure to enforce any provision of
this Agreement will not be construed as a waiver of any such provision, nor
prevent a party thereafter from enforcing the provision or any other provision
of this Agreement. The rights granted the parties are cumulative, and the
election of one will not constitute a waiver of such party's right to assert all
other legal and equitable remedies available under the circumstances.
14.5 Severability. The provisions of this Agreement are
severable, and if any provision will be held to be invalid or otherwise
unenforceable, in whole or in part, the remainder of the provisions, or
enforceable parts of this Agreement, will not be affected.
14.6 Entire Agreement. This Agreement, including the
Confidentiality Agreement and any Option Agreements, constitutes the entire
agreement of the parties with
5
<PAGE> 6
respect to the subject matter of this Agreement, and supersedes all prior and
contemporaneous oral or written negotiations, agreements or understandings
between the parties.
14.7 Modification/Waiver. No modification, amendment,
supplementation, termination or attempted waiver of this Agreement will be valid
unless in writing, signed by the party against whom modification, amendment
termination or waiver is sought to be enforced.
14.8 Fees and Expenses. If any proceeding is brought for the
enforcement or interpretation of this Agreement, or because of any alleged
dispute, breach, default or misrepresentation in connection with any provisions
of this Agreement, the successful or prevailing party will be entitled to
recover from the other party reasonable attorneys' fees and other costs incurred
in that proceeding (including, in the case of an arbitration, arbitration fees
and expenses), in addition to any other relief to which such party may be
entitled.
14.9 Duplicate Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original. Such counterparts
together constitute one instrument.
14.10 Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.11 Drafting Ambiguities. Each party to this Agreement and his
or its counsel have reviewed and revised this Agreement. The rule of
construction that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any of the
amendments to this Agreement.
WebSideStory, Inc. Employee
By: /s/ JOHN HENTRICH /s/ TERRY A. KINNINGER
______________________________________ ________________________
John Hentrich, Chief Executive Officer Terry Kinninger
6
<PAGE> 1
EXHIBIT 10.31
AMENDMENT TO LEASE - CONTRACTION
THIS AMENDMENT is executed at San Diego County, San Diego, Ca 92121 by and
between WebsideStory, Inc., A California Corporation, ("Lessee") and PS Business
Parks, Inc. as Manager and Agent for Owner ("Lessor") for the premises located
at 6450 Lusk Blvd., Suite E103/104/201/203/204/207/208/209, San Diego, CA 92121.
Lessor and Lessee being parties to that certain Lease dated November 4, 1998,
hereby express their mutual desire and intent to decrease the area of the leased
premised by 12,667 rentable square feet effective February 14, 2000 and amend by
this writing those terms, covenants and conditions as hereinafter provided.
AMENDMENTS
"1.01 PREMISES" shall hereafter additionally provide as follows: The square
footage of the leased premises was 15,854 rentable square feet. The
square footage of the leased premises shall hereafter be 3,187 rentable
square feet, and is located and described in the attached Exhibit "A" -
CONTRACTION and Exhibit "A-1" CONTRACTION. The address of the leased
Premises shall hereafter be 6450 Lusk Blvd., Suite E103/104, San Diego,
CA 92121.
"1.07 BASE MONTHLY RENT" shall hereafter additionally provide as follows: The
Base Monthly Rent was $14,680.00 per month. The Base Monthly Rent shall
hereafter be $2,932.00 per month in lawful money of the United States of
America.
ADJUSTMENTS TO BASE MONTHLY RENT:
December 1, 2000 through October 31, 2001 shall be $3,091.00 per month.
SATELLITE DISH: $200.00 per month
GENERATOR: $200.00 per month
LESSEE'S PROPORTIONATE SHARE OF OPERATING COSTS AND PROPERTY TAXES shall
hereafter be seven hundred one dollars and fourteen cents $701.14 per
month and may be adjusted annually.
"1.08 SECURITY DEPOSIT: shall hereafter additionally provide as follows: The
Security Deposit was $5019.80 and shall hereafter be $3,792.00.
*$1,200 to be deducted from Security Deposit for the surrender of suites
E201/202/203/204/207/208/209 (Documentation Fee)
*1,227.80 to be deducted from Security Deposit to be paid toward Broker
Commission due.
"1.10 PROPORTIONATE SHARE" shall hereafter additionally provide as follows:
Lessee's Proportionate share was .1346. Lessee's Proportionate Share
shall hereafter be .0251.
*LESSEE IS RESPONSIBLE FOR THE RETURN OF MAIL BOX KEYS, FITNESS CENTER CARDS,
DAMAGED CEILING TILES, PLUMBING PROBLEMS AND LIGHTS PER THE SURRENDER AGREEMENT
AND THE CONTRACTION OF SUITES E201/202/203/204/207/208&209. SHOULD THESE ITEMS
NOT BE RETURNED/COMPLETED, LESSEE WILL PAY TO LESSOR THE COST OF SUCH ITEMS.
LESSOR: LESSEE:
PS Business Parks, Inc. WebsideStory, Inc.
A California Corporation A California Corporation
By its agent
PS Business Parks, L.P.
By: PS Business Parks, Inc.
General Partner
/s/ PATRICIA ABBOTT /s/ MICHAEL CHRISTIAN
- ------------------------------------- -------------------------------------
(Authorized Signature) (Authorized Signature)
Patricia Abbott, Assistant VP Michael Christian
- ------------------------------------- -------------------------------------
(Title) (Title) Senior V.P.
3/7/00 Feb. 16, 2000
- ------------------------------------- -------------------------------------
(Date of Execution) (Date of Execution)
<PAGE> 2
STANDARD INDUSTRIAL LEASE
Lease Preparation Date: November 4, 1998
Lessor: PS Business Parks, Inc., A California Corporation
Lessee: WebSideStory, Inc.
Trade Name: same
1. Lease Terms
1.01 Premises: The Premises referred to in this Lease contain
approximately 9,900 rentable square feet and are located on Exhibit "A" as
described in Exhibit "A1" attached. The address of the leases Premises is
6450 Lusk Blvd.,
Suites E103, 104, 203, 204, 207, 208
San Diego, CA 92121.
1.02 Project: The Project consists of approximately 117,813
rentable/useable square feet.
1.03 Lessee's Notice Address: Lessee's Notice Address is the address of
the leased Premises as defined in paragraph 1.01 unless otherwise specified
here: same as above.
1.04 Lessor's Notice Address: Lessor's Notice Address is:
6750 Lusk Blvd.
Suite F211
San Diego, CA 92121.
1.05 Lessee's Permitted Use: General and Administrative offices for a
computer translation and internet services organization.
1.06 Lease Term: The Lease Term commences on December 1, 1998 and ends on
October 31, 2001 (35 months, and ____ days).
1.07 Base Monthly Rent: $7,662.00 in lawful money of the United States of
America.
1.08 Security Deposit: $*9,990.00 in lawful money of the United States of
America.
*Currently held by Lessor -- $4,916.20
1.09 Lease Documentation Fee: $ waived in lawful money of the United
States of America.
1.10 Proportionate Share: Lessee's Proportionate Share is .0848.
1.12 Lessee is entitled to 40 vehicle parking spaces subject to the
provisions of section 10 of this Lease.
2. Demise and Possession
2.01 Lessor leases to Lessee and Lessee leases from Lessor the Premises
described in subsection 1.01. By entering the Premises, Lessee acknowledges
that it has examined the Premises and accepts the Premises in their present
condition subject to any additional work Lessor has agreed to do as stated on
Exhibit B.
2.02 If for any reason Lessor cannot deliver possession of the Premises on
the date the Lease commences, Lessor shall not be subject to any liability nor
shall the validity of this Lease be affected. If Lessee has not caused such
delay there shall be a proportionate reduction of the Base Monthly Rent
covering the period between the commencement of the Lease Term and the date
when Lessor can deliver possession. However, either Lessor or Lessee, unless it
is the cause of the delay, has the right to cancel this Lease by written
notification if possession of the Premises is not delivered within ninety (90)
days of the date the Lease Term commences.
*LESSEE MAY OCCUPY SUITE E103 ON NOVEMBER 16, 1998 AND PAY A PRORATED AMOUNT OF
$734.25 for the period of November 16, 1998 through November 30, 1998
<PAGE> 3
3. BASE MONTHLY RENT
3.01 Base Monthly Rent: On the first day of each calendar month of the
Lease Term, Lessee will pay, without deduction or offset, prior notice or
demand, Base Monthly Rent at the place designated by Lessor. However, the first
month's rent is due and payable upon execution of this Lease. In the event that
the Term of this Lease commences or ends on a day other than the first day of a
calendar month, a prorated amount of Base Monthly Rent shall be due upon
execution and it will be calculated using a thirty (30) day month.
A. At the same time the Base Monthly Rent is adjusted, the Security
Deposit will also be adjusted to equal the new Base Monthly rent amount and the
deficiency is due concurrently with the next payment of Base Monthly Rent.
3.03 Any installment of rent or any other charge payable which is not
paid within five (5) days after it becomes due will be considered past due and
Lessee will pay to Lessor as Additional Rent a late charge equal to ten percent
(10%) of such installment or the sum of twenty-five dollars ($25.00), whichever
is greater, for each month or fractional month transpiring from the date due
until paid. A twenty-five dollar ($25.00) handling charge will be paid by
Lessee to Lessor for each returned check and, thereafter, Lessee will pay all
future payments of rent or other charges due by money order or cashier's check.
4. COMMON AREAS
4.01 Definitions:
"ENTIRE PREMISES": The Premises, the Project (of which the Premises are a
part), the Common Areas, the land upon which the Project and the Common Areas
are located, along with all other improvements and facilities thereon are
collectively referred to as the "Entire Premises".
"COMMON AREAS": "Common Area" is defined as all areas and facilities
outside the Premises and within the exterior boundary line of the Entire
Premises that are provided and designated by Lessor for the non-exclusive use of
Lessor, Lessee and other lessees of the Project and their respective employees,
agents, customers and invitees. Common Areas include, but are not limited to:
all parking areas, loading and unloading areas, trash areas, roadways,
sidewalks, walkways, parkways, driveways, corridors, landscaped areas and any
restrooms used in common by lessees.
4.02 Lessee, its employees, agents, customers and invitees have the
non-exclusive right (in common with other lessees, Lessor, and any other person
granted use by Lessor) to use of the Common Areas. Lessee agrees to abide by and
conform to, and to cause its employees, agents, customers and invitees to abide
by and conform to all rules and regulations established by Lessor subject to
provisions of section 26 and the Rules and Regulations attached to this Lease.
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4.03 Lessor has the right, in its sole discretion, from time to time, to:
1) make changes to the Common Areas, including without limitation, changes in
the location, size, shape and number of driveways, entrances, parking spaces,
parking areas, ingress, egress, direction of driveways, entrances, corridors,
parking areas and walkways; 2) close temporarily any of the Common Areas for
maintenance purposes so long as reasonable access to the Premises remains
available; 3) add additional buildings and improvements to the Common Areas; 4)
use the Common Areas while engaged in making additional improvements, repairs or
alterations to the Entire Premises or any portion thereof; do and perform any
other acts or make any other changes in, to or with respect to the Common Areas
and Entire Premises as Lessor may, in the exercise of sound business judgment,
deem to be appropriate.
5. Additional Rent
5.01 All charges payable by Lessee other than Base Monthly Rent are called
"Additional Rent". Unless this lease provides otherwise, Additional Rent is to
be paid with the next monthly installment of Base Monthly Rent and is subject to
the provisions of 3.03. The term "rent" whenever used in this Lease means Base
Monthly Rent and Additional Rent.
5.02 Operating Costs
A. "Operating Costs" are all costs and expenses of ownership, operation,
maintenance, repair and insurance incurred by Lessor including, but not limited
to, the following: all supplies, materials, labor and equipment, used in or
related to the operation and maintenance of the Common Areas; all utilities,
including but not limited to, water, electricity, gas, heating, lighting, sewer,
waste disposal related to the maintenance or operation of the Common Areas; all
air-conditioning and ventilating costs related to the maintenance or operation
of the Entire Premises; all Lessor's costs in managing, maintaining, repairing,
operating and insuring the Entire Premises, including, for example, clerical,
supervisory, and janitorial staff; all maintenance, management and service
agreements, including but not limited to, janitorial, security, trash removal
related to the maintenance or operation of the Entire Premises; all legal and
accounting costs and fees for licenses and permits related to the ownership and
operation of the Entire Premises; all insurance premiums and costs of fire,
casualty, and liability coverage, rent abatement and earthquake insurance and
any other type of insurance related to the Entire Project; all operation,
maintenance and repair costs to the Common Areas, including but not limited to,
sidewalks, walkways, parkways, parking areas, loading and unloading areas, trash
areas, roadways, driveways, corridors, and landscaped area, including for
example, costs of resurfacing and restriping parking areas; all maintenance and
repair costs of building exteriors (including painting), restrooms used in
common by lessees and signs and directories of the Entire Premises; amortization
(along with reasonable financing charges) of capital improvements made to the
Common Areas which may be required by any government authority or which will
improve the operating efficiency of the Entire Premises; a five percent (5%) fee
for Lessor's supervision of the Common Areas (five percent (5%) of the total
above mentioned costs and expenses incurred in a calendar year). Operating Costs
will not include depreciation of the Entire Premises.
B. Lessee shall pay to Lessor Lessee's Proportionate Share of the
Operating Costs as indicated in subsection 1.10. Such payment shall be paid by
Lessee with and in addition to the monthly payment of Base Monthly Rent. Lessee
shall, if Lessor so elects, pay to Lessor on a monthly basis, in advance, the
amount which Lessor reasonably estimates to be Lessee's Proportionate Share of
the Operating Costs. In the event of such election by Lessor, Lessor shall
periodically determine Lessee's share of the actual Operating Costs, and in the
event that the amount which Lessee has paid to Lessor on account of the
estimated Operating Costs is less than his share of such actual Operating costs,
Lessee shall pay such difference to Lessor on the next rent payment date. In the
event that Lessee has paid to Lessor more than his share of such actual
Operating Costs, the amount of such difference shall be credited against
Lessee's payments of Operating Costs next due.
C. Failure by Lessor to provide Lessee with a statement by April 1st of
each year shall not constitute a waiver by Lessor of its right to collect
Lessee's share of Operating Costs. In addition, if for any reason Lessor should
not elect to bill Lessee for lump sum Operating Costs or estimates for a
particular calendar year, Lessor's right to charge Lessee for such expenses in
subsequent years is not waived.
5.03 Taxes
A. "Real Property Taxes" are: (i) any fee, license fee, license tax,
business license fee, commercial rental tax, levy, charge, assessment, penalty
or tax imposed by any taxing authority against the Property; (ii) any tax or fee
on Lessor's right to receive, or the receipt of, rent or income from the
Property or against Landlord's business of leasing the Property, (iii) any tax
or charge for fire protection, streets, sidewalks, road maintenance, refuse or
other services provided to the Property by any governmental agency; (iv) any tax
imposed upon this transaction, or based upon a re-assessment of the Project due
to a change in ownership or transfer of all or part of Lessor's interest in the
Property; and (v) any charge or fee replacing, substituting for, or in addition
to any tax previously included within the definition of real property tax. Real
Property Taxes do not, however, include Lessor's federal or state income,
franchise, inheritance or estate taxes.
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B. Lessee shall pay to Lessor Lessee's Proportionate Share of the Real
Property Taxes as indicated in subsection 1.10. Such payment shall be paid by
Lessee with and in addition to the monthly payment of Base Monthly Rent. Lessee
shall, if Lessor so elects, pay to Lessor on a monthly basis, in advance, the
amount which Lessor reasonably estimates to be Lessee's Proportionate Share of
the Real Property Taxes. In the event of such election by Lessor, Lessor shall
periodically determine Lessee's share of the actual Real Property Taxes, and in
the event that the amount which Lessee has paid to Lessor on account of the Real
Property Taxes is less than his share of such actual Real Property Taxes, Lessee
shall pay such difference to Lessor on the next rent payment date. In the event
that Lessee has paid to Lessor more than his share of such actual Real Property
Taxes, the amount of such difference shall be credited against Lessee's payment
of Real Property Taxes next due.
C. Personal Property Taxes: Lessee will pay all taxes charged against
trade fixtures, furnishings, equipment or any other personal property belonging
to Lessee. Lessee will have personal property taxes billed separately from the
Project. If any of Lessee's personal property is taxed with the Project, Lessee
will pay Lessor the taxes for the personal property upon demand by Lessor.
5.04 Based on Lessee's Proportionate Share defined in subsection 1.10,
Lessee agrees to pay as Additional Rent to Lessor its share of any parking
charges, utility surcharges, occupancy taxes, or any other costs resulting from
the statutes or regulations, or interpretations thereof, enacted by any
governmental authority in connection with the use or occupancy of the Project or
the parking facilities serving the Project, or any part thereof.
6. Security Deposit
6.01 If Lessee defaults with respect to any provision of this Lease,
Lessor may retain, use or apply all or any part of the Security Deposit to
compensate Lessor for any loss or damage suffered by Lessee's default including
but not limited to, the payment of Base Monthly Rent, Additional Rent or other
rental sums due, and for payment of amounts Lessor is obligated to spend by
reason of Lessee's default. If any portion is so retained, used or applied,
Lessee, upon demand, will deposit with Lessor an amount sufficient to restore
the deposit to its original amount, as adjusted per subsection 3.02. Lessor will
not be required to keep the Security Deposit separate from its general funds,
and Lessee will not be entitled to interest on it. If Lessee fully and
faithfully performs every provision of this Lease, the Security Deposit or a
balance thereof will be returned to Lessee within the time frame permitted by
law. In no event will Lessee have the right to apply any part of the Security
Deposit to any rents payable under this Lease.
7. Lease Documentation Fee
8. Use of Premises; Quiet Conduct
8.01 The Premises may be used and occupied only for Lessee's Permitted Use
as shown in subsection 1.05 and for no other purpose, without obtaining Lessor's
prior written consent. Lessee will comply with all covenants, conditions and
restrictions affecting the Premises. Lessee will promptly comply with all laws,
ordinances, orders and regulations affecting the Premises. Lessee will not
perform any act or carry on any practices that may injure the Project or the
Premises or be a nuisance or menace, or disturb the quiet enjoyment of other
lessees, in the Project including but not limited to equipment which causes
vibration, use or storage of chemicals, heat or noise which is not properly
insulated, or anything which causes noxious or unpleasant odors. Lessee will not
cause, maintain or permit any outside storage on or about the Premises. In
addition, Lessee will not allow any condition or thing to remain on or about the
Premises which diminishes the appearance or aesthetic qualities of the Premises
and/or the Project or the surrounding property. The keeping of a dog or other
animal on or about the Premises is expressly prohibited.
9. Tenant Improvements
9.01 Tenant Improvements to be performed in the Premises, if any, will be
performed in accordance with the terms and provisions entitled "Lessor's Work"
contained in "Exhibit B" attached. Thereafter during the Lease Term, Lessor will
be under no obligation to alter, change, decorate or improve the Premises.
10. Parking
10.01 Lessee and Lessee's customers, suppliers, employees, and invitees
have the non-exclusive right to park in common with other lessees in the parking
facilities as designated by Lessor. Lessee agrees not to overburden the parking
facilities and agrees to cooperate with Lessor and other lessees in the use of
the parking facilities. Lessor reserves the right to, on an equitable basis,
assign specific spaces with or without charge to Lessee as Additional Rent, make
changes in the parking layout from time to time, and to establish reasonable
time limits on parking.
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11. Utilities
11.01 Lessee will pay for all gas, heat, light, power, electricity, or
other services metered, chargeable to or provided to the Premises. Lessor
reserves the right to install separate meters for any such utility.
11.02 Lessor will not be liable or deemed in default to Lessee nor will
there be any abatement of rent or any interruption or reduction of utilities or
services not caused by any act of Lessor or any act reasonably beyond Lessor's
control. Lessee agrees to comply with energy conservation programs implemented
by Lessor by reason of enacted laws or ordinances.
11.03 Lessee will contract and pay for all telephone and such other
services for the Premises subject to the provisions of subsection 12.03.
12. Alterations, Mechanic's Liens
12.01 Lessee will not make any alterations to the interior of the
Premises, without Lessor's prior written consent which will not be unreasonably
withheld. If Lessor gives its consent, no such alterations will proceed without
Lessor's prior written approval of (i) Lessee's contractor, (ii) certificates of
insurance by Lessee's contractor for public liability and automobile liability
and property damage insurance with limits not less than
$1,000,000/$250,000/$500,000 respectively endorsed to show Lessor as an
additional insured and for worker's compensation as required and (iii) detailed
plans and specification for such work. In addition, before alterations may
begin, valid building permits or other permits or licenses required must be
furnished to Lessor, and, once the alterations begin, Lessee will diligently and
continuously pursue their completion. At Lessor's option, any alterations may
become part of the realty and belong to Lessor. If requested by Lessor, Lessee
will pay, prior to the commencement of construction, an amount determined by
Lessor necessary to cover the costs of demolishing such alterations and/or the
cost of returning the Premises to its condition prior to such alterations. As a
further condition to giving such consent, Lessor may require Lessee to provide
Lessor, at Lessee's sole cost and expense, a payment and performance bond in
form acceptable to Lessor, in a principal amount not less than one and one-half
times the estimated costs of such alterations, to ensure Lessor against any
liability for mechanic's and materialmen's liens and to ensure completion of
work and such bond will continue in force for a period no less than 131 days
after the completion of such work.
12.02 Notwithstanding anything in subsection 12.01, Lessee may, with
written consent of Lessor, install trade fixtures, equipment, and machinery in
conformance with the ordinances of the applicable city and county, and they may
be removed upon termination of this Lease provided the Premises are not damaged
by their removal.
12.03 All private telephone systems and/or other related
telecommunications equipment and lines may not be installed without Lessor's
prior written consent. In addition, if Lessor gives consent all equipment must
be installed within Lessee's Premises and, upon termination of this Lease
removed and the Premises restored to the same condition as before such
installation.
12.04 Lessee will pay all costs for alterations and will keep the
Premises, the Project and the underlying property free from any liens arising
out of work performed for, materials furnished to, or obligation incurred by
Lessee as outlined in the applicable parts of subsection 12.01 above.
12.05 Lessor will have the right to construct or permit construction of
tenant improvements in or about the Project for existing and new lessees and to
alter any public areas in and around the Project. Notwithstanding anything which
may be contained in this Lease, Lessee understands this right of Lessor and
agrees that such construction will not be deemed to constitute a breach of this
Lease by Lessor and Lessee waives any such claim which it might have arising
from such construction.
13. Fire Insurance; Hazards and Liability Insurance
13.01 Except as expressly provided as Lessee's Permitted Use, subsection
1.05, or as otherwise consented to by Lessor in writing, Lessee shall not do or
permit anything to be done within or about the Premises which will increase the
existing rate of insurance on the Project or shall, at its sole cost and
expense, comply with any requirements pertaining to the Premises or any
insurance organization insuring the Project and Project-related apparatus.
Lessee agrees to pay to Lessor, as Additional Rent, any increases in premiums on
policies resulting from Lessee's Permitted Use or other use consented to by
Lessor which increases Lessor's premiums or requires extended coverage by Lessor
to insure the Premises.
13.02 Lessee, at all times during the term of this Lease and at Lessee's
sole expense, will maintain a policy of standard fire and extended coverage
insurance with "all risk" coverage on all Lessee's improvements and alterations
in or about the Premises and on all personal property and equipment to the
extent of at least ninety percent (90%) of their full replacement value. The
proceeds from this policy will be used by Lessee for the replacement of personal
property and equipment and the restoration of Lessee's improvements and/or
alterations. This policy will contain an express waiver, in favor of Lessor, of
any right of subrogation by the insurer.
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13.03 Lessee, at all times during the term of this Lease and at Lessee's
sole expense, will maintain a policy of comprehensive general liability
coverage with limits of not less than $1,000,000 combined single loss for
bodily injury and property damage insuring against all liability of Lessee and
its authorized representatives arising out of or in connection with Lessee's
use or occupancy of the Premises. This policy of insurance will name Lessor as
an additional insured and will include an express waiver of subrogation by the
insurer in favor of Lessor and will release Lessor from claims for damage to
any person, to the Premises, and to the Project, and to Lessee's personal
property, equipment, improvements and alterations in or on the Premises of the
Project, caused by or resulting from risks which are to be insured against by
Lessee under this Lease.
13.04 All insurance required to be provided by Lessee under this Lease
will (a) be issued by an insurance company authorized to do business in the
state in which the Premises are located and which is satisfactory to Lessor,
(b) be primary and noncontributing with any insurance carried by Lessor, and
(c) contain an endorsement requiring at least thirty (30) days prior written
notice of cancellation to Lessor before cancellation or change in coverage,
scope or limit of any policy. Lessee will deliver a certificate of insurance or
a copy of the policy to Lessor within thirty (30) days of execution of the
Lease and will provide evidence of renewed insurance coverage at each
anniversary, prior to the expiration of any current policies. Lessee's failure
to provide evidence of this coverage to Lessor may, in Lessor's sole
discretion, constitute a default under this Lease.
14. Indemnification and Waiver of Claim
14.01 Lessee waives all claims against Lessor for damage to any property
in or about the Premises and for injury to any persons, including death
resulting therefrom, regardless of cause or time of occurrence. Lessee will
defend, indemnify and hold Lessor harmless from and against any and all claims,
actions, proceedings, expenses, damages and liabilities, including attorneys'
fees, arising out of, connected with, or resulting from any use of the Premises
by Lessee, its employees, agents, visitors or licensees, except for any damage
or injury which is the direct result of intentional acts by Lessor, its
employees, agents, visitors or licensees.
15. Repairs
15.01 Lessee shall, at its sole expense, keep and maintain the Premises and
every part thereof (excepting air-conditioning, common use equipment, exterior
walls and roofs, which Lessor agrees to repair unless damages are due to the
neglect or intentional acts of Lessee or its agents, employees, visitors or
licensees), including interior windows, skylights, doors, any store fronts and
the interior of the Premises, in good and sanitary order, condition and repair.
Lessee will, also, at its sole cost keep and maintain all utilities, fixtures,
plumbing and mechanical equipment used by Lessee in good order and repair and
furnish all expendables (light bulbs [unless provided by Lessor], paper goods,
soaps, etc.) used in the Premises. The standard for comparison and need of
repair will be the condition of the Premises at the time of commencement of
this Lease and all repairs will be made by a licensed and bonded contractor
approved by Lessor.
15.02 Lessee will not make repairs to the Premises at the cost of Lessor,
whether by deduction of rent or otherwise or vacate the Premises or terminate
the Lease with abatement or termination of rent because repairs are not made.
If during the Term, any alteration, addition or change to the Premises is
required by legal authorities, Lessee, at its sole expense, shall promptly make
the same. Lessor reserves the right to make any such repairs not repaired or
maintained in good condition by Lessee and Lessee shall reimburse Lessor for
all such costs upon demand. If such repairs have not been made within 30 days
of notice to repair by Lessor to Lessee, Lessor may make such repairs and such
costs of repairs shall be at Lessee's expense. Failure to pay such expenses
within 30 days of presentation, shall be deemed a breach of this Lease.
16. Auction, Signs, Landscaping
16.01 Lessee will not conduct or permit to be conducted any sale by
auction on the Premises. Lessor will have the right to control landscaping and
approve the placement, size, and quality of signs. Lessee shall comply with the
terms and conditions regarding sign criteria set forth in Exhibit "C" attached.
Lessee will not make alterations or additions to the landscaping and will not
place signs which are visible from the outside of any buildings of the Project
without prior written consent of Lessor. Lessor will have the right in its sole
discretion to withhold its consent. Any signs not in conformity with this Lease
may be removed by Lessor at Lessee's expense.
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17. Entry By Lessor
17.01 Lessee will permit Lessor and Lessor's agents to enter the Premises
at all reasonable times for the purpose of inspecting the same, or for the
purpose of maintaining the Project, or for the purpose of making repairs,
alternations or additions to any portion of the Project, including the erection
and maintenance of such scaffolding, canopies, fences and props as may be
required, or for the purpose of posting notices of nonresponsibility for
alterations, addition or repairs, or for the purpose of showing the Premises to
prospective tenants during the last six months of the lease Term, or placing
upon the Project any usual or ordinary "for sale" signs, without any rebate of
rents and without any liability to Lessee for any loss of occupation or quiet
enjoyment of the Premises thereby occasioned. Lessee will permit Lessor at any
time within sixty (60) days prior to the expiration of this Lease, to place upon
the Premises any usual or ordinary "to let" or "to lease" signs. For each of the
above purposes, Lessor will at all times have and retain a key with which to
unlock all of the doors in, upon and about the Premises, excluding Lessee's
vaults and safes. Lessee will not alter any lock or install a new or additional
lock or any bolt on any door of the Premises without the prior written consent
of Lessor, which will not be unreasonably withheld. If Lessor gives its consent,
Lessee will furnish Lessor with a key and Lessor retains the right to charge
Lessee for restoring any altered doors to their condition prior to the
installation of the new or additional locks.
18. Abandonment
18.01 Lessee will not vacate or abandon the Premises at any time during
the Lease Term or permit the Premises to remain unoccupied for a period longer
than fifteen (15) consecutive days during the Lease Term. If Lessee abandons,
vacates or surrenders the Premises, or is dispossessed by process of law, or
otherwise, any personal property belonging to Lessee left in or about the
Premises will, at the option of Lessor be deemed abandoned and may be disposed
of by Lessor in the manner provided for by the laws of the state in which the
Premises are located.
19. Destruction
19.01 Should the Premises or the building on the Premises be partially
destroyed by any cause not the fault of Lessee (or any person in or about the
Premises with the consent, expressed or implied, of Lessee), this Lease will
continue in full force and effect and Lessor, at Lessor's own cost and expense,
will promptly commence the work of repairing and restoring the Premises to their
prior condition providing the then work can be accomplished under all applicable
government laws and regulations within sixty (60) working days from the date of
damage at a cost not exceeding twenty-five percent (25%) of the total
replacement cost of the Premises. Within thirty (30) days of the occurrence of
partial destruction, Lessor may terminate this Lease as of the date of the
occurrence if nine (9) months or less remain in the Lease Term.
19.02 Should the Premises or the building in which the Premises are a
part be so far destroyed by any cause not the fault of Lessee (or any person in
or about the Premises with the consent, expressed or implied, of Lessee) that
they cannot be repaired or stored to their former condition within sixty (60)
days of the date of damage or at a cost exceeding twenty-five percent(25%) of
the total replacement cost of the Premises, Lessor may at Lessor's options
either:
A. Continue this Lease in full force and effect by repairing and restoring,
at Lessor's own cost and expense, the Premises to their former condition; or
B. Terminate this Lease by giving Lessee written notice of such
termination.
19.03 Should the Premises be partially or totally destroyed by any cause of
Lessee, or any person in or about the Premises with the consent, expressed or
implied, of Lessee, this Lease will remain in full force and effect and Lessee
shall immediately commence work to repair the damage and diligently pursue its
completion.
19.04 Any insurance proceeds received by Lessor because of the total or
partial destruction of the Premises or the building on the Premises will be the
sole property of Lessor, free from any claims of Lessee, and may be used by
Lessee for whatever purpose Lessor may desire.
19.05 Should Lessor elect to repair and restore the Premises to their
former condition, or should Lessor be required to restore the Premises to their
former condition, there will be a proportional abatement in the amount of rent
payable during the period of repairs and restoration as long as Lessee (or any
person in or about the Premises with the consent, expressed or implied, of
Lessee) is not the cause of the total or partial destruction. The rent due under
the terms of the Lease will be reduced between the date of destruction and the
date of completion of restoration and repairs based on the extent to which
destruction interferes with Lessee's use of the Premises.
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20. Assignment, Subletting and Transfers of Ownership
20.01 Lessee will not directly or indirectly, voluntarily or by operation
of law, assign, sell, mortgage, encumber, convey, or otherwise Transfer all or
any part of Lessee's Leasehold estate, or permit the Premises to be occupied by
anyone other than the Lessee and Lessee's employees or sublet the Premises or
any portion thereof (collectively called "Transfer") without Lessor's prior
written consent. If Lessee desires at any time to Transfer this Lease, Lessee
shall first give written notice to Lessor of its desire to do so, which notice
shall contain (a) the identity of the proposed Transferee, (b) the terms and
provisions of the proposed Transfer, (c) the nature of the proposed Transferee's
business to be carried on in the Premises, (d) a detailed summary of the
business background and financial condition of the proposed Transferee, and (e)
such financial information as deemed necessary by Lessor to evaluate any
proposed Transfer. All of the foregoing information shall be provided to Lessor
by Lessee at least sixty (60) days in advance of Lessee's proposed Transfer
date.
20.02 Lessor will not unreasonably withhold its consent to any proposed
Transfer except that such consent need not be granted if: (a) in the reasonable
judgment of Lessor the Transferee is of a character or is engaged in a business
which is not in keeping with the standards of the Lessor for the Project; (b) in
the reasonable judgment of Lessor any purpose for which the Transferee intends
to use the Premises is not in keeping with the standards of Lessor for the
Project; provided in no event may any purpose for which Transferee intends to
use the Premises be in violation of this Lease; (c) the portion of the Premises
subject to the Transfer is not regular in shape with appropriate means of
entering and exiting, including adherence to any local, county or other
governmental codes, or is not otherwise suitable for the normal purposes
associated with such a Transfer; (d) the proposed Transferee be at least as
financially responsible as Lessee was expected to be at the time of the
execution of this Lease or (e) Tenant is in default under this Lease.
20.03 In the event Lessor consents to a Transfer, Lessee will pay Lessor
the excess, if any, of the rent and other charges reserved in the Transfer over
the allocable portion of the rent and other charges hereunder for that portion
of the Premises subject to the Transfer. For the purpose of this section, the
rent reserved in the Transfer will be deemed to include any lump sum payment or
other consideration given to Lessee in consideration for the Transfer. Lessee
will pay or cause the Transferee to pay to Lessor this additional rent together
with the monthly installments of rent due.
20.04 Any consent to any Transfer which may be given by Lessor, or the
acceptance of any rent, charges or other consideration by Lessor from Lessee or
any third party, will not constitute a waiver by Lessor of the provisions of
this Lease or a release of Lessee from the full performance by it or the
covenants stated herein; and any consent given by Lessor to any Transfer will
not relieve Lessee (or any transferee of Lessee) from the above requirements for
obtaining the written consent of Lessor to any subsequent Transfer.
20.05 If a default under this Lease should occur while the Premises or any
part of the Premises are assigned, sublet or otherwise transferred, Lessor, in
addition to any other remedies provided for within this Lease or by law, may at
its option collect directly from the Transferee all rent or other consideration
becoming due to Lessee under the Transfer and apply these monies against any
sums due to Lessor by Lessee; and Lessee authorizes and directs any Transferee
to make payments of rent or other consideration direct to Lessor upon receipt of
notice from Lessor. No direct collection by Lessor from any Transferee should be
construed to constitute a novation or a release of Lessee or any guarantor of
Lessee from the further performance of its obligations in connection with this
Lease.
20.06 Any Transfer without the Lessor's consent shall be void and shall, at
the option of Lessor, terminate this Lease.
20.07 If Lessee requests a consent of Lessor to any Transfer, then Lessee
shall, upon demand, pay Lessor an administrative fee of One Hundred Fifty
Dollars ($150.00) plus any attorneys' fees reasonably incurred by Lessor in
connection with such request.
21. Breach By Lessee
21.01 Lessee will be in breach of this Lease if at any time during the term
of this Lease (and regardless of the pendency of any bankruptcy, organization,
receivership, insolvency or other proceedings in law, in equity or before any
administrative tribunal which have or might have the effect of preventing Lessee
from complying with the terms of this Lease):
A. Lessee fails to make payment of any installment of Base Monthly Rent,
Additional Rent, or of any other sum herein specified to be paid by Lessee, and
such failure is not cured within three (3) days after Lessor's written notice
to Lessee of such failure of payment, which notice shall be in lieu of and not
in addition to any notice required by statute; or
B. Lessee fails to observe or perform any of its other covenants,
agreements or obligations hereunder, and such failure is not cured within ten
(10) days after Lessor's written notice to Lessee of such failure, which notice
shall be in lieu of and not in addition to any notice required by statute
provided, however, that if the nature of Lessee's obligation is such that more
than ten (10) days are required for performance, then Lessee will not be in
breach if Lessee commences performance within such ten (10) day period and
thereafter diligently prosecutes the same to completion; or
<PAGE> 10
C. Lessee becomes insolvent, makes a transfer in fraud of its creditors,
makes a transfer for the benefit of its creditors, voluntarily files for
bankruptcy, is adjudged bankrupt or insolvent in proceedings filed against
Lessee, a receiver, trustee, or custodian is appointed for all or substantially
all of Lessee's assets, fails to pay its debts as they become due, convenes a
meeting of all or a portion of its creditors, or performs any acts of bankruptcy
or insolvency, including the selling of its assets to pay creditors, or
indicates a general inability to pay its obligations hereunder; or
D. Lessee has abandoned the Premises as defined in section 18 above.
22. Remedies of Lessor
22.01 Termination of Lease After Breach: If lessee breaches this Lease and
abandons the Premises before the end of the term, or if its right to possession
is terminated by Lessor because of Lessee's breach of this Lease, then this
Lease may be terminated by Lessor at its option. On such termination Lessor may
recover from Lessee, in addition to the remedies permitted by law:
A. The worth at the time of award of the unpaid rents which had been earned
at the time of termination;
B. The worth at the time of award of the amount by which the unpaid rents
which would have been earned after termination until the time of award exceeds
the amount of such rental loss that Lessee proves could have been reasonably
avoided;
C. The worth at the time of award of the amount by which the unpaid rents
for the balance of the Lease Term after the time of award exceeds the amount of
such rental loss for such period that Lessee proves could be reasonably avoided;
and
D. Any other amount necessary to compensate Lessor for all the damage
proximately caused by Lessee's breach of its obligations under this Lease, or
which in the ordinary course of events would be likely to result therefrom. The
damage proximately caused by Lessee's breach will include, without limitation,
(i) expenses for cleaning, repairing or restoring the Premises, (ii) expenses
for altering, remodeling or otherwise improving the Premises for the purpose of
reletting, (iii) brokers' fees and commissions, advertising costs and other
expenses of reletting the Premises, (iv) costs of carrying the Premises such as
taxes, insurance premiums, utilities and security precautions, (v) expenses in
retaking possession of the Premises, (vi) attorneys' fees and court costs, (vii)
any unearned brokerage commissions paid in connection with this Lease and (viii)
reimbursement of any previously waived Base Rent or Additional Rent.
22.02 Continuation of Lease After Breach: Notwithstanding the foregoing, in
the event Lessee has breached this Lease and abandoned the Premises, this Lease,
at Lessor's option, will continue in full force and effect so long as Lessor
does not terminate Lessees' right to possession of the Premises, and in such
event Lessor may enforce all of its rights and remedies under this Lease,
including the right to recover rent as it becomes due. For purposes of this
subsection 22.03, the following acts by Lessor will not constitute the
termination of Lessee's right to possession of the premises:
A. Acts of maintenance or preservation or efforts to relet the Premises,
including, but not limited to, alterations, remodeling, redecorating, repairs,
replacements and/or painting as Lessor shall consider advisable for the purpose
of reletting the Premises or any part thereof; or
B. The appointment of a receiver upon the initiative of Lessor to protect
Lessor's interest under this Lease or in the Premises.
22.03 In the event of bankruptcy, Lessee assigns to Lessor all its rights,
title and interest in the Premises as security for its obligations and covenants
set forth in this Lease.
22.04 Definitions and Incidental Rights
A. The "worth at the time of award" of the amounts referred to in
subsection 22.01A, and subsection 22.01B, will be computed by allowing interest
at the rate of ten percent (10%) per annum. The "worth at the time of award" of
the amount referred to above in subsection 22.01C will be computed by
discounting the amount at the discount rate of the Federal Reserve Bank of San
Francisco in effect at the time of award, plus one percent (1%).
B. Any efforts by Lessor to lessen the damages caused by Lessee's breach of
this Lease will not waive Lessor's right to recover the damages set forth above.
C. Nothing herein will be construed to affect other provisions of this
Lease regarding Lessor's right to indemnification from Lessee for liability
arising prior to the termination of this Lease for personal injuries or property
damage.
-9-
<PAGE> 11
D. No right or remedy conferred upon or reserved to Lessor in this Lease
is intended to be exclusive of any other right or remedy granted to Lessor by
statute or common law, and each and every such right and remedy will be
cumulative.
23. Surrender of Lease Not Merger
23.01 The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, will not work a merger and will, at the option of
Lessor, terminate all or any existing transfers, or may, at the option of
Lessor, operate as an assignment to it of any or all of such transfers.
24. Attorneys Fees / Collection Charges
24.01 In the event of any legal action or proceeding between the
parties hereto, actual attorneys' fees and expenses of the prevailing party in
any such action or proceeding will be added to the judgment therein. Should
Lessor be named as defendant in any suit brought against Lessee in connection
with or arising out of Lessee's occupancy hereunder, Lessee will pay to Lessor
its costs and expenses incurred in such suit, including actual attorneys' fees.
24.02 If Lessor utilizes the services of any attorney at law for the
purpose of collecting any rent due and unpaid by Lessee after three (3) days'
written notice to Lessee of such nonpayment of rent or in connection with any
other breach of this Lease by Lessee, Lessee agrees to pay Lessor actual
attorneys' fees as determined by Lessor for such services, regardless of the
fact that no legal action may be commenced or filed by Lessor.
25. Condemnation
25.01 If twenty-five percent (25%) or more of the Premises is taken for
any public or quasi-public purpose by any lawful government power or authority,
by exercise of the right of appropriation, reverse condemnation, condemnation or
eminent domain, or sold to prevent such taking, the Lessee or the Lessor may at
its option terminate this Lease as of the effective date thereof. Lessee will
not because of such taking assert any claim against the Lessor or the taking
authority for any compensation because of such taking, and Lessor will be
entitled to receive the entire amount of any award without deduction for any
estate of interest of Lessee. If less than twenty-five percent (25%) of the
Premises is taken, Lessor at its option may terminate this Lease. If Lessor does
not so elect, Lessor will promptly proceed to restore the Premises to
substantially its same condition prior to such partial taking, allowing for any
reasonable effects of such taking, and a proportionate allowance will be made to
Lessee for the rent corresponding to the time during which, and to the part of
the Premises which, Lessee is deprived on account of such taking and
restoration.
26. Rules and Regulations
26.01 Lessee will faithfully observe and comply with the Rules and
Regulations printed on or attached to this Lease and Lessor reserves the right
to modify and amend them as it deems necessary. Lessor will not be responsible
to Lessee for the nonperformance by any other lessee or occupant of the Project
of any of said Rules and Regulations.
26.02 Violation of any such Rules and Regulations shall be deemed a
material breach of the Lease by Lessee.
27. Estoppel Certificate
27.01 Lessee will execute and deliver to Lessor, within ten (10) days
of receiving written notice, a statement in writing certifying that this Lease
is unmodified and in full force and effect (or, if modified, stating the nature
of such modification) and the date to which rent and other charges are paid in
advance, if any, and acknowledging that there are not, to Lessee's knowledge,
any uncured defaults on the part of Lessor hereunder or specifying such defaults
if they are claimed. Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrancer of the Premises. Lessee's failure to
deliver such statement within such time shall be conclusive upon Lessee that (1)
this Lease is in full force and effect, without modification except as may be
represented by Lessor; (2) there are no uncured defaults in Lessor's
performance; and (3) not more than one (1) month's rent has been paid in
advance.
28. Sale By Lessor
28.01 In the event of a sale or conveyance by Lessor of the Project the
same shall operate to release Lessor from any liability upon any of the
covenants or conditions, expressed or implied, herein contained in favor of
Lessee, and in such event Lessee agrees to look solely to the responsibility of
the successor in interest of Lessor in and to this Lease. This Lease will not be
affected by any such sale, and Lessee agrees to attorn to the purchaser or
assignee.
<PAGE> 12
29. Notices
29.01 All notices, statements, demands, requests, consents, approvals,
authorizations, offers, agreements, appointments or designations under this
Lease by either party to the other will be in writing and will be considered
sufficiently given and served upon the other party if sent by certified mail,
return receipt requested, postage prepaid, and addressed as indicated in
subsection 1.03 and subsection 1.04.
30. Waiver
30.01 The failure of Lessor to insist in any one or more cases upon the
strict performance of any term, covenant or condition of this Lease will not be
construed as a waiver of a subsequent breach of the same or any other covenant,
term or condition; nor shall any delay or omission by Lessor to seek a remedy
for any breach of this Lease be deemed a waiver by Lessor of its remedies or
rights with respect to such a breach.
31. Lessee's Intent, Holding over
31.01 Lessee will give Lessor, ninety (90) days prior to the expiration of
the Lease Term, written notification of Lessee's intent to either remain in or
vacate the Premises on the Lease Expiration Date. If Lessee does not notify
Lessor by the date specified herein, Lessor deems that Lessee will vacate the
Premises by the Lease Expiration Date and Lessor will have no further
obligation.
31.02 Any holding over after the expiration or termination of the term of
this Lease, or after any notice given by Lessor to Lessee terminating this
Lease, such possession by Lessee will be deemed to be a month-to-month tenancy
terminable on thirty (30) day notice at any time by either party. All provisions
of this Lease, except those pertaining to term and rent, will apply to the
month-to-month tenancy. Lessee will pay Base Monthly Rent in an amount equal to
150% of rent for the last full calendar month during the regular term.
32. Project Plan
32.01 In the event Lessor requires the Premises for use in conjunction
with another suite or for other reasons connected with the Project planning
program, Lessor, upon notifying Lessee in writing, shall have the right to move
Lessee to space in the Project of which the Premises forms a part, at Lessor's
sole cost and expense (excluding private telephone systems which Lessee must
bear the cost of moving and installing), and the terms and conditions of the
original Lease will remain in full force and effect excepting that the Premises
will be in a new location. However, if the new space does not meet with Lessee's
approval, Lessee will have the right to cancel this Lease upon giving Lessor
thirty (30) days' notice within ten (10) days of receipt to Lessor's
notification. Should Lessee elect to cancel the Lease as provided in this
paragraph, the effective expiration date will equal the projected move-in date
of the suite Lessor wishes Lessee to move to as indicated in Lessor's written
notification to Lessee.
33. Default of Lessor / Limitation of Liability
33.01 In the event of any default by Lessor hereunder, Lessee agrees to
give notice of such default, by registered mail, to Lessor at Lessor's Notice
Address as stated in subsection 1.04 and to offer Lessor a reasonable
opportunity to cure the default.
33.02 In the event of any actual or alleged failure, breach or default
hereunder by Lessor, Lessee's sole and exclusive remedy will be against Lessor's
interest in the Project, and no partner of Lessor will be sued, be subject to
service of process, or have a judgment obtained against him in connection with
any alleged breach or default, and no writ of execution will be levied against
the assets of any partner of Lessor. The covenants and agreements are
enforceable by Lessor and also by any partner of Lessor.
34. Release of Partners of Lessor
34.01 If Lessee has any claim against Lessor under or arising out of this
Lease, Lessee's sole recourse shall be against the assets of Lessor and Lessee
further waives any and all right to assert any claim against, or obtain any
damages from, the partners, employees, officers, directors or agents of Lessor.
35. Expansion Clause
35.01 If during the Lease Term, Lessee executes a Lease within the Project
for space larger than the present premises with a Lease term at least equal to
that which remains on this Lease or one (1) year, whichever is greater, with a
Base Monthly Rent amount at least equal to the present Base Monthly Rent of this
Lease, this Lease shall be terminated upon the commencement date of the Lease
for such substitute space. Notwithstanding the above-stated, Lessee shall remain
obligated to pay for any adjustments in rent pursuant to sections 3, 4 and 5 due
Lessor as a result of Lessee's tenancy hereunder and this obligation shall
survive the termination of this Lease pursuant to this section 35.
-- 11 --
<PAGE> 13
36. Subordination
36.01 Without the necessity of any additional document being executed by
Lessee for the purpose of effecting a subordination, and at the election of
Lessor or any mortgagee with a lien on the Project or any ground lessor with
respect to the Project, this Lease will be subject and subordinate at all time
to (a) all ground leases or underlying leases which may now exist or hereafter
be executed affecting the Project, and (b) the lien of any mortgage or deed of
trust which may now exist or hereafter be executed in any amount for which the
Project, ground leases or underlying leases, or Lessor's interest or estate in
any of said items is specified as security. In the event that any ground lease
or underlying lease terminates for any reason or any mortgage or deed of trust
is foreclosed or a conveyance in lieu of foreclosure is made for any reason,
Lessee will, notwithstanding any subordination, attorn to and become the Lessee
of the successor in interest to Lessor, at the option of such successor in
interest. Lessee covenants and agrees to execute and deliver, upon demand by
Lessee and in the form requested by Lessor any additional documents evidencing
the priority or subordination of this Lease with respect to any such ground
lease or underlying leases or the lien of any such mortgage or deed of trust.
Lessee hereby irrevocably appoints Lessor as attorney-in-fact of Lessee to
execute, deliver and record any such document in the name and on behalf of
Lessee.
37. Miscellaneous Provisions
37.01 Whenever the singular number is used in this Lease and when required
by the context, the same will include the plural, and the masculine gender will
include the feminine and neuter genders, and the word "person" will include
corporation, firm, partnership, or association. If there be more than one
Lessee, the obligations imposed upon Lessee under this Lease will be joint and
several.
37.02 The headings or titles to paragraphs of this Lease are not a part of
this Lease and will have no effect upon the construction or interpretation of
any part of this Lease.
37.03 This instrument contains all of the agreements and conditions made
between the parties to this Lease and may not be modified orally or in any other
manner than by an agreement in writing signed by all parties to this Lease.
Lessee acknowledges that neither Lessor nor Lessor's agents have made any
representation or warranty as to the suitability of the Premises to the conduct
of Lessee's business. Any agreements, warranties or representations not
expressly contained herein will in no way bind either Lessor or Lessee, and
Lessor and Lessee expressly waive all claims for damages, by reason of any
statement, representation, warranty, promise or agreement, if any, not contained
in this Lease.
37.04 Time is of the essence of each term and provision of this Lease.
37.05 Except as otherwise expressly stated, each payment required to be
made by Lessee is in addition to and not in substitution for other payments to
be made by Lessee.
37.06 Subject to section 20, the terms and provisions of this Lease are
binding upon and inure to the benefit of the heirs, executors, administrators,
successors and assigns of Lessor and Lessee.
37.07 All covenants and agreements to be performed by Lessee under any of
the terms of this Lease will be performed by Lessee at Lessee's sole cost and
expense and without any abatement of rent.
37.08 In consideration of Lessor's covenants and agreements hereunder,
Lessee hereby covenants and agrees not to disclose any terms, covenants or
conditions of this Lease or any other party without the prior written consent of
Lessor.
38. Deposit Agreement
38.01 Lessor and Lessee hereby agree that Lessor will be entitled to
immediately endorse and cash Lessee's good faith rent and the Security Deposit
check(s) accompanying this Lease. It is further agreed and understood that such
action will not guarantee acceptance of this Lease by Lessor, but, in the event
Lessor does not accept this Lease, such deposits will be refunded in full to
Lessee. This Lease will be effective only after Lessee has received a copy fully
executed by Lessor.
39. Governing Law
39.01 This Lease is governed by and construed in accordance with the laws
of the state in which the Premise are located, and venue of any suit will be in
the county where the Premises are located.
40. Severability
40.01 If any provision of this Lease is found to be unenforceable, all
other provisions shall remain in full force and effect.
-- 12 --
<PAGE> 14
41. Landlord's Lien
41.01 LESSOR HEREUNDER WILL HAVE THE BENEFIT OF, AND THE RIGHT TO, ANY AND
ALL LANDLORD'S LIENS PROVIDED UNDER THE LAW BY WHICH THIS LEASE IS GOVERNED.
42. Special Provisions
42.01 Special provisions of this Lease number 43 through 51 are attached
hereto and made a part hereof. If none; so state in the following space:
_________________________
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of the
day and year indicated by Lessor's execution date as written below.
Individuals signing on behalf of a Lessee warrant that they have the
authority to bind their principals. In the event that Lessee is a corporation,
Lessee shall deliver to Lessor, concurrently with the execution and delivery of
this Lease, a certified copy of corporate resolutions adopted by Lessee
authorizing said corporation to enter into and perform the Lease and
authorizing the execution and delivery of the Lease on behalf of the
corporation by the parties executing and delivering this Lease. THIS LEASE,
WHETHER OR NOT EXECUTED BY LESSEE, IS SUBJECT TO ACCEPTANCE BY LESSOR, ACTING
ITSELF OR BY ITS AGENT ACTING THROUGH ITS PRESIDENT AND VICE PRESIDENT AT ITS
HOME OFFICE.
LESSOR LESSEE
PS Business Parks, Inc. WebSideStory, Inc.
A California Corporation A California Corporation
_____________________________ _____________________________
By its agent
PS Business Parks, L.P.
By: PS Business Parks, Inc.
General Partner
By /s/ PATRICIA ABBOTT By /s/ BLAISE BARRELET
-------------------- --------------------
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
Patricia Abbott, Regional Blaise Barrelet, President
Manager
- ------------------------- --------------------------
TITLE TITLE
Date 12/7/98 Date
-------------------- ---------------------
EXECUTION DATE
By ______________________ By _______________________
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
_________________________ __________________________
TITLE TITLE
Date ____________________ Date _____________________
EXECUTION DATE
- 13 -
<PAGE> 15
43. HAZARDOUS MATERIALS
43.01 Compliance with Law.
Lessee, at Lessee's expense, shall comply with all laws, rules, orders,
ordinances, directions, regulations and requirements of federal, state, county
and municipal authorities pertaining to Lessee's use of the Premises and with
the recorded covenants, conditions and restrictions, regardless of when they
become effective, including, without limitation, all applicable federal, state,
and local laws, regulations or ordinances pertaining to air and water quality,
Hazardous Materials (as hereinafter defined), waste disposal, air emissions
and other environmental matters, all zoning and other land use matters, and
utility availability, and with any direction of any public officer or officers,
pursuant to law, which shall impose any duty upon Lessor or Lessee with respect
to the use or occupation of the Premises.
43.02 Use of Hazardous Materials
(1) Lessee shall (1) not cause or permit any Hazardous Material to be
brought upon, kept or used in or about the Premises or the Project by Lessee,
its agents, employees, contractors, or invitees without the prior written
consent of Lessor, which Lessor shall not unreasonably withhold as long as
Lessee demonstrates to Lessor's reasonable satisfaction that such Hazardous
Material is necessary or useful to Lessee's business and will be used, kept and
stored in a manner that complies with all laws regulating any such Hazardous
Material so brought upon or used or kept in or about the Premises. If Lessee
breaches the obligations stated in the preceding sentence, or if the presence
of Hazardous Material on the Premises or the Project caused or permitted by
Lessee results in contamination of the Premises or the Project, or if
contamination of the Premises or the Project by Hazardous Material otherwise
occurs for which Lessee is legally liable for Lessor for damage resulting
therefrom, then Lessee shall indemnify, defend and hold Lessor harmless from
any and all claims, judgements, damages, penalties, fines, costs, liabilities
or losses (including, without limitation, diminution in value of the Premises
or the Project, damages for the loss or restriction on use of rentable or usable
space or of any amenity of the Premises or the Project, damages arising from
any adverse impact on marketing of space, and sums paid in settlement of
claims, attorneys' fees, consultant fees and expert fees) which arise during or
after the Lease term as a result of such contamination.
<PAGE> 16
This indemnification of Lessor by Lessee 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 Premises or the
Project. Without limiting the foregoing, if the presence of any Hazardous
Material on the Premises or the Project caused or permitted by Lessee result in
any contamination of the Premises or the Project, Lessee shall promptly take
all actions at its sole expense as are necessary to return the Premises and the
Project to the condition existing prior to the introduction of any such
Hazardous Material to the Premises or the Project; provided that Lessor's
approval of such action shall first be obtained, which approval shall not
unreasonably withheld so long as such actions would not potentially have any
material adverse long-term or short-term effect on the Premises or the Project.
The foregoing indemnity shall survive the expiration or earlier termination of
this Lease.
(2) Definition of "Hazardous Material". AS used herein, the term
"Hazardous Material" means any hazardous or toxic substance, material or waste,
including, but not limited to, those substances, materials or wastes listed in
the United States Department of Transportation Hazardous Material Table (49 CFR
172.101) or by the Environmental Protection Agency as hazardous substances (40
CFR Part 302) and amendments thereto, or such substances, materials and wastes
that are or become regulated under any applicable local, state or federal law.
(3) Disclosure. At the commencement of this Lease, and on January 1 of
each year thereafter (each such date being hereafter called "Disclosure
Dates"), including January 1 of the year after the termination of this Lease,
Lessee shall disclose to Lessor the names and amounts of all Hazardous
Materials, or any combination thereof, which were stored, used or disposed of
on or about the Premises, or which Lessee intends to store, use or dispose of
on or about the Premises.
(4) Inspection. Lessor and its agents shall have the right, but not the
duty, to inspect the Premises and the Project at any time to determine whether
Lessee is complying with the terms of this Lease. If Lessee is not in compliance
with this Lease, Lessor shall have the right to immediately enter upon the
Premises and the Project and the to remedy any contamination caused by Lessee's
failure to comply notwithstanding any other provision of this Lease. Lessor
shall use its best efforts to minimize interference with Lessee's business but
shall not be liable for any interference caused thereby.
(5) Default. Any default under this Paragraph shall be a material default
enabling lessor to exercise any of the remedies set forth in this Lease.
<PAGE> 17
SPECIAL PROVISION
44. USE CLAUSE
44.01 Tenant has negotiated the use clause contained in section 1.05 of
this lease. Tenant hereby agrees that the use clause as so written is deemed to
be reasonable for all purposes. Tenant hereby further agrees that this use
clause is enforceable for all purposes and specifically waives all challenges
to this clause now and in the future. The purpose for which this use clause is
deemed to be reasonable and enforceable include, but are not limited to, any
and all future changes tenant may request in the use of the premises, and any
and all circumstances relating to breach of lease, and/or mitigation of
damages, and/or assignment, and/or subletting.
45. SMOKING
45.01 Smoking of any kind is strictly prohibited at all times at any
location on this property, except in the designated smoking area which is
located as follows:
Outside the perimeter of building only.
The designated smoking area may be relocated by Lessor at its sole discretion
at any time during the term of the Lease.
<PAGE> 18
PROVISION #46
Estimated Operating Costs and Property Taxes
Pursuant to provision 5, "Additional Rent", of this Lease, Lessee shall pay to
Lessor in addition to all expenses stated in this lease on a monthly basis, in
advance, in addition to Lessee's monthly base rent, the amount of Lessee's
estimated monthly Proportionate Share of Operating Cost and Property Taxes as
defined and calculated in accordance with and subject to the provisions of
Section 5.02, "Operating Cost", and Section 5.03, "Taxes", under this Lease.
At the inception of this Lease, Lessee's initial estimated monthly Proportionate
Share of Operating Costs and Real Property Taxes are estimated by Lessor to be
equal to Two thousand one hundred ninety eight dollars ($2,198.00).
<PAGE> 19
PROVISION #47
TELEPHONE OR TELECOMMUNICATION LINE ACCESS
Tenant acknowledges that there are finite number of telephone or
telecommunication lines available to the premises and the property. Tenant
further acknowledges that Landlord must be able to provide all tenants of the
property satisfactory telephone or telecommunication lines access in order to
provide telephone or communication access and service to all tenants. Therefore
tenant agrees that it will not apply for more than 49 telephone lines to its
premises, nor install any telephone, telecommunication or other communication
equipment (specifically including any antennas (lower or microwave) or other
exterior equipment of any nature) which either utilizes telephone equipment or
technology or in any other manner effects Landlord's ability to provide
telephone or communications facilities or access to its tenants other than as
listed hereon without the express written permission of Landlord. Tenant agrees
therefore that;
a. Landlord Consent Required. In the event that Tenant wishes additional
telephone, telecommunication or other communication lines or access after
the date of Tenant's execution of this Lease, no such additional lines or
access shall be permitted nor other telephone, telecommunication or
communication related equipment installed without first securing the prior
written consent of Landlord.
b. Conditions to Consent. All of the following conditions must be met, as
expressed in a written agreement between Tenant and Landlord or by any
other means acceptable to Landlord in its reasonable judgment, before
Landlord considers whether to give its consent or not:
(1) No Expense. Landlord shall incur no expense whatsoever with respect to
any aspect of Tenant's need for additional access or equipment,
including without limitation, the costs of installation, materials,
permits, service, etc.
(2) Building Rules. Prior to the commencement of any work in or about the
building to install such additional access, lines or equipment, Tenant
shall agree to abide by such rules and regulations, job site rules,
and such other requirements as reasonably determined by Landlord to be
necessary to protect the interest of the building, the Tenants in the
Building, and the Landlord, including without limitation, providing
security in such form and amount as determined by Landlord;
(3) Sufficient Space. Landlord reasonably determines that there is
sufficient space in the building for the placement of all of the
lines, access and equipment.
(4) Tenant is not, nor has been at time during lease term, in breach or
default under the lease.
(5) Compensation for Space. Tenant agrees to compensate Landlord the
reasonable amount determined by Landlord for space used in the
building for the storage and maintenance of the equipment, if any lies
outsides the leased premises, and for all costs that may be incurred
by Landlord in arranging for: access by the Tenant's personnel,
security for Tenant's equipment, and any other such costs as Landlord
may expect to incur.
c. Consent is Not Landlord Warranty. Landlord's consent under this section
shall not be deemed any kind of warranty or representation by Landlord,
including without limitation, any warranty or representation as to the
availability or suitability, of the present or future telephone or
communications equipment, connections, compatibility or space available for
any additional equipment, lines or access.
d. Tenant Pays Expenses. Tenant acknowledges and agrees that all telephone and
telecommunications services desired by Tenant shall be ordered and utilized
at the sole expense of Tenant.
e. Tenant Responsible for Service Interruptions. Tenant agrees that to the
extent service by any telephone or communication equipment is interrupted,
curtailed, or discontinued, Landlord shall have no obligation or liability
with respect thereto and it shall be the sole obligation of Tenant at its
expense to obtain substitute service, but only with Landlord's prior
written permission.
f. Landlord's Refusal to Consent. Notwithstanding any provision herein to the
contrary, the refusal of Landlord to consent to any prospective request
shall not be deemed a default or breach by Landlord of its obligation under
this Lease unless and until Landlord is adjudicated in a final and
unappealable court decision to have acted recklessly or maliciously with
respect to its refusal.
g. No Third Party Rights. The provisions of this clause may be enforced solely
by the Tenant and Landlord, and are not for the benefit of another party,
specifically, without limitation, no telephone or telecommunications
provider shall be deemed a third part beneficiary of the Lease.
EQUIPMENT TO BE INSTALLED AT THE COMMENCEMENT
OF THE LEASE.
<PAGE> 20
PROVISION #48
ADJUSTMENTS TO BASE MONTHLY RENT
The Base Monthly Rent shall be adjusted to the following amounts for the
following periods.
May 1, 1999 through November 30, 1999, Lessee's Base Monthly Rent shall
increase to Nine thousand eighty nine dollars ($9,089.00) per month.
December 1, 1999 through November 2000, Lessee's Base Monthly rent shall
increase to Nine thousand four hundred ninety one dollars ($9,491.00) per month.
December 2000, through October 31, 2001, Lessee's Base Monthly rent shall
increase to Nine thousand nine hundred ninety dollars ($9,990.00) per month.
<PAGE> 21
PROVISION #49
OPTION TO RENEW
Provided that Lessee is not in default or breach of the terms and conditions of
the within Lease, Lessee is hereby granted a one time (1) Option to Renew this
Lease for an additional period of one (1) year.
All such terms, conditions and rental provisions shall, upon the exercise of
the option, be evidenced upon the form of the Lease then in effect for the
project. The within option shall be exercised by Lessee no later than four (4)
months prior to the expiration of the initial term of the within Lease.
Should Lessee exercise the above option to renew, the base monthly rent for the
renewal term shall increase to reflect the prevailing fair market rental rate.
For the purpose of the lease the term "Fair Market Rental Rate" shall mean the
monthly amount per rentable square foot that Lessor has accepted in current
transactions between non-affiliated parties from new, non-expansion,
non-renewal tenants of comparable credit worthiness, for comparable space, for a
comparable use, for a comparable period of time, in the building. If the Lessor
and Lessee cannot agree on the fair market rent for the premises.
In the event Lessee or Lessor are unable to agree to the terms and conditions
to such renewed term within six (6) months prior to the expiration for the
initial term the parties hereto shall have no further obligation hereunder.
<PAGE> 22
PROVISION #50
OPTION TO EXPAND:
Provided that Lessee is not in default of any term or condition of any lease or
has not been in default of any lease at 6450 Lusk Blvd., Lessor agrees to the
following
NON RENEWAL OF EXISTING TENANT
1 With notice to PS Business Parks, Inc., on or before January 1, 1999,
WebSideStory will have the option to lease E201 & 202 from May 1, 1999
through October 31, 2001. The rental rate will be the then prevailing
market rate.
2. With notice to PS Business Parks on or before March 1, 1999, WebSideStory
will have the option to lease E209 from July 1, 1999 through October 31,
2001. The rental rate will be the then prevailing market rate.
PROJECT PLAN
3. With ninety (90) day notice to PS Business Parks, Inc., WebSideStory, Inc.
will have the option to lease E200, (provided PS Business Parks has a
space suitable for a Conference Center) for a twenty (20) month period or
until October 31, 2001, whichever is longer. Rent will be the then
prevailing market rate.
4. With ninety (90) day notice to PS Business Parks, Inc., WebSideStory,
Inc., will have the option to lease suites E210 & E105 (Pursuant to
paragraph 32.01, PROJECT PLAN). WebSideStory, Inc., will be responsible
for all costs that PS Business Parks is required to pay pursuant to the
project plan clause in connection with the moving of existing tenants to
another space within the project provided similar space is available.
5. All new expansions will have the same terms and conditions as this lease
dated November 4, 1998.
6. WebSideStory, Inc., agrees to pay for all costs incurred to re-divide the
suites upon vacating during the term of any lease or upon expiration of
lease term.
<PAGE> 23
PROVISION #51
LEASE MODIFICATION
This agreement is entered into between PS Business Parks, Inc. hereinafter
referred to as "Lessor" and WEBSIDESTORY, INC., A California Corporation,
referred to as "Lessee" in this agreement.
Recitals
The Lessor and Lessee entered into a written lease, referred to in this
agreement as the "Lease", beginning December 1, 1998 for the premises commonly
known as 6450 Lusk Blvd., Suites E103.104, 203, 204, 207, & 208, San Diego, CA
92121. The Lease is attached to this agreement as Exhibit A and is incorporated
by reference.
Lessor and Lessee desire to amend the lease and therefore, it is agreed:
For valuable consideration, receipt and sufficiency of which is acknowledged by
the parties, the following amendment is added to the Lease:
Lessor herein grants to Lessee, subject to the terms and conditions below, at
Lessee's sole cost, permission to construct and maintain one (1) back-up
generator located at the exterior of the Premises as indicated on Exhibit B
attached. Specifications and dimensions of the back-up generator and all
connections, utility and otherwise (including all power sources) are listed on
Exhibit C, attached hereto. Lessee agrees that said back-up generator will:
(1) Be approximately: Length: 92 inches, Width: 43 inches, Height:
64 inches.
(2) Weight including attachments approximately 2,500 pounds.
(3) Be enclosed within chain link fence and shrouded from view at
least 8 feet high, rest on a 10' by 10' concrete pad and be locked at
all times it is not being serviced.
(4) There can be no building penetration other than for an electrical
line. Any building penetration must be pre-approved by Lessor.
(5) Be in compliance with (including compliance with the Certificate
of Occupancy requirements of the City of San Diego) all applicable
laws, ordinances, codes, etc. that may be imposed on the construction
and continued operation of the back-up generator.
(6) Have all construction; architectural plans, utility connection
and other installation and operation requirements approved, in
advance, in writing by Lessor.
Lessee agrees that it will carry additional liability insurance of
$300,000.00/$500,000.00 covering any and all damage whether by acts of God,
negligence or otherwise, caused directly or indirectly by the back-up generator,
its stands, support, etc. The policy issuer of this policy shall notify Lessor
thirty (30) days prior to the expiration or the termination of the policy.
Failure of Lessee to provide proof of insurance beyond the termination or
expiration date, three days prior to such termination or expiration date, shall
give Lessor the unqualified right to remove the back-up generator with no
liability of Lessors part regardless of any damage thereof.
Lessee agrees that it will indemnify and hold harmless Lessor from any damage
cause by the back-up generator.
<PAGE> 24
Lessee agrees that it will, at its sole cost, maintain and keep in good repair
and condition (in Lessor's sole opinion) the generator, the fence, and all
supports and connections (herein after "back-up generator") during the Lease.
Lessor and its agents shall have the right, but not the duty, to inspect the
back-up generator any time to determine whether Lessee is complying with the
terms of this Lease. If Lessee is not in compliance with this section of the
Lease, Lessor shall have the right, after giving Lessee notice and an
opportunity to cure any such default, to immediately enter upon the Premises
and back-up generator location to remedy the violation of this section of the
Lease including but not limited to removal of the back-up generator. Any
default under this paragraph shall be a material default enabling Lessor to
exercise any of the remedies set forth in the Lease.
Lessee agrees that it shall be responsible for removal of the back-up
generator, pad, fencing, etc. and any and all related equipment, at Lease
termination or earlier if demanded by Lessor. Lessee further acknowledges that
it will be responsible for returning the area, all penetrations to the building
be virtue of such back-up generator and the Premises if applicable in Lessor's
sole opinion to its original condition to Lessor's sole satisfaction.
As additional consideration for the placement of the back-up generator lessee
agrees to the additional rental of $200.00 per month.
Except for the modification of the Lease made herein, all provisions of the
Lease shall continue in full force and effect.
This modification shall become effective on 12/01/98.
LESSOR LESSEE
PS Business Parks, Inc. WEBSIDESTORY, INC.,
A California Corporation A California Corporation
By its agent
PS Business Parks, L.P.,
By: PS Business Parks, Inc.
General Partner
By: /s/ [SIGNATURE ILLEGIBLE] By: /s/ [SIGNATURE ILLEGIBLE]
----------------------------- ------------------------------
- --------------------------------
Date: 12/7/98 Date:
--------------------------- ----------------------------
- --------------------------------
Page 2 of 2
<PAGE> 25
EXHIBIT A
[SITE MAP GENERATOR LOCATION]
PS BUSINESS CENTER - SORRENTO MESA III
6370, 6440, 6450, LUSK BOULEVARD, SAN DIEGO, CALIFORNIA 92121
<PAGE> 26
[DIAGRAM OF FLOOR PLAN]
PS BUSINESS CENTER - LUSK III
SUITE E207-E208
6450 LUSK BOULEVARD
BUILDING E
SAN DIEGO, CA 92121
<PAGE> 27
[DIAGRAM OF FLOOR PLAN]
PS BUSINESS CENTER - LUSK III
SUITE E203-E204
6450 LUSK BOULEVARD
BUILDING E
SAN DIEGO, CA 92121
Suite E203-E204
<PAGE> 28
[DIAGRAM OF FLOOR PLAN]
PS BUSINESS CENTER - LUSK III
6450 LUSK BOULEVARD
BUILDING E SUITE E104
SAN DIEGO, CA 92121
<PAGE> 29
[DIAGRAM OF FLOOR PLAN]
PS BUSINESS CENTER - LUSK III
6450 LUSK BOULEVARD
BUILDING E SUITE E103
SAN DIEGO, CA 92121
<PAGE> 30
EXHIBIT A
LEGAL DESCRIPTION
THE REAL PROPERTY SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF SAN
DIEGO, AND IS DESCRIBED AS FOLLOWS:
LOTS 4 AND 5 OF LUSK INDUSTRIAL PARK UNIT NO. 5, IN THE CITY OF SAN DIEGO,
COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF, NO. 10700,
FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, AUGUST 16,
1983.
EXCEPT THEREFROM ALL COAL, OIL, GAS, PETROLEUM AND OTHER HYDROCARBON SUBSTANCES
IN AND UNDER SUCH PROPERTY, GRANTOR, ITS SUCCESSORS AND ASSIGNS, RETAINING THE
EXCLUSIVE TITLE AND RIGHT TO REMOVE SAID SUBSTANCES, TOGETHER WITH SOLE RIGHT TO
NEGOTIATE AND CONCLUDE LEASES AND AGREEMENT WITH RESPECT TO ALL SUCH SUBSTANCES
UNDER THE PROPERTY, AND TO USE THOSE PORTIONS OF THE PROPERTY WHICH UNDERLIE A
PLANE PARALLEL TO, AND 500 FEET BELOW, THE PRESENT SURFACE OF THE PROPERTY FOR
THE PURPOSE OF PROSPECTING FOR, DEVELOPING AND/OR EXTRACTING SUCH SUBSTANCES
FROM THE PROPERTY BY MEANS OF WELLS DRILLED INTO OR THROUGH SAID PORTIONS OF
THE PROPERTY FROM DRILL SITES LOCATED ON OTHER PROPERTY, IT BEING EXPRESSLY
UNDERSTOOD AND AGREED THAT GRANTOR, ITS SUCCESSORS AND ASSIGNS SHALL HAVE NO
RIGHT TO ENTER UPON THE SURFACE OR THE PROPERTY OR ANY PORTION THEREOF ABOVE
THE LEVEL OF THE AFORESAID PLANE, AS RESERVED BY LUSK/MIRA MESA, A LIMITED
PARTNERSHIP, IN A DEED RECORDED FEBRUARY 18, 1984, RECORDER'S FILE NO.
84-058807.
PAGE 2 OF 2
<PAGE> 31
EXHIBIT "B"
Lessee accepts premises in present condition.
Subject to the provisions of Article 9, Lessee accepts the premises in the
condition they are in at the commencement of this lease and shall maintain said
premises in the same condition, order, and repair, excepting only reasonable
wear and tear, arising from the use under this Agreement. Lessee has examined
and knows the condition of the leased premises and agrees that no
representation, except such as are contained herein, have been made to Lessee
respecting the condition of said premises. The taking possession of said
premises by Lessee shall be conclusive that the premises are in good and
satisfactory condition.
Lessor agrees to clean carpeting and paint suite throughout in suite E103.
<PAGE> 32
TENANT SIGN CRITERIA
Type style: Helvetica Medium, All caps or upper and lower case.
- -------------------------------------------------------------------------------
abcdefghijklmnopqrstuvwxyz
ABCDEFGHIJKLMNOPQRSTUVWXYZ
- -------------------------------------------------------------------------------
Material: Die-cut letters.
Color: Black or White - According to building standard.
Size: see illustrations.
Mounting Location: To remain consistent with sign criteria.
[DIAGRAM]
Note: No sign submittal will be considered if more than 40% of allowable sign
area is utilized for positive copy. All sign requests must be submitted on
scaled drawings for written approval by Lessor.
For additional information, please contact the Operations Manager located in
our Leasing Office.
EXHIBIT "C"
<PAGE> 33
TENANT DOOR SIGNAGE
---------------------------------------
1 1/2" (Suite Number)
---------------------------------------
3"
---------------------------------------
1 1/2" (Tenant Name)
---------------------------------------
---------------------------------------
1 1/2"
---------------------------------------
---------------------------------------
1 1/2"
---------------------------------------
[DIAGRAM]
[DIAGRAM]
EXHIBIT "C"
<PAGE> 34
EXHIBIT "D"
RULES AND REGULATIONS
In order to promote the safety, cleanliness, and aesthetics of the business
park, the following rules and regulations are in effect which may be modified or
amended at any time by Lessor upon notice to Lessee. In the case of conflict
between these regulations and the Lease, the Lease shall be controlling.
1. Furniture, safes/moving. Safes, furniture, or bulky articles shall be moved
in and out of the complex in a manner and at such times so as not to create an
inconvenience to other tenants and is subject to direction and approval of
Lessor. Heavy articles that exceed the structural support of the premises or
exceeds fifty (50) pounds per square foot is not permitted. Any heavy articles
which exceeds load capacity of the elevator to transport it is not permitted.
2. Windows/signs. All tenant identification signs shall be a type, size, and
color as specified by Lessor and provided at Lessee's expense. No sign, picture,
or advertisement may be placed in the windows, common areas or exterior of the
building. Where Lessor provides standard window coverings, such coverings shall
not be altered, removed or replaced by Lessee. Where Lessor does not provide
standard window coverings, installation of window coverings by Lessee shall be
subject to Lessor's prior written approval.
3. Common area/roof. Sidewalks, common area hallways, stairwells, elevators,
entrances, and exits shall not be obstructed or used by Lessee for any purpose
other than normal ingress and egress. Neither Lessee nor employees or invitees
of Lessee shall go upon the roof of any building.
4. Parking. The parking areas include surface parking, parking structure,
driveways, entrances, exits, pedestrian walkways, and any other areas designated
for parking and shall be regulated and modified by Lessor with respect to
restricted areas, direction and flow of traffic, hours of use, and any other
related facilities. The parking areas shall be used solely for the parking of
passenger vehicles during normal business hours. The parking of trucks,
trailers, recreational vehicles, and campers is not permitted. No vehicle of any
type shall be stored in the parking areas at any time. In the event that a
vehicle is disabled it shall be removed within 48 hours. Maintenance of vehicles
is not permitted in the parking areas. All vehicles shall be parked in
designated parking areas in conformance with all signs and markings and shall
not be parked in areas not designated for parking, in aisles, driveways,
no-parking areas, or in any manner which impedes the flow of traffic. "For Sale"
signs or any other advertising is not permitted on or about any parked vehicle.
Lessor may implement a validation system or other proration with or without
charges to Lessee and/or other users for use of the parking area.
5. Vendors. Lessor reserves the right to prohibit personal goods and service
vendors from access to the building as are related to the safety, care, and
cleanliness of the building and the relief of any financial burden on Landlord
created by the presence of such vendors.
6. Advertising. Lessee shall not use the name of the building in connection
with promoting or advertising Lessee's business except as to Lessee's address.
Lessor shall have the right to prohibit the use of the name of the project or
other publicity by Lessee which in Lessor's opinion tends to impair the
reputation of the project or its desirability for other Lessees. Lessee will
discontinue such publication immediately upon receipt of notice from Lessor.
7. Dangerous articles. Lessee shall not use or keep on the premises or any
part of the project any kerosene, gasoline, or inflammable or combustible fluid
or material or any article deemed extra hazardous.
Page 1 of 3
<PAGE> 35
8. Nuisance. Lessee shall not keep or allow to be used any foul or noxious
gas of substance on the premises. Nor shall Lessee occupy or use the premises
in any manner which is objectionable or offensive to other occupants by reason
of odor, notice, vibration, or interference in any way with other tenants or
those having business therein. No animals or birds shall be brought in or kept
about the premises or any part of the project. Lessee shall maintain the leased
premises free of mice, ants, bugs, or other vermin.
9. Improper conduct. Lessor reserves the right to expel from the business
park any person who is intoxicated or under the influence of liquor or drugs or
who shall act in violation of any of these rules and regulations.
10. Janitorial service. Lessee shall not dispose any dirt or other substance
into the parking areas, landscaping, walkways, or common areas. Lessee shall
not do any act which would create additional costs to maintain the cleanliness
of the project. Lessor shall not be responsible to Lessee for loss of property
on the premises or for any damage done by the janitorial service, employee, or
any other person.
11. Building access. Lessee may have access to the building and premises
between the hours of 8:00 am and 6:00 pm Monday through Friday. Lessor reserves
the right to refuse access to the building in the case of invasion, riot, mob,
or other commotion for safety of the tenants and protection of property. Lessor
shall not be liable for damages for the admission or exclusion of any person
from the building. If Lessee uses the building after regular hours or on
non-business days, Lessee shall keep all entrance doors to the building locked
immediately after entering or leaving the building.
12. Heating/air conditioning. Lessor shall be under no obligation to provide
heating or air conditioning services to the building between the hours of 6:00
pm and 8:00 am and on non-business days. Lessee may request Lessor to provide
additional heating or air conditioning during off hours or non-business days
and should Lessor provide the additional service, Lessor may determine the
costs incurred which Lessee will pay to Lessor. Lessee shall not use any method
of heating or air conditioning other than supplied by Lessor.
13. Locks. Lessee shall not alter any lock or install new or additional lock
or bolt on any door of the premises without prior written consent of Lessor. If
Lessor shall give such consent, Lessee shall furnish a key to such lock. Upon
termination of the tenancy, Lessee must return all keys of the premises to
Lessor.
14. Rest Rooms. The restrooms and facilities shall not be used for any
purposes other than those for which they were constructed. No dirt, trash, or
other foreign substances shall be disposed of therein. No person shall waste
water or tamper with faucets or fixtures. Any damage caused by Lessee, his
employees, agents, or invitees shall be paid for by the Lessee.
15. Requirements of Lessee. Employees of Lessor shall not perform any work
or do anything outside of their regular duties unless under special instruction
from Lessor. Lessee shall give prompt notice of required maintenance items,
for which Lessor is responsible within the leased premises. Lessee shall give
Lessor prompt notice of any defects in the water, sewage, gas pipes, exterior
electrical lights and fixtures, or other service equipment.
16. Solicitation. Lessee shall not disturb, solicit, or canvas any occupant
of the project and shall cooperate to prevent the same.
Page 2 of 3
<PAGE> 36
17. Use of premises. The leased premises shall not be used for lodging,
sleeping, cooking, or for any immoral or illegal purpose or for any purpose
that will damage the premises or the reputation thereof. Lessee shall not use
the premises for any purpose other than that specified in the lease covering
the premises.
18. Safety. Lessee shall not do or permit any act or bring anything on the
premises which shall in any way increase rate of fire insurance on the
building, obstruct or interfere with, the right of other tenants, conflict with
fire regulations and fire laws, or conflict ordinances established by the Board
of Health or other governmental authority.
19. Auction. No auction, public or private, will be permitted.
20. Damage. Walls, floors and ceilings shall not be defaced in any way and
no one shall be permitted to make, paint, penetrate or in any way mar the
building surfaces, walkways, stairwells, driveways, or parking area. Pictures,
certificates, licenses, and similar items normally used in Lessee's premises
may be carefully attached to the walls by Lessee in a manner to be prescribed
by the Lessor. Upon removal of such items by Lessee, any damage to the walls or
other surfaces shall be repaired by Lessee.
21. Wiring. No electrical wiring, electrical apparatus, or additional
outlets shall be installed without the prior written approval of Lessor. Any
such installation may be removed by Lessor at Lessee's expenses. Lessee may not
alter any existing electrical outlets or overburden them beyond their designed
capacity. Lessor reserves the right to enter the leased premises, with
reasonable notice to tenant, for the purpose of installing additional
electrical wiring and other utilities for the benefit of Lessee or adjoining
tenants. Lessor will direct electricians as to where and how telephone and
telegraph wires are to be introduced. The location of telephones, call boxes,
and other equipment affixed to the premises shall be subject to the approval of
Lessor.
22. Exteriors. Lessee shall not place any improvement or moveable object
including antennas, awnings, outside furniture, etc. in the parking areas,
landscape areas, on the roof, or other areas outside of the leased premises.
23. General. It is understood that if Lessee, his employees, agents, or
invitees violate any of these rules and regulations which results in any damage
to the property, increases costs of maintenance of the property, or incurs
expenses to reasonably enforce the rules and regulations, Lessee shall pay to
Lessor all such costs as additional rent.
Page 3 of 3
<PAGE> 37
RULES AND REGULATIONS
FITNESS CENTER & CONFERENCE CENTER AGREEMENT
This supplemental agreement, dated November 4, 1998 is entered into between PS
Business Parks, Inc., A California Corporation hereinafter referred to as
"Lessor" and, PS Business Parks, Inc. WebSideStory, Inc., hereafter referred to
as "Lessee" (which shall hereinafter refer to and include, but not limited to,
Lessee, Lessee's employees, and Lessee's visitors) in this agreement. The Lessor
and Lessee entered into a written lease, referred to in this agreement as the
"Lease", on December 1, 1998 for the Premises located at 6450 Lusk Blvd., Suites
E103, 104, 203, 204, 207, 208.
RULES AND REGULATIONS AS SET FORTH ARE PART OF THE LEASE AND LESSEE, ITS
EMPLOYEES AND VISITORS ARE OBLIGATED TO OBSERVE AND COMPLY WITH THE SAME. LESSOR
MAY MAKE REASONABLE CHANGES FROM TIME TO TIME WITHOUT PRIOR APPROVAL BY LESSEE.
A portion of the Common Areas shall include a Fitness Center and Conference
Center, hereinafter referred to as "Centers". Use of the Centers shall be open
to Lessee during normal business hours, or such other hours as Lessor may
reasonably determine. Lessor will not provide any staff to monitor or supervise
the use of the Centers. Use of the Centers shall be solely at the risk of the
individual using the Centers facilities, and Lessor shall have no responsibility
for Lessee who shall use the Centers. In the event that Lessor suffers any loss
arising out of the use of the Centers by Lessee, said Lessee shall indemnify
Lessor for any such loss. Lessee agrees to abide by such reasonable rules and
regulations as Lessor may promulgate from time to time concerning use of the
Centers. Lessor, at its sole discretion, shall have the right to revoke Lessee's
privileges should Lessee cause damage, abuse or violate any of the rules and
regulations in this agreement or posted within the Centers. Lessee shall also be
solely responsible to reimburse Lessor for any damage caused by Lessee. Access
to the Centers shall be controlled by means selected by Lessor. The Fitness
Center's use is limited to Lessee and its employees only and may only be
accessed by Lessee's visitors when accompanied by Lessee. Lessor shall have the
right to request, from time to time a list of Lessee's employees for the
purposes of controlling unauthorized access to the Centers. Lessee shall notify
Lessor when any of Lessee's employees terminate employment. Initial issuance of
keys or other devices for controlling access to the Centers shall be at $15.00
per card to Lessee, but Lessor reserves the right to impose a reasonable charge
to replace, repair and/or maintain equipment, furniture, access devises or any
other furnishings pertinent to the Centers.
In accordance with the paragraphs of your Lease referring to BASE MONTHLY RENT
and ADDITIONAL RENT, If Base Monthly Rent or any Additional Rent is not paid per
your Lease Agreement, Lessor, in its sole discretion, shall have the right to
suspend and/or revoke all Fitness and Conference Center privileges without
further notice and access will be terminated. If Lessee's privileges are
suspended or revoked, Lessee shall still be obligated to pay their pro rata
share, and will receive no reduction or modification of common area maintenance
fees. Reinstatement of Fitness and Conference Center privileges, which is at all
times in the sole
<PAGE> 38
discretion of Lessor, may be requested in writing by any suspended or revoked
Lessee. In addition to any and all moneys due and owing under the Lease, $25.00
per each person reinstated will be charged.
1. HOURS: Normal business hours for the Centers will be posted within the
Centers and shall be subject to reasonable change at the sole discretion of
Lessor. Should Lessee request use of the Centers anytime other than during
normal business hours, Lessor, at its sole discretion, reserves the right to
grant Lessee's request and Lessor also reserves the right to charge Lessee
$35.00 per hour for such use.
2. ACCESS: Lessee will be issued key/s, access card/s or access code/s, at
$15.00 per card, to the Fitness Center. Lessee shall reserve in advance, on a
first come first serve basis with Lessor, the day and time they would like to
reserve the Conference Center. Lessee agrees that use of their key, access card
or code number by anyone other than to whom it was issued could result in the
Centers being closed to said Lessee and all access keys, cards, and codes
confiscated. Lessor reserves the right to issue new access keys, cards or codes.
3. USE OF CENTERS FACILITIES: In order to insure that the Centers are
properly maintained, Lessor reserves the right to temporarily close or limit
access to the Centers at any time during the year. Lessor may close the Centers
on legal holidays, open houses or other promotions. Lessee acknowledges and
agrees that alcoholic beverages, illegal drugs, smoking and/or chewing tobacco
is prohibited in both Fitness and Conference Centers. Lessee is responsible for
the disposal of all food, trash and other items brought into or used within the
Center and Lessor shall not be responsible for the clean up during normal
business hours.
4. FACILITY RULES: Lessee will, at all times, make sure that the doors to the
Fitness Center, Conference Center, Bathrooms and Showers remain closed while in
use. All users must provide their own towel and dry off before leaving the
shower area. Lockers are provided on a per visit basis and Lessor is not
responsible for lost, stolen or damaged items. Locks left on lockers overnight
will be cut off and contents donated to charity or discarded. Lessee
acknowledges and agrees that Lessor, its officers, agents and employees, will
not be liable for either loss or damage to Lessee's property or personal
possessions within or on the Centers premises, including but not limited to the
parking facilities.
5. FITNESS CENTER: Lessee must carry a towel at all times while using the
equipment and/or machinery and will wipe clean all sweat after the use of
equipment and/or machinery. Any person using equipment or machinery shall be
familiar with the proper usage and operation prior to such use. It is the sole
duty of Lessee to check and confirm proper functioning of equipment and/or
machinery prior to any use; Lessor is not responsible for any malfunction,
disrepair, breakage, misuse, or any claim of injury or loss therefrom. Lessee
hereby agrees that they are voluntarily participating in physical exercise and
should use common sense, only the individual can monitor his or her own
personal physical feelings. Immediately stop any sports activity if you feel
faint, dizzy, nauseous, or short of breath. Lessor makes no warranties
<PAGE> 39
and no representations express or implied, other than those set forth herein and
Lessee acknowledges and agrees that they have not relied on any warranties or
representations other than those set in this Rules and Regulations. Lessee is
aware that participation in a sport or physical exercise may result in accidents
or injury, and Lessee assumes the risk connected with the participation in a
sport or exercise represents that Lessee is in good health and suffers from no
physical impairment, disability or ailment preventing Lessee from safety,
comfort, or physical condition, or to that of others. It is advisable that
Lessee consult their physician before undertaking the use of fitness equipment
and/or machinery. Lessee acknowledges that Lessor has not and will not render
any medical services including medical diagnosis of Lessee's physical condition.
6. INDEMNIFICATION AND WAIVER OF CLAIMS: Lessee waives all claims against
Lessor for damage and/or loss to any real or personal property in or about the
Centers, Property, Project or Premises and for injury to any person, including,
but not limited to, death resulting therefrom, regardless of cause or time of
occurrence. Lessee will defend, indemnify and hold Lessor harmless from and
against all claims, actions, proceedings, expenses; damages and liabilities,
including attorney's fees, arising out of, connected with, or resulting from any
use of the Centers, Property, Project and Premises including and to any personal
property in or about the Centers, Property, Project and Premises by Lessee,
except for any damage or injury which is the direct result of intentional acts
by Lessor, its employees, agents, visitors or licenses.
<TABLE>
<S> <C>
LESSOR LESSEE
PS Business Parks, Inc. WebSideStory, Inc.
A California Corporation A California Corporation
- ---------------------------------------- -----------------------------------
By: /s/ Patricia Abbott By: /s/ Blaise Barrelet
----------------------------------- ------------------------------
Title: Patricia Abbot, Regional Manager Title: Blaise Barrelet, President
-------------------------------- ---------------------------
Date: 12/7/98 Date:
--------------------------------- ----------------------------
By:
------------------------------
Title:
---------------------------
Date:
----------------------------
</TABLE>
NOTE: Scheduling limitations for Corporate Conference Room
MAXIMUM HOURS per week/per tenant: 5 hours
MAXIMUM HORSE per month/per tenant: 20 hours
MAXIMUM DAYS tenant may schedule in advance: 30 days
Tenant may not schedule the same time consecutively throughout the month.
<PAGE> 1
EXHIBIT 10.32
SEAVIEW CORPORATE CENTER, PHASE II
OFFICE LEASE
LANDLORD:
LNR SEAVIEW, INC.,
A CALIFORNIA CORPORATION
TENANT:
WEBSIDESTORY, INC.,
A CALIFORNIA CORPORATION
<PAGE> 2
SUMMARY OF BASIC LEASE INFORMATION AND DEFINITIONS
This SUMMARY OF BASIC LEASE INFORMATION AND DEFINITIONS ("SUMMARY") is hereby
incorporated into and made a part of the attached Office Lease which pertains to
the Building described in Section 1.4 below. All references in the Lease to the
"Lease" shall include this Summary. All references in the Lease to any term
defined in this Summary shall have the meaning set forth in this Summary for
such term. Any initially capitalized terms used in this Summary and any
initially capitalized terms in the Lease which are not otherwise defined in this
Summary shall have the meaning given to such terms in the Lease. If there is any
inconsistency between the Summary and the Lease, the provisions of the Lease
shall control.
1.1 LANDLORD'S ADDRESS: Lennar Partners
18401 Von Karman Avenue, Suite 540
Irvine, California 92612
Attn: Asset Manager
Telephone: (949) 442-6100
Facsimile: (949) 442-6175
with a copy to:
The Muller Company
23521 Paseo de Valencia, Suite 200
Laguna Hills, California 92653
Attn: Mr. Stephen J. Muller
Telephone: (949) 460-5380
Facsimile: (949) 586-0470
1.2 TENANT'S ADDRESS: Before Commencement Date:
WebSideStory, Inc.
6450 Lusk Blvd., E 205
San Diego, California 92121
Attn: Chief Financial Officer
Telephone: (619) 546-0040
Facsimile: (619) 546-0480
After Commencement Date:
WebSideStory, Inc.
10182 Telesis Court, Suite 600
San Diego, California 92121
Attn: Chief Financial Officer
Telephone: (619) 546-0040
Facsimile: (619) 546-0480
With a copy to: The Irving Hughes Group, Inc.
501 W. Broadway, Suite 2020
San Diego, CA 92101
Attn: Mr. David B. Marino
Telephone: (619) 238-4393
Facsimile: (619) 238-1025
1.3 SITE; PROJECT: The Site consists of the parcel(s) of real property
located in the City of San Diego, County of San Diego, State of
California, as shown on the site plan attached hereto as Exhibit "A".
The Project includes the Site and all buildings, improvements and
facilities, now or subsequently located on the Site from time to time,
including, without limitation, the currently existing five (5) story
office building located at 10180 Telesis Court containing 93,232
rentable square feet, the two (2) story office building located at 10190
Telesis Court containing 12,780 rentable square feet and the parking
structure located at 10184 Telesis Court containing 1,354 rentable
square feet (the "OTHER BUILDINGS") and the Building (defined below), as
depicted on the site plan attached hereto as Exhibit "A". The aggregate
rentable square feet of the Building and the Other Buildings is
currently 230,164 rentable square feet.
1.4 BUILDING: A six (6) story office building located on the Site,
containing 122,798 rentable square feet, the address of which is 10182
Telesis Court, San Diego, California 92121.
1.5 PREMISES: Initially, those certain premises known as Suite(s) 500 and
600 as generally shown on the floor plan attached hereto as Exhibit "B",
located on the fifth (5th) and sixth (6th) floors of the
-i-
<PAGE> 3
Building, and containing 21,260 rentable square feet (20,015 usable
square feet) on the fifth (5th) floor and 18,599 rentable square feet
(17,420 usable square feet) on the sixth (6th) floor, for a total of
39,859 rentable square feet (37,435 usable square feet), together with
the patio area located on the sixth (6th) floor of the Building (the
"PATIO"). Commencing upon the Fourth Floor Delivery Date (as defined in
Section 1.4 of the Lease), the Premises shall also include Suite 400 as
generally shown on the floor plan attached hereto as Exhibit "B" located
on the fourth (4th) floor of the Building, and containing 21,352
rentable square feet (20,105 usable square feet) resulting in a total of
61,211 rentable square feet (57,540 usable square feet). Although the
Patio is a portion of the Premises, the area of the Patio shall not be
considered for purposes of determining the rentable or usable square
footage of the Premises.
1.6 TERM: Eighty-Four (84) months, subject to extension pursuant to Section
36.
1.7 ESTIMATED COMMENCEMENT DATE: January 10, 2000; COMMENCEMENT DATE: The
earlier to occur of (i) January 10, 2000 or (ii) the date Tenant
commences business operations in the Premises. The January 10, 2000 date
referenced in clause (i) above (the "TARGET DATE") is subject to
extension pursuant to Section 5.2 of Exhibit "C" attached hereto.
1.8 MONTHLY BASIC RENT: Upon the commencement of the Term of this Lease, and
on the first day of each month thereafter during the Term of this Lease,
Tenant shall pay to Landlord, in advance and without offset, deduction
or demand as Monthly Basic Rent for the Premises the following monthly
payments:
(a) Monthly Basic Rent for the initial Premises (i.e., the 5th and 6th
Floors).
<TABLE>
<CAPTION>
Months of Term Monthly Basic Rent
-------------- ------------------
<S> <C>
1-4* $48,750.00**
5-8 $58,500.00***
9-12 $77,725.05
13-24 $80,445.43
25-36 $83,261.02
37-48 $86,175.16
49-60 $89,191.29
61-72 $92,312.99
73-84 $95,543.94
</TABLE>
* Including any partial month at the beginning of the Term if the
Commencement Date is not the first (1st) day of the month.
** Calculated on the basis of 25,000 rentable square feet only.
*** Calculated on the basis of 30,000 rentable square feet only.
(b) Monthly Basic Rent for Suite 400:
<TABLE>
<CAPTION>
Months of Term Monthly Basic Rent
-------------- ------------------
<S> <C>
Fourth Floor Commencement $41,636.40
Date - 12
13-24 $43,093.67
25-36 $44,601.95
37-48 $46,163.02
49-60 $47,778.73
61-72 $49,450.99
73-84 $51,181.77
</TABLE>
1.9 TENANT'S PERCENTAGE: 26.6%. Tenant's Percentage is subject to adjustment
in accordance with Section 1.3 and 4.4(g) of the Lease.
1.10 BASE YEAR: Calendar year 2000
1.11 SECURITY DEPOSIT: $119,361.45, plus a letter of credit in the original
amount of $360,000.00. See Section 5 of the Lease.
1.12 PERMITTED USE: General office uses and, to the extent legally
permissible, research and development, and any other legally permissible
uses, consistent with a first-class office building; provided, however,
in no event may Tenant use the Premises for retail or restaurant
purposes.
1.13 BROKERS: Colliers International representing Landlord.
The Irving Hughes Group, Inc. representing Tenant.
-ii-
<PAGE> 4
1.14 INTEREST RATE: The lesser of: (a) the rate announced from time to time
by Wells Fargo Bank or, if Wells Fargo Bank ceases to exist or ceases to
publish such rate, then the rate announced from time to time by the
largest (as measured by deposits) chartered bank operating in
California, as its "prime rate" or "reference rate", plus two percent
(2%); or (b) the maximum rate permitted by law.
1.15 TENANT IMPROVEMENTS: The tenant improvements installed or to be
installed in the Premises as described in the Work Letter Agreement
attached hereto as Exhibit "C".
1.16 PARKING: A total of 4.3 unreserved parking spaces per 1000 usable square
feet of floor area of the Premises at no charge during the Term
(including any Option Term), subject, however, to the payment of Direct
Expenses attributable to the parking areas and to the provisions set
forth in Section 6.2. Tenant shall be entitled to designate up to five
(5) parking spaces for Tenant's exclusive use in locations designated by
Landlord, in reasonable proximity to the Building, reasonably acceptable
to Tenant. If Landlord grants to any other tenant of the Building the
right to designate exclusive parking spaces at a ratio of exclusive
spaces to non-exclusive spaces that is higher than the ratio of Tenant's
exclusive spaces to non-exclusive spaces, then Landlord shall increase
Tenant's exclusive spaces to equal such higher ratio.
1.17 BUSINESS HOURS FOR THE BUILDING. 7:00 a.m. to 7:00 p.m., Mondays through
Fridays (except Building Holidays) and 9:00 a.m. to 1:00 p.m. on
Saturdays (except Building Holidays). "BUILDING HOLIDAYS" shall mean New
Year's Day, Labor Day, Presidents' Day, Thanksgiving Day, Memorial Day,
Independence Day and Christmas Day and such other national holidays as
are adopted by Landlord as holidays for the Building. Notwithstanding
the Business Hours, Tenant shall be entitled to have access to the
Premises on a seven (7) day per week, twenty-four (24) hour per day
basis, subject, however, to the terms of the Lease.
-iii-
<PAGE> 5
STANDARD FORM OFFICE LEASE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION TITLE PAGE
- ------- ----- ----
<S> <C> <C>
1 Premises ....................................................................... 1
2 Term ........................................................................... 1
3 Rent ........................................................................... 2
4 Common Areas; Direct Expenses .................................................. 2
5 Security Deposit ............................................................... 7
6 Use ............................................................................ 8
7 Payments and Notices ...........................................................11
8 Brokers ........................................................................11
9 Surrender; Holding Over ........................................................11
10 Taxes on Tenants Property ......................................................12
11 Condition of Premises; Repairs .................................................12
12 Alterations ....................................................................13
13 Liens ..........................................................................15
14 Assignment and Subletting ......................................................15
15 Entry by Landlord ..............................................................17
16 Utilities and Services .........................................................18
17 Indemnification and Exculpation ................................................19
18 Damage or Destruction ..........................................................20
19 Eminent Domain .................................................................21
20 Tenant's Insurance .............................................................21
21 Landlord's insurance ...........................................................22
22 Waiver of Claims; Waiver of Subrogation.........................................23
23 Tenant's Default and Landlord's Remedies........................................23
24 Landlord's Default..............................................................25
25 Subordination...................................................................25
26 Estoppel Certificate............................................................26
27 Intentionally Omitted...........................................................26
28 Modification and Cure Rights of Landlord's Mortgagees and Lessors...............26
29 Quiet Enjoyment.................................................................26
30 Transfer of Landlord's Interest.................................................26
31 Limitation on Landlord's Liability..............................................26
32 Miscellaneous...................................................................27
33 Lease Execution.................................................................28
34 Right of First Refusal..........................................................29
35 Temporary Space.................................................................30
36 Option Term.....................................................................30
</TABLE>
EXHIBITS
--------
EXHIBIT "A" Site Plan
EXHIBIT "B" Floor Plan
EXHIBIT "C" Work Letter Agreement
EXHIBIT "D" Sample Form of Notice of Lease Term Dates
EXHIBIT "E" Rules and Regulations
EXHIBIT "F" Sample Form of Tenant Estoppel Certificate
-iv-
<PAGE> 6
INDEX OF MAJOR DEFINED TERMS
<TABLE>
<CAPTION>
LOCATION OF DEFINITION
DEFINED TERMS IN OFFICE LEASE
- ------------- ----------------------
<S> <C>
Abandonment ......................................................... 23
Abatement Event ..................................................... 18
ADA ................................................................. 9
Applicable Reassessment ............................................. 7
Approved Working Drawings ........................................... 4
Architect ........................................................... Exhibit C
Base Year ........................................................... 3
Base, Shell, and Core ............................................... Exhibit C
BOMA Standard ....................................................... 1
Brokers ............................................................. ii
Building ............................................................ i
Building Common Areas ............................................... 2
Building Holidays ................................................... iii
Capital Items ....................................................... 4
Cash Security Deposit ............................................... 7
Code ................................................................ Exhibit C
Commencement Date ................................................... ii
Common Areas ........................................................ 2
Comparable Buildings ................................................ 31
Construction Drawings ............................................... Exhibit C
Cost Pools .......................................................... 4
days ................................................................ 27
Delay Notice ........................................................ Exhibit C
Direct Expenses ..................................................... 3
Draw Request ........................................................ Exhibit C
Election Date ....................................................... 29
Eligibility Period .................................................. 19
Engineer ............................................................ 3
Essential Services .................................................. 19
Estimate ............................................................ 6
Estimate Statement .................................................. 6
Estimated Commencement Date ......................................... ii
Estimated Excess .................................................... 6
Estimated Utilities Costs ........................................... 6
Evidence of Completion .............................................. Exhibit C
Excess .............................................................. 6
Expense Year ........................................................ 3
Extension Option .................................................... 30
Fair Market Rental Rate ............................................. 30
Final Costs ......................................................... Exhibit C
Final Space Plan .................................................... Exhibit C
Final Working Drawings .............................................. Exhibit C
First Refusal Notice ................................................ 29
First Refusal Space ................................................. 29
Force Majeure Delays ................................................ 28
Fourth Floor Commencement Date ...................................... 1
Fourth Floor Delivery Date .......................................... 1
Hazardous Materials ................................................. 10, 11
HVAC ................................................................ 13
Indemnified Claims .................................................. 19
Landlord ............................................................ 1
Landlord Caused Delay ............................................... Exhibit C
Landlord Indemnified Parties ........................................ 10
Landlord's Rate ..................................................... Exhibit C
Lease ............................................................... 1
Letter of Credit .................................................... 8
Monthly Basic Rent .................................................. ii
MPE Subcontractors .................................................. 3
number of days ...................................................... Exhibit C
Operating Expenses .................................................. 3
Option Rent Notice .................................................. 30
Option Term ......................................................... 30
Original Tenant ..................................................... 10
Other Buildings ..................................................... i
Outside Agreement Date .............................................. 30
Patio ............................................................... ii
PCBs ................................................................ 11
</TABLE>
-v-
<PAGE> 7
<TABLE>
<S> <C>
Permit Delay..........................................................................Exhibit C
Permits...............................................................................Exhibit C
Permitted Transfer...........................................................................16
Permitted Use................................................................................ii
Pre-Approved Change..........................................................................13
Premises......................................................................................i
Project.......................................................................................i
Project Common Areas..........................................................................2
Proposition 13................................................................................5
Proposition 13 Protection Amount..............................................................7
Proposition 13 Purchase Price.................................................................7
Reassessment..................................................................................6
rent..........................................................................................2
rentable area.................................................................................1
rentable square footage.......................................................................1
Retention.............................................................................Exhibit C
Security Deposit.............................................................................ii
Site..........................................................................................i
Special Sublease.............................................................................16
Specifications........................................................................Exhibit C
Standard Improvement Package..........................................................Exhibit C
Statement.....................................................................................6
Substantial Completion................................................................Exhibit C
Summary.......................................................................................1
Superior Leases..............................................................................29
Superior Rights..............................................................................29
Target Date..................................................................................ii
Tax Expenses..................................................................................5
Tax Increase..................................................................................6
Temporary Space..............................................................................30
Temporary Space Term.........................................................................30
Tenant........................................................................................1
Tenant Changes...............................................................................13
Tenant Improvement Allowance..........................................................Exhibit C
Tenant Improvement Allowance Items....................................................Exhibit C
Tenant Improvements...................................................................Exhibit C
Tenant Parties...............................................................................19
Tenant's Agents.......................................................................Exhibit C
Tenant's Election Notice.....................................................................29
Tenant's Parties.............................................................................10
Tenant's Percentage..........................................................................ii
Tenant's Proposed Terms......................................................................29
Tenant's Signage.............................................................................10
Term.........................................................................................ii
Terms........................................................................................29
Transfer.....................................................................................15
Transfer Notice..............................................................................16
Transferee...................................................................................16
Unavoidable Delay.....................................................................Exhibit C
usable area...................................................................................1
usable square footage.........................................................................1
Utilities Costs...............................................................................5
Work Letter Agreement.................................................................Exhibit C
worth at the time of award...................................................................24
</TABLE>
-vi-
<PAGE> 8
OFFICE LEASE
This LEASE, which includes the preceding Summary of Basic Lease Information and
Definitions ("Summary") attached hereto and incorporated herein by this
reference ("Lease"), is made as of the 23 day of August, 1999, by and between
LNR SEAVIEW, INC., a California corporation ("Landlord"), and WEBSIDESTORY, INC.
a California corporation ("Tenant"),
1. PREMISES.
1.1 PREMISES. Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, the Premises described in Section 1.5 of the Summary above,
improved or to be improved with the Tenant Improvements. Such lease is upon, and
subject to, the terms, covenants and conditions herein set forth and each party
covenants, as a material part of the consideration for this Lease, to keep and
perform their respective obligations under this Lease.
1.2 LANDLORD'S RESERVATION OF RIGHTS. Provided Tenant's use of and access to
the Premises is not interfered with in an unreasonable manner, and subject to
the terms of this Lease, Landlord reserves for itself the right from time to
time to install, use, maintain, repair, replace and relocate pipes, ducts,
conduits, wires and appurtenant meters and equipment above the ceiling surfaces,
below the floor surfaces and within the walls of the Building and the Premises.
1.3 MEASUREMENT OF PREMISES, BUILDING AND/OR THE PROJECT. Landlord reserves
the right to remeasure the Premises, the Building and/or the Project and adjust
all provisions of this Lease which are based upon the area of the Premises, the
Building and/or the Project such as Tenant's Percentage, Monthly Basic Rent, and
the Tenant Improvement Allowance. As used in this Lease, the following terms
have the meanings indicated:
(a) The term "USABLE AREA" or "USABLE SQUARE FOOTAGE" means the usable area
as determined in accordance with the Standard Method for Measuring Floor
Area in Office Buildings, ANSI/BOMA Z65.1 - 1996 (the "BOMA STANDARD");
and
(b) The term "RENTABLE AREA" or "RENTABLE SQUARE FOOTAGE" means the rentable
area measured in accordance with the BOMA Standard, plus a prorata share
of the usable area of the Project's recreational facilities.
1.4 SUITE 400. Landlord will deliver possession of Suite 400 to Tenant
within one (1) business day following Tenant's written request therefor (the
"FOURTH FLOOR DELIVERY DATE"). Tenant will construct the Tenant Improvements
within Suite 400 in accordance with the provisions of Exhibit "C", except that
(i) all references in Exhibit "C" to the Premises shall refer to Suite 400, (ii)
the Tenant Improvement Allowance will be in the amount up to, but not exceeding,
Thirty-Two Dollars ($32.00) per usable square foot of Suite 400 (for purposes of
calculating the Tenant Improvement Allowance, the usable square footage of Suite
400 shall be 19,705 (which excludes the restrooms, electrical rooms, tele/com
equipment rooms [but not Tenant's network operating center] and the curtain wall
in Suite 400), (iii) the time period for Landlord's review of the Final Space
Plan for Suite 400 shall be two (2) business days following Landlord's receipt
thereof and (iv) the Commencement Date for Suite 400 (the "FOURTH FLOOR
COMMENCEMENT DATE") shall be the earlier to occur of: (a) the date that is nine
(9) months following the Commencement Date (which nine (9) month period may only
be extended by reason of a Landlord Caused Delay and not by reason of a Permit
Delay or an Unavoidable Delay); or (b) Substantial Completion of the Tenant
Improvements for Suite 400. The Fourth Floor Commencement Date will not be
extended due to any delay in Tenant's request for delivery of Suite 400.
Following the determination of the Fourth Floor Commencement Date, and at the
request of either party, the parties shall enter into an amendment to this Lease
acknowledging the Fourth Floor Commencement Date and establishing a schedule for
Monthly Basic Rent that combines the Monthly Basic Rent for the initial Premises
and Suite 400.
2. TERM.
2.1 TERM; NOTICE OF LEASE DATES. The Term of this Lease shall be for the
period designated in Section 1.6 of the Summary commencing on the Commencement
Date (as determined pursuant to Exhibit "C"), and ending on the expiration of
such period, unless the Term is sooner terminated as provided in this Lease.
Notwithstanding the foregoing, if the Commencement Date falls on any day other
than the first day of a calendar month then the term of this Lease will be
measured from the first day of the month following the month in which the
Commencement Date occurs. Within ten (10) days after Landlord's written request,
Tenant shall execute a written confirmation of the Commencement Date and
expiration date of the Term in the form of the Notice of Lease Term Dates
attached hereto as Exhibit "D". The Notice of Lease Term Dates shall be binding
upon Tenant unless Tenant objects thereto in writing within such ten (10) day
period.
2.2 ESTIMATED COMMENCEMENT DATE. It is estimated by the parties that the
Term of this Lease will commence on the Estimated Commencement Date set forth in
Section 1.7 of the Summary. The Estimated Commencement Date is merely an
estimate of the Commencement Date and, consequently,
<PAGE> 9
Tenant agrees that Landlord shall have no liability to Tenant for any loss or
damage, nor shall Tenant be entitled to terminate or cancel this Lease if the
Term of this Lease does not commence by the Estimated Commencement Date for any
reason whatsoever, including any delays in substantial completion of the Tenant
Improvements.
2.3 EARLY OCCUPANCY. Tenant will occupy the Premises prior to the
Commencement Date for purposes of constructing the Tenant Improvements. Such
early occupancy shall be subject to all of the terms and conditions of this
Lease, including, without limitation, the provisions of Sections 17, 20 and 22,
except that provided Tenant does not commence the operation of business from the
Premises, Tenant will not be obligated to pay Monthly Basic Rent or any
additional rent during the period of such early occupancy. Tenant agrees to
cooperate with Landlord during the period of any such early occupancy so as not
to interfere with Landlord in the completion of any improvements to the Premises
to be constructed pursuant to Exhibit "C" by Landlord.
3. RENT.
3.1 BASIC RENT. Tenant agrees to pay Landlord, as basic rent for the
Premises, the Monthly Basic Rent in the amounts designated in Section 1.8 of the
Summary. The Monthly Basic Rent shall be paid by Tenant in monthly installments
in the amounts designated in Section 1.8 of the Summary in advance on the first
day of each and every calendar month during the Term, without demand, notice,
deduction or offset (except as otherwise provided in this Lease), except that
the first full month's Monthly Basic Rent shall be paid upon the execution of
this Lease. Monthly Basic Rent for any partial month shall be prorated in the
proportion that the number of days this Lease is in effect during such month
bears to the actual number of days in such month.
3.2 ADDITIONAL RENT. All amounts and charges payable by Tenant under this
Lease in addition to the Monthly Basic Rent described in Section 3.1 above
(including, without limitation, payments for insurance, and repairs, and
Tenant's Percentage of Direct Expenses, and Utilities Costs as provided in
Section 4.5 shall be considered additional rent for the purposes of this Lease,
and the word "RENT" in this Lease shall include such additional rent unless the
context specifically or clearly implies that only the Monthly Basic Rent is
referenced. The Monthly Basic Rent and additional rent shall be paid to Landlord
as provided in Section 7, without any prior demand therefor and without any
deduction or offset whatever (except as otherwise provided in this Lease), in
lawful money of the United States of America.
4. COMMON AREAS; DIRECT EXPENSES.
4.1 DEFINITIONS; TENANT'S RIGHTS. During the Term of this Lease, Tenant
shall have the non-exclusive right to use, in common with other tenants in the
Project, and subject to the Rules and Regulations referred to in Section 6.1
below, those portions of the Project (the "PROJECT COMMON AREAS") not leased or
designated for lease to tenants that are provided for use in common by Landlord,
Tenant and any other tenants of the Project (or by the sublessees, agents,
employees, customers invitees, guests or licensees of any such party), whether
or not those areas are open to the general public. The Project Common Areas
shall include, without limitation, any fixtures, systems, decor, facilities and
landscaping contained, maintained or used in connection with those areas, and
shall be deemed to include any city sidewalks adjacent to the Project, any
pedestrian walkway system, park or other facilities located on the Site and open
to the general public, the parking structure and parking areas (subject to
Section 6.2 below), the loading and unloading areas, trash areas, roadways,
parkways, and driveways, as well as the existing pool, workout facilities and
tennis facility for so long as Landlord, in its sole discretion, provides for
the same. The common areas of the Building shall be referred to herein as the
"BUILDING COMMON AREAS" and shall include, without limitation, the following
areas: the common entrances, lobbies, restrooms on multi-tenant floors,
elevators, stairways and accessways, loading docks, ramps, drives and platforms
and any passageways and serviceways thereto to the extent not exclusively
serving another tenant or contained within another tenant's premises, and the
common pipes, conduits, wires and appurtenant equipment serving the Premises.
The Building Common Areas and the Project Common Areas shall be referred to
herein collectively as the "COMMON AREAS."
4.2 LANDLORD'S RESERVED RIGHTS. Landlord reserves the right from time to
time to use any of the Common Areas and to do any of the following, as long as
such acts do not unreasonably interfere with Tenant's use of or access to the
Premises or Tenant's use and enjoyment of the Common Areas:
(a) expand the Building and construct or alter other buildings or
improvements on the Site;
(b) make any changes, additions, improvements, repairs or replacements in or
to the Project, the Site, the Common Areas and/or the Building
(including the Premises if required to do so by any law or regulation)
and the fixtures and equipment thereof, including, without limitation:
(i) maintenance, replacement and relocation of pipes, ducts, conduits,
wires and meters; and (ii) changes in the location, size, shape and
number of driveways, entrances, stairways, elevators, loading and
unloading areas, ingress, egress, direction of traffic, landscaped areas
and walkways and, subject to Section 6.2, parking spaces and parking
areas;
-2-
<PAGE> 10
(c) close temporarily any of the Common Areas while engaged in making
repairs, improvements or alterations to the Project, Site and/or
Building; and
(d) perform such other acts and make such other changes with respect to the
Project, Site, Common Areas and Building, as Landlord may, in the
exercise of good faith business judgment, deem to be appropriate.
4.3 ADDITIONAL RENT. In addition to paying the Monthly Basic Rent, Tenant
shall pay as additional rent Tenant's Percentage of the annual Direct Expenses
that are in excess of the amount of Direct Expenses applicable to the Base Year
and Tenant's Percentage of the annual Utilities Costs.
4.4 DEFINITIONS. The following terms shall have the meanings hereinafter set
forth:
(a) "BASE YEAR" shall mean the year set forth in Section 1.10 of the
Summary.
(b) "DIRECT EXPENSES" shall mean Operating Expenses and Tax Expenses.
(c) "EXPENSE YEAR" shall mean each calendar year in which any portion of the
Term falls, through and including the calendar year in which the Term
expires; provided, that Landlord, upon notice to Tenant, may change the
Expense Year from time to time to any twelve (12) consecutive month
period, and, in the event of any such change, Tenant's Percentage of the
Direct Expenses and Tenant's Percentage of the Utilities Costs shall be
equitably adjusted for any Expense Year involved in any such change such
that Tenant's Percentage is not affected to Tenant's financial
detriment.
(d) "OPERATING EXPENSES" shall mean all expenses, costs and amounts of every
kind and nature which Landlord shall pay or incur during any Expense
Year because of or in connection with the ownership, management,
maintenance, repair, replacement, restoration or operation of the
Project, including, without limitation, any amounts paid or incurred
for: (i) the cost of janitorial service, alarm and security service,
window cleaning, and trash removal, the cost of operating, maintaining,
repairing, replacing, renovating and managing the utility systems,
mechanical systems, sanitary and storm drainage systems, and escalator
and elevator systems, and the cost of supplies, tools, and equipment and
maintenance and service contracts in connection therewith; (ii) the cost
of licenses, certificates, permits and inspections and the cost of
contesting the validity or applicability of any governmental enactments
which may affect Operating Expenses, and the costs incurred in
connection with the implementation and operation of a transportation
system management program or similar program; (iii) the cost of
insurance carried by Landlord in connection with the Project, in such
amounts as Landlord may reasonably determine, or as may be required by
any mortgagees, or the lessor of any underlying or ground lease
affecting the Project; (iv) the cost of landscaping, relamping,
supplies, tools, equipment (including equipment rental agreements) and
materials, and all fees, charges and other costs, including management
fees (or amounts in lieu thereof), consulting fees, legal fees and
accounting fees, incurred in connection with the management, operation,
administration, maintenance and repair of the Project; (v) the cost of
parking area repair, restoration and maintenance, including, but not
limited to, resurfacing, repainting, restriping, and cleaning; (vi)
wages, salaries and other compensation and benefits of all persons
directly engaged in the operation, management, maintenance or security
of the Project, and employer's Social Security taxes, unemployment taxes
or insurance, and any other taxes which may be levied on such wages,
salaries, compensation and benefits; (vii) payments under any easement,
license, operating agreement, declaration, restrictive covenant, or
instrument pertaining to the sharing of costs by the Project; (viii)
amortization (including interest on the unamortized cost at the Interest
Rate) of the cost of acquiring or the rental expense of personal
property used in the maintenance, operation and repair of the Project;
(ix) the cost (including rent) of Landlord's property management office
for the Project and all utilities, supplies and materials used in
connection therewith; and (x) the cost of any capital alterations,
capital additions, or capital improvements made to the Project or any
portion thereof (A) which relate to the operation, repair, maintenance
and replacement of all systems, equipment or facilities which serve the
Project in the whole or in part (including replacement of wall and floor
coverings, ceiling tiles and fixtures in lobbies, corridors, restrooms
and other common or public areas or facilities, maintenance and
replacement of curbs, walkways and parking areas, and repairs to roofs
and reroofing of improvements), (B) which are intended as a labor-saving
device or to effect other economies in the operation or maintenance of
the Project, or any portion thereof, or (C) that are required under any
governmental law or regulation that is then being enforced by a federal,
state or local governmental agency; provided, however, that each such
permitted capital expenditure shall be amortized (including interest on
the unamortized cost at the Interest Rate in effect at the time such
expenditure is placed in service) over its useful life as Landlord shall
reasonably determine in accordance with generally accepted accounting
principles. If Landlord is not furnishing any particular work or service
(the cost of which, if performed or provided by Landlord, would be
included in Operating Expenses) to a tenant who has undertaken to
perform such work or service in lieu of the performance thereof by
Landlord, Operating Expenses shall be deemed to be increased by an
amount equal to the additional Operating Expenses which would reasonably
have been incurred during such period by Landlord if it had at its own
expense furnished such work or service to such tenant. If the Building
(and any additional buildings constructed in the Project) are not one
hundred percent (100%) occupied during all or a portion of any Expense
Year (including the Base Year), Landlord shall make an appropriate
adjustment to the variable components of Operating
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<PAGE> 11
Expenses for such Expense Year (including the Base Year) as reasonably
determined by Landlord employing sound accounting and management
principles, to determine the amount of Operating Expenses that would
have been paid had such building(s) been one hundred percent (100%)
occupied, and the amount so determined shall be deemed to have been the
amount of Operating Expenses for such Expense Year. Notwithstanding
anything to the contrary herein, when calculating Direct Expenses for
the Base Year, Operating Expenses shall exclude market-wide labor-rate
increases due to extraordinary circumstances, including, but not limited
to, boycotts and strikes, and costs relating to capital improvements or
expenditures.
Landlord shall have the right, from time to time, to equitably allocate
and prorate some or all of the Direct Expenses and/or Utilities Costs
among different tenants and/or different buildings of the Project and/or
on a building-by-building basis (the "COST POOLS"). Such Cost Pools may
include, without limitation, the office space tenants and retail space
tenants of the buildings in the Project and may be modified to take into
account the addition of any additional office buildings within the
Project. No costs for development or construction of future buildings,
parking structures and sitework shall be included as an Operating
Expense.
Notwithstanding the foregoing, for purposes of this Lease, Operating
Expenses shall not, however, include: (A) except as otherwise set forth
above in this Section 4.4(d), interest on debt and amortization on
mortgages; (B) ground lease payments; (C) costs of leasing commissions,
attorneys' fees and other costs and expenses incurred in connection with
negotiations or disputes with present or prospective tenants or other
occupants of the Project; (D) Utilities Costs for which Tenant pays
Tenant's Percentage to Landlord as set forth in Section 4.5 below; (E)
any costs expressly excluded from Operating Expenses elsewhere in this
Lease; (F) costs of any items to the extent Landlord receives
reimbursement from insurance proceeds (such proceeds to be excluded from
Operating Expenses in the year in which received, except that any
deductible amount under any insurance policy shall be included within
Operating Expenses) or from a third party; (G) costs, including permit,
license and inspection costs, incurred in renovating or otherwise
improving, decorating, or redecorating rentable space (including vacant
rentable space) for tenants or other occupants in the Project; (H) tax
penalties incurred as a result of Landlord's negligence, inability or
unwillingness to make payments or file returns when due; (I) costs
arising from Landlord's charitable or political contributions; (J) costs
incurred in connection with upgrading the Building to comply with life,
fire and safety codes, ordinances, statutes or other laws in effect
prior to the Commencement Date, including, without limitation, the ADA,
including penalties or damages incurred due to such noncompliance (for
this purpose, a change in the interpretation of or change in the
procedures for enforcing an existing law will be the equivalent of a new
law; provided, however, that costs incurred by Landlord in connection
with the loss of a variance or a disappearance of a
grandfathered/grandmothered right shall not be included as an Operating
Expense); (K) depreciation, amortization and interest payments, except
as provided herein, and except with respect to materials, tools,
supplies and vendor-type equipment purchased by Landlord to enable
Landlord to supply services Landlord might otherwise contract for with a
third party which such depreciation, amortization and interest payments
are not in excess of what would otherwise have been charged for such
third party's services, all as determined in accordance with generally
accepted accounting principles, consistently applied, and when
depreciation or amortization is permitted or required, the item shall be
amortized over its reasonably anticipated useful life; (L) costs
incurred by Landlord for alterations which are considered capital
improvements and replacements under generally accepted accounting
principles, consistently applied ("CAPITAL ITEMS"), except for Capital
Items expressly permitted under Section 4.4(d)(x); (M) expenses in
connection with services or other benefits which are not offered to
Tenant but which are provided to another tenant or occupant of the
Building or for which Tenant is charged directly; (N) costs incurred by
Landlord due to the violation by Landlord or any other tenant of the
Building of the terms and conditions of any lease of space in the
Building unless directly related to the use or maintenance of the Common
Areas; (O) overhead and profit increments paid to Landlord or to
subsidiaries or affiliates of Landlord for services in the Building to
the extent the same exceeds the cost of such services rendered at the
same level of service for similar quality buildings in San Diego, by
unaffiliated third parties on a competitive basis; (P) interest,
principal, points and fees on debt or amortization on any mortgage or
mortgages or any other debt instrument encumbering the Building; (Q)
Landlord's general corporate overhead and general administrative
expenses (provided that the reasonable rental cost of the Building
office shall be included in Operating Expenses); (R) any compensation
paid to clerks, attendants or other persons in commercial concessions
operated by Landlord; (S) except in connection with making repairs or
keeping permanent systems in operation while repairs are being made,
rentals and other related expenses incurred in leasing air conditioning
systems, elevators or other equipment ordinarily considered to be of a
capital nature which if purchased, rather than rented, would constitute
a Capital Item which is specifically excluded in (L) above, except
equipment not affixed to the Building which is used in providing
janitorial or similar services; (T) all items and services for which
Tenant or any other tenant of the Building reimburses Landlord (other
than through the pass-through of Operating Expenses) or which Landlord
provides selectively to one or more tenants (other than Tenant) without
reimbursement; (U) advertising and promotional expenditures, and costs
of purchase and installation of signs in or on the Building (except for
the Building directory) identifying the owner of the Building; (V)
electrical power costs for which any tenant directly contracts with the
local public service company; provided, however, that if any tenant
directly contracts for electric power service during any portion of the
relevant period, the total electric
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<PAGE> 12
power costs for the Building shall be "grossed up" to reflect what those
costs would have been had each tenant in the Building used the Building
standard amount of electric power; (W) labor or other costs incurred in
connection with any operation of any restaurant in the Building; (X)
except as contemplated under Section 4.4(d)(x)(C) above, any costs,
fines or penalties incurred due to violations by Landlord of any
government rule or authority; (AA) purchase price of sculpture,
paintings, or other objects of art placed in common areas of the
Building; (BB) wages, salaries, medical, surgical and general welfare
benefits, pension payments, payroll taxes, workers' compensation costs
or other compensation paid to or for any executive employees above the
grade of building manager; and (CC) costs (including in connection
therewith all attorneys' fees and costs of settlement judgments and
payments in lieu thereof) arising from claims, disputes or potential
disputes in connection with potential or actual claims, litigation or
arbitration pertaining to Landlord and/or the Project unless directly
related to the use or maintenance of the Common Areas and not covered by
insurance.
(e) "TAX EXPENSES" shall mean all federal, state, county, or local
governmental or municipal taxes, fees, charges or other impositions of
every kind and nature, whether general, special, ordinary or
extraordinary (including, without limitation, real estate taxes, general
and special assessments, transit taxes or charges, business or license
taxes or fees, annual or periodic license or use fees, open space
charges, housing fund assessments, leasehold taxes or taxes based upon
the receipt of rent, including gross receipts or sales taxes applicable
to the receipt of rent, personal property taxes imposed upon the
fixtures, machinery, equipment, apparatus, systems and equipment,
appurtenances, furniture and other personal property used in connection
with the Project), which Landlord shall pay or incur during any Expense
Year (without regard to any different fiscal year used by such
governmental or municipal authority) because of or in connection with
the ownership, leasing and operation of the Project or Landlord's
interest therein. Tax Expenses shall include, without limitation (i) any
assessment, tax, fee, levy or charge in addition to, or in substitution,
partially or totally, of any assessment, tax, fee, levy or charge
previously included within the definition of Project tax, it being
acknowledged by Tenant and Landlord that Proposition 13 was adopted by
the voters of the State of California in the June 1978 election
("Proposition 13") and that assessments, taxes, fees, levies and charges
may be imposed by governmental agencies for such services as fire
protection, street, sidewalk and road maintenance, conservation, refuse
removal and for other governmental services formerly provided without
charge to property owners or occupants, and, in further recognition of
the decrease in the level and quality of governmental services and
amenities as a result of Proposition 13, Tax Expenses shall also include
any governmental or private assessments or the Project's contribution
towards a governmental or private cost-sharing agreement for the purpose
of augmenting or improving the quality of services and amenities
normally provided by governmental agencies. It is the intention of
Tenant and Landlord that all such new and increased assessments, taxes,
fees, levies, and charges and all similar assessments, taxes, fees,
levies and charges be included within the definition of Tax Expenses for
purposes of this Lease; (ii) any assessment, tax, fee, levy, or charge
allocable to or measured by the area of the Premises or the rent payable
hereunder, including, without limitation, any gross income tax with
respect to the receipt of such rent, or upon or with respect to the
possession, leasing, operating, management, maintenance, alteration,
repair, use or occupancy by Tenant of the Premises, or any portion
thereof; (iii) any assessment, tax, fee, levy or charge, upon this
transaction or any document to which Tenant is a party, creating or
transferring an interest or an estate in the Premises; (iv) any
possessory taxes charged or levied in lieu of real estate taxes; and (v)
any expenses incurred by Landlord in attempting to protest, reduce or
minimize Tax Expenses. Notwithstanding anything to the contrary herein,
there shall be excluded from Tax Expenses: (i) all excess profits taxes,
franchise taxes, gift taxes, capital stock taxes, inheritance and
succession taxes, estate taxes, federal and state income taxes, and
other taxes to the extent applicable to Landlord's general or net income
(as opposed to rents, receipts or income attributable to operations at
the Project); and (ii) any items paid by Tenant under Section 10 of
this Lease. Tax Expenses shall be adjusted to reflect an assumption that
the Building is fully assessed for real property tax purposes as a
completed building that is one hundred percent (100%) occupied with
Building standard tenant improvements.
(f) "UTILITIES COSTS" shall mean the cost of all utilities supplied for the
Project (including, without limitation, water, sewer, electricity,
telephone and HVAC), other than those utilities which are paid directly
by Tenant and other tenants of the Project for excess consumption and
after-hours HVAC pursuant to Section 16 of this Lease or similar
provisions in other tenants' leases.
(g) "TENANT'S PERCENTAGE" shall mean the percentage set forth in Section 1.9
of the Summary. Tenant's Percentage was calculated by multiplying the
number of rentable square feet of the Premises by 100 and dividing the
product by the total rentable square feet in the Project. Landlord shall
have the right from time to time, in its discretion, to include or
exclude existing or future buildings in the Project in the calculation
of the total rentable square feet of the Project, for purposes of
determining Direct Expenses, Utilities Costs and/or the provision of
various services and amenities thereto, including equitable allocation
of Direct Expenses and/or Utilities Costs in Cost Pools (as described in
Section 4.4(d) above); in such event, Tenants Percentage shall be
appropriately revised to reflect any such actual increases or decreases
in square footage of the Project. In addition, in the event either the
rentable square feet of the Premises and/or the Building and other
buildings in the Project is changed, Tenant's Percentage shall be
appropriately adjusted, and, as to the Expense Year in which such change
occurs, Tenant's Percentage for such year shall
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<PAGE> 13
be determined on the basis of the number of days during such Expense
Year that each such Tenant's Percentage was in effect.
4.5 CALCULATION AND PAYMENT OF ADDITIONAL RENT.
(a) CALCULATION OF EXCESS. For each Expense Year ending or commencing within
the Lease Term, Tenant shall pay to Landlord, in the manner set forth in
Section 4.5(b), below, and as additional rent: (i) the amount by which
Tenant's Percentage of Direct Expenses for such Expense Year exceeds
Tenant's Percentage of the Direct Expenses for the Base Year (Tenant's
Percentage of such excess amount is hereinafter referred to as the
"EXCESS"); and (ii) Tenant's Percentage of the Utilities Costs incurred
for such Expense Year.
(b) STATEMENT OF ACTUAL DIRECT EXPENSES AND UTILITIES COSTS AND PAYMENT BY
TENANT. Following the end of each Expense Year, Landlord shall give to
Tenant a statement (the "STATEMENT"), which shall indicate: (i) the
Direct Expenses incurred or accrued for such preceding Expense Year, and
which shall indicate the amount, if any, of any Excess; and (ii) the
amount of the Utilities Costs incurred for such preceding Expense Year.
Upon receipt of the Statement for each Expense Year ending during the
Lease Term, Tenant shall pay, within thirty (30) days after receipt of
such Statement, (A) the full amount of any Excess for such Expense Year,
less the amounts, if any, paid during such Expense Year as Estimated
Excess, as that term is defined below, plus (B) the full amount of
Tenant's Percentage of the Utilities Costs for such Expense Year, less
the amounts, if any, paid by Tenant during the Expense Year as Estimated
Utilities Cost, as that term is defined below. The failure of Landlord
to timely furnish the Statement for any Expense Year shall not prejudice
Landlord from enforcing its rights under this Section 4.5. Even though
the Term has expired and Tenant has vacated the Premises, when the final
determination is made of the Direct Expenses and Utilities Costs for the
Expense Year in which this Lease terminates, taking into consideration
that the expiration date may have occurred prior to the final day of the
applicable Expense Year, Tenant shall within ten (10) days after
Landlord's request therefor pay to Landlord an amount as calculated
pursuant to the provisions of Section 4.5(a) of this Lease as Tenant's
Percentage of the Excess and Utilities Costs for such final Expense
Year. The provisions of this Section 4.5(b) shall survive the expiration
or earlier termination of the Lease Term.
(c) STATEMENT OF ESTIMATED DIRECT EXPENSES AND UTILITIES COSTS. In addition,
Landlord shall give Tenant a yearly expense estimate statement (the
"ESTIMATE STATEMENT") which shall set forth Landlord's reasonable
estimate (the "ESTIMATE") of (i) what the total amount of Direct
Expenses for the then-current Expense Year shall be and the estimated
Excess (the "ESTIMATED EXCESS") as calculated by comparing Tenant's
Percentage of Direct Expenses for such then-current Expense Year, which
shall be based upon the Estimate, to Tenant's Percentage of Direct
Expenses for the Base Year, and (ii) what the total amount of Tenant's
Percentage of the Utilities Costs for the then current Expense Year
shall be (the "ESTIMATED UTILITIES COSTS"). The Estimate Statement may
be revised and reissued by Landlord from time to time. The failure of
Landlord to timely furnish the Estimate Statement for any Expense Year
shall not preclude Landlord from enforcing its rights to collect any
Estimated Excess or Estimated Utilities Costs under this Section 4.5.
Within thirty (30) days after receipt of such Estimate Statement, Tenant
shall pay to Landlord an amount equal to (A) a fraction of the Estimated
Excess (or the increase in the Estimated Excess if pursuant to a revised
Estimate Statement) for the then-current Expense Year (reduced by any
amounts paid as Estimated Excess pursuant to the last sentence of this
Section 4.5(c), plus (B) a fraction of the Estimated Utilities Costs (or
the increase in the Estimated Utilities Costs if pursuant to a revised
Estimate Statement) for the then-current Expense Year (reduced by the
amounts paid as Estimated Utilities Costs pursuant to the last sentence
of this Section 4.5(c)). Such fraction shall have as its numerator the
number of months which have elapsed in such current Expense Year to the
month of such payment, both months inclusive, and shall have twelve (12)
as its denominator. Until a new Estimate Statement is furnished, Tenant
shall pay monthly, with the monthly Base Rent installments, an amount
equal to the sum of (x) one-twelfth (1/12) of the total Estimated Excess
plus (y) one-twelfth (1/12) of the total Estimated Utilities Costs set
forth in the previous Estimate Statement delivered by Landlord to
Tenant.
4.6 PROPOSITION 13 PROTECTION. Notwithstanding anything to the contrary
contained in this Lease, in the event that, at any time during the initial Term,
a change in ownership of the Project is consummated, and as a result thereof the
Project is reassessed (the "REASSESSMENT") for real estate tax purposes by the
appropriate governmental authority pursuant to the terms of Proposition 13, then
the terms of this Section 4.6 shall apply to such Reassessment. This Section 4.6
shall not apply during any Option Period.
(a) THE TAX INCREASE. The term "TAX INCREASE" shall mean fifty percent (50%)
of that portion of the Real Property Taxes and Assessments, as
calculated immediately following the Reassessment, which is attributable
solely to the Reassessment. Accordingly, the term Tax Increase shall not
include any portion of the Real Property Taxes and Assessments, as
calculated immediately following the Reassessment, which is attributable
to (i) the initial assessment of the value of the Project, (ii)
assessments which were pending immediately prior to the Reassessment and
which were conducted during, and included in, such Reassessment, or were
otherwise rendered unnecessary following the Reassessment, or (iii) the
annual inflationary increase of Real Property Taxes and Assessments.
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<PAGE> 14
(b) PROTECTION. During the initial Term, any Tax Increase will be excluded
from Real Property Taxes and Assessments.
(c) LANDLORD'S RIGHT TO PURCHASE THE PROPOSITION 13 PROTECTION AMOUNT. The
amount of Real Property Taxes and Assessments which Tenant is not
obligated to pay or will not be obligated to pay during the initial Term
in connection with a particular Reassessment is referred to as a
"PROPOSITION 13 PROTECTION AMOUNT." If the occurrence of a Reassessment
is reasonably foreseeable by Landlord and the Proposition 13 Protection
Amount attributable to such Reassessment can be reasonably quantified or
estimated for each year commencing with the year in which the
Reassessment will occur, the terms of this Section 4.6(c) shall apply to
each such Reassessment. Upon notice to Tenant, Landlord shall have the
right to purchase the Proposition 13 Protection Amount relating to the
applicable Reassessment (the "APPLICABLE REASSESSMENT"), at any time, by
paying to Tenant an amount equal to the Proposition 13 Purchase Price.
The "PROPOSITION 13 PURCHASE PRICE" shall mean the present value of the
Proposition 13 Protection Amount remaining during the initial Term, as
of the date of payment of the Proposition 13 Purchase Price by Landlord.
Such present value shall be calculated (i) by using the portion of the
Proposition 13 Protection Amount attributable to each remaining year
during the initial Term that such protection is available (as though the
portion of such Proposition 13 Protection Amount benefited Tenant at the
end of each year), as the amounts to be discounted, and (ii) by using
discount rates for each amount to be discounted equal to (A) the prime
interest rate, as reported in the Wall Street Journal as of the date of
Landlord's exercise of its right to purchase plus (B) two percent (2%)
per annum. Upon such payment of the Proposition 13 Purchase Price, the
provisions of this Section 4.6 shall not apply to any Tax Increase
attributable to the Applicable Reassessment. As Landlord will estimate
the Proposition 13 Purchase Price because a Reassessment has not yet
occurred, then when such Reassessment occurs, if Landlord has
underestimated the Proposition 13 Purchase Price, then upon notice by
Landlord to Tenant, Tenant's rent next due shall be credited with the
amount of such underestimation, and if Landlord overestimates the
Proposition 13 Purchase Price, then upon notice by Landlord to Tenant,
rent next due shall be increased by the amount of the overestimation.
4.7 TENANT'S AUDIT RIGHTS. Landlord shall maintain records respecting Direct
Expenses and Utilities Costs and determine the same in accordance with sound
accounting and management practices, consistently applied. Tenant or Tenant's
Representative (for purposes hereof, Tenant's Representative shall mean an
independent certified public accountant whose fees are not paid on a contingency
fee basis) or both shall have the right, within six (6) months after receipt of
an Actual Statement, to examine at Tenant's cost and make copies of such records
at the Building upon reasonable prior notice and during business hours. If
Tenant takes exception to any matter contained in an Actual Statement, Landlord
shall promptly refer the matter to an independent certified public accountant
who has done no work for Landlord in the past five (5) years, whose
certification as to the proper amount shall be final and conclusive as between
Landlord and Tenant. Tenant shall pay the cost of such certification unless such
certification determines that Tenant was overbilled by more than five percent
(5%) in total in which case Landlord shall pay the cost of the certification and
all of Tenant's reasonable out-of-pocket costs in reviewing Landlord's records
or in having them reviewed by Tenants Representative (provided, that the total
out-of-pocket costs shall not exceed Two Thousand Dollars ($2,000.00)).
Appropriate adjustments in amounts paid by Tenant shall be settled in cash
within thirty (30) days.
5. SECURITY DEPOSIT.
5.1 CASH SECURITY DEPOSIT. Concurrently with the execution of this Lease,
Tenant shall deposit with Landlord the cash portion of the Security Deposit
designated in Section 1.11 of the Summary (the "CASH SECURITY DEPOSIT"). The
Cash Security Deposit shall be held by Landlord as security for the full and
faithful performance by Tenant of all of the terms, covenants and conditions of
this Lease to be performed by Tenant during the Term. If Tenant defaults with
respect to any of its obligations under this Lease, Landlord may (but shall not
be required to) use, apply or retain all or any part of the Cash Security
Deposit for the payment of any rent or any other sum in default, or for the
payment of any other amount, loss or damage which Landlord may spend, incur or
suffer by reason of Tenant's default. If any portion of the Cash Security
Deposit is so used or applied, Tenant shall, within ten (10) days after demand
therefor, deposit cash with Landlord in an amount sufficient to restore the Cash
Security Deposit to its original amount. Landlord shall not be required to keep
the Cash Security Deposit separate from its general funds, and Tenant shall not
be entitled to interest on the Cash Security Deposit. If Tenant shall fully and
faithfully perform every provision of this Lease to be performed by it, the Cash
Security Deposit or any balance thereof shall be returned to Tenant within two
(2) weeks following the expiration of the Lease term, provided that Landlord may
retain the Cash Security Deposit until such time as any amount due from Tenant
in accordance with this Lease has been determined and paid in full (however, if
the amount payable by Tenant is less than the Cash Security Deposit, Landlord
shall return to Tenant an amount equal to the difference between the Cash
Security Deposit and the amount payable by Tenant). If Landlord sells its
interest in the Building during the Term and if Landlord deposits with the
purchaser the Cash Security Deposit (or balance thereof), and such purchaser
acknowledges receipt thereof, then, upon such sale, Landlord shall be discharged
from any further liability with respect to the Cash Security Deposit.
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<PAGE> 15
5.2 LETTER OF CREDIT SECURITY DEPOSIT.
(a) DELIVERY. Concurrently with Tenant's execution of this Lease, Tenant
shall deliver to Landlord an unconditional, irrevocable and renewable
letter of credit issued by Imperial Bank ("LETTER OF CREDIT") in favor
of Landlord in form reasonably satisfactory to Landlord, in the initial
principal amount specified in Section 1.1 of the Summary, as security
for the faithful performance and observance by Tenant of the terms,
provisions and conditions of this Lease. The Letter of Credit shall
state that an authorized officer or other representative of Landlord may
make demand on Landlord's behalf for the amount owed by Tenant to
Landlord, and that the issuing bank must immediately honor such demand,
without qualification or satisfaction of any conditions, except the
proper identification of the party making such demand and the reason
that the party is making the demand. In addition, the Letter of Credit
shall indicate that it is transferable in its entirety by Landlord as
beneficiary and that upon receiving written notice of transfer, and upon
presentation to the issuer of the original Letter of Credit, the issuer
will reissue the Letter of Credit naming such transferee as the
beneficiary. If the term of the Letter of Credit held by Landlord will
expire prior to thirty (30) days following the expiration date of this
Lease and it is not extended, or a new Letter of Credit for an extended
period of time is not substituted, within thirty (30) days prior to the
expiration of the Letter of Credit, then Landlord may deliver written
notice of such fact to Tenant and if Tenant does not extend the Letter
of Credit or substitute a new Letter of Credit within ten (10) days
after Tenant's receipt of such notice from Landlord, Landlord shall be
entitled to make demand for the principal amount of said Letter of
Credit and, thereafter, to hold such funds in accordance with Section
5.2(c) below.
(b) PRINCIPAL AMOUNT OF LETTER OF CREDIT. The required principal amount of
the Letter of Credit shall be as follows:
<TABLE>
<CAPTION>
REQUIRED
YEAR OF TERM PRINCIPAL AMOUNT
------------ ----------------
<S> <C>
1 $360,000.00
2 $240,000.00
3 $120,000.00
4-7 $0.00
</TABLE>
Notwithstanding the foregoing, if as of the applicable reduction date
set forth above, (i) Tenant is in default under this Lease, or (ii)
circumstances exist that would, with notice or lapse of time, or both,
constitute a default (provided Landlord has given Tenant written notice
of the existence of any such circumstances by the applicable reduction
date), then the principal amount shall not be reduced, unless and until
such default or circumstances shall have been fully cured, at which time
the principal amount may be reduced as hereinabove described. If Tenant
completes an initial public offering of its securities on a recognized
United States public securities exchange, then Tenant shall have the
right, upon prior written notice to Landlord, to eliminate the Letter of
Credit provided that (i) at the time of Tenant's request, Tenant shall
have a tangible net worth of at least Thirty Million Dollars
($30,000,000.00) (Tenant shall provide Landlord with evidence reasonably
acceptable to Landlord evidencing such tangible net worth), (ii) at the
time of Tenant's request, Tenant is not in default hereunder and no
circumstances exists that would, with the passage of time, the giving of
notice, or both, constitute a default hereunder (provided Landlord has
given Tenant written notice of the existence of any such circumstances
within three (3) business days following receipt of Tenant's request)
and (iii) Landlord shall have not given Tenant written notice of a
failure to pay rent pursuant to Section 23.1(b) during the preceding
twelve (12) month period.
(c) APPLICATION OF LETTER OF CREDIT. The Letter of Credit shall be held by
Landlord as security for the faithful performance by Tenant of all of
the terms, covenants and conditions of this Lease. If Tenant commits a
default with respect to any provision of this Lease, Landlord may (but
shall not be required to) draw upon the Letter of Credit and use, apply
or retain all or any part of the proceeds for the payment of any sum
which is in default, or for the payment of any other amount which
Landlord may spend or become obligated to spend by reason of Tenant's
default or to compensate Landlord for any loss or damage which Landlord
may suffer by reason of Tenant's default. If any portion of the Letter
of Credit is so used or applied, Tenant shall, within ten (10) days
after demand therefor, post an additional Letter of Credit in an amount
sufficient to restore the Letter of Credit to the principal amount
required under Section 5.2(b) above. Landlord shall not be required to
keep any proceeds from the Letter of Credit separate from its general
funds and Tenant shall not be entitled to any interest on such proceeds.
Should Landlord sell its interest in the Premises during the Term and if
Landlord deposits with the purchaser thereof the Letter of Credit or any
proceeds of the Letter of Credit, thereupon Landlord shall be discharged
from any further liability with respect to the Letter of Credit and said
proceeds.
6. USE.
6.1 GENERAL. Tenant shall use the Premises solely for the Permitted Use
specified in Section 1.12 of the Summary, and shall not use or permit the
Premises to be used for any other use or purpose whatsoever. Tenant shall
observe and comply with the "Rules and Regulations" attached hereto as
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Exhibit "E", and all reasonable non-discriminatory modifications thereof and
additions thereto from time to time put into effect and furnished to Tenant by
Landlord. Landlord shall endeavor to enforce the Rules and Regulations, but
shall have no liability to Tenant for the violation or non-performance by any
other tenant or occupant of the Project or the Building of any such Rules and
Regulations. Tenant shall, at its sole cost and expense, observe and comply with
all requirements of any board of fire underwriters or similar body relating to
the Premises, all recorded covenants, conditions and restrictions now or
hereafter affecting the Project and all laws, statutes, codes, rules and
regulations now or hereafter in force relating to or affecting the use,
occupancy, alteration or improvement of the Premises, including, without
limitation, the provisions of Title III of the Americans with Disabilities Act
of 1990 ("ADA") as it pertains to Tenant's use, occupancy, improvement and
alteration of the Premises. Tenant shall not use or allow the Premises to be
used (a) in violation of any recorded covenants, conditions and restrictions
affecting the Site or of any law or governmental rule or regulation, or of any
certificate of occupancy issued for the Premises or Building, or (b) for any
improper, immoral, unlawful or reasonably objectionable purpose. Tenant shall
not do or permit to be done anything which will obstruct or interfere with the
rights of other tenants or occupants of the Project or the Building, or injure
or annoy them. Tenant shall not cause, maintain or permit any nuisance in, on or
about the Premises, the Building, the Project or the Site, nor commit or suffer
to be committed any waste in, on or about the Premises. Notwithstanding the
foregoing, Tenant's obligation to observe and comply with future covenants,
conditions and restrictions shall be (i) subject to Tenants receipt of a copy
thereof and (ii) conditioned upon them not reducing Tenant's rights or
increasing Tenant's obligations hereunder in any material respect.
6.2 PARKING.
(a) TENANT'S PARKING PRIVILEGES. During the Term of this Lease, Landlord
shall lease to Tenant, and Tenant shall lease from Landlord, the number of
parking spaces specified in Section 1.16 of the Summary hereof for use by
Tenant's employees in the common parking areas for the Building within the
Project, as designated by Landlord from time to time. Landlord shall at all
times have the right to establish and modify the nature and extent of the
parking areas for the Building and Project (including whether such areas shall
be surface, underground and/or other structures) as long as Tenant is provided
the number of parking spaces designated in Section 1.16 of the Summary. In
addition, Landlord may, in its sole discretion, assign any unreserved and
unassigned parking spaces, and/or make all or a portion of such spaces reserved.
(b) PARKING CHARGES. Tenant's parking spaces set forth in Section 1.16 of
the Summary hereof shall, during the Term (including any Option Term), not be
subject to a monthly parking fee (during an Option Term, such rights will be
reflected in the determination of the fair market rental rate). In addition to
such parking privileges for use by Tenant's employees, Landlord shall permit
access to the parking areas for Tenant's visitors, subject to availability of
spaces and payment (by validation charges or otherwise) of daily visitor parking
charges therefor as may be established and adjusted by Landlord from time to
time. Tenant acknowledges that Landlord may restrict the parking structure, or
portions thereof, from parking by Tenant's visitors (but not Tenant's
employees).
(c) PARKING RULES. The use of the parking areas shall be subject to the
Parking Rules and Regulations contained in Exhibit "E" attached hereto and any
other reasonable, nondiscriminatory rules and regulations adopted by Landlord
and/or Landlord's parking operators from time to time, including any system for
controlled ingress and egress and charging visitors and invitees, with
appropriate provision for validation of such charges. Tenant shall not use more
parking privileges than its allotment and shall not use any parking spaces
specifically assigned by Landlord to other tenants of the Building or Project or
for such other uses as visitor parking. Tenant's parking privileges shall be
used only for parking by vehicles no larger than normally sized passenger
automobiles, sports utility vehicles or pick-up trucks. Tenant shall not permit
or allow any vehicles that belong to or are controlled by Tenant or Tenant's
employees, suppliers, shippers, customers or invitees to be loaded, unloaded,
or parked in areas other than those designated by Landlord for such activities.
If Tenant permits or allows any of the prohibited activities described herein,
then Landlord shall have the right, without notice, in addition to such other
rights and remedies that it may have, to remove or tow away the vehicle involved
and charge the cost thereof to Tenant, which cost shall be immediately payable
by Tenant upon demand by Landlord; provided, however, Landlord will not charge
Tenant the cost thereof unless Landlord previously gave Tenant written or oral
notice of such prohibited activity and such activity was not corrected within a
reasonable period of time under the circumstances (however, no notice will be
required in the event of an emergency or with respect to a violator of whom
Landlord has previously given notice to Tenant).
6.3 SIGNS.
(a) BUILDING SIGNAGE. Subject to the terms of this Section 6.3(b), Tenant
shall have the right to install, at Tenant's sole cost and expense, (i)
exclusive Building top signage in one (1) location on the exterior of
the Building, (ii) non-exclusive monument signage in one (1) location on
the Building's monument sign, but only if Landlord elects to provide a
monument sign for the Building, (iii) a nonexclusive lobby signage in
one (1) location in the ground floor lobby of the Building and (iv)
exclusive signage in the fourth (4th), fifth (5th) and sixth (6th) floor
elevator lobbies of the Premises
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(collectively, "TENANT'S SIGNAGE"). The location of Tenant's Signage
shall be determined by Landlord and approved by Tenant, such approval
not to be unreasonably withheld. Notwithstanding the foregoing, Tenant's
right to Tenant's Signage is personal to the original Tenant named in
the Summary ("ORIGINAL TENANT") and shall not be assignable to any
assignee or transferee of or any successor to Tenant's interest under
this Lease, except with the prior written consent of Landlord, which
consent shall not be unreasonably withheld. The foregoing restriction is
a material consideration to Landlord because of the visibility of such
signage and because of Landlord's concern for maintaining the quality,
stature and prestige of the Building. Tenant's Signage shall conform to
sign plans approved by Landlord, which approval shall not be
unreasonably withheld or delayed, and comply with all applicable laws,
statutes, regulations, ordinances and restrictions, including but not
limited to, any permit requirements and City of San Diego size
restrictions. Tenant shall install and maintain Tenants Signage in good
condition and repair at its sole cost and expense during the entire
Term, as the same may be extended for any Option Term. Tenant shall bear
all costs and expenses associated with Tenant's Signage, including but
not limited to, expenses of design, acquisition, construction,
installation, display, illumination, maintenance, repair and permit
costs therefor. Tenant shall be solely responsible for obtaining all
permits and approvals required by any governmental agency or authority
with respect to Tenant's Signage. Except as provided above, Tenant shall
not place, erect or maintain or cause to be placed, erected or
maintained on or to the roof or any exterior door, wall or window or the
roof of the Premises or the Building, or on or to the glass or any
window or door of the Premises, or on or to any sidewalk or other
location outside the Premises, or within any entrance to the Premises,
any sign, decal, banner, placard, or any other advertising matter of any
kind or description. Any modifications to Tenant's Signage, including
without limitation, the location, quality, design, style, lighting and
size of such signage, shall be consistent with applicable laws, rules
and permits and Landlord's Building standard signage program and shall
be subject to Landlord's prior written approval, in its reasonable
discretion. Upon the expiration or earlier termination of this Lease,
Tenant shall be responsible, at its sole cost and expense, for the
removal of Tenant's Signage and the repair of all damage to the Building
caused by such removal.
(b) PROHIBITED SIGNAGE AND OTHER ITEMS. Any signs, notices, logos, pictures,
names or advertisements which are installed and that have not been
separately approved by Landlord may be removed without notice by
Landlord at the sole expense of Tenant. Except as hereinabove mentioned,
Tenant may not install any signs on the exterior or roof of the Building
or the Building Common Areas or the Project. Any signs, window
coverings, or blinds (even if the same are located behind the Landlord
approved window coverings for the Building), or other items visible from
the exterior of the Premises or Building are subject to the prior
written approval of Landlord, in its sole discretion.
(c) BUILDING DIRECTORY. Tenant shall, at Landlord's expense, be entitled to
a reasonable number of lines on the Building directory to display
Tenant's name and suite numbers
6.4 HAZARDOUS MATERIALS.
(a) TENANT'S OBLIGATIONS. Except for ordinary and general office supplies,
such as copier toner, liquid paper, glue, ink and common household
cleaning materials (some or all of which may constitute "HAZARDOUS
MATERIALS" as defined in this Lease), Tenant agrees not to cause or
permit any Hazardous Materials to be brought upon, stored, used,
handled, generated, released or disposed of on, in, under or about the
Premises, the Building, the Common Areas or any other portion of the
Project by Tenant, its agents, employees, subtenants, assignees,
licensees, contractors or invitees (collectively, "TENANT'S PARTIES"),
without the prior written consent of Landlord, which consent Landlord
may withhold in its sole and absolute discretion. Upon the expiration or
earlier termination of this Lease, Tenant agrees to promptly remove from
the Premises, the Building and the Project, at its sole cost and
expense, any and all Hazardous Materials, including any equipment or
systems containing Hazardous Materials which are installed, brought
upon, stored, used, generated or released upon, in, under or about the
Premises, the Building and/or the Project or any portion thereof by
Tenant or any of Tenant's Parties. To the fullest extent permitted by
law, Tenant agrees to promptly indemnify, protect, defend and hold
harmless Landlord and Landlord's partners, officers, directors,
employees, agents, successors and assigns (collectively, "LANDLORD
INDEMNIFIED PARTIES") from and against any and all claims, damages,
judgments, suits, causes of action, losses, liabilities, penalties,
fines, expenses and costs (including, without limitation, clean-up,
removal, remediation and restoration costs, sums paid in settlement of
claims, attorneys' fees, consultant fees and expert fees and court
costs) which arise or result from the presence of Hazardous Materials
on, in, under or about the Premises, the Building or any other portion
of the Project and which are caused or permitted by Tenant or any of
Tenant's Parties. Tenant agrees to promptly notify Landlord of any
release of Hazardous Materials in the Premises, the Building or any
other portion of the Project which Tenant becomes aware of during the
Term of this Lease, whether caused by Tenant or any other persons or
entities. In the event of any release of Hazardous Materials caused or
permitted by Tenant or any of Tenant's Parties, Landlord shall have the
right, but not the obligation, to cause Tenant to immediately take all
steps Landlord deems necessary or appropriate to remediate such release
and prevent any similar future release to the satisfaction of Landlord
and Landlord's mortgagee(s). At all times during the Term of this Lease
following reasonable prior
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<PAGE> 18
written notice (except in the event of an emergency), Landlord will have
the right, but not the obligation, to enter upon the Premises to
inspect, investigate, sample and/or monitor the Premises to determine if
Tenant is in compliance with the terms of this Lease regarding Hazardous
Materials. As used in this Lease, the term "HAZARDOUS MATERIALS" shall
mean and include any hazardous or toxic materials, substances or wastes
as now or hereafter designated under any law, statute, ordinance, rule,
regulation, order or ruling of any agency of the State, the United
States Government or any local governmental authority, including,
without limitation, asbestos, petroleum, petroleum hydrocarbons and
petroleum based products, urea formaldehyde foam insulation,
polychlorinated biphenyls ("PCBs"), and freon and other
chlorofluorocarbons. The provisions of this Section 6.4(a) will survive
the expiration or earlier termination of this Lease.
(b) LANDLORD'S OBLIGATIONS. Landlord represents and warrants to Tenant that
as of the date of this Lease and to Landlord's actual knowledge (i)
there are no Hazardous Materials in, on, under, below or otherwise
located on or about the Building in violation of applicable law, and
(ii) there has been no release or migration of any Hazardous Materials
in violation of applicable law onto, beneath, upon or about the
Building. Landlord shall indemnify, protect, defend and hold Tenant, its
successors, assigns, subtenants, agents, employees, officers and
directors harmless from any and all losses, damages, liabilities,
judgments, costs, claims, expenses, penalties, including, but not
limited to, attorneys' fees, court costs and consultant fees (i) arising
out of or involving any Hazardous Materials existing on the Building to
the extent caused by Landlord; or (ii) due to Landlord's breach of its
foregoing representation. The provisions of this Section 6.4(b) will
survive the expiration or earlier termination of this Lease.
7. PAYMENTS AND NOTICES. All rent and other sums payable by Tenant to
Landlord hereunder shall be paid to Landlord at the address designated in
Section 1.1 of the Summary, or to such other person and/or at such other place
as Landlord may hereafter designate in writing. Any notice required or permitted
to be given hereunder must be in writing and may be given by personal delivery
(including delivery by nationally recognized overnight courier or express
mailing service), facsimile transmission sent by a machine capable of confirming
transmission receipt, with a hard copy of such notice delivered no later than
one (1) business day after facsimile transmission by another method specified in
this Section 7, or by registered or certified mail, postage prepaid, return
receipt requested, addressed to Tenant at the address(es) designated in Section
1.2 of the Summary, or to Landlord at the address(es) designated in Section 1.1
of the Summary. Either party may, by written notice to the other, specify a
different address for notice purposes. Notice given in the foregoing manner
shall be deemed given (i) upon confirmed transmission if sent by facsimile
transmission, provided such transmission is prior to 5:00 p.m. on a business day
(if such transmission is after 5:00 p.m. on a business day or is on a
non-business day, such notice will be deemed given on the following business
day), (ii) when actually received or refused by the party to whom sent if
delivered by a carrier or personally served or (iii) if mailed, on the day of
actual delivery or refusal as shown by the certified mail return receipt or the
expiration of three (3) business days after the day of mailing, whichever first
occurs. For purposes of this Section 7, a "business day" is Monday through
Friday, excluding holidays observed by the United States Postal Service.
8. BROKERS. The parties recognize that the broker(s) who negotiated this
Lease are stated in Section 1.13 of the Summary, and agree that Landlord shall
be solely responsible for the payment of brokerage commissions to said broker(s)
pursuant to a separate agreement between Landlord and such broker(s), and that
Tenant shall have no responsibility therefor unless written provision to the
contrary has been made. Each party represents and warrants to the other, that,
to its knowledge, no other broker, agent or finder (a) negotiated or was
instrumental in negotiating or consummating this Lease on its behalf, and (b) is
or might be entitled to a commission or compensation in connection with this
Lease. Any broker, agent or finder of Tenant whom Tenant has failed to disclose
herein shall be paid by Tenant. Tenant shall indemnify, defend (by counsel
reasonably approved in writing by Landlord) and hold Landlord harmless from and
against any and all claims, judgments, suits, causes of action, damages, losses,
liabilities and expenses (including attorneys' fees and court costs) resulting
from any breach by Tenant of the foregoing representation. Landlord shall
indemnify, defend (by counsel reasonably approved in writing by Tenant) and hold
Tenant harmless from and against any and all claims, judgments, suits, causes of
action, damages, losses, liabilities and expenses (including attorneys' fees and
court costs) resulting from any breach by Landlord of the foregoing
representation. The foregoing indemnities shall survive the expiration or
earlier termination of this Lease.
9. SURRENDER; HOLDING OVER.
9.1 SURRENDER OF PREMISES. Upon the expiration or sooner termination of this
Lease, Tenant shall surrender all keys for the Premises to Landlord, and
exclusive possession of the Premises to Landlord broom clean and in good
condition and repair, reasonable wear and tear excepted (and casualty damage
excepted if not required to be repaired by Landlord or Tenant or if this Lease
is terminated as a result thereof pursuant to Section 18), with all of Tenant's
personal property (and those items, if any, of Tenant improvements and Tenant
Changes identified by Landlord pursuant to Section 12.2 below) removed therefrom
and all damage caused by such removal repaired, as required pursuant to Sections
12.2 and 12.3 below. If, for any reason, Tenant fails to surrender the Premises
on the expiration or earlier termination of this Lease (including upon the
expiration of any subsequent month-to-month tenancy consented to by Landlord
pursuant to Section 9.2 below), with such removal and repair obligations
completed, then, in addition to the provisions of Section 9.3 below
and Landlord's rights and remedies
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<PAGE> 19
under Section 12.4 and the other provisions of this Lease (but provided Landlord
has given Tenant written notice at least sixty (60) days prior to the expiration
or earlier termination of this Lease that Landlord needs possession of the
Premises immediately following the expiration or earlier termination of this
Lease), Tenant shall indemnify, protect, defend (by counsel approved in writing
by Landlord) and hold Landlord harmless from and against any and all claims,
judgments, suits, causes of action, damages, losses, liabilities and expenses
(including attorneys' fees and court costs) resulting from such failure to
surrender, including, without limitation, any claim made by any succeeding
tenant based thereon. The foregoing indemnity shall survive the expiration or
earlier termination of this Lease.
9.2 HOLD OVER WITH LANDLORD'S CONSENT. If, with Landlord's express written
consent, Tenant remains in possession of the Premises after the expiration or
earlier termination of the Lease Term, Tenant shall become a tenant from
month-to-month upon the terms and conditions set forth in this Lease (including
Tenant's obligation to pay all Direct Expenses and Utilities Costs and any other
additional rent under this Lease), but at a Monthly Basic Rent equal to the
greater of: (a) one hundred fifty percent (150%) of the Monthly Basic Rent
applicable to the Premises immediately prior to the date of such expiration or
earlier termination; or (b) one hundred twenty-five percent (125%) of the
prevailing market rate excluding any rental or other concessions (as reasonably
determined by Landlord) for the Premises in effect on the date of such
expiration or earlier termination. Tenant shall pay an entire month's Monthly
Basic Rent calculated in accordance with this Section 9.2 for any portion of a
month it holds over and remains in possession of the Premises pursuant to this
Section 9.2. This Section 9.2 shall not be construed to create any expressed or
implied right to holdover beyond the expiration of the Lease Term or any
extension thereof.
9.3 HOLD OVER WITHOUT LANDLORD'S CONSENT. If Tenant holds over after the
expiration or earlier termination of the Lease Term without the express written
consent of Landlord, then, in addition to all other remedies available to
Landlord, Tenant shall become a tenant at sufferance only, upon the terms and
conditions set forth in this Lease so far as applicable (including Tenant's
obligation to pay all Direct Expenses and Utilities Costs and any other
additional rent under this Lease), but at a Monthly Basic Rent equal to the
greater of: (a) one hundred fifty percent (150%) of the Monthly Basic Rent
applicable to the Premises immediately prior to the date of such expiration or
earlier termination; or (b) one hundred fifty percent (150%) of the prevailing
market rate excluding any rental or other concessions (as reasonably determined
by Landlord) for the Premises in effect on the date of such expiration or
earlier termination. Acceptance by Landlord of rent after such expiration or
earlier termination shall not constitute a consent to a hold over hereunder or
result in an extension of this Lease. Tenant shall pay an entire month's Monthly
Basic Rent calculated in accordance with this Section 9.3 for any portion of a
month it holds over and remains in possession of the Premises pursuant to this
Section 9.3.
9.4 NO EFFECT ON LANDLORD'S RIGHTS. The foregoing provisions of this Section
9 are in addition to, and do not affect, Landlord's right of re-entry or any
other rights of Landlord hereunder or otherwise provided by law or equity.
10. TAXES ON TENANT'S PROPERTY. Tenant shall be liable for, and shall pay
before delinquency, all taxes and assessments (real and personal) levied against
(a) any personal property or trade fixtures placed by Tenant in or about the
Premises (including any increase in the assessed value of the Premises based
upon the value of any such personal property or trade fixtures); and (b) any
Tenant Improvements or alterations in the Premises (whether installed and/or
paid for by Landlord or Tenant) to the extent such items are assessed at a
valuation higher than the valuation at which tenant improvements conforming to
the Building's standard tenant improvements are assessed. If any such taxes or
assessments are levied against Landlord or Landlord's property, Landlord may,
after written notice to Tenant (and under proper protest if requested by Tenant)
pay such taxes and assessments, and Tenant shall reimburse Landlord therefor
within ten (10) business days after demand by Landlord; provided, however,
Tenant, at its sole cost and expense, shall have the right, with Landlord's
cooperation, to bring suit in any court of competent jurisdiction to recover the
amount of any such taxes and assessments so paid under protest.
11. CONDITION OF PREMISES; REPAIRS.
11.1 CONDITION OF PREMISES. Tenant acknowledges that, except as otherwise
expressly set forth in this Lease, neither Landlord nor any agent of Landlord
has made any representation or warranty with respect to the Premises, the
Building, the Site or the Project or their condition, or with respect to the
suitability thereof for the conduct of Tenant's business. The taking of
possession of the Premises by Tenant shall conclusively establish that the
Project, the Site, the Premises, the Tenant Improvements therein, the Building
and the Common Areas were at such time complete and in good, sanitary and
satisfactory condition and repair with all work required to be performed by
Landlord, if any, pursuant to Exhibit "C" completed and without any obligation
on Landlord's part to make any alterations, upgrades or improvements thereto,
except for patent and latent defects not caused by Tenant for which Landlord is
responsible to repair pursuant to the terms of this Lease.
11.2 LANDLORD'S REPAIR OBLIGATIONS. Subject to Section 18.1 and 18.2 of this
Lease, Landlord shall, at its sole cost and expenses and not as part of the
Operating Expenses, repair, maintain and replace, as necessary the Base, Shell
and Core of the Building and other structural portions of the Building and the
Common Areas (including structural walls, concrete sub-flooring, structural
elements of the roof, foundations and underground utilities, except where the
utility company has assumed such responsibility).
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Subject to Sections 18.1 and 18.2 of this Lease, Landlord shall, as part of
Operating Expenses, repair, maintain and repair, as necessary (a) the Building
systems, including, without limitation, the basic heating, ventilating, air
conditioning ("HVAC"), sprinkler and electrical systems within the Building core
and standard conduits, connections and distribution systems thereof within the
Premises and Building standard restrooms (but not the Tenant Improvements or any
above standard improvements installed in the Premises such as, for example, but
not by way of limitation, custom lighting, special or supplementary HVAC or
plumbing systems or distribution extensions, special or supplemental electrical
panels or distribution systems, or kitchen or restroom facilities and appliances
to the extent such facilities and appliances are intended for the exclusive use
of Tenant), and (b) the Common Areas. Notwithstanding the foregoing, to the
extent such maintenance, repairs or replacements are required as a result of any
act, neglect, fault or omission of Tenant or any of Tenant's agents, employees,
contractors, licensees or invitees and are not covered by the insurance
maintained or required to be maintained hereunder by Landlord, Tenant shall pay
to Landlord, as additional rent, the costs of such maintenance, repairs and
replacements. Landlord shall not be liable to Tenant for failure to perform any
such maintenance, repairs or replacements, unless Landlord shall fail to make
such maintenance, repairs or replacements and such failure shall continue for an
unreasonable time following written notice from Tenant to Landlord of the need
therefor. Without limiting the foregoing, Tenant waives the right to make
repairs at Landlord's expense under any law, statute or ordinance now or
hereafter in effect (including the provisions of California Civil Code Section
1942 and any successive sections or statutes of a similar nature).
11.3 TENANT'S REPAIR OBLIGATIONS. Except for Landlord's obligations
specifically set forth in Sections 11.1. 11.2, 16.1, 18.1 and 19.2 hereof,
Tenant shall at all times and at Tenant's sole cost and expense, keep, maintain,
clean, repair, preserve and replace, as necessary, the Premises and all parts
thereof including, without limitation, all Tenant Improvements, Tenant Changes,
utility meters, all special or supplemental HVAC systems, electrical systems,
pipes and conduits, located within the Premises, all fixtures, furniture and
equipment, Tenant's storefront (if any), Tenant's signs, locks, closing devices,
security devices, windows, window sashes, casements and frames, floors and floor
coverings, shelving, kitchen and/or restroom facilities and appliances located
within the Premises to the extent such facilities and appliances are intended
for the exclusive use of Tenant, if any, custom lighting, and any alterations,
additions and other property located within the Premises in first-class
condition and repair, reasonable wear and tear excepted. Tenant shall replace,
at its expense, any and all interior glazing, doors and plate and other glass in
the Premises (but not Building windows or doors) which is damaged or broken from
any cause whatsoever except due to the gross negligence or willful misconduct of
Landlord, its agents or employees. Such maintenance and repairs shall be
performed with due diligence, lien-free and in a first-class and workmanlike
manner, by licensed contractor(s) which are selected by Tenant and approved by
Landlord, which approval Landlord shall not unreasonably withhold or delay.
Except as otherwise expressly provided in this Lease, Landlord shall have no
obligation to alter, remodel, improve, repair, renovate, redecorate or paint all
or any part of the Premises.
12. ALTERATIONS.
12.1 TENANT CHANGES; CONDITIONS. After installation of the initial Tenant
Improvements for the Premises pursuant to Exhibit "C", Tenant may, at its sole
cost and expense, make alterations, additions, improvements and decorations to
the Premises (collectively, "TENANT CHANGES") subject to and upon the following
terms and conditions:
(a) Notwithstanding any provision in this Section 12 to the contrary, Tenant
is absolutely prohibited from making any alterations, additions,
improvements or decorations which: (i) affect any area outside the
Premises; (ii) affect the Building's structure, equipment, services or
systems, or the proper functioning thereof, or Landlord's access
thereto; (iii) affect the outside appearance, character or use of the
Project, the Building or the Common Areas; (iv) weaken or impair the
structural strength of the Building; (v) in the reasonable opinion of
Landlord, lessen the value of the Project or Building; or (vi) will
violate or require a change in any occupancy certificate applicable to
the Premises.
(b) Before proceeding with any Tenant Change which is not otherwise
prohibited in Section 12.1(a) above, Tenant must first obtain Landlord's
written approval thereof (including approval of all plans,
specifications and working drawings for such Tenant Change), which
approval shall not be unreasonably withheld or delayed. However,
Landlord's prior approval shall not be required for any Tenant Change
(other than Tenant Changes for the Patio) which satisfies the following
conditions (hereinafter a "PRE-APPROVED CHANGE"): (i) the costs of such
Tenant Change does not exceed Five Thousand Dollars ($5,000.00)
individually; (ii) the costs of such Tenant Change when aggregated with
the costs of all other Tenant Changes made by Tenant during the Term of
this Lease do not exceed Fifty Thousand Dollars ($50,000.00); (iii)
Tenant delivers to Landlord final plans, specifications and working
drawings for such Tenant Change at least ten (10) days prior to
commencement of the work thereof; and (iv) Tenant and such Tenant Change
otherwise satisfy all other conditions set forth in this Section 12.1.
In addition to obtaining Landlord's consent to Tenant Changes for the
Patio pursuant to the first sentence of this Section 12.(b), Tenant must
obtain Landlord's consent (which may not be unreasonably withheld or
delayed) to the placement of any furniture or plants on the Patio if the
same are visible from other locations of the Project.
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(c) After Landlord has approved the Tenant Changes and the plans,
specifications and working drawings therefor (or is deemed to have
approved the Pre-Approved Changes as set forth in Section 12.1(b)
above), Tenant shall: (i) enter into an agreement for the performance of
such Tenant Changes with such contractors and subcontractors selected by
Tenant and approved by Landlord, which approval shall not be
unreasonably withheld or delayed; (ii) before proceeding with any Tenant
Change (including any Pre-Approved Change), provide Landlord with ten
(10) days' prior written notice thereof; and (iii) pay to Landlord,
within ten (10) days after written demand, the costs of any increased
insurance premiums incurred by Landlord to include such Tenant Changes
in the fire and extended coverage insurance obtained by Landlord
pursuant to Section 21 below. However, Landlord shall be required to
include the Tenant Changes under such insurance only to the extent such
insurance is actually obtained by Landlord and such Tenant Changes are
insurable under such insurance; if such Tenant Changes are not or cannot
be included in Landlord's insurance, Tenant shall insure the Tenant
Changes under its casualty insurance pursuant to Section 20.1(a) below.
In addition, before proceeding with any Tenant Change, Tenant's
contractors shall obtain, on behalf of Tenant and at Tenant's sole cost
and expense: (A) all necessary governmental permits and, approvals for
the commencement and completion of such Tenant Change; and (B) if
required by Landlord, a completion and lien indemnity bond, or other
surety, satisfactory to Landlord for any such Tenant Change that is in
excess of Fifty Thousand Dollars ($50,000.00). Landlord's approval of
any contractor(s) and subcontractor(s) of Tenant shall not release
Tenant or any such contractor(s) and/or subcontractor(s) from any
liability for any conduct or acts of such contractor(s) and/or
subcontractor(s).
(d) Tenant shall pay to Landlord, as additional rent, the reasonable and
actual costs of Landlord's engineers and other consultants (but not
Landlord's on-site management personnel) for review of all plans,
specifications and working drawings for the Tenant Changes, within ten
(10) business days after Tenant's receipt of invoices either from
Landlord or such consultants. In addition to such costs, Tenant shall
pay to Landlord, within ten (10) business days after completion of any
Tenant Change, the actual, reasonable costs incurred by Landlord for
services rendered by Landlord's management personnel and engineers to
coordinate and/or supervise any of the Tenant Changes to the extent such
services are provided in excess of or after the normal on-site hours of
such engineers and management personnel.
(e) All Tenant Changes shall be performed: (i) in accordance with the
approved plans, specifications and working drawings; (ii) lien-free and
in a first-class workmanlike manner; (iii) in compliance with all laws,
rules, regulations of all governmental agencies and authorities
including, without limitation, the provisions of the ADA; (iv) in such a
manner so as not to unreasonably interfere with the occupancy of any
other tenant in the Project or Building, nor impose any additional
expense upon nor delay Landlord in the maintenance and operation of the
Project or Building; and (v) at such times, in such manner and subject
to such rules and regulations as Landlord may from time to time
reasonably designate.
(f) Throughout the performance of the Tenant Changes, Tenant shall obtain,
or cause its contractors to obtain, workers compensation insurance and
general liability insurance in compliance with the provisions of Section
20 of this Lease.
12.2 REMOVAL OF TENANT CHANGES AND TENANT IMPROVEMENTS. All Tenant Changes
and the initial Tenant Improvements in the Premises (whether installed or paid
for by Landlord or Tenant), shall become the property of Landlord and shall
remain upon and be surrendered with the Premises at the end of the Term of this
Lease; provided, however, Landlord may, by written notice delivered to Tenant at
any time prior to the date which is thirty (30) days before the expiration of
the Lease Term (or immediately upon any sooner termination of this Lease)
identify those items of the Tenant Improvements and Tenant Changes which
Landlord shall require Tenant to remove at the end of the Term of this Lease.
Notwithstanding the foregoing (i) Landlord may only require Tenant to remove
those items of the initial Tenant Improvements by giving Tenant written notice
of such requirement at the time of Landlord's approval thereof and (ii) Landlord
may only require Tenant to remove Tenant Changes for which Tenant has requested
Landlord's approval if, at the time of Tenant's request for approval, Tenant
also requested Landlord to make such election at that time and Landlord actually
gave Tenant written notice at the time of Landlord's approval that Landlord
would require the removal of the Tenant Changes. If Landlord requires Tenant to
remove any such items as described above, Tenant shall, at its sole cost, remove
the identified items on or before the expiration or sooner termination of this
Lease and repair any damage to the Premises caused by such removal (or, at
Landlord's option, shall pay to Landlord all of Landlord's costs of such removal
and repair if Landlord actually removes such items).
12.3 REMOVAL OF PERSONAL PROPERTY. All articles of personal property owned by
Tenant or installed by Tenant at its expense in the Premises (including business
and trade fixtures, furniture and moveable partitions) shall be, and remain, the
property of Tenant, and shall be removed by Tenant from the Premises, at
Tenant's sole cost and expense, on or before the expiration or sooner
termination of this Lease. Tenant shall promptly repair any damage caused by
such removal.
12.4 TENANT'S FAILURE TO REMOVE. If Tenant fails to remove by the expiration
or sooner termination of this Lease all of its personal property, or any items
of Tenant Improvements or Tenant Changes identified
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by Landlord for removal pursuant to Section 12,2 above, or if Tenant fails to
comply with its obligations under Section 12.3, Landlord may, without liability
to Tenant for loss thereof, at Tenant's sole cost and in addition to Landlord's
other rights and remedies under this Lease, at law or in equity: (a) remove and
store such items in accordance with applicable law; and/or (b) upon ten (10)
days' prior notice to Tenant, sell all or any such items at private or public
sale for such price as Landlord may obtain as permitted under applicable law.
Landlord shall apply the proceeds of any such sale to any amounts due to
Landlord under this Lease from Tenant (including Landlord's attorneys' fees and
other costs incurred in the removal, storage and/or sale of such items), with
any remainder to be paid to Tenant.
12.5 BACKUP GENERATOR AND SUPPLEMENTAL HVAC. Subject to Landlord's prior
approval of all plans and specifications, which approval shall not be
unreasonably withheld, and compliance with the provisions of Section 12 of this
Lease, Landlord shall permit Tenant to install and maintain, at Tenant's sole
cost and expense, a backup diesel-powered generator at the location shown on
Exhibit "A" and/or a supplemental HVAC unit at a location designated by Landlord
and reasonably acceptable to Tenant. Such backup generator shall be used by
Tenant only during (i) testing and regular maintenance, and (ii) any period of
electrical power outage in the Project. Tenant shall be entitled to operate the
generator for testing and regular maintenance only at times reasonably approved
by Landlord. Tenant shall submit the specifications for design, operation,
installation and maintenance of the backup generator and supplemental HVAC unit
for Landlord's consent, which consent shall not be unreasonably withheld or
delayed and may be conditioned on Tenant complying with such reasonable
requirements imposed by landlord, based on the advice of Landlord's structural
and mechanical engineers, so that the Project's systems and equipment are not
adversely affected. Any repairs and maintenance of such generator and
supplemental HVAC unit shall be the sole responsibility of Tenant and Landlord
makes no representation or warranty with respect to such generator. The backup
generator will be considered to be Tenant's personal property (and not Tenant
Changes or Tenant Improvements), will not constitute a Tenant Improvement
Allowance Item and will constitute a portion of the Premises for purposes of
Sections 17 and 20. The supplemental HVAC unit will be considered to be a Tenant
Change, will constitute a Tenant Improvement Allowance Item and will constitute
a portion of the Premises for purposes of Sections 17 and 20.
12.6 TENANT SECURITY SYSTEM. Subject to Landlord's prior approval of all
plans and specifications, which approval shall not be unreasonably withheld, and
in compliance with the provisions of Section 12 of this Lease, Landlord shall
permit Tenant, at Tenant's sole cost and expense, to integrate Tenant's security
system into the Building system and install card readers in the stairwells so
that Tenant's employees can use the stairwells to transition between floors of
the Premises. Tenant's obligations under Section 17.2 of this Lease shall also
apply to Tenant's use and operation of such security system, and such security
system shall be considered a Tenant Change.
13. LIENS. Tenant shall not permit any mechanic's, materialmen's or other
liens to be filed against all or any part of the Project, the Site, the Building
or the Premises, nor against Tenant's leasehold interest in the Premises, by
reason of or in connection with any repairs, alterations, improvements or other
work contracted for or undertaken by Tenant or any other act or omission of
Tenant or Tenant's agents, employees, contractors, licensees or invitees. Tenant
shall, at Landlord's request, provide Landlord with enforceable, unconditional
and final lien releases (and other evidence reasonably requested by Landlord to
demonstrate protection from liens) from all persons furnishing labor and/or
materials with respect to the Premises. Landlord shall have the right at all
reasonable times to post on the Premises and record any notices of
non-responsibility which it deems necessary for protection from such liens. If
any such liens are filed, Tenant shall, at its sole cost, immediately cause such
lien to be released of record or bonded to Landlord's reasonable satisfaction so
that it no longer affects title to the Project, the Site, the Building or the
Premises. If Tenant fails to cause such lien to be so released or bonded within
twenty (20) days after filing thereof, Landlord may, without waiving its rights
and remedies based on such breach, and without releasing Tenant from any of its
obligations and upon not less than five (5) days' prior written notice to Tenant
(except no notice will be required if doing so would subject the Project to
foreclosure by the lien), cause such lien to be released by any means it shall
deem proper, including payment in satisfaction of the claim giving rise to such
lien. Tenant shall pay to Landlord within five (5) days after receipt of invoice
from Landlord, any sum paid by Landlord to remove such liens, together with
interest at the Interest Rate from the date of such payment by Landlord.
14. ASSIGNMENT AND SUBLETTING.
14.1 RESTRICTION ON TRANSFER. Except as otherwise expressly provided in this
Section 14, Tenant shall not, without the prior written consent of Landlord,
which consent Landlord will not unreasonably withhold, assign this Lease or any
interest herein or sublet the Premises or any part thereof, or permit the use or
occupancy of the Premises by any party other than Tenant (any such assignment,
encumbrance, sublease, license or the like shall sometimes be referred to as a
"TRANSFER"). In no event may Tenant encumber this Lease. Any Transfer without
Landlord's consent (except for a Permitted Transfer pursuant to Section 14.2
below) shall constitute a default by Tenant under this Lease, and in addition to
all of Landlord's other remedies at law, in equity or under this Lease, such
Transfer shall be voidable at Landlord's election. In addition, this Lease shall
not, nor shall any Interest of Tenant herein, be assignable by operation of law
without the written consent of Landlord. For purposes of this Section 14, other
than with respect to a Permitted Transfer under Section 14.2 and transfers of
stock of Tenant if Tenant is a publicly-held corporation (or will be in the case
of an initial public offering) and such stock is
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transferred publicly over a recognized security exchange or over-the-counter
market, if Tenant is a corporation, partnership or other entity, any transfer,
assignment, encumbrance or hypothecation of forty percent (40%) or more
(individually or in the aggregate) of any stock or other ownership interest in
such entity, and/or any transfer, assignment, hypothecation or encumbrance of
any controlling ownership or voting interest in such entity, shall be deemed an
assignment of this Lease and shall be subject to all of the restrictions and
provisions contained in this Section 14. The reincorporation of Tenant in
another state in the United States will not constitute an assignment provided
(i) the newly incorporated entity assumes, as a matter of law, the obligations
of Tenant hereunder; (ii) the newly incorporated entity has a net worth that is
not less than the net worth of Tenant immediately prior to such reincorporation
and (iii) Tenant gives Landlord written notice of such reincorporation and
evidence that the conditions in clauses (i) and (ii) have been satisfied within
ten (10) days following such reincorporation.
14.2 PERMITTED TRANSFERS. Notwithstanding the provisions of Sections 14.1
above to the contrary, Tenant may assign this Lease or sublet the Premises or
any portion thereof (herein, a "PERMITTED TRANSFER"), without Landlord's consent
and without extending any sublease option to Landlord, to any corporation which
controls, is controlled by or is under common control with Tenant, or to any
corporation resulting from a merger or consolidation with Tenant, or to any
person or entity which acquires all the assets of Tenant's business as a going
concern, provided that: (a) at least twenty (20) days prior to such assignment
or sublease, Tenant delivers to Landlord the financial statements and other
financial and background information of the assignee or sublessee described in
Section 14.3 below; (b) if an assignment, the assignee assumes, in full, the
obligations of Tenant under this Lease (or if a sublease, the sublessee of a
portion of the Premises or Term assumes, in full, the obligations of Tenant with
respect to such portion); (c) the financial net worth of the assignee or
sublessee equals or exceeds that of Tenant as of the date of execution of this
Lease; (d) Tenant remains fully liable under this Lease; (e) the use of the
Premises under Article 6 remains unchanged; and (f) such transaction is not
entered into as a subterfuge to avoid the restrictions and provisions of this
Section 14.
14.3 LANDLORD'S OPTIONS. If at any time or from time to time during the Term
Tenant desires to effect a Transfer, Tenant shall deliver to Landlord written
notice ("TRANSFER NOTICE") setting forth the terms and provisions of the
proposed Transfer and the identity of the proposed assignee, sublessee or other
transferee (sometimes referred to hereinafter as a "TRANSFEREE"). Tenant shall
also deliver to Landlord with the Transfer Notice, a current financial statement
and financial statements for the preceding two (2) years of the Transferee (to
the extent the Transferee has been in existence for such period) which have been
certified by an authorized officer of such Transferee or by a reputable
independent accounting firm acceptable to Landlord, and such other information
concerning the business background and financial condition of the proposed
Transferee as Landlord may reasonably request. Except with respect to a
Permitted Transfer, Landlord shall have the option, exercisable by written
notice delivered to Tenant within ten (10) business days after Landlord's
receipt of the Transfer Notice, such financial statements and other information,
either to:
(a) approve or disapprove such Transfer, which approval shall not be
unreasonably withheld; or
(b) in the event the Transfer is a sublease of the entire Premises ("SPECIAL
SUBLEASE"), terminate this Lease with respect to the entire Premises and
recapture the Premises, which termination shall be effective thirty (30)
days after Tenant's receipt of Landlord's notice; provided, however,
Tenant may nullify such termination by giving Landlord written notice,
within ten (10) business days following Tenant's receipt of Landlord's
termination notice, that Tenant has rescinded the proposed Transfer.
14.4 ADDITIONAL CONDITIONS; EXCESS RENT. If Landlord approves of the proposed
Transfer pursuant to Section 14.3(a) above, Tenant may enter into the proposed
Transfer with such proposed Transferee subject to the following further
conditions:
(a) the Transfer shall be on the same terms set forth in the Transfer Notice
delivered to Landlord (if the terms have changed, Tenant must submit a
revised Transfer Notice to Landlord and Landlord shall have another
twenty (20) days after receipt thereof to make the election in Sections
14.3(a) or 14.3(b) above);
(b) no Transfer shall be valid and no Transferee shall take possession of
the Premises until an executed counterpart of the assignment, sublease
or other instrument affecting the Transfer has been delivered to
Landlord pursuant to which the Transferee shall expressly assume all of
Tenant's obligations under this Lease (or with respect to a sublease of
a portion of the Premises or for a portion of the Term, all of Tenant's
obligations applicable to such portion);
(c) no Transferee shall have a further right to assign, encumber or sublet,
except on the terms herein contained; and
(d) if any rent or other economic consideration received by Tenant as a
result of such Transfer exceeds, in the aggregate, (i) the total rent
which Tenant is obligated to pay Landlord under this Lease (prorated to
reflect obligations allocable to any portion of the Premises subleased),
plus (ii) any reasonable brokerage commissions, attorneys' fees, tenant
improvements and moving costs actually paid by Tenant in connection with
such Transfer, then fifty percent (50%) of such
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excess shall be paid to Landlord within ten (10) days after receipt
thereof as additional rental under this Lease, without affecting or
reducing any other obligations of Tenant hereunder.
14.5 REASONABLE DISAPPROVAL. Landlord and Tenant hereby acknowledge that
Landlord's disapproval of any proposed Transfer (other than a Permitted
Transfer) pursuant to Section 14.3(a) shall be deemed reasonably withheld if
based upon any reasonable factor, including, without limitation, any or all of
the following factors: (a) the proposed Transfer would result in more than two
subleases of portions of the Premises being in effect at any one time during the
Term; (b) the net effective rent payable by the Transferee (adjusted on a
rentable square foot basis) is less than the net effective rent then being
quoted by Landlord for new leases in the Building for comparable size space for
a comparable period of time (however, this factor may only be considered if
Landlord has space at the Project that can satisfy such Transferee's space
needs); (c) the proposed Transferee is an existing tenant of the Project (and
Landlord has space at the Project that can satisfy such Transferee's space
needs) or the proposed Transferee is negotiating with Landlord (or has
negotiated with Landlord in the last two (2) months) for space in the Project;
(d) the portion of the Premises to be sublet or assigned is irregular in shape
with inadequate means of ingress and egress; (e) the use of the Premises by the
Transferee (i) is not permitted by the use provisions in Section 6 hereof, or
(ii) violates any exclusive use granted by Landlord to another tenant in the
Building; (f) the Transfer would likely result in significant increase in the
use of the parking areas or Common Areas by the Transferee's employees or
visitors, and/or significantly increase the demand upon utilities and services
to be provided by Landlord to the Premises; (g) the Transferee does not have the
financial capability to fulfill the obligations imposed by the Transfer; or (h)
the Transferee is not in Landlord's reasonable opinion of reputable or good
character or consistent with Landlord's desired tenant mix. Notwithstanding any
contrary provision of this Lease, if Tenant or any proposed Transferee claims
that Landlord has unreasonably withheld or delayed its consent to a proposed
Transfer or otherwise has breached its obligations under this Section 14,
Tenant's and such Transferee's only remedy shall be to seek a declaratory
judgment and/or injunctive relief, and Tenant, on behalf of itself and, to the
extent permitted by law, such proposed Transferee waives all other remedies
against Landlord, including, without limitation, the right to seek monetary
damages or to terminate this Lease.
14.6 NO RELEASE. No Transfer shall release Tenant of Tenant's obligations
under this Lease or alter the primary liability of Tenant to pay the rent and to
perform all other obligations to be performed by Tenant hereunder. Landlord may
require that any Transferee remit directly to Landlord on a monthly basis, all
monies due Tenant by said Transferee. However, the acceptance of rent by
Landlord from any other person shall not be deemed to be a waiver by Landlord of
any provision hereof except to the extent of the rent so accepted. Consent by
Landlord to one Transfer shall not be deemed consent to any subsequent Transfer.
In the event of default by any Transferee of Tenant or any successor of Tenant
in the performance of any of the terms hereof, Landlord may proceed directly
against Tenant without the necessity of exhausting remedies against such
Transferee or successor. Landlord may consent to subsequent assignments of the
Lease or sublettings or amendments or modifications to the Lease with assignees
of Tenant, without notifying Tenant, or any successor of Tenant, and without
obtaining its or their consent thereto and any such actions shall not relieve
Tenant of liability under this Lease; provided, however, if Landlord amends this
Lease without the consent of Tenant and such amendment increases the obligations
of the Tenant hereunder, then Tenant will not be liable for that portion of the
obligations hereunder that were so increased.
14.7 ADMINISTRATIVE AND ATTORNEYS' FEES. If Tenant effects a Transfer or
requests the consent of Landlord to any Transfer, then Tenant shall, upon
demand, pay Landlord a non-refundable administrative fee, plus any reasonable
attorneys' and paralegal fees and costs incurred by Landlord in connection with
such Transfer or request for consent (whether attributable to Landlord's
in-house attorneys or paralegals or otherwise) in an aggregate amount not to
exceed One Thousand Dollars ($1,000.00) (in 1999 Dollars). Acceptance of the
administrative fee and/or reimbursement of Landlord's attorneys' and paralegal
fees shall in no event obligate Landlord to consent to any proposed Transfer.
14.8 MATERIAL INDUCEMENT. Tenant understands, acknowledges and agrees that
(a) Landlord's option to terminate this Lease and recapture the Premises from
Tenant in the case of a Special Sublease as provided in Section 14.3(b) above
rather than approve the proposed sublease, and (b) Landlord's right to receive
fifty percent (50%) of any excess consideration paid by a Transferee in
connection with an approved Transfer as provided in Section 14.4(d) above, are a
material inducement for Landlord's agreement to lease the Premises to Tenant
upon the terms and conditions herein set forth.
15. ENTRY BY LANDLORD. Landlord and its employees and agents shall at all
reasonable times have the right to enter the Premises to inspect the same, to
supply janitorial service and any other service required to be provided by
Landlord to Tenant under this Lease, to exhibit the Premises to prospective
lenders or purchasers (or during the last year of the Term, to prospective
tenants), to post notices of nonresponsibility, and/or to alter, improve or
repair the Premises (in accordance with this Lease) or any other portion of the
Building or Project, all without being deemed guilty of or liable for any breach
of Landlord's covenant of quiet enjoyment or any eviction of Tenant, and without
abatement of rent. In exercising such entry rights, Landlord shall endeavor to
minimize, as reasonably practicable, the interference with Tenant's business,
and shall provide Tenant with reasonable advance written notice of such entry
(except in emergency situations and for scheduled services). For each of the
foregoing purposes, Landlord shall at all times have and retain a key with which
to unlock all of the doors in, upon and about the Premises, excluding Tenant's
vaults and safes, and Landlord shall have the means which Landlord may deem
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proper to open said doors in an emergency in order to obtain entry to the
Premises. Any entry to the Premises obtained by Landlord by any of said means or
otherwise shall not under any circumstances be construed or deemed to be a
forcible or unlawful entry into, or a detainer of, the Premises, or an eviction
of Tenant from the Premises or any portion thereof, or grounds for any abatement
or reduction of rent and Landlord shall not have any liability to Tenant for any
damages or losses on account of any such entry by Landlord except, subject to
the provisions of Section 22.1, to the extent of Landlord's gross negligence or
willful misconduct.
16. UTILITIES AND SERVICES.
16.1 STANDARD UTILITIES AND SERVICES. Landlord shall provide the following
services on all days during the Lease Term, unless otherwise stated below.
(a) Subject to all governmental rules, regulations and guidelines applicable
thereto, Landlord shall provide heating, ventilation and air
conditioning ("HVAC") when necessary for normal comfort for normal
office use in the Premises, during the Business Hours of the Building,
except for Building Holidays; provided, that notwithstanding the
foregoing, Landlord may separately meter the Premises and charge Tenant
based upon Tenant's consumption as provided under Section 16.2 below.
(b) Landlord shall provide adequate electrical wiring and facilities and
power for normal general office use as reasonably determined by
Landlord. Landlord shall repair and replace standard lighting. Tenant
shall bear the cost of replacement of lamps, starters and ballasts for
non-standard Building lighting fixtures within the Premises.
(c) Landlord shall provide city water from the regular Building outlets for
drinking, locker room, lavatory and toilet purposes.
(d) Landlord shall provide janitorial services five (5) days per week,
except the dates of observation of the Building Holidays, in and about
the Premises.
(e) Landlord shall provide nonexclusive automatic elevator service at all
times.
16.2 OVERSTANDARD TENANT USE; SEPARATE METER. Tenant shall not, without
Landlord's prior written consent, use heat-generating machines, machines other
than normal fractional horsepower office machines, or equipment or lighting
other than building standard lights in the Premises, which may adversely affect
the temperature otherwise maintained by the air conditioning system or increase
the water normally furnished for the Premises by Landlord pursuant to the terms
of Section 16.1 of this Lease. At Landlord's election, Landlord may separately
meter the Premises for utilities, including without limitation, HVAC, water, gas
and electricity, and Tenant shall pay, at Landlord's election, either directly
to the provider thereof or to Landlord, within ten (10) days after billing, the
cost of Tenant's consumption. To the extent the Premises are not separately
metered or if Landlord's cooperation is necessary in connection therewith, if
Tenant desires to use HVAC during hours other than the Business Hours, (i)
Tenant shall give Landlord such prior notice, as Landlord shall from time to
time establish as appropriate, of Tenant's desired use, (ii) Landlord shall
supply such after-hours HVAC to Tenant at such hourly cost (which shall be
Landlord's actual cost of the use of such HVAC and administrative and overhead
charges (not to exceed five percent (5%) of the actual cost of the service
rendered or delivered), and the cost of maintenance and increased wear and tear
on equipment used to provide such after hours HVAC to Tenant as Landlord shall
from time to time reasonably establish in order to reimburse Landlord for such
costs, and (iii) Tenant shall pay such cost within ten (10) days after billing.
16.3 ADDITIONAL SERVICES. Landlord shall also have the exclusive right, but
not the obligation, to provide any additional services which may be required by
Tenant, including, without limitation, locksmithing, additional janitorial
service, and additional repairs and maintenance, provided that Tenant shall pay
to Landlord, within ten (10) days after billing, the sum of all costs to
Landlord of such additional services plus an administration fee in an amount not
to exceed ten (10%) of such costs, Charges for any utilities or service for
which Tenant is required to pay from time to time hereunder, shall be deemed
additional rent hereunder and shall be billed on a monthly basis.
16.4 INTERRUPTION OF USE. Landlord's failure to furnish any of the utilities
and services described in Section 16.1 above when such failure is caused by all
or any of the following shall not result in any liability of Landlord: (a)
accident, breakage or repairs; (b) strikes, lockouts or other labor disturbances
or labor disputes of any such character; (c) governmental regulation, moratorium
or other governmental action; (d) inability, despite the exercise of reasonable
diligence, to obtain electricity, water or fuel; or (e) any other cause beyond
Landlord's reasonable control. In addition, in the event of the failure of any
said utilities or services, Tenant shall not be entitled to any abatement or
reduction of rent (except as expressly provided below and in Sections 18.3 and
19.2 if such failure is a result of a damage or taking described therein), no
eviction of Tenant shall result, and Tenant shall not be relieved from the
performance of any covenant or agreement in this Lease. In the event of any
stoppage or interruption of services or utilities, Landlord shall diligently
attempt to resume such services or utilities as promptly as practicable.
Notwithstanding the foregoing, in the event (an "ABATEMENT EVENT") that Tenant
cannot reasonably use, and does not use, the Premises or any portion thereof, as
a result of (a) any failure by Landlord to supply any of the Building's
sanitary, heating, air conditioning, water, elevator, life safety or other
essential systems serving
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the Premises (collectively, the "ESSENTIAL SERVICES"), or (b) any failure by
Landlord to make repairs or perform any maintenance under Section 11.2 of this
Lease, then Tenant shall give Landlord notice of such Abatement Event, and if
such Abatement Event continues for (a) with respect to an Abatement Event over
which Landlord does not have reasonable control, forty-five (45) consecutive
calendar days, and (b) with respect to an Abatement Event over which Landlord
has reasonable control, five (5) consecutive business days, after Landlord's
receipt of any such notice (the "ELIGIBILITY PERIOD"), then the Monthly Basic
Rent and Tenant's Percentage of Direct Expenses and (to the extent not
separately metered to the Premises) Utilities Costs shall be abated or reduced,
as the case may be, after the expiration of the Eligibility Period for such time
that Tenant continues to be so prevented from using, and does not use, the
Premises or a portion thereof, in the proportion that the rentable area of the
portion of the Premises that Tenant cannot reasonably use, and does not use,
bears to the total rentable area of the Premises; provided, however, in the
event that Tenant is prevented from using, and does not use, a portion of the
Premises for a period of time in excess of the Eligibility Period and the
remaining portion of the Premises is not sufficient to allow Tenant to
effectively conduct its business therein, and if Tenant does not conduct its
business from such remaining portion, then for such time after expiration of the
Eligibility Period during which Tenant is so prevented from effectively
conducting its business therein, the Monthly Basic Rent and Tenant's Percentage
of Direct Expenses and (to the extent not separately metered to the Premises)
Utilities Costs shall be abated for such time as Tenant continues to be so
prevented from using, and does not use, the Premises. If, however, Tenant
reoccupies any portion of the Premises during such period, the Monthly Basic
Rent and Tenant's Percentage of Direct Expenses and (to the extent not
separately metered to the Premises) Utilities Costs allocable to such reoccupied
portion, based on the proportion that the rentable area of such reoccupied
portion of the Premises bears to the total rentable area of the Premises, shall
be payable by Tenant from the date Tenant reoccupies such portion of the
Premises. Such right to abate Monthly Basic Rent and Tenant's Percentage of
Direct Expenses and (to the extent not separately metered to the Premises)
Utilities Costs shall be Tenant's sole and exclusive remedy at law or in equity
for an Abatement Event. Landlord shall use commercially reasonable efforts to
restore any Essential Services or make any repairs or perform any maintenance
that is the subject of any Abatement Event. Notwithstanding anything to the
contrary contained in this Lease, but subject to the provisions of Section 18
which shall apply in the event of damage or destruction, upon the occurrence of
an Abatement Event and the continuation thereof in a manner that would prevent
Tenant's operation of its business in the Premises for a period of time greater
than ninety (90) days after the date Landlord receives notice of such Abatement
Event, then Tenant may elect to terminate this Lease upon written notice to
Landlord. Except as provided in this Section 16.3, nothing contained herein
shall be interpreted to mean that Tenant is excused from paying rent due
hereunder.
17. INDEMNIFICATION AND EXCULPATION.
17.1 TENANT'S ASSUMPTION OF RISK AND WAIVER. Except to the extent such matter
is not covered by the insurance required to be maintained by Tenant under this
Lease and such matter is attributable to the gross negligence or willful
misconduct of Landlord, Landlord shall not be liable to Tenant, Tenant's
employees, agents or invitees for: (i) any damage to property of Tenant, or of
others, located in, on or about the Premises, nor for (ii) the loss of or damage
to any property of Tenant or of others by theft or otherwise, (iii) any injury
or damage to persons or property resulting from fire, explosion, falling
plaster, steam, gas, electricity, water, rain or leaks from any part of the
Premises or from the pipes, appliance of plumbing works or from the roof, street
or subsurface or from any other places or by dampness or by any other cause of
whatsoever nature, or (iv) any such damage caused by other tenants or persons in
the Premises, occupants of adjacent property of the Project, or the public, or
caused by operations in construction of any private, public or quasi-public
work. Unless caused by the intentionally tortious conduct of Landlord, Landlord
shall not be liable to Tenant for any consequential damages or for loss of
revenue or income and Tenant waives any and all claims for any such damages.
Notwithstanding anything to the contrary contained in this Section 17.1, all
property of Tenant, its agents, employees and invitees kept or stored on the
Premises, whether leased or owned by any such parties, shall be so kept or
stored at the sole risk of Tenant and Tenant shall hold Landlord harmless from
any claims arising out of damage to the same, including subrogation claims by
Tenant's insurance carriers, unless such damage shall be caused by the gross
negligence or willful misconduct of Landlord. Landlord or its agents shall not
be liable for interference with the light or other intangible rights.
17.2 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall be liable for, and
shall indemnify, defend, protect and hold Landlord and Landlord's partners,
officers, directors, employees, agents, successors and assigns (collectively,
"LANDLORD INDEMNIFIED PARTIES") harmless from and against, any and all claims,
damages, judgments, suits, causes of action, losses, liabilities and expenses,
including attorneys' fees and court costs (collectively, "INDEMNIFIED CLAIMS"),
arising or resulting from (a) any occurrence at the Premises following the date
Landlord delivers all or any portion of the Premises to Tenant, unless caused by
the gross negligence or willful misconduct of Landlord or its agents, employees
or contractors, (b) any act or omission of Tenant or any of Tenant's agents,
employees, contractors, subtenants, assignees, licensees or, with respect to
acts or omissions within the Premises only, Tenant's invitees (collectively,
"TENANT PARTIES"); (c) the use of the Premises and Common Areas and conduct of
Tenant's business by Tenant or any Tenant Parties, or any other activity, work
or thing done, permitted or suffered by Tenant or any Tenant Parties, in or
about the Premises, the Building or elsewhere in the Project; and/or (d) any
default by Tenant of any obligations on Tenant's part to be performed under the
terms of this Lease. In case any action or proceeding is brought against
Landlord or any Landlord Indemnified Parties by reason of any such Indemnified
Claims, Tenant, upon notice from Landlord, shall defend the same at Tenant's
expense by counsel approved in writing by Landlord, which approval shall not be
unreasonably withheld.
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17.3 SURVIVAL; NO RELEASE OF INSURERS. Tenant's indemnification obligations
under Section 17.2 shall survive the expiration or earlier termination of this
Lease. Tenant's covenants, agreements and indemnification in Sections 17.1 and
17.2 above are not intended to and shall not relieve any insurance carrier of
its obligations under policies required to be carried by Tenant pursuant to the
provisions of this Lease.
18. DAMAGE OR DESTRUCTION.
18.1 LANDLORD'S RIGHTS AND OBLIGATIONS. In the event the Premises or any part
of the Building is damaged by fire or other casualty, and Landlord's contractor
estimates in a writing delivered to the parties that the damage thereto is such
that the Building and/or Premises may be repaired, reconstructed or restored to
substantially its condition immediately prior to such damage within one hundred
twenty (120) days from the date of commencement of repair, reconstruction or
restoration, and Landlord will receive insurance proceeds sufficient to cover
the costs of such repairs, reconstruction and restoration (including proceeds
from Tenant and/or Tenant's insurance which Tenant is required to deliver to
Landlord pursuant to Section 18.2 below), then Landlord shall commence and
proceed diligently with the work of repair, reconstruction and restoration and
this Lease shall continue in full force and effect. If, however, the Premises or
any other part of the Building is damaged and Landlord's contractor estimates
that such work of repair, reconstruction and restoration will require longer
than one hundred twenty (120) days to complete, or Landlord will not receive
insurance proceeds (and/or proceeds from Tenant, as applicable) sufficient to
cover the costs of such repairs, reconstruction and restoration, then Landlord
may elect to either:
(a) repair, reconstruct and restore the portion of the Building and Premises
damaged by such casualty (including the Tenant Improvements and, to the
extent of insurance proceeds received from Tenant, Tenant Changes), in
which case this Lease shall continue in full force and effect; or
(b) terminate this Lease effective as of the date which is thirty (30) days
after Tenant's receipt of Landlord's election to so terminate.
Under any of the conditions of this Section 18.1, Landlord shall give written
notice to Tenant of its intention to repair or terminate within the later of
sixty (60) days after the occurrence of such casualty, or fifteen (15) days
after Landlord's receipt of the estimate from Landlord's contractor.
18.2 TENANT'S COSTS AND INSURANCE PROCEEDS. In the event of any damage or
destruction of all or any part of the Premises, Tenant shall immediately: (a)
notify Landlord thereof; and (b) deliver to Landlord all insurance proceeds
received by Tenant with respect to the Tenant Improvements and Tenant Changes in
the Premises (excluding proceeds for Tenant's furniture, fixtures and equipment
and other personal property), whether or not this Lease is terminated as
permitted in this Section 18, and Tenant hereby assigns to Landlord all rights
to receive such insurance proceeds. If, for any reason (including Tenant's
failure to obtain insurance for the full replacement cost of any Tenant Changes
which Tenant is required to insure pursuant to Sections 12.1(c) and/or 20.1(a)
hereof), Tenant fails to receive insurance proceeds covering the full
replacement cost of such Tenant Changes which are damaged, Tenant shall be
deemed to have self-insured the replacement cost of such Tenant Changes, and
upon any damage or destruction thereto and provided Landlord restores the
Premises, Tenant shall immediately pay to Landlord the full replacement cost of
such items, less any insurance proceeds actually received by Landlord from
Landlord's or Tenant's insurance with respect to such items.
18.3 ABATEMENT OF RENT. In the event that as a result of any such damage,
repair, reconstruction and/or restoration of the Premises or the Building,
Tenant is prevented from using, and does not use, the Premises or any portion
thereof, then the rent shall be abated or reduced, as the case may be, during
the period that Tenant continues to be so prevented from using and does not use
the Premises or portion thereof, in the proportion that the rentable area of the
portion of the Premises that Tenant is prevented from using, and does not use,
bears to the total rentable area of the Premises. Notwithstanding the foregoing
to the contrary, if the damage is due to the negligence or willful misconduct of
Tenant or any Tenant Parties, there shall be no abatement of rent if the rental
interruption insurance carried by Landlord is not payable by reason of such
conduct. Except for abatement of rent as provided hereinabove, Tenant shall not
be entitled to any compensation or damages for loss of, or interference with,
Tenant's business or use or access of all or any part of the Premises resulting
from any such damage, repair, reconstruction or restoration.
18.4 INABILITY TO COMPLETE. Notwithstanding anything to the contrary
contained in this Section 18, in the event Landlord is obligated or elects to
repair, reconstruct and/or restore the damaged portion of the Building or
Premises pursuant to Section 18.1 above, but is delayed from completing such
repair, reconstruction and/or restoration beyond the date which is six (6)
months after the date estimated by Landlord's contractor for completion thereof
pursuant to Section 18.1, by reason of any causes beyond the reasonable control
of Landlord (including, without limitation, delays due to Force Majeure events
as defined in Section 32.15, and delays caused by Tenant or any Tenant Parties,
but not including financial inability), then Landlord may elect to terminate
this Lease upon thirty (30) days' prior written notice to Tenant.
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18.5 DAMAGE NEAR END OF TERM. In addition to its termination rights in
Sections 18.1 and 18.4 above, Landlord shall have the right to terminate this
Lease if any damage to the Building or Premises occurs during the last twelve
(12) months of the Term of this Lease and Landlord's contractor estimates in a
writing delivered to the parties that the repair, reconstruction or restoration
of such damage cannot be completed within the earlier of (a) the scheduled
expiration date of the Lease Term, or (b) sixty (60) days after the date of such
casualty; however, if at the time of such election to terminate Tenant has the
right to exercise an Extension Option, then Tenant may rescind Landlord's
election to terminate by exercising the Extension Option within the earlier to
occur of ten (10) days following Landlord's election to terminate or the last
date that Tenant otherwise has to exercise the Extension Option.
18.6 WAIVER OF TERMINATION RIGHT. This Lease sets forth the terms and
conditions upon which this Lease may terminate in the event of any damage or
destruction. Accordingly, the parties hereby waive the provisions of California
Civil Code Section 1932, Subsection 2, and Section 1933, Subsection 4 (and any
successor statutes thereof permitting the parties to terminate this Lease as a
result of any damage or destruction).
19. EMINENT DOMAIN.
19.1 SUBSTANTIAL TAKING. Subject to the provisions of Section 19.4 below in
case the whole of the Premises, or such part thereof as shall substantially
interfere with Tenant's use and occupancy of the Premises, shall be taken for
any public or quasi-public purpose by any lawful power or authority by exercise
of the right of appropriation, condemnation or eminent domain, or sold to
prevent such taking, either party shall have the right to terminate this Lease
effective as of the date possession is required to be surrendered to said
authority.
19.2 PARTIAL TAKING; ABATEMENT OF RENT. In the event of a taking of a portion
of the Premises which does not substantially interfere with the conduct of
Tenant's business, then, except as otherwise provided in the immediately
following sentence, neither party shall have the right to terminate this Lease
and Landlord shall thereafter proceed to make a functional unit of the remaining
portion of the Premises (but only to the extent Landlord receives proceeds
therefor from the condemning authority), and rent shall be abated with respect
to the part of the Premises which Tenant shall be so deprived on account of such
taking.
19.3 CONDEMNATION AWARD. Subject to the provisions of Section 19.4 below, in
connection with any taking of the Premises or Building, Landlord shall be
entitled to receive the entire amount of any award which may be made or given in
such taking or condemnation, without deduction or apportionment for any estate
or interest of Tenant, it being expressly understood and agreed by Tenant that
no portion of any such award shall be allowed or paid to Tenant for any
so-called bonus or excess value of this Lease, and such bonus or excess value
shall be the sole property of Landlord. Tenant shall not assert any claim
against Landlord or the taking authority for any compensation because of such
taking (including any claim for bonus or excess value of this Lease); provided,
however, if any portion of the Premises is taken, Tenant shall be granted the
right to recover from the condemning authority (but not from Landlord) any
compensation for the taking of Tenant's furniture, fixtures, equipment and other
personal property within the Premises, for Tenant's relocation expenses, and for
any loss of goodwill or other damage to Tenant's business by reason of such
taking and for the value of Tenant's interest in any above Building standard
Tenant Improvements or Tenant Changes that were paid for by Tenant (and not from
the Tenant Improvement Allowance).
19.4 TEMPORARY TAKING. In the event of a taking of the Premises or any part
thereof for temporary use, (a) this Lease shall be and remain unaffected thereby
and rent shall not abate, and (b) Tenant shall be entitled to receive for itself
such portion or portions of any award made for such use with respect to the
period of the taking which is within the Term, provided that if such taking
shall remain in force at the expiration or earlier termination of this Lease,
Tenant shall perform its obligations under Section 9 with respect to surrender
of the Premises and shall pay to Landlord the portion of any award which is
attributable to any period of time beyond the Term expiration date. For purpose
of this Section 19.4, a temporary taking shall be defined as a taking for a
period of two hundred seventy (270) days or less.
19.5 WAIVER OF TERMINATION RIGHT. This Lease sets forth the terms and
conditions upon which this Lease may terminate in the event of a taking.
Accordingly, the parties waive the provisions of the California Code of Civil
Procedure Section 1265.130 and any successor or similar statutes permitting the
parties to terminate this Lease as a result of a taking.
20. TENANT'S INSURANCE.
20.1 TYPES OF INSURANCE. On or before the earlier of the Commencement Date,
the date Tenant takes possession of the Premises, or the date Tenant commences
or causes to be commenced any work of any type in or on the Premises pursuant to
this Lease, and continuing during the entire Term, Tenant shall obtain and keep
in full force and effect, the following insurance:
(a) Special Form (formerly known as All Risk) insurance, including fire and
extended coverage, sprinkler leakage, vandalism and malicious mischief
coverage upon property of every description and kind owned by Tenant and
located in the Premises or Building, or for which Tenant is legally
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<PAGE> 29
liable or installed by or on behalf of Tenant including, without
limitation, furniture, equipment and any other personal property, and
any Tenant Changes (but excluding the initial Tenant Improvements
previously existing or installed in the Premises), in an amount not less
then the full replacement cost thereof. In the event that there shall be
a dispute as to the amount which comprises full replacement cost, the
decision of Landlord or the mortgagees of Landlord shall be presumptive.
(b) Commercial general liability insurance coverage on an occurrence basis,
including personal injury, bodily injury (including wrongful death),
broad form property damage, operations hazard, owner's protective
coverage, contractual liability (including Tenant's indemnification
obligations under this Lease, including Section 17 hereof), liquor
liability (if Tenant serves alcohol on the Premises), products and
completed operations liability, and owned/non-owned auto liability, with
an initial combined single limit of liability of not less than Three
Million Dollars ($3,000,000.00). The limits of liability of such
commercial general liability insurance shall be increased every five (5)
years during the Term of this Lease to an amount reasonably required by
Landlord.
(c) Worker's compensation and employers liability insurance, in statutory
amounts and limits.
(d) Loss of income, extra expense and business interruption insurance in
such amounts as will reimburse Tenant for direct or indirect loss of
earnings attributable to all perils commonly insured against by prudent
tenants or attributable to prevention of access to the Premises,
Tenant's parking areas or to the Building as a result of such perils.
(e) Any other form or forms of insurance as Tenant or the mortgagees of
Landlord may reasonably require from time to time, in form, amounts and
for insurance risks against which a prudent tenant would protect itself,
but only to the extent such risks and amounts are available in the
insurance market at commercially reasonable costs.
20.2 REQUIREMENTS. Each policy required to be obtained by Tenant hereunder
shall: (a) be issued by insurers authorized to do business in the state in which
the Building is located and rated not less than financial class X, and not less
than policyholder rating A in the most recent version of Best's Key Rating Guide
(provided that, in any event, the same insurance company shall provide the
coverages described in Sections 20.1(a) and 20.1(d) above); (b) be in form
reasonably satisfactory from time to time to Landlord; (c) name Tenant as named
insured thereunder and shall name Landlord and, at Landlord's request, such
other persons or entities of which Tenant has been informed in writing, as
additional insureds thereunder, all as their respective interests may appear;
(d) shall not have a deductible amount exceeding Five Thousand Dollars
($5,000.00) which deductible amount shall be deemed self-insured with full
waiver of subrogation; (e) specifically provide that the insurance afforded by
such policy for the benefit of Landlord and any other additional insureds shall
be primary, and any insurance carried by Landlord or any other additional
insureds shall be excess and non-contributing; (f) contain an endorsement that
the insurer waives its right to subrogation as described in Section 22 below;
(g) require the insurer to notify Landlord (and any other additional insureds)
in writing not less than thirty (30) days prior to any material change,
reduction in coverage, cancellation or other termination thereof; and (h)
contain a cross liability or severability of interest endorsement. Tenant agrees
to deliver to Landlord, as soon as practicable after the placing of the required
insurance, but in no event later than the date Tenant is required to obtain such
insurance as set forth in Section 20.1 above, certified copies of each such
insurance policy (or certificates from the insurance company evidencing the
existence of such insurance and Tenants compliance with the foregoing provisions
of this Section 20). Tenant shall cause replacement policies or certificates to
be delivered to Landlord not less than thirty (30) days prior to the expiration
of any such policy or policies. If any such initial or replacement policies or
certificates are not furnished within the time(s) specified herein and such
failure continues for more than ten (10) days following written notice thereof
to Tenant, then Tenant shall be deemed to be in material default under this
Lease without the benefit of any additional notice or cure period provided in
Section 23.1 below, and Landlord shall have the right, but not the obligation,
to procure such policies and certificates at Tenant's expense.
20.3 EFFECT ON INSURANCE. Tenant shall not do or permit to be done anything
which will (a) violate or invalidate any insurance policy maintained by Landlord
or Tenant hereunder, or (b) increase the costs of any insurance policy
maintained by Landlord pursuant to Section 21 or otherwise with respect to the
Building or the Project. If Tenant's occupancy or conduct of its business in or
on the Premises results in any increase in premiums for any insurance carried by
Landlord with respect to the Building or the Project, Tenant shall pay such
increase as additional rent within ten (10) days after being billed therefor by
Landlord. If any insurance coverage carried by Landlord pursuant to Section 21
or otherwise with respect to the Building or the Project shall be cancelled or
reduced (or cancellation or reduction thereof shall be threatened) by reason of
the use or occupancy of the Premises by Tenant or by anyone permitted by Tenant
to be upon the Premises, and if Tenant fails to remedy such condition within
five (5) days after notice thereof, Tenant shall be deemed to be in default
under this Lease, without the benefit of any additional notice or cure period
specified in Section 23.1 below, and Landlord shall have all remedies provided
in this Lease, at law or in equity, including, without limitation, the right
(but not the obligation) to enter upon the Premises and attempt to remedy such
condition at Tenant's cost.
21. LANDLORD'S INSURANCE. During the Term, Landlord shall insure the Project
Common Areas, the Building, the Premises and the Tenant Improvements initially
installed in the Premises pursuant to Exhibit
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"C" (excluding, however, Tenant's furniture, equipment and other personal
property and any Tenant Changes) against damage by fire and standard extended
coverage perils and with vandalism and malicious mischief endorsements, rental
loss coverage, at Landlord's option, earthquake damage coverage, and such
additional coverage as Landlord deems appropriate. Landlord shall also carry
commercial general liability insurance, in such reasonable amounts and with such
reasonable deductibles as would be carried by a prudent owner (of similar
financial strength as Landlord) of a similar building in the state in which the
Building is located. At Landlord's option, all such insurance may be carried
under any blanket or umbrella policies which Landlord has in force for other
buildings and projects. In addition, at Landlord's option, and provided Landlord
has a net worth of at least Seventy-Five Million Dollars ($75,000,000.00) with
net current assets of at least Twenty-Five Million Dollars ($25,000,000.00),
Landlord may elect to self-insure all or any part of such required insurance
coverage. Landlord may, but shall not be obligated to, carry any other form or
forms of insurance as Landlord or the mortgagees or ground lessors of Landlord
may reasonably determine is advisable. The cost of insurance obtained by
Landlord pursuant to this Section 21 (including self-insured amounts [determined
based upon the prevailing market rates for similar coverage from insurance
companies satisfying the requirements of Section 20.2] and deductibles) shall be
included in Insurance Costs, except that any increase in the premium for the
property insurance attributable to the replacement cost of the Tenant
Improvements in excess of Building standard shall not be included as Insurance
Costs, but shall be paid by Tenant concurrently with Tenant's monthly
installment of its share of Insurance Costs.
22. WAIVER OF CLAIMS; WAIVER OF SUBROGATION.
22.1 MUTUAL WAIVER OF PARTIES. Landlord and Tenant hereby waive their rights
against each other with respect to any claims or damages or losses which are
caused by or result from (a) any occurrence insured against under any insurance
policy (other than the commercial general liability insurance) carried by
Landlord or Tenant (as the case may be) pursuant to the provisions of this Lease
and enforceable at the time of such damage or loss, or (b) any occurrence which
would have been covered under any insurance (other than the commercial general
liability insurance) required to be obtained and maintained by Landlord or
Tenant (as the case may be) under Sections 20 and 21 of this Lease (as
applicable) had such insurance been obtained and maintained as required therein.
The foregoing waivers shall be in addition to, and not a limitation of, any
other waivers or releases contained in this Lease.
22.2 WAIVER OF INSURERS. Each party shall cause each insurance policy (other
than the commercial general liability insurance) required to be obtained by it
pursuant to Sections 20 and 21 to provide that the insurer waives all rights of
recovery by way of subrogation against either Landlord or Tenant, as the case
may be, in connection with any claims, losses and damages covered by such
policy. If either party fails to maintain any such insurance required hereunder,
such insurance shall be deemed to be self-insured with a deemed full waiver of
subrogation as set forth in the immediately preceding sentence.
23. TENANT'S DEFAULT AND LANDLORD'S REMEDIES.
23.1 TENANT'S DEFAULT. The occurrence of any one or more of the following
events shall constitute a default under this Lease by Tenant:
(a) the vacation or abandonment of the Premises by Tenant. "Abandonment" is
herein defined to include, but is not limited to, any absence by Tenant
from the Premises for thirty (30) days or longer while in default of any
other provision of this Lease;
(b) the failure by Tenant to make any payment of rent or additional rent or
any other payment required to be made by Tenant hereunder, when such
failure continues for five (5) business days after written notice
thereof from Landlord that such payment was not received when due;
(c) the failure by Tenant to observe or perform any of the express or
implied covenants or provisions of this Lease to be observed or
performed by Tenant, other than as specified in Sections 23.1(a) or (b)
above, where such failure shall continue for a period of thirty (30)
days after written notice thereof from Landlord to Tenant; provided,
however, that if the nature of Tenant's default is such that more than
thirty (30) days are reasonably required for its cure, then Tenant shall
not be deemed to be in default if Tenant shall commence such cure within
said thirty (30) day period and thereafter diligently prosecute such
cure to completion; and
(d) (i) the making by Tenant or any guarantor hereof of any general
assignment for the benefit of creditors, (ii) the filing by or against
Tenant or any guarantor hereof of a petition to have Tenant or any
guarantor hereof adjudged a bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of
a petition filed against the Tenant or any guarantor hereof, the same is
dismissed within sixty (60) days), (iii) the appointment of a trustee or
receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease or of
substantially all of a guarantors assets, where possession is not
restored to Tenant or the guarantor within sixty (60) days, or (iv) the
attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this
Lease or of substantially all of a guarantor's assets where such seizure
is not discharged within sixty (60) days.
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Any notice sent by Landlord to Tenant pursuant to this Section 23.1 shall be in
lieu of, and not in addition to, any notice required under California Code of
Civil Procedure, Section 1161,
23.2 LANDLORD'S REMEDIES; TERMINATION. In the event of any such default by
Tenant, in addition to any other remedies available to Landlord under this
Lease, at law or in equity, Landlord shall have the immediate option to
terminate this Lease and all rights of Tenant hereunder. In the event that
Landlord shall elect to so terminate this Lease, then Landlord may recover from
Tenant:
(a) the worth at the time of award of any unpaid rent which had been earned
at the time of such termination; plus
(b) the worth at the time of the award of the amount by which the unpaid
rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could
have been reasonably avoided; plus
(c) the worth at the time of award of the amount by which the unpaid rent
for the balance of the term after the time of award exceeds the amount
of such rental loss that Tenant proves could be reasonably avoided; plus
(d) 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: unamortized Tenant
Improvement costs; attorneys' fees; brokers' commissions; the costs of
refurbishment, alterations, renovation and repair of the Premises; and
removal (including the repair of any damage caused by such removal) and
storage (or disposal) of Tenant's personal property, equipment,
fixtures, Tenant Changes, Tenant Improvements and any other items which
Tenant is required under this Lease to remove but does not remove.
As used in Sections 23.2(a) and 23.2(b) above, the "WORTH AT THE TIME OF AWARD"
is computed by allowing interest at the Interest Rate set forth in Section 1.14
of the Summary. As used in Section 23.2(c) above, the "worth at the time of
award" is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one percent
(1%).
23.3 LANDLORD'S REMEDIES; RE-ENTRY RIGHTS. In the event of any such default
by Tenant, in addition to any other remedies available to Landlord under this
Lease, at law or in equity, Landlord shall also have the right, with or without
terminating this Lease, to re-enter the Premises and remove all persons and
property from the Premises; such property may be removed, stored and/or disposed
of pursuant to Section 12.4 of this Lease or any other procedures permitted by
applicable law. No re-entry or taking possession of the Premises by Landlord
pursuant to this Section 23.3, and no acceptance of surrender of the Premises or
other action on Landlord's part, shall be construed as an election to terminate
this Lease unless a written notice of such intention be given to Tenant or
unless the termination thereof be decreed by a court of competent jurisdiction.
23.4 LANDLORD'S REMEDIES; CONTINUATION OF LEASE. In the event of any such
default by Tenant, in addition to any other remedies available to Landlord under
this Lease, at law or in equity, Landlord shall have the right to continue this
Lease in full force and effect, whether or not Tenant shall have abandoned the
Premises. The foregoing remedy shall also be available to Landlord pursuant to
California Civil Code Section 1951.4 and any successor statute thereof in the
event Tenant has abandoned the Premises. In the event Landlord elects to
continue this Lease in full force and effect pursuant to this Section 23.4, then
Landlord shall be entitled to enforce all of its rights and remedies under this
Lease, including the right to recover rent as it becomes due. Landlord's
election not to terminate this Lease pursuant to this Section 23.4 or pursuant
to any other provision of this Lease, at law or in equity, shall not preclude
Landlord from subsequently electing to terminate this Lease or pursuing any of
its other remedies.
23.5 LANDLORD'S RIGHT TO PERFORM. Except as specifically provided otherwise
in this Lease, all covenants and agreements by Tenant under this Lease shall be
performed by Tenant at Tenant's sole cost and expense and without any abatement
or offset of rent. If Tenant shall fail to pay any sum of money (other than
Monthly Basic Rent) or perform any other act on its part to be paid or performed
hereunder and such failure shall continue for five (5) business days with
respect to monetary obligations (or thirty (30) days with respect to
non-monetary obligations, or such shorter period of time as appropriate in the
event of an emergency) after Tenant's receipt of written notice thereof from
Landlord, Landlord may, without waiving or releasing Tenant from any of Tenant's
obligations, make such payment or perform such other act on behalf of Tenant.
All sums so paid by Landlord and all necessary incidental costs incurred by
Landlord in performing such other acts shall be payable by Tenant to Landlord
within five (5) business days after demand therefor as additional rent.
23.6 INTEREST. If any monthly installment of Rent or Project Operating
Expenses, or any other amount payable by Tenant hereunder is not received by
Landlord by the date when due, it shall bear interest at the Interest Rate set
forth in Section 1.14 of the Summary from the date due until paid. All interest,
and any late charges imposed pursuant to Section 23.7 below, shall be considered
additional rent due from Tenant to Landlord under the terms of this Lease.
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23.7 LATE CHARGES. Tenant acknowledges that, in addition to interest costs,
the late payments by Tenant to Landlord of any Monthly Basic Rent or other sums
due under this Lease will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of such costs being extremely difficult and impractical
to fix. Such other costs include, without limitation, processing, administrative
and accounting charges and late charges that may be imposed on Landlord by the
terms of any mortgage, deed of trust or related loan documents encumbering the
Premises, the Building or the Project. Accordingly, if any monthly installment
of Monthly Basic Rent or Direct Expenses or any other amount payable by Tenant
hereunder is not received by Landlord by the due date thereof, Tenant shall pay
to Landlord an additional sum of five percent (5%) of the overdue amount as a
late charge, but in no event more than the maximum late charge allowed by law;
provided, however, the late charge shall not be payable with respect to the
first late payment in any consecutive twelve (12) month period. The parties
agree that such late charge represents a fair and reasonable estimate of the
costs that Landlord will incur by reason of any late payment as hereinabove
referred to by Tenant, and the payment of late charges and interest are distinct
and separate in that the payment of interest is to compensate Landlord for the
use of Landlord's money by Tenant, while the payment of late charges is to
compensate Landlord for Landlord's processing, administrative and other costs
incurred by Landlord as a result of Tenant's delinquent payments. Acceptance of
a late charge or interest shall not constitute a waiver of Tenant's default with
respect to the overdue amount or prevent Landlord from exercising any of the
other rights and remedies available to Landlord under this Lease or at law or in
equity now or hereafter in effect.
23.8 [INTENTIONALLY OMITTED].
23.9 RIGHTS AND REMEDIES CUMULATIVE. All rights, options and remedies of
Landlord contained in this Section 23 and elsewhere in this Lease (including
Section 28 below) shall be construed and held to be cumulative, and no one of
them shall be exclusive of the other, and Landlord shall have the right to
pursue any one or all of such remedies or any other remedy or relief which may
be provided by law or in equity, whether or not stated in this Lease. Nothing in
this Section 23 shall be deemed to limit or otherwise affect Tenant's
indemnification of Landlord pursuant to any provision of this Lease.
24. LANDLORD'S DEFAULT. Subject to the provisions of Section 16.3, Landlord
shall not be in default in the performance of any obligation required to be
performed by Landlord under this Lease unless Landlord has failed to perform
such obligation within thirty (30) days after the receipt of written notice from
Tenant specifying in detail Landlord's failure to perform (or such shorter
period of time as may be reasonable in the event of an emergency); provided
however, that if the nature of Landlord's obligation is such that more than
thirty (30) days (or such shorter period, as applicable) are required for its
performance, then Landlord shall not be deemed in default if it commences such
performance within such thirty (30) day period (or such shorter period, as
applicable) and thereafter diligently pursues the same to completion. Upon any
such uncured default by Landlord, Tenant may exercise any of its rights provided
at law or in equity; provided, however: (a) Tenant shall have no right to offset
or abate rent in the event of any default by Landlord under this Lease, except
to the extent offset rights are specifically provided to Tenant in this Lease;
(b) Tenant shall have no right to terminate this Lease; (c) Tenant's rights and
remedies hereunder shall be limited to the extent (i) Tenant has expressly
waived in this Lease any of such rights or remedies and/or (ii) this Lease
otherwise expressly limits Tenant's rights or remedies, including the limitation
on Landlord's liability contained in Section 31 hereof and (d) in no event shall
Landlord be liable for consequential damages.
25. SUBORDINATION. Without the necessity of any additional document being
executed by Tenant for the purpose of effecting a subordination, and at the
election of Landlord or any mortgagee of a mortgage or a beneficiary of a deed
of trust now or hereafter encumbering all or any portion of the Building or
Site, or any lessor of any ground or master lease now or hereafter affecting all
or any portion of the Building or Site, this Lease shall be subject and
subordinate at all times to such ground or master leases (and such extensions
and modifications thereof), and to the lien of such mortgages and deeds of trust
(as well as to any advances made thereunder and to all renewals, replacements,
modifications and extensions thereof). Notwithstanding the foregoing, Landlord
and any mortgagee and/or ground lessor of Landlord, as applicable, shall have
the right to subordinate or cause to be subordinated any or all ground or master
leases or the lien of any or all mortgages or deeds of trust to this Lease. In
the event that any ground or master lease terminates for any reason or any
mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure
is made for any reason, at the election of Landlord's successor in interest,
Tenant shall attorn to and become the tenant of such successor. Tenant hereby
waives its rights under any current or future law which gives or purports to
give Tenant any right to terminate or otherwise adversely affect this Lease and
the obligations of Tenant hereunder in the event of any such foreclosure
proceeding or sale. Tenant covenants and agrees to execute and deliver to
Landlord within ten (10) days after receipt of written demand by Landlord, any
commercially reasonable additional documents evidencing the priority or
subordination of this Lease with respect to any such ground or master lease or
the lien of any such mortgage or deed of trust or Tenant's agreement to attorn.
Should Tenant fail to sign and return any such documents within said ten (10)
day period and such failure continues for more than five (5) business days
following written notice thereof to Tenant, Tenant shall be in default hereunder
without the benefit of any additional notice or cure periods specified in
Section 23.1 above.
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26. ESTOPPEL CERTIFICATE.
26.1 OBLIGATIONS. Within ten (10) business days following a party's written
request, the other party shall execute and deliver to the requesting party an
estoppel certificate, in a form substantially similar to the form of Exhibit "F"
attached hereto (modified as appropriate in the event Landlord is the party
giving the estoppel certificate), certifying: (a) the Commencement Date of this
Lease; (b) that this Lease is unmodified and in full force and effect (or, if
modified, that this Lease is in full force and effect as modified, and stating
the date and nature of such modifications); (c) the date to which the rent and
other sums payable under this Lease have been paid; (d) that there are not, to
the best of such party's knowledge, any defaults under this Lease by either
Landlord or Tenant, except as specified in such certificate; and (e) such other
matters as are reasonably requested by the requesting party. Any such estoppel
certificate delivered pursuant to this Section 26.1 may be relied upon by any
mortgagee, beneficiary, purchaser or prospective purchaser of any portion of the
Site, as well as their assignees.
26.2 TENANT'S FAILURE TO DELIVER. If Tenant fails to deliver such estoppel
certificate within such time, and such failure continues for more than five (5)
business days following written notice thereof to Tenant, then such failure
shall constitute a default hereunder without the applicability of the notice and
cure periods specified in Section 23.1 above and shall be conclusive upon Tenant
that: (a) this Lease is in full force and effect without modification, except as
may be represented by Landlord; (b) there are no uncured defaults in Landlord's
or Tenant's performance (other than Tenant's failure to deliver the estoppel
certificate); and (c) not more than one (1) month's rental has been paid in
advance.
27. [INTENTIONALLY OMITTED].
28. MODIFICATION AND CURE RIGHTS OF LANDLORD'S MORTGAGEES AND LESSORS.
28.1 MODIFICATIONS. If, in connection with Landlord's obtaining or entering
into any financing or ground lease for any portion of the Building or Site, the
lender or ground lessor shall request modifications to this Lease, Tenant shall,
within ten (10) days after request therefor, execute an amendment to this Lease
including such modifications, provided such modifications are reasonable, do not
increase the obligations of Tenant hereunder, or adversely affect the leasehold
estate created hereby or Tenant's rights hereunder.
28.2 CURE RIGHTS. In the event of any default on the part of Landlord, Tenant
will give notice by registered or certified mail to any beneficiary of a deed of
trust or mortgagee covering the Premises or ground lessor of Landlord whose
address shall have been furnished to Tenant, and shall offer such beneficiary,
mortgagee or ground lessor a reasonable opportunity to cure the default
(including with respect to any such beneficiary or mortgagee, time to obtain
possession of the Premises, subject to this Lease and Tenant's rights hereunder,
by power of sale or a judicial foreclosure, if such should prove necessary to
effect a cure).
29. QUIET ENJOYMENT. Landlord covenants and agrees with Tenant that, upon
Tenant performing all of the covenants and provisions on Tenant's part to be
observed and performed under this Lease (including payment of rent hereunder),
Tenant shall have the right to use and occupy the Premises in accordance with
and subject to the terms and conditions of this Lease as against all persons
claiming by, through or under Landlord.
30. TRANSFER OF LANDLORD'S INTEREST. The term "Landlord" as used in this
Lease, so far as covenants or obligations on the part of the Landlord are
concerned, shall be limited to mean and include only the owner or owners, at the
time in question, of the fee title to, or a lessee's interest in a ground lease
of, the Site. In the event of any transfer or conveyance of any such title or
interest (other than a transfer for security purposes only), and upon the
assumption by the transferee of Landlord's obligations under this Lease accruing
after the date of such transfer or conveyance, the transferor shall be
automatically relieved of all covenants and obligations on the part of Landlord
contained in this Lease accruing after the date of such transfer or conveyance.
Landlord and Landlord's transferees and assignees shall have the absolute right
to transfer all or any portion of their respective title and interest in the
Site, the Building, the Premises and/or this Lease without the consent of
Tenant, and such transfer or subsequent transfer shall not be deemed a violation
on Landlord's part of any of the terms and conditions of this Lease.
31. LIMITATION ON LANDLORD'S LIABILITY. Notwithstanding anything contained
in this Lease to the contrary, the obligations of Landlord under this Lease
(including any actual or alleged breach or default by Landlord) do not
constitute personal obligations of the individual partners, directors, officers,
members or shareholders of Landlord or Landlord's members or partners, and
Tenant shall not seek recourse against the individual partners, directors,
officers, members or shareholders of Landlord or against Landlord's members or
partners or any other persons or entities having any interest in Landlord, or
any of their personal assets for satisfaction of any liability with respect to
this Lease. In addition, in consideration of the benefits accruing hereunder to
Tenant and notwithstanding anything contained in this Lease to the contrary,
Tenant hereby covenants and agrees for itself and all of its successors and
assigns that the liability of Landlord for its obligations under this Lease
(including any liability as a result of any actual or alleged failure, breach or
default hereunder by Landlord), shall be limited solely to, and Tenant's and its
successors' and assigns' sole and exclusive remedy shall be against, Landlord's
interest in the Building
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(including any proceeds from a sale of the Building, insurance and condemnation
proceeds with respect to the Building and any rentals received from the
Building), and no other assets of Landlord.
32. MISCELLANEOUS.
32.1 GOVERNING LAW. This Lease shall be governed by, and construed pursuant
to, the laws of the state in which the Building is located.
32.2 SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 30 above,
and except as otherwise provided in this Lease, all of the covenants, conditions
and provisions of this Lease shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives and permitted successors and assigns; provided, however, no
rights shall inure to the benefit of any Transferee of Tenant unless the
Transfer to such Transferee is made in compliance with the provisions of Section
14, and no options or other rights which are expressly made personal to the
original Tenant hereunder or in any rider attached hereto shall be assignable to
or exercisable by anyone other than the original Tenant under this Lease.
32.3 NO MERGER. The voluntary or other surrender of this Lease by Tenant or a
mutual termination thereof shall not work as a merger and shall, at the option
of Landlord, either (a) terminate all or any existing subleases, or (b) operate
as an assignment to Landlord of Tenant's interest under any or all such
subleases.
32.4 PROFESSIONAL FEES. If either Landlord or Tenant should bring suit
against the other with respect to this Lease, including for unlawful detainer or
any other relief against the other hereunder, then all costs and expenses
incurred by the prevailing party therein (including, without limitation, its
actual appraisers', accountants', attorneys' and other professional fees, court
costs and costs of appeal), shall be paid by the other party.
32.5 WAIVER. The waiver by either party of any breach by the other party of
any term, covenant or condition herein contained shall not be deemed to be a
waiver of any subsequent breach of the same or any other term, covenant and
condition herein contained, nor shall any custom or practice which may become
established between the parties in the administration of the terms hereof be
deemed a waiver of, or in any way affect, the right of any party to insist upon
the performance by the other in strict accordance with said terms. No waiver of
any default of either party hereunder shall be implied from any acceptance by
Landlord or delivery by Tenant (as the case may be) of any rent or other
payments due hereunder or any omission by the non-defaulting party to take any
action on account of such default if such default persists or is repeated, and
no express waiver shall affect defaults other than as specified in said waiver.
The subsequent acceptance of rent hereunder by Landlord shall not be deemed to
be a waiver of any preceding breach by Tenant of any term, covenant or condition
of this Lease other than the failure of Tenant to pay the particular rent so
accepted, regardless of Landlord's knowledge of such preceding breach at the
time of acceptance of such rent.
32.6 TERMS AND HEADINGS. The words "Landlord" and "Tenant" as used herein
shall include the plural as well as the singular. Words used in any gender
include other genders. The Section headings of this Lease are not a part of this
Lease and shall have no effect upon the construction or interpretation of any
part hereof. Any deletion of language from this Lease prior to its execution by
Landlord and Tenant shall not be construed to raise any presumption, canon of
construction or implication, including, without limitation, any implication that
the parties intended thereby to state the converse of the deleted language.
32.7 TIME. Time is of the essence with respect to performance of every
provision of this Lease in which time or performance is a factor. All references
in this Lease to "DAYS" shall mean calendar days unless specifically modified
herein to be "business" days.
32.8 PRIOR AGREEMENTS; AMENDMENTS. This Lease (and the Exhibits and Riders
attached hereto) contain all of the covenants, provisions, agreements,
conditions and understandings between Landlord and Tenant concerning the
Premises and any other matter covered or mentioned in this Lease, and no prior
agreement or understanding, oral or written, express or implied, pertaining to
the Premises or any such other matter shall be effective for any purpose. No
provision of this Lease may be amended or added to except by an agreement in
writing signed by the parties hereto or their respective successors in interest.
The parties acknowledge that all prior agreements, representations and
negotiations are deemed superseded by the execution of this Lease to the extent
they are not expressly incorporated herein.
32.9 SEPARABILITY. The invalidity or unenforceability of any provision of
this Lease (except for Tenant's obligation to pay Monthly Basic Rent and Direct
Expenses and Utilities Costs) shall in no way affect, impair or invalidate any
other provision hereof, and such other provisions shall remain valid and in full
force and effect to the fullest extent permitted by law.
32.10 RECORDING. Neither Landlord nor Tenant shall record this Lease. In
addition, neither party shall record a short form memorandum of this Lease
without the prior written consent (and signature on the memorandum) of the
other, and provided that prior to recordation Tenant executes and delivers to
Landlord, in recordable form, a properly acknowledged quitclaim deed or other
instrument extinguishing
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all of the Tenant's rights and interest in and to the Site, Building and
Premises, and designating Landlord as the transferee, which deed or other
instrument shall be held by Landlord and may be recorded by Landlord once the
Lease terminates or expires (but not prior thereto). If such short form
memorandum is recorded in accordance with the foregoing, the party requesting
the recording shall pay for all costs of or related to such recording,
including, but not limited to, recording charges and documentary transfer taxes.
32.11 EXHIBITS AND RIDERS. All Exhibits and Riders attached to this Lease are
hereby incorporated in this Lease as though set forth at length herein.
32.12 ACCORD AND SATISFACTION. No payment by Tenant or receipt by Landlord of
a lesser amount than the rent payment herein stipulated shall be deemed to be
other than on account of the rent, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such rent or pursue any
other remedy provided in this Lease. Tenant agrees that each of the foregoing
covenants and agreements shall be applicable to any covenant or agreement either
expressly contained in this Lease or imposed by any statute or at common law.
32.13 FINANCIAL STATEMENTS. Upon ten (10) days prior written request from
Landlord (which Landlord may make at any time during the Term but no more often
than one (1) time in any calendar year, except in the event of a sale or
refinancing of the Building), Tenant shall deliver to Landlord (a) a current
financial statement of Tenant and any guarantor of this Lease, and (b) financial
statements of Tenant and such guarantor for the two (2) years prior to the
current financial statement year. Such statements shall be prepared in
accordance with generally acceptable accounting principles and certified as true
in all material respects by Tenant (if Tenant is an individual) or by an
authorized officer, member/manager or general partner of Tenant (if Tenant is a
corporation, limited liability company or partnership, respectively).
32.14 NO PARTNERSHIP. Landlord does not, in any way or for any purpose, become
a partner of Tenant in the conduct of its business, or otherwise, or joint
venturer or a member of a joint enterprise with Tenant by reason of this Lease.
The provisions of this Lease relating to Percentage Rent payable hereunder, if
any, are included solely for the purpose of providing a method whereby rent is
to be measured and ascertained.
32.15 FORCE MAJEURE. In the event that either party hereto shall be delayed or
hindered in or prevented from the performance of any act required hereunder by
reason of strikes, lock-outs, labor troubles, inability to procure materials,
failure of power, governmental moratorium or other governmental action or
inaction (including failure, refusal or delay in issuing permits, approvals
and/or authorizations), injunction or court order, riots, insurrection, war,
fire, earthquake, flood or other natural disaster or other reason of a like
nature not the fault of the party delaying in performing work or doing acts
required under the terms of this Lease (but excluding delays due to financial
inability) (herein collectively, "FORCE MAJEURE DELAYS"), then performance of
such act shall be excused for the period of the delay and the period for the
performance of any such act shall be extended for a period equivalent to the
period of such delay. The provisions of this Section 32.15 shall not apply to
nor operate to excuse Tenant from the payment of Monthly Basic Rent, Project
Operating Expenses, additional rent or any other payments strictly in accordance
with the terms of this Lease.
32.16 COUNTERPARTS. This Lease may be executed in one or more counterparts,
each of which shall constitute an original and all of which shall be one and the
same agreement.
32.17 NONDISCLOSURE OF LEASE TERMS. Tenant acknowledges and agrees that the
terms of this Lease are confidential and constitute proprietary information of
Landlord. Disclosure of the terms could adversely affect the ability of Landlord
to negotiate other leases and impair Landlord's relationship with other tenants.
Accordingly, Tenant agrees that it, and its partners, officers, directors,
employees, agents and attorneys, shall not intentionally and voluntarily
disclose the terms and conditions of this Lease to any newspaper or other
publication or any other tenant or apparent prospective tenant of the Building
or other portion of the Project, or real estate agent (excepting Tenant's
agent), either directly or indirectly, without the prior written consent of
Landlord, provided, however, that Tenant may disclose the terms to prospective
subtenants or assignees under this Lease.
32.18 NON-DISCRIMINATION. Tenant acknowledges and agrees that there shall be
no discrimination against, or segregation of, any person, group of persons, or
entity on the basis of race, color, creed, religion, age, sex, marital status,
national origin, or ancestry in the leasing, subleasing, transferring,
assignment, occupancy, tenure, use, or enjoyment of the Premises, or any portion
thereof.
32.19 WAIVER OF JURY TRIAL. Each party hereby waives any right to a trial by
jury in any action seeking specific performance of any provision of this Lease,
for damages for any breach under this Lease, or otherwise for enforcement of any
right or remedy hereunder.
33. LEASE EXECUTION.
33.1 TENANT'S AUTHORITY. If Tenant executes this Lease as a limited liability
company, partnership or corporation, then Tenant and the persons and/or entities
executing this Lease on behalf of Tenant represent and warrant that: (a) Tenant
is a duly organized and validly existing limited liability company,
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partnership or corporation, as the case may be, and is qualified to do business
in the state in which the Premises are located; (b) such persons and/or entities
executing this Lease are duly authorized to execute and deliver this Lease on
Tenant's behalf in accordance with the Tenant's operating agreement (if Tenant
is a limited liability company), Tenant's partnership agreement (if Tenant is a
partnership), or a duly adopted resolution of Tenant's board of directors and
Tenant's by-laws (if Tenant is a corporation); and (c) this Lease is binding
upon Tenant in accordance with its terms. Concurrently with Tenant's execution
and delivery of this Lease to Landlord and/or at any time during the Lease Term
within ten (10) days of Landlord's request, Tenant shall provide to Landlord a
copy of any documents reasonably requested by Landlord evidencing such
qualification, organization, existence and authorization.
33.2 JOINT AND SEVERAL LIABILITY. If more than one person or entity executes
this Lease as Tenant: (a) each of them is and shall be jointly and severally
liable for the covenants, conditions, provisions and agreements of this Lease to
be kept, observed and performed by Tenant; and (b) the act or signature of, or
notice from or to, any one or more of them with respect to this Lease shall be
binding upon each and all of the persons and entities executing this Lease as
Tenant with the same force and effect as if each and all of them had so acted or
signed, or given or received such notice.
33.3 NO OPTION. The submission of this Lease for examination or execution by
Tenant does not constitute a reservation of or option for the Premises and this
Lease shall not become effective as a Lease until it has been executed by
Landlord and delivered to Tenant.
34. RIGHT OF FIRST REFUSAL. Landlord hereby grants to the Original Tenant
(and any Transferee under a Permitted Transfer), during the initial Term, a
right of first refusal with respect to all space located on the third (3rd)
floor of the Building (the "FIRST REFUSAL SPACE"). Notwithstanding the foregoing
(i) for First Refusal Space which is subject to a lease as of the date of this
Lease, such first refusal right of Tenant shall commence only following the
expiration or earlier termination of such existing lease (such existing leases
may be collectively referred to herein as the "SUPERIOR LEASES"), including any
renewal of such Superior Leases, whether or not such renewal is pursuant to an
express written provision in such lease, and regardless of whether any such
renewal is consummated pursuant to a lease amendment or a new lease, and (ii)
such first refusal right shall be subordinate and secondary to all rights of
expansion, first refusal, first offer or similar rights granted to the tenant(s)
of the Superior Leases or any other leases existing as of the date of this Lease
(the rights described in items (i) and (ii) above to be known collectively, for
purposes of this Section 34 only, as "SUPERIOR RIGHTS"). Tenant's right of first
refusal shall be on the terms and conditions set forth in this Section 34.
(a) Procedure. Landlord shall notify Tenant (the "FIRST REFUSAL NOTICE")
from time to time when Landlord receives a proposal that Landlord
desires to accept for all or any portion of the First Refusal Space,
where no holder of a Superior Right desires to lease such space. The
First Refusal Notice shall describe the space which is the subject of
the proposal, shall set forth the terms and conditions (including the
proposed lease term) set forth in the proposal (collectively, the
"TERMS") and shall include a copy of the proposal. Notwithstanding the
foregoing, Landlord's obligation to deliver the First Refusal Notice
shall not apply during the last nine (9) months of the initial Term
unless Tenant has exercised the first Extension Option.
(b) Procedure for Acceptance. If Tenant wishes to exercise Tenant's rights
of first refusal with respect to the space described in the First
Refusal Notice, then within three (3) business days after delivery of
the First Refusal Notice to Tenant (the "ELECTION DATE"), Tenant shall
deliver written notice to Landlord ("TENANT'S ELECTION NOTICE") pursuant
to which Tenant shall elect either to (i) lease the entire First Refusal
Space described in the First Refusal Notice upon the Terms set forth in
the First Refusal Notice; (ii) refuse to lease such First Refusal Space
identified in the First Refusal Notice, specifying that such refusal is
not based upon the Terms set forth by Landlord in the First Refusal
Notice, but upon Tenant's lack of need for such First Refusal Space, in
which event Landlord may lease such First Refusal Space to any person or
entity on any terms Landlord desires and Tenant's right of first refusal
with respect to the First Refusal Space specified in Landlord's First
Refusal Notice shall thereupon terminate and be of no further force or
effect; or (iii) refuse to lease the First Refusal Space, specifying
that such refusal is based upon the Terms set forth in the First Refusal
Notice, in which event Tenant shall also specify in Tenant's Election
Notice revised Terms upon which Tenant would be willing to lease such
First Refusal Space from Landlord ("TENANT'S PROPOSED TERMS"). If Tenant
does not so respond in writing to Landlord's First Refusal Notice by the
Election Date, Tenant shall be deemed to have elected the option
described in clause (ii) above. If Tenant timely delivers to Landlord
Tenant's Election Notice pursuant to clause (iii) above, Landlord may
elect either to: (a) lease such First Refusal Space to Tenant upon
Tenant's Proposed Terms; or (b) lease the First Refusal Space to any
person or entity upon any terms Landlord desires and Tenant's right of
first refusal with respect to the First Refusal Space specified in
Landlord's First Refusal Notice shall thereupon terminate and be of no
further force or effect; provided, however if Landlord intends to lease
the First Refusal Space upon terms equal to or more favorable to such
third party than Tenant's Proposed Terms, then Tenant's Right of First
Refusal will not terminate and the provisions of this Section 34 shall
apply again to such proposed leasing.
(c) Lease of First Refusal Space. If Tenant timely exercises Tenants right
to lease the First Refusal Space as set forth herein, Landlord and
Tenant shall execute at Landlord's sole election, (i) an
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amendment to this Lease incorporating into this Lease the Terms
applicable to such First Refusal Space, or (ii) a new lease
incorporating the terms applicable to such First Refusal Space.
(d) Termination of Right of First Refusal. The rights set forth in this
Section 34, and Landlord's obligations with respect thereto, shall be
personal to the Original Tenant and any Transferee under a Permitted
Transfer. The right of first refusal granted herein shall terminate as
to a particular First Refusal Space upon the failure by Tenant to
exercise its right of first refusal with respect to such First Refusal
Space as offered by Landlord but shall remain in effect for any
subsequent availability of all or any portion of the remaining First
Refusal Space. Tenant shall not have the right to lease the First
Refusal Space if, as of the date of the attempted exercise of any right
of first refusal by Tenant, or, at Landlord's option, as of the
scheduled date of delivery of such First Refusal Space to Tenant, Tenant
is in default under this Lease after any applicable notice and cure
periods.
35. TEMPORARY SPACE. Landlord agrees to permit Tenant to occupy 13,432
rentable square feet of vacant space known as Suite 100 located on the ground
floor of the Building located at 10180 Telesis Court within the Project (the
"TEMPORARY SPACE") during the period between the full execution and delivery of
this Lease and five (5) business days following the Commencement Date hereunder
(the "TEMPORARY SPACE TERM"). Tenant will accept the Temporary Space in its
"then as-is" condition, and Landlord will have no obligation to improve the
Temporary Space. Tenant shall have no obligation to pay any rental for the
Temporary Space, but Tenant shall be obligated to pay for all utilities that may
be provided to the Temporary Space (the allocation of the cost for such
utilities will be made in the same manner as the allocation of utilities for the
Premises). Except as provided above, Tenant's occupancy of the Temporary Space
shall be subject to all of the terms and conditions of this Lease that could
logically be construed as applying thereto as if the Temporary Space were the
Premises, including, without limitation, Sections 17, 20 and 22. Landlord will
have the right to show the Temporary Space to potential Tenants at any time
during the Temporary Space Term. If Tenant fails to surrender possession of the
Temporary Space with five (5) business days following the Commencement Date,
then the provisions of Section 9 of this Lease shall apply to such failure and
holdover, except that Monthly Basic Rent for the Temporary Space shall be at the
rate of One and 80/100 Dollars ($1.80) per rentable square foot of the Temporary
Space per month.
36. OPTION TERM.
(a) OPTION RIGHT. Landlord hereby grants to Tenant two (2) options (each an
"EXTENSION OPTION") to extend the Term for a period of five (5) years
each (each, an "OPTION TERM"), each of which shall be exercised only by
written notice delivered by Tenant to Landlord as provided below,
provided that, as of the date of delivery of such notice, Tenant is not
in default under this Lease beyond any applicable notice and cure
periods. Upon the proper exercise of an option to extend, and provided
that (at Landlord's option), as of the end of the initial Term or first
Option Term, as applicable, Tenant is not in default under this Lease
beyond any applicable notice and cure periods, the Term as it applies to
the Premises, shall be extended for the applicable Option Term and all
references to the Term shall include the exercised Option Term. The
rights contained in this Section 36 shall be personal to the Original
Tenant and/or any Transferee under a Permitted Transfer and may only be
exercised by the Original Tenant and/or such Transferee if, at the time
of the attempted exercise of the Option, the Original Tenant or such
Transferee is in physical occupancy and possession of the entire
Premises.
(b) OPTION RENT. The Monthly Basic Rent payable by Tenant during an Option
Term shall be the "Fair Market Rental Rate" for the Premises. The term
"FAIR MARKET RENTAL RATE" for the Premises during an Option Term shall
mean the amount per rentable square foot that a comparable, willing,
non-equity, non-sublease tenant would pay and a comparable, willing
landlord would accept on a non-sublease, non-renewal basis, at arm's
length, for unencumbered space comparable to the Premises located in the
Project and in other comparable Class "A" office buildings in the
Sorrento Mesa area.
(c) EXERCISE OF OPTION. An Extension Option shall be exercised by Tenant, if
at all, and only in the following manner: (i) Tenant shall deliver
written notice to Landlord not less than nine (9) months prior to the
expiration of the initial Term or first Option Term, as applicable
exercising its option; (ii) Landlord, after receipt of Tenant's notice,
shall deliver notice (the "Option Rent Notice") to Tenant not less than
eight (8) months prior to the expiration of the initial Term or first
Option Term, as applicable, setting forth Landlord's determination of
the Fair Market Rental Rate; and (iii) if Tenant objects to Landlord's
determination of the Fair Market Rental Rate contained in the Option
Rent Notice, Tenant shall deliver written notice of such objection
within twenty (20) days after delivery of the Option Rent Notice and the
parties shall follow the procedure, and the Fair Market Rental Rate
shall be determined, as set forth in Section 36(d) below.
(d) DETERMINATION OF FAIR MARKET RENTAL RATE. In the event Tenant timely and
appropriately objects in writing to the Fair Market Rental Rate
initially determined by Landlord with respect to the Option Term,
Landlord and Tenant shall attempt to agree upon the Fair Market Rental
Rate, using their best good-faith efforts. If Landlord and Tenant fail
to reach agreement within sixty (60) days following Tenant's delivery to
Landlord of Tenants objection to the Fair Market Rental Rate (the
"OUTSIDE AGREEMENT DATE"), then each party shall submit to the other
party a separate written determination of the Fair Market Rental Rate
within ten (10) business days after the Outside Agreement Date, and
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<PAGE> 38
such determinations shall be submitted to arbitration in accordance with
the provisions set forth below. Failure of Tenant or Landlord to submit
a written determination of the Fair Market Rental Rate within such ten
(10) business day period shall conclusively be deemed to be the
non-determining party's approval of the Fair Market Rental Rate
submitted within such ten (10) business day period by the other party.
(i) Landlord and Tenant shall each appoint one arbitrator who shall
be by profession an independent real estate broker who shall
have been active over the five (5) year period ending on the
date of such appointment in the leasing of Class "A" office
buildings in the Sorrento Mesa area ("COMPARABLE BUILDINGS").
The determination of the arbitrators shall be limited solely to
the issue of whether Landlord's or Tenant's submitted Fair
Market Rental Rate is the closest to the actual Fair Market
Rental Rate as determined by the arbitrators, taking into
account the requirements of Section 36(b) of this Lease. Each
such arbitrator shall be appointed within thirty (30) days after
the Outside Agreement Date.
(ii) The two (2) arbitrators so appointed shall within ten (10) days
of the date of the appointment of the last appointed arbitrator
agree upon and appoint a third arbitrator who shall be qualified
under the same criteria set forth hereinabove for qualification
of the initial two (2) arbitrators.
(iii) The three (3) arbitrators shall within thirty (30) days after
the appointment of the third arbitrator reach a decision as to
whether the parties shall use Landlord's or Tenant's submitted
Fair Market Rental Rate and shall notify Landlord and Tenant
thereof.
(iv) The decision of the majority of the three (3) arbitrators shall
be binding upon Landlord and Tenant.
(v) If either Landlord or Tenant fails to appoint an arbitrator
within thirty (30) days after the applicable Outside Agreement
Date, the arbitrator appointed by one of them shall reach a
decision, notify Landlord and Tenant thereof, and such
arbitrator's decision shall be binding upon Landlord and Tenant.
(vi) If the two (2) arbitrators fail to agree upon and appoint a
third arbitrator within the time period provided in clause (ii)
above, then the parties shall mutually select the third
arbitrator. If Landlord and Tenant are unable to agree upon the
third arbitrator within ten (10) days, then either party may,
upon at least five (5) days' prior written notice to the other
party, request the Presiding Judge of the San Diego County
Superior Court, acting in his private and nonjudicial capacity,
to appoint the third arbitrator. Following the appointment of
the third arbitrator, the panel of arbitrators shall within
thirty (30) days thereafter reach a decision as to whether
Landlord's or Tenant's submitted Fair Market Rental Rate shall
be used and shall notify Landlord and Tenant hereof.
(vii) The cost of the arbitrators and the arbitration proceeding shall
be paid by Landlord and Tenant equally, except that each party
shall pay for the cost of its own witnesses and attorneys.
IN WITNESS WHEREOF, the parties have executed this Lease as of the day and year
first above written.
TENANT: LANDLORD:
WebSideStory, Inc., LNR Seaview, Inc.
a California corporation a California
By: /s/ MICHAEL CHRISTIAN By: /s/ DAVID O. TEAM
------------------------------ -----------------------------
Print Name: MICHAEL CHRISTIAN Print Name: DAVID O. TEAM
Print Title: CHIEF OPERATING OFFICER Print Title: VICE PRESIDENT
*By: /s/ MICHAEL D. REYNOLDS By: /s/ CURTIS J. STEPHENSON
----------------------------- -----------------------------
Print Name: MICHAEL D. REYNOLDS Print Name: CURTIS J. STEPHENSON
Print Title: CHIEF FINANCIAL OFFICER Print Title:
NOTE:
IF TENANT IS A CALIFORNIA CORPORATION, then one of the following alternative
requirements must be satisfied:
(A) This Lease must be signed by two (2) officers of such corporation: one
being the chairman of the board, the president or a vice president, and
the other being the secretary, an assistant secretary, the chief
financial officer or an assistant treasurer. If one (1) individual is
signing in two (2) of the foregoing capacities, that individual must
sign twice; once as one officer and again as the other officer.
(B) If there is only one (1) individual signing in two (2) capacities, or if
the two (2) signatories do not satisfy the requirements of (A) above,
then Tenant shall deliver to Landlord a certified copy of a corporate
resolution in the form reasonably acceptable to Landlord authorizing the
signatory(ies) to execute this Lease.
If Tenant is a corporation incorporated in a state other than California, then
Tenant shall deliver to Landlord a certified copy of a corporate resolution in
the form reasonably acceptable to Landlord authorizing the signatory(ies) to
execute this Lease.
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<PAGE> 39
EXHIBIT "A"
SITE PLAN
SEAVIEW CORPORATE CENTER
Site Plan
[SITE PLAN]
EXHIBIT "A"
-32-
<PAGE> 40
EXHIBIT "B"
FLOOR PLAN
[SEE ATTACHED]
EXHIBIT "B"
<PAGE> 41
[FLOOR PLAN]
SUMMARY
------------------------
WORKSTATIONS 46
OFFICES 16
------------------------
TOTAL 62
SEAVIEW
SIXTH FLOOR PLAN
PAGE 1 OF 3
<PAGE> 42
[FLOOR PLAN]
SUMMARY
------------------------
WORKSTATIONS 91
OFFICES 19
------------------------
TOTAL TOTAL 110
SEAVIEW
FIFTH FLOOR PLAN
8/13/99
PAGE 2 OF 3
<PAGE> 43
[FLOOR PLAN]
FOURTH FLOOR PLATE
PAGE 3 OF 3
<PAGE> 44
EXHIBIT "C"
WORK LETTER AGREEMENT
THIS WORK LETTER AGREEMENT ("Work Letter Agreement") shall set forth the terms
and conditions relating to the construction of improvements for the Premises.
All references in this Work Letter Agreement to "the Lease" shall mean the
relevant portions of the Lease to which this Work Letter Agreement is attached
as Exhibit "C".
SECTION I
GENERAL CONSTRUCTION OF THE PREMISES
Landlord will construct, at its sole cost and expense, the base, shell, and core
(i) of the Premises and (ii) of the floors of the Building on which the Premises
are located (collectively, the "BASE, SHELL, AND CORE") in compliance with all
applicable laws. In addition, Landlord will construct, at its sole cost and
expense, those items described on Schedule I attached hereto in compliance with
all applicable laws, which items shall be considered as part of the Base, Shell
and Core. Tenant shall, at its sole cost and expense (but subject to
reimbursement pursuant to Section 2 below), install in the Premises certain
"Tenant Improvements" (as defined below) pursuant to the provisions of this Work
Letter Agreement. Except for the work described in this Work Letter Agreement to
be performed by Landlord, Landlord shall not be obligated to make any other
alterations or improvements to the Premises or the Building.
SECTION 2
TENANT IMPROVEMENTS
2.1 TENANT IMPROVEMENT ALLOWANCE. Tenant shall be entitled to a one-time
tenant improvement allowance (the "TENANT IMPROVEMENT ALLOWANCE") in the amount
of up to, but not exceeding, Thirty-Five and No/100 Dollars ($35.00) per usable
square foot of the Premises, for the costs relating to the initial design and
construction, using Building standard finishes, quantities and materials (unless
otherwise reasonably approved by Landlord), of Tenant's improvements which are
permanently affixed to the Premises (the "TENANT IMPROVEMENTS"), excluding (i)
phone and data cabling, (ii) the back-up generator and (iii) the uninterrupted
power supply system. For purposes of calculating the Tenant Improvement
Allowance, the usable square footage of the Premises shall be 36,694, which
excludes the restrooms, electrical rooms, tele/com equipment rooms (but not
Tenant's network operating center) and the curtain walls in the Premises. In no
event shall Landlord be obligated to make disbursements pursuant to this Work
Letter Agreement in a total amount which exceeds the Tenant Improvement
Allowance. Tenant shall not be entitled to receive any cash payment or credit
against rent or otherwise for any portion of the Tenant Improvement Allowance
which is not used to pay for the Tenant Improvement Allowance Items (as such
term is defined below).
2.2 TENANT IMPROVEMENT ALLOWANCE ITEMS. Except as otherwise set forth in
this Work Letter Agreement, the Tenant Improvement Allowance shall be disbursed
by Landlord (each of which disbursement shall be made pursuant to the
disbursement process described in Sections 2.3, 2.4 and 2.5 below), only for the
following items and costs (collectively, the "TENANT IMPROVEMENT ALLOWANCE
ITEMS"):
2.2.1 Payment of the fees of the "Architect" and the "Engineers," as
those terms are defined in Section 3.1 of this Work Letter Agreement, and
payment of the fees incurred by, and the cost of documents and materials
supplied by, Landlord and Landlord's consultants in connection with the
preparation and review of the "Construction Drawings," as that term is defined
in Section 3.1 of this Work Letter Agreement;
2.2.2 The payment of plan check, permit and license fees relating to
construction of the Tenant Improvements;
2.2.3 The cost of construction of the Tenant Improvements, including,
without limitation, contractors fees and general conditions, testing and
inspection costs, trash removal and hoists;
2.2.4 The cost of any changes in the Base, Shell and Core when such
changes are required by the Construction Drawings (including if such changes are
due to the fact that such work is prepared on an unoccupied basis), such cost to
include all direct architectural and/or engineering fees and expenses incurred
in connection therewith;
2.2.5 The cost of any changes to the Construction Drawings and/or
Tenant Improvements required by applicable laws and building codes
(collectively, "CODE");
2.2.6 Sales and use taxes and Title 24 fees; and
EXHIBIT "C"
<PAGE> 45
2.2.7 All other actual, reasonable out-of-pocket costs expended by
Tenant in connection with the construction of the Tenant Improvements, including
any payment and performance bonds required by Landlord and the fees for Tenant's
construction manager (such fees not to exceed 50 cents per usable square foot of
the Premises).
If any portion of the Tenant Improvement Allowance remains after payment in full
for the above-referenced Tenant Improvement Allowance Items, Landlord shall
retain such portion of the Tenant Improvement Allowance and Tenant shall have no
claim or interest therein.
2.3 PERIODIC DISBURSEMENTS OF TENANT IMPROVEMENT ALLOWANCE. Provided Tenant
is not in default under the Lease (and no circumstance exists that would, with
notice or lapse of time, or both, constitute a default under the Lease),
Landlord shall make periodic disbursements (but no more often than monthly) of
the Tenant Improvement Allowance for Tenant Improvement Allowance Items.
Landlord may, at its election, make disbursement checks payable jointly to
Tenant and the Contractor. As to each disbursement, the appropriate portion of
the Tenant Improvement Allowance (as calculated pursuant to Section 2.5 below)
shall be disbursed to Tenant only when Landlord has received the following
("EVIDENCE OF COMPLETION"):
2.3.1 Tenant has delivered to Landlord a draw request ("DRAW REQUEST")
in the form of AIA Document G702 and G703 (or other form acceptable to Landlord)
specifying that the requisite portion of Tenant Improvements has been completed,
together with invoices, receipts and bills evidencing the costs and expenses set
forth in such Draw Request. The Draw Request shall constitute a representation
by Tenant that the Tenant Improvements identified therein have been completed in
a good and workmanlike manner and in accordance with the Approved Working
Drawings;
2.3.2 The Architect has certified to Landlord that Tenant Improvements
have been completed to the level indicated in the Draw Request in accordance
with the Approved Working Drawings;
2.3.3 Tenant has delivered to Landlord conditional lien releases from
the Contractor and all relevant subcontractors and materialmen with respect to
work covered by the current Draw Request and unconditional lien releases from
the Contractor and all relevant subcontractors and materialmen with respect to
work covered by prior Draw Requests;
2.3.4 Landlord or Landlord's architect or construction representative
has inspected the Tenant Improvements and determined, in its reasonable judgment
and with all diligence, that the portion of the Tenant Improvements covered by
the Draw Request has been completed in a good and workmanlike manner, and
Landlord is satisfied, in its reasonable judgment, that the cost to complete the
Tenant Improvements does not exceed the remaining Tenant Improvement Allowance
and other sums available to Tenant for the payment of such costs.
2.4 DISBURSEMENT OF THE RETENTION. The Retention (as defined in Section 2.5
below) shall be disbursed only when Landlord has received Evidence of Completion
as to all of the Tenant Improvements as provided in Section 2.3 above and the
following conditions have been satisfied:
(i) Thirty (30) calendar days shall have elapsed following the
filing of a valid notice of completion by Tenant for the Tenant
Improvements;
(ii) A final or temporary certificate of occupancy for the Premises
(if a temporary certificate, the conditions set forth therein
shall be satisfactory to Landlord in its reasonable judgment)
has been issued by the appropriate governmental body;
(iii) Tenant shall have delivered to Landlord one set of reproducible
"As Built" plans for the Tenant Improvements as prepared by the
Architect;
(iv) A complete list of the names, addresses, telephone numbers and
contract amount for all contractors, subcontractors, vendors
and/or suppliers providing materials and/or labor for the Tenant
Improvements;
(v) No claim of lien shall be of record respecting the Tenant
Improvements (however, if there is such a lien, this condition
will be deemed satisfied if Tenant (i) bonds over such lien to
Landlord's reasonable satisfaction or (ii) permits Landlord to
retain an amount reasonably determined by Landlord to satisfy
such lien until the same is released of record or otherwise
bonded over to Landlord's reasonable satisfaction);
(vi) Tenant shall have delivered to Landlord conditional or
unconditional lien releases, as applicable, in accordance with
California Civil Code Section 3262 as to all of the Tenant
Improvements;
(vii) Copies of all building permits, indicating inspection and
approval of the Premises by the issuer of said permits; and
(viii) Tenant is not in default under the Lease and no circumstance
exists that would, with notice or lapse of time, or both,
constitute a default under the Lease.
C-2
<PAGE> 46
Landlord, at any time after completion of the Tenant Improvements and upon at
least five (5) business days prior written notice to Tenant, may cause an audit
to be made of Tenant's books and records relating to Tenant's expenditures in
connection with the construction of the Tenant Improvements. Tenant shall
maintain complete and accurate books and records in accordance with generally
accepted accounting principles of these expenditures during the term. Tenant
shall make available to Landlord's auditor within three (3) business days
following Landlord's notice requiring the audit, all books and records
maintained by Tenant pertaining to the construction and completion of the Tenant
Improvements. In addition to all other remedies which Landlord may have pursuant
to the Lease, Landlord may recover from Tenant the reasonable cost of its audit
if the audit discloses that Tenant falsely reported to Landlord expenditures
which were not in fact made or falsely reported a material amount of any
expenditure or the aggregate expenditures.
2.5 LANDLORD'S PERCENTAGE. Provided the conditions described in Section 2.3
above are satisfied, Landlord will disburse, with respect to each Draw Request
(other than for the Retention), an amount equal to (a) the product of the Final
Costs (as defined in Section 4.2 below) included in the Draw Request multiplied
by Landlord's Rate, minus (b) 10% of the foregoing product (the "RETENTION").
"LANDLORD'S RATE" means the quotient of the Tenant Improvement Allowance divided
by the Final Costs. All Final Costs and other costs and expenses incurred in
connection with the design or construction of the Tenant Improvements in excess
of the Tenant Improvement Allowance shall be paid by Tenant.
2.6 STANDARD TENANT IMPROVEMENT PACKAGE. Landlord has established
specifications (the "SPECIFICATIONS") for the Building standard components to be
used in the construction of the Tenant Improvements in the Premises
(collectively, the "STANDARD IMPROVEMENT PACKAGE"), which Specifications
entitled Seaview Corporate Center Phase 11 Building Standard Materials and
Finishes have been received by Tenant. With respect to all other Tenant
Improvement components, Tenant shall utilize materials and finishes which are
not of lesser quality than the Specifications, unless otherwise approved by
Landlord. Landlord may make changes to the Specifications for the Standard
Improvement Package from time to time.
SECTION 3
CONSTRUCTION DRAWINGS
3.1 SELECTION OF ARCHITECT/CONSTRUCTION DRAWINGS. Tenant has retained
Austin, Veum, Robbins, Parshalle (the "ARCHITECT") to prepare the Construction
Drawings. Tenant shall retain (i) an engineering consultant designated by
Landlord (the "ENGINEER") to prepare all plans and engineering working drawings
relating to structural work and (ii) subcontractors designated by Landlord for
the mechanical, plumbing and electrical trades (the "MPE SUBCONTRACTORS") to
prepare, on a design-build basis, all plans and engineering working drawings
relating to the mechanical, electrical, plumbing, HVAC, lifesafety, and
sprinkler work in the Premises. If the bid for an MPE Subcontractor is
materially higher than another bid for the same trade from a subcontractor that
is reasonably acceptable to Landlord, Tenant may utilize that subcontractor as
an MPE Subcontractor. The plans and drawings to be prepared by Architect, the
MPE Subcontractors and the Engineer hereunder shall be known collectively as the
"CONSTRUCTION DRAWINGS." All Construction Drawings shall comply with the drawing
format and specifications reasonably determined by Landlord, and shall be
subject to Landlord's approval. Tenant and Architect shall verify, in the field,
the dimensions and conditions as shown on the relevant portions of the base
building plans, and Tenant and Architect shall be solely responsible for the
same, and Landlord shall have no responsibility in connection therewith.
Landlord's review of the Construction Drawings as set forth in this Section 3,
shall be for its sole purpose and shall not imply Landlord's review of the same,
or obligate Landlord to review the same, for quality, design, Code compliance or
other like matters. Accordingly, notwithstanding that any Construction Drawings
are reviewed by Landlord or its space planner, architect, engineers and
consultants, and notwithstanding any advice or assistance which may be rendered
to Tenant by Landlord or Landlord's space planner, architect, engineers, and
consultants, Landlord shall have no liability whatsoever in connection therewith
and shall not be responsible for any omissions or errors contained in the
Construction Drawings.
3.2 FINAL SPACE PLAN. Tenant and Architect have prepared the final space
plan for Tenant Improvements in the Premises (the "FINAL SPACE PLAN"), which
Final Space Plan includes a layout and designation of all offices, rooms and
other partitioning, their intended use, and equipment to be contained therein,
and has delivered the Final Space Plan to Landlord for Landlord's approval.
Landlord shall diligently review the Final Space Plan and shall either approve
or disapprove the Final Space Plan within two (2) business days following the
date hereof, and if Landlord disapproves of any portion of the Final Space Plan,
the parties shall meet, within two (2) business days after Landlord's
disapproval, to agree upon revisions to be made to the Final Space Plan to meet
the reasonable satisfaction of Landlord and Tenant. The Architect shall then,
within two (2) business days after such meeting, revise the Final Space Plan to
the form agreed upon in such meeting. Landlord shall then approve or reasonably
disapprove the revised Final Space Plan, and in the case of disapproval, the
foregoing process shall be repeated until the Final Space Plan is approved by
Landlord.
3.3 FINAL WORKING DRAWINGS. Within twenty (20) business days following
Landlord's approval of the Final Space Plan, Tenant, Architect, the MPE
Subcontractors and the Engineer shall complete the architectural and engineering
drawings for the Premises, and Architect shall compile a fully coordinated set
C-3
<PAGE> 47
of architectural, structural, mechanical, electrical and plumbing working
drawings in a form which is complete to allow subcontractors to bid on the work
and to obtain all applicable permits (collectively, the " FINAL WORKING
DRAWINGS"), and shall submit the same to Landlord for Landlord's approval.
Landlord shall diligently review the Final Working Drawings and shall either
approve or disapprove the Final Working Drawings within three (3) business days
following receipt thereof, and if Landlord disapproves of any portion of the
Final Working Drawings, the parties shall meet, within two (2) business days
after Landlord's disapproval, to agree upon revisions to be made to the Final
Working Drawings to meet the reasonable satisfaction of Landlord and Tenant. The
Architect shall then, within two (2) business days after such meeting, revise
the Final Working Drawings to the form agreed upon in such meeting. Landlord
shall then approve or reasonably disapprove the revised Final Working Drawings,
and in the case of disapproval, the foregoing process shall be repeated until
the Final Working Drawings are approved by Landlord.
3.4 APPROVED WORKING DRAWINGS. Within three (3) business days following
Landlord's approval of the Final Working Drawings (the "APPROVED WORKING
DRAWINGS"), Tenant shall submit the Approved Working Drawings to the applicable
local governmental agency for all applicable building permits necessary to allow
"Contractor," as that term is defined in Section 4.1 of this Work Letter
Agreement, to commence and fully complete the construction of the Tenant
Improvements (collectively, the "PERMITS"), and, in connection therewith, Tenant
shall coordinate with Landlord in order to allow Landlord, at Landlord's option,
to take part in all phases of the permitting process, and shall supply Landlord,
as soon as possible, with all plan check numbers and dates of submittal.
Notwithstanding the foregoing, Tenant hereby agrees that neither Landlord nor
Landlord's consultants shall be responsible for obtaining any building permit or
certificate of occupancy for the Premises and that the obtaining of the same
shall be Tenant's responsibility; provided, however, that Landlord shall, in any
event, cooperate with Tenant in executing permit applications and performing
other ministerial acts reasonably necessary to enable Tenant to obtain any such
permit or certificate of occupancy. No changes, modifications or alterations in
the Approved Working Drawings may be made without the prior written consent of
Landlord.
3.5 TIME DEADLINES. Tenant shall cooperate with Architect, the MPE
Subcontractors, the Engineer, and Landlord to complete all phases of the
Construction Drawings and the permitting process and to receive the Permits in
accordance with the dates set forth in this Work Letter. Tenant shall meet with
Landlord on a weekly basis (or more frequently, if necessary) to discuss
Tenant's progress in connection with the same.
SECTION 4
CONSTRUCTION OF TENANT IMPROVEMENTS
4.1 TENANT'S SELECTION OF CONTRACTOR AND TENANT'S AGENTS.
4.1.1 THE CONTRACTOR. Bilbro Construction Company shall be retained by
Tenant to construct the Tenant Improvements.
4.1.2 TENANT'S AGENTS. All subcontractors, laborers, materialmen, and
suppliers used by Tenant, including the MPE Subcontractors (such subcontractors,
laborers, materialmen, and suppliers, and the Contractor to be known
collectively as "TENANT'S AGENTS"), and all bids from Tenant's Agents, must be
approved in writing by Landlord, which approval shall not be unreasonably
withheld or delayed. In addition to the MPE Subcontractors, Tenant shall utilize
subcontractors designated by Landlord for the following trades: structural
systems and roofing; provided, however, with respect to any such trade, if the
bid by Landlord's designated subcontractor is materially higher than another bid
received from a subcontractor that is reasonably acceptable to Landlord, Tenant
may utilize such other subcontractor.
4.2 CONSTRUCTION CONTRACT; COST BUDGET. Prior to Tenant's execution of the
construction contract and general conditions with Contractor (the "CONTRACT"),
Tenant shall submit the Contract and the Final Costs (as defined below) to
Landlord for its approval, which approval shall not be unreasonably withheld or
delayed. The Contract shall provide for a guaranteed maximum price and shall
permit the assignment of the Contract to Landlord, at Landlord's option, if the
Lease terminates as a result of Tenant's default. As soon as reasonably
practicable, Tenant shall provide to Landlord for Landlord's approval, a
detailed breakdown, by trade, of the final costs to be incurred, or which have
been incurred, as set forth more particularly in Section 2.2, in connection with
the design and construction of the Tenant Improvements, which costs form a basis
for the amount of the Contract (the "FINAL COSTS"). Tenant shall cause
Contractor to obtain a payment and performance bond from a surety reasonably
acceptable to Landlord in the amount of the Final Costs.
4.3 LANDLORD SUPERVISION. Landlord shall not charge Tenant, or deduct from
the Tenant Improvement Allowance, any supervision Fee.
4.4 CONTRACTOR'S WARRANTIES AND GUARANTIES. Tenant shall require Contractor
to provide standard customary warranties and guaranties relating to the Tenant
Improvements. Tenant will assign to Landlord all warranties and guaranties by
Contractor relating to the Tenant Improvements (i) to the extent necessary to
perform Landlord's obligations under the Lease and (ii) upon the termination of
this Lease. Tenant hereby waives all claims against Landlord relating to, or
arising out of the construction of, the Tenant Improvements.
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4.5 TENANT'S COVENANTS. Tenant hereby indemnifies Landlord for any loss,
claims, damages or delays arising from the actions of Architect, the Engineer
(but only to the extent such actions relate to the Tenant Improvements) and
Tenant's Agents on the Premises or in the Building. Within ten (10) days after
completion of construction of the Tenant Improvements, Tenant shall cause
Contractor and Architect to cause a Notice of Completion to be recorded in the
office of the Recorder of the County in which the Building is located in
accordance with Section 3093 of the Civil Code of the State of California or any
successor statute and furnish a copy thereof to Tenant upon recordation.
4.6 LANDLORD'S GENERAL CONDITIONS FOR TENANT'S AGENTS AND TENANT IMPROVEMENT
WORK. Tenant and Tenant's Agents' construction of the Tenant Improvements shall
comply with the following: (i) the Tenant Improvements shall be constructed in
strict accordance with the Approved Working Drawings; (ii) Tenant and Tenant's
Agents shall not, in any way, interfere with, obstruct, or delay, Landlord's
Work or any other work in the Building; and (iii) Tenant shall abide by all
reasonable rules made by Landlord's Building contractor or Landlord's Building
manager with respect to the use of freight, loading dock and service elevators,
storage of materials, coordination of work with the contractors of other
tenants, and any other matter in connection with this Tenant Work Letter,
including, without limitation, the construction of the Tenant Improvements.
Subject to such reasonable rules and regulations, Tenant shall have the same
rights of access to the Building as applies to all other tenants or contractors
to the extent necessary to perform Tenant's obligations under this Work Letter
Agreement.
4.7 INSURANCE REQUIREMENTS.
4.7.1 GENERAL COVERAGES. All of Tenants Agents shall carry worker's
compensation insurance covering all of their respective employees, and shall
also carry public liability insurance, including property damage, all with
limits, in form and with companies as are required to be carried by Tenant as
set forth in this Lease, except that the public liability insurance limits shall
be at least One Million Dollars ($1,000,000.00).
4.7.2 SPECIAL COVERAGES. Tenant shall carry "Builder's All Risk"
insurance in an amount and in a form approved by Landlord covering the
construction of the Tenant Improvements, and such other insurance as Landlord
may reasonably require. Such insurance shall be in form and with companies as
are required to be carried by Tenant as set forth in the Lease.
4.7.3 GENERAL TERMS. Certificates for all insurance carried pursuant
to this Section 4.7 shall be delivered to Landlord before the commencement of
construction of the Tenant Improvements and before the Contractor's equipment is
moved onto the site. All such policies of insurance must contain a provision
that the company writing said policy will give Landlord thirty (30) days prior
written notice of any cancellation or lapse of the effective date or any
reduction in the amounts of such insurance. In the event that the Tenant
Improvements are damaged by any risk that is of a type covered by the "Builder's
All Risk" insurance required to be maintained by Tenant during the course of the
construction thereof, Tenant shall immediately repair the same at Tenant's sole
cost and expense. All policies carried under this Section 4.6 shall insure
Landlord and Tenant, as their interests may appear, as well as Contractor and
Tenant's Agents, and shall name as additional insureds all mortgagees and ground
lessors of the Building and such other persons or entities designated by
Landlord. All insurance maintained by Tenant's Agents shall preclude subrogation
claims by the insurer against anyone insured thereunder. Such insurance shall
provide that it is primary insurance as respects the owner and that any other
insurance maintained by owner is excess and noncontributing with the insurance
required hereunder.
4.8 GOVERNMENTAL COMPLIANCE. The Tenant Improvements shall comply in all
respects with the following: (i) the Code and other state, federal, city or
quasi-governmental laws, codes, ordinances and regulations, as each may apply
according to the rulings of the controlling public official, agent or other
person; (ii) applicable standards of the American Insurance Association
(formerly, the National Board of Fire Underwriters) and the National Electrical
Code; and (iii) building material manufacturer's specifications.
4.9 INSPECTION BY LANDLORD. Landlord shall have the right to inspect the
Tenant Improvements at all times, provided, however, that Landlord's failure to
inspect the Tenant Improvements shall in no event constitute a waiver of any of
Landlord's rights hereunder nor shall Landlord's inspection of the Tenant
Improvements constitute Landlord's approval of the same. Should Landlord
disapprove any portion of the Tenant Improvements, Landlord shall notify Tenant
in writing of such disapproval and shall specify the items disapproved. Any
defects or deviations in, and/or disapproval by Landlord of, the Tenant
Improvements shall be rectified by Tenant at no expense to Landlord, provided,
however, that in the event Landlord determines that a defect or deviation exists
or disapproves of any matter in connection with any portion of the Tenant
Improvements and such defect, deviation or matter might adversely affect the
mechanical, electrical, plumbing, heating, ventilating and air conditioning or
life-safety systems of the Building, the structure or exterior appearance of the
Building or any other tenant's use of such other tenant's leased premises,
Landlord may take such action as Landlord deems necessary, at Tenant's expense
and without incurring any liability on Landlord's part, to correct any such
defect, deviation and/or matter, including, without limitation, causing the
cessation of performance of the construction of the Tenant Improvements until
such time as the defect, deviation and/or matter is corrected to Landlord's
satisfaction.
4.10 MEETINGS. Tenant shall hold weekly (or more frequently, if necessary)
meetings at a reasonable time, with the Architect and the Contractor regarding
the progress of the preparation of Construction Drawings and the construction of
the Tenant Improvements, and Landlord and/or its agents shall receive
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prior notice of, and shall have the right to attend, all such meetings, and,
upon Landlord's request, certain of Tenant's Agents shall attend such meetings.
In addition, minutes shall be taken at all such meetings, a copy of which
minutes shall be promptly delivered to Landlord. One such meeting each month
shall include the review of Contractor's current request for payment.
4.11 COPY OF "AS BUILT" PLANS. At the conclusion of construction, (i) Tenant
shall cause the Architect and Contractor (A) to update the Approved Working
Drawings as necessary to reflect all changes made to the Approved Working
Drawings during the course of construction, (B) to certify to the best of their
knowledge that the "record-set" of as-built drawings are true and correct, which
certification shall survive the expiration or termination of the Lease, and (C)
to deliver to Landlord two (2) sets of sepias of such as-built drawings within
ninety (90) days following issuance of a certificate of occupancy for the
Premises, and (ii) Tenant shall deliver to Landlord a copy of all warranties,
guaranties, and operating manuals and information relating to the improvements,
equipment, and systems in the Premises.
4.12 COORDINATION BY TENANT'S AGENTS WITH LANDLORD. Upon Tenant's delivery of
the Contract to Landlord under Section 4.2. of this Tenant Work Letter, Tenant
shall furnish Landlord with a schedule setting forth the projected date of the
completion of the Tenant Improvements and showing the critical time deadlines
for each phase, item or trade relating to the construction of the Tenant
Improvements.
SECTION 5
SUBSTANTIAL COMPLETION/LEASE COMMENCEMENT DATE
5.1 SUBSTANTIAL COMPLETION. For purposes of this Lease, "SUBSTANTIAL
COMPLETION" of the Tenant Improvements shall occur upon the completion of
construction of the Tenant Improvements in the Premises pursuant to the Approved
Working Drawings, with the exception of any punchlist items, and the issuance of
a certificate of occupancy (temporary or permanent) or other similar evidence of
acceptance from the appropriate local governmental authority permitting
occupancy of the Premises.
5.2 COMMENCEMENT DATE DELAYS. The Commencement Date shall occur as provided
in Section 1.7 of the Summary. However, if Substantial Completion is delayed
beyond the Target Date due to a Permit Delay, a Landlord Caused Delay or an
Unavoidable Delay, as those terms are defined below, then the Target Date, for
purposes of establishing the Commencement Date, shall be extended by the number
of days equal to the number of days of the Permit Delay, the Landlord Caused
Delay and/or the Unavoidable Delay. The term "PERMIT DELAY" shall mean an actual
delay in Substantial Completion beyond the Target Date resulting from the
issuance of the Permits after the date that is twenty (20) business days
following Tenant's submission to the appropriate governmental authorities of a
complete application for the Permits (however, delays caused by incomplete or
inaccurate submissions by Tenant, Tenant's failure to respond to inquiries or
requested changes by the governmental authorities with due diligence or changes
to submissions by Tenant shall not constitute a Permit Delay). The term,
"LANDLORD CAUSED DELAY" shall mean an actual delay in Substantial Completion
beyond the Target Date to the extent resulting from (i) the material
interference by Landlord, its agents or contractors with Substantial Completion,
(ii) Landlord's failure to abide by the time periods required of Landlord for
approvals hereunder, (iii) Landlord's failure to substantially complete and
deliver Landlord's Work prior to the Target Date or (iv) the failure of an MPE
Contractor designated by Landlord or any other subcontractor designated by
Landlord to perform its work in a timely manner (a "timely manner" shall mean
the time that the work could have been reasonably performed by another similarly
qualified contractor who would have otherwise been available to Tenant were it
not for Landlord's designation of the subcontractor in question). The term
"UNAVOIDABLE DELAY" shall mean an actual delay in Substantial Completion beyond
the Target Date resulting from a Force Majeure Delay, but excluding delays
resulting from the inability to procure materials and delays caused by the acts
or omissions of Tenant's Agents, the Architect or the Engineer (but only to the
extent the acts or omissions of the Engineer relate to the Tenant Improvements).
If Tenant contends that a Permit Delay, a Landlord Caused Delay or an
Unavoidable Delay has occurred, Tenant shall notify Landlord in writing (the
"DELAY NOTICE") of the event which constitutes such delay and the delay shall be
deemed to have occurred commencing as of the date of the commencement of such
delay provided Tenant gives Landlord written notice of such delay within two (2)
business days after the date Tenant first has knowledge of such delay, otherwise
such delay will be deemed to have occurred commencing as of the date of
Landlord's receipt of the Delay Notice. In the event of a dispute as to any such
Landlord Caused Delay, Permit Delay or Unavoidable Delay, a mutually acceptable
architect shall determine the existence and extent of the delay.
Notwithstanding the foregoing, if Tenant fails to submit to the appropriate
governmental authorities a complete application for the Permits by September 14,
1999 (as such date is subject to extension on a day for day basis for each day
of delay in Tenant's submission due to Landlord's failure to comply with the
time periods required of Landlord for approvals hereunder), then the number of
days for the extension of the Target Date due to Permit Delays as provided above
will be reduced by one (1) day for each day that Tenant delays in making such
submission beyond September 14, 1999 (as such date may be extended as provided
above).
5.3 DELIVERY OF POSSESSION. Landlord agrees to deliver possession of the
Premises to Tenant within one (1) business day following the full execution and
delivery of the Lease and Tenant's delivery to
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Landlord of the Security Deposit, the Letter of Credit, the first full month's
Monthly Basic Rent and evidence that Tenant has obtained the insurance required
under the Lease.
SECTION 6
MISCELLANEOUS
6.1 TENANT'S REPRESENTATIVE. Tenant has designated Michael Reynolds and Kirt
Gilliland as its representatives with respect to the matters set forth in this
Work Letter Agreement, either of whom shall, until further notice from tenant to
Landlord, have full authority and responsibility to act on behalf of the Tenant
as required in this Work Letter Agreement.
6.2 LANDLORD'S REPRESENTATIVE. Landlord has designated Bob Wade and Steve
Muller as its representatives with respect to the matters set forth in this Work
Letter Agreement, either of whom, until further notice to Tenant, shall have
full authority and responsibility to act on behalf of the Landlord as required
in this Work Letter Agreement.
6.3 TIME OF THE ESSENCE IN THIS WORK LETTER AGREEMENT. Unless otherwise
indicated, all references herein to a "NUMBER OF DAYS" shall mean and refer to
business days. In all instances where Tenant is required to approve or deliver
an item, if no written notice of approval is given or the item is not delivered
within the stated time period, at Landlord's sole option, at the end of said
period the item shall automatically be deemed approved or delivered by Tenant
and the next succeeding time period shall commence.
6.4 TENANT'S LEASE DEFAULT. Notwithstanding any provision to the contrary
contained in the Lease, if an event of default by Tenant as described in Section
23.1 of the Lease or any default by Tenant under this Work Letter Agreement has
occurred at any time on or before the Substantial Completion of the Premises,
then (i) in addition to all other rights and remedies granted to Landlord
pursuant to the Lease, Landlord shall have the right to withhold payment of all
or any portion of the Tenant Improvement Allowance and/or Landlord may cause
Contractor to cease the construction of the Premises, and (ii) all other
obligations of Landlord under the terms of this Work Letter Agreement shall be
forgiven until such time as such default is cured pursuant to the terms of the
Lease.
6.5 SERVICES. In no event will Tenant be charged for utilities prior to the
Commencement Date. Landlord shall, at no cost to Tenant but consistent with the
obligations to other tenants of the Building, make an elevator available for
Tenant in connection with Tenant's construction activities, initial decorating,
furnishing and moving into the Premises.
6.6 FORCE MAJEURE DELAYS. For purposes of this Work Letter Agreement, "FORCE
MAJEURE DELAYS" means any actual delay in the construction of the Tenant
Improvements, which is beyond the reasonable control of Landlord or Tenant, as
the case may be, as described in Section 32.15 of the Lease.
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SCHEDULE "1"
DESCRIPTION OF BASE, SHELL AND CORE COMPONENTS
1. Smooth and level floor (1/4" to 10') ready for carpet or other floor
coverings;
2. Two (2) four-inch (4") fiber optic conduits to the Building;
3. Completed telephone and electrical closets;
4. Completed and painted fire stairwells;
5. Sheet rocked, taped, mudded and sanded perimeter of inside walls and
elevator lobby and fire rated vestibule including total doors;
6. Main electrical distribution with switchgear and circuit breakers for
lighting and distribution of power to each floor;
7. Multi-zone central plant for HVAC system complying with the
Specifications and the HVAC water loop and outside air loop;
8. Fire protection system including primary sprinkler loop. (Sprinkler
distribution and heads will be located and dropped as part of the Tenant
Improvement Allowance);
9. Base Building plumbing (hot and cold water) brought to the Premises;
Base Building restrooms per ADA standards; and
10. Security and access systems controlling access to the Building and each
floor,
SCHEDULE "1" to EXHIBIT "C"
<PAGE> 52
EXHIBIT "D"
SAMPLE FORM OF NOTICE OF LEASE TERM DATES
To:_____________________________________ Date:_________________________
Re: Office Lease dated __________________________, 19__ between
__________________________, a ______________________________, Landlord, and
__________________________, a ______________________________, Tenant, concerning
Suite _____ ("PREMISES") located at _________________________________.
Gentlemen:
In accordance with the above-referenced Lease, we wish to advise and/or confirm
as follows:
1. That the Premises have been accepted by Tenant as being substantially
complete in accordance with the Lease, and that there is no known
deficiency in construction.
2. That Tenant has accepted and is in possession of the Premises, and
acknowledges that under the provisions of the Lease, the Term of the
Lease is for _________________ (___) years, with ________________ (___)
options to renew for ____________ (______) years each, and commenced
upon the Commencement Date of ______________, 19__ and is currently
scheduled to expire on _____________________, 19__, subject to earlier
termination as provided in the Lease.
3. That in accordance with the Lease, rental payment has commenced (or
shall commence) on ______________________, 19__.
4. If the Commencement Date of the Lease is other than the first day of the
month, the first billing will contain a pro rata adjustment. Each
billing thereafter, with the exception of the final billing, shall be
for the full amount of the monthly installment as provided for in the
Lease.
5. Rent is due and payable in advance on the first day of each and every
month during the Term of the Lease. Your rent checks should be made
payable to _____________________________ at _________________________.
6. The exact number of rentable square feet within the Premises is
_____________ square feet. The exact number of usable square
feet within the Premises is____________ square feet.
7. Tenant's Percentage, as adjusted based upon the exact number of Rentable
Square Feet within the Premises, is _________%.
AGREED AND ACCEPTED
TENANT: LANDLORD:
____________________________________, ___________________________________,
a __________________________________ a __________________________________
By: By:
--------------------------------- ---------------------------------
Print Name: Print Name:
---------------------- ----------------------
Print Title: Print Title:
--------------------- ---------------------
By: By:
--------------------------------- ---------------------------------
Print Name: Print Name:
---------------------- ----------------------
Print Title: Print Title:
--------------------- ---------------------
SAMPLE ONLY [NOT FOR EXECUTION]
EXHIBIT "D"
<PAGE> 53
EXHIBIT "E"
RULES AND REGULATIONS
1. No sign, advertisement, name or notice shall be installed or displayed
on any part of the outside or inside of the Building without the prior written
consent of Landlord. Landlord shall have the right to remove, at Tenant's
expense and without notice, any sign installed or displayed in violation of this
rule. All approved signs or lettering on doors and walls shall be printed,
painted, affixed or inscribed at the expense of Tenant by a person approved by
Landlord, using materials and in a style and format approved by Landlord.
2. Tenant shall not place anything or allow anything to be placed near the
glass of any window, door, partition or wall which may appear unsightly from
outside the Premises. No awnings or other projection shall be attached to the
outside walls of the Building without the prior written consent of Landlord. No
curtains, blinds, shades or screens shall be attached to or hung in, or used in
connection with, any window or door of the Premises, other than Building
standard materials, without the prior written consent of Landlord.
3. Tenant shall not obstruct any sidewalks, halls, passages, exits,
entrances, elevators, escalators or stairways of the Building. The halls,
passages, exits, entrances, elevators, escalators and stairways are not for the
general public, and Landlord shall in all cases retain the right to control and
prevent access thereto of all persons whose presence in the judgment of Landlord
would be prejudicial to the safety, character, reputation and interests of the
Building and its tenants; provided, that nothing herein contained shall be
construed to prevent such access to persons with whom any tenant normally deals
in the ordinary course of its business, unless such persons are engaged in
illegal activities. Except as otherwise provided in the Lease, Tenant and no
employee, invitee, agent, licensee or contractor of Tenant shall go upon or be
entitled to use any portion of the roof of the Building.
4. The directory of the Building will be provided exclusively for the
display of the name and location of tenants only, and Landlord reserves the
right to exclude any other names therefrom.
5. All cleaning and janitorial services for the Building and the Premises
shall be provided exclusively through Landlord or Landlord's janitorial
contractors in accordance with the provisions of Section 18.1(d) of the Lease.
No person or persons other than those approved by Landlord shall be employed by
Tenant or permitted to enter the Building for the purpose of cleaning the same.
Tenant shall not cause any unnecessary labor by carelessness or indifference to
the good order and cleanliness of the Premises.
6. Landlord will furnish Tenant, free of charge, with two keys to each door
lock in the Premises. Landlord may impose a reasonable charge for any additional
keys. Tenant may not make or have made additional keys, and Tenant shall not
alter any lock or install a new additional lock or bolt on any door or window of
its Premises. Tenant, upon termination of its tenancy, shall deliver to Landlord
the keys of all doors which have been furnished to, or otherwise procured by
Tenant, and, in the event of loss of any keys, shall pay Landlord the cost of
replacing the same or of changing the lock or locks opened by such lost key if
Landlord shall deem it necessary to make such change.
7. Electric wires, telephones, telegraphs, burglar alarms or other similar
apparatus shall not be installed in the Premises except with the approval and
under the direction of Landlord or as otherwise provided in the Lease. Except as
otherwise provided in the Lease, the location of telephones, call boxes and any
other equipment affixed to the Premises shall be subject to the approval of
Landlord. Any installation of telephones, telegraphs, electric wires or other
electric apparatus made without permission or otherwise in accordance with the
Lease shall be removed by Tenant at Tenant's own expense. Except as otherwise
provided in the Lease, no machines other than standard office machines, such as
typewriters and calculators, photo copiers, personal computers and word.
processors, and vending machines permitted by the Lease, shall be used in the
Premises without the approval of Landlord.
8. No furniture, freight, or equipment of any kind shall be brought into
the Building without prior notice to Landlord and all moving of the same into or
out of the Building shall be done at such time and in such manner as Landlord
shall designate. No furniture, equipment or merchandise shall be received in the
Building or carried up or down in the elevator, except between such hours as
shall be designated by Landlord. Deliveries during normal office hours shall be
limited to normal office supplies and other small items. No deliveries shall be
made which impede or interfere with other tenants or the operation of the
Building.
9. Tenant shall not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor was designed to carry (unless
structural support is provided that is acceptable to Landlord) and which is
allowed by law. Landlord shall have the right to prescribe the weight, size and
position of all equipment, materials, furniture or other property brought into
the Building. Heavy objects, if such objects are considered necessary by Tenant,
as determined by Landlord, shall stand on such platforms as determined by
Landlord to be necessary to properly distribute the weight. Business machines
and mechanical equipment which cause noise or vibration that may be transmitted
to the structure of the Building or to any space therein to such a degree as to
be objectionable to Landlord or to
EXHIBIT "E"
<PAGE> 54
any tenants in the Building, shall be placed and maintained by Tenant, at
Tenant's expense, on vibration eliminators or other devices sufficient to
eliminate noise or vibration. Landlord will not be responsible for loss of, or
damage to, any such equipment or other property from any cause, and all damage
done to the Building by maintaining or moving such equipment or other property
shall be repaired at the expense of Tenant.
10. Tenant shall not use or keep in the Premises any kerosene, gasoline or
inflammable or combustible fluid or material other than those limited quantities
necessary for the operation or maintenance of office equipment or Tenant's
back-up generator. Tenant shall not use or permit to be used in the Premises any
foul or noxious gas or substance, or permit or allow the Premises to be occupied
or used in a manner offensive or objectionable to Landlord or other occupants of
the Project by reason of noise, odors or vibrations, nor shall Tenant bring into
or keep in or about the Premises any birds or animals.
11. Except as otherwise provided in the Lease, Tenant shall not use any
method of heating or airconditioning other than that supplied by Landlord.
12. Tenant shall not waste electricity, water or air-conditioning and agrees
to cooperate fully with Landlord to assure the most effective operation of the
Building's heating and air-conditioning and to comply with any governmental
energy-saving rules, laws or regulations of which Tenant has actual notice, and
shall not adjust controls other than room thermostats installed for Tenant's
use. Tenant shall keep corridor doors closed and shall close window coverings at
the end of each business day.
13. Landlord reserves the right from time to time, in Landlord's sole and
absolute discretion, exercisable without prior notice and without liability to
Tenant, to: (a) name or change the name of the Building, Site or Project; (b)
change the address of the Building or Project, and/or (c) install, replace or
change any signs in, on or about the Common Areas, the Building or Site (except
for Tenant's signs, if any, which are expressly permitted by the Lease).
14. Landlord reserves the right to exclude from the Building between the
hours of 6:00 p.m. and 7:00 a.m., or such other hours as may be established from
time to time by Landlord, and on legal holidays, any person unless that person
is known to the person or employee in charge of the Building and has a pass or
is properly identified. Landlord shall not be liable for damages for any error
with regard to the admission to or exclusion from the Building of any person.
Tenant shall be responsible for all persons for whom it requests passes and
shall be liable to Landlord for all acts of such persons. Landlord reserves the
right to prevent access to the Building in case of invasion, mob, riot, public
excitement or other commotion by closing the doors or by other appropriate
action.
15. Tenant shall close and lock all doors of its Premises and entirely shut
off all water faucets or other water apparatus, and, except with regard to
Tenant's computers and other equipment which reasonably require electricity on a
24-hour basis, all electricity, gas or air outlets before Tenant and its
employees leave the Premises. Tenant shall be responsible for any damage or
injuries sustained by other tenants or occupants of the Building or by Landlord
for noncompliance with this rule.
16. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall
not be used for any purpose other than that for which they were constructed, and
no foreign substances of any kind whatsoever shall be thrown therein.
17. Tenant shall not sell, or permit the sale at retail, of newspapers,
magazines, periodicals, theater tickets, or any other goods or merchandise to
the general public in or on the Premises. Tenant shall not make any room-to-room
solicitation of business from other tenants in the Project. Tenant shall not use
the Premises for any business or activity other than that specifically provided
for in the Lease.
18. Except as otherwise provided in the Lease, Tenant shall not install any
radio or television antenna, loudspeaker or other device on the roof or exterior
walls of the Building. Tenant shall not interfere with radio or television
broadcasting or reception from or in the Building or elsewhere.
19. Except as expressly permitted in the Lease, Tenant shall not mark, drive
nails, screw or drill into the partitions, window mullions, woodwork or plaster,
or in any way deface the Premises or any part thereof, except to install normal
wall hangings. Tenant shall repair any damage resulting from noncompliance under
this rule.
20. Except for vending machines used for Tenant's employees, Tenant shall
not install, maintain or operate upon the Premises any vending machines without
the prior written consent of Landlord, which shall not be unreasonably withheld.
21. Canvassing, soliciting and distribution of handbills or any other
written material, and peddling in and around the Project or the Building are
expressly prohibited, and each tenant shall cooperate to prevent same.
E-2
<PAGE> 55
22. Landlord reserves the right to exclude or expel from the Project and/or
the Building any person who, in Landlord's judgment, is intoxicated or under the
influence of liquor or drugs or who is in violation of any of the Rules and
Regulations of the Project or Building.
23. Tenant shall store all its trash and garbage within its Premises. Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of trash and garbage disposal.
All garbage and refuse disposal shall be made in accordance with directions
reasonably issued from time to time by Landlord.
24. The Premises shall not be used for the storage of merchandise held for
sale to the general public, or for lodging or for manufacturing of any kind. No
cooking shall be done or permitted by Tenant on the Premises, except that use by
Tenant of Underwriters' Laboratory-approved equipment for brewing coffee, tea,
hot chocolate and similar beverages shall be permitted and the use of a
microwave shall be permitted, provided that such equipment and use is in
accordance with all applicable federal, state, county and city laws, codes,
ordinances, rules and regulations.
25. Tenant shall not use in any space, or in the public halls of the
Building, any hand trucks except those equipped with rubber tires and side
guards, or such other material-handling equipment as Landlord may approve.
Tenant shall not bring any other vehicles of any kind into the Building.
26. Tenant shall not use the name of the Project or Building in connection
with, or in promoting or advertising, the business of Tenant, except for
Tenant's address.
27. Tenant agrees that it shall comply with all fire and security
regulations that may be issued from time to time by Landlord, and Tenant also
shall provide Landlord with the name of a designated responsible employee to
represent Tenant in all matters pertaining to such fire or security regulations.
Tenant shall cooperate fully with Landlord in all matters concerning fire and
other emergency procedures.
28. Tenant assumes any and all responsibility for protecting its Premises
from theft, robbery and pilferage. Such responsibility shall include keeping
doors locked and other means of entry to the Premises closed.
29. Landlord may waive any one or more of these Rules and Regulations for
the benefit of Tenant or any other tenant, but no such waiver by Landlord shall
be construed as a waiver of such Rules and Regulations in favor of Tenant or any
other such tenant (except to the extent of such waiver), nor prevent Landlord
from thereafter enforcing any such Rules and Regulations against any and all of
the tenants in the Building; provided, however, Landlord Will not waive or
enforce such Rules and Regulations in a manner that would unreasonably interfere
with Tenant's rights under the Lease.
30. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of any lease of premises in the Project or
Building.
31. Landlord reserves the right to make such other and reasonable Rules and
Regulations as, in its judgment, may from time to time be needed for safety,
security, care and cleanliness of the Project and/or Building and for the
preservation of good order therein. Tenant agrees to abide by all such Rules and
Regulations hereinabove stated and any additional rules and regulations which
are adopted.
32. Tenant shall be responsible for the observance of all of the foregoing
rules by Tenant's employees, agents, clients, customers, invitees or guests.
33. Tenant shall not lay linoleum, tile, carpet or other similar floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except by a paste, or other material which may easily be removed with
water, the use of cement or other similar adhesive materials being expressly
prohibited. The method of affixing any such linoleum, tile, carpet or other
similar floor covering shall be subject to the approval of Landlord. The expense
of repairing any damage resulting from a violation of this rule shall be borne
by Tenant.
PARKING RULES AND REGULATIONS
In addition to the parking provisions contained in the Lease to which this
Exhibit "E" is attached, the following rules and regulations shall apply with
respect to the use of the Building's parking facilities.
1. Every parker is required to park and lock his/her own vehicle. All
responsibility for damage to or loss of vehicles is assumed by the parker and
Landlord shall not be responsible for any such damage or loss by water, fire,
defective brakes, the act or omissions of others, theft, or for any other cause.
2. Tenant shall not park or permit its employees to park in any parking
areas designated by Landlord as areas for parking by visitors to the Project.
Tenant shall not leave vehicles in the parking areas
E-3
<PAGE> 56
overnight nor park any vehicles in the parking areas other than automobiles,
sport utility vehicles, pickups, motorcycles, motor driven or non-motor driven
bicycles or four wheeled trucks.
3. Parking stickers or any other device or form of identification supplied
by Landlord as a condition of use of the parking facilities shall remain the
property of Landlord. Such parking identification device must be displayed as
requested and may not be mutilated in any manner. The serial number of the
parking identification device may not be obliterated. Devices are not
transferable and any device in the possession of an unauthorized holder will be
void.
4. No overnight or extended term storage of vehicles shall be permitted.
5. Vehicles must be parked entirely within painted stall lines of a single
parking stall.
6. All directional signs and arrows must be observed.
7. The speed limit within all parking areas shall be five (5) miles per
hour.
8. Parking is prohibited: (a) in areas not striped for parking; (b) in
aisles; (c) where "no parking" signs are posted; (d) on ramps; (e) in
cross-hatched areas; and (f) in reserved spaces and in such other areas as may
be designated by Landlord or Landlord's parking operator.
9. Loss or theft of parking identification devices must be reported to the
Management Office immediately, and a lost or stolen report must be filed by the
Tenant or user of such parking identification device at the time. Landlord has
the right to exclude any vehicle from the parking facilities that does not have
an identification device.
10. Any parking identification devices reported lost or stolen found on any
unauthorized car will be confiscated and the illegal holder will be subject to
prosecution.
11. Washing, waxing, cleaning or servicing of any vehicle in any area not
specifically reserved for such purpose is prohibited.
12. The parking operators, managers or attendants are not authorized to make
or allow any exceptions to these rules and regulations.
13. Tenant's continued right to park in the parking facilities is
conditioned upon Tenant abiding by these rules and regulations and those
contained in this Lease. Further, if the Lease terminates for any reason
whatsoever, Tenant's right to park in the parking facilities shall terminate
concurrently therewith.
14. Tenant agrees to sign a parking agreement with Landlord or Landlord's
parking operator within five (5) days of request, which agreement shall provide
the manner of payment of monthly parking fees and otherwise be consistent with
the Lease and these rules and regulations.
15. Landlord reserves the right to refuse the sale or use of monthly
stickers or other parking identification devices to any tenant or person who
willfully refuses to comply with these rules and regulations and all city, state
or federal ordinances, laws or agreements.
16. Landlord reserves the right to establish and change parking fees, and to
modify and/or adopt such other reasonable and non-discriminatory rules and
regulations for the parking facilities as it deems necessary for the operation
of the parking facilities. Landlord may refuse to permit any person who violates
these rules to park in the parking facilities, and any violation of the rules
shall subject the vehicle to removal, at such vehicle owner's expense.
E-4
<PAGE> 57
EXHIBIT "F"
SAMPLE FORM OF TENANT ESTOPPEL CERTIFICATE
The undersigned ("TENANT") hereby certifies to ___________________________, a
____________________________________________________________ ("LANDLORD"), and
_______________________________________________, as follows:
1. Attached hereto is a true, correct and complete copy of that certain
Office Lease dated ____________, 19__ between Landlord and Tenant (the "LEASE"),
which demises Premises which are located at ______________________________. The
Lease is now in full force and effect and has not been amended, modified or
supplemented, except as set forth in Section 6 below.
2. The term of the Lease commenced on __________, 19__.
3. The term of the Lease is currently scheduled to expire on _______, 19__.
4. Tenant has no option to renew or extend the Term of the Lease except:
_______________________________________________________________________________
_________________.
5. Tenant has no preferential right to purchase the Premises or any portion
of the Building or Site upon which the Premises are located, and Tenant has no
rights or options to expand into other space in the Building except:___________
______________________________________________.
6. The Lease has: (initial One)
( ) not been amended, modified, supplemented, extended, renewed or
assigned.
( ) been amended, modified, supplemented, extended, renewed or
assigned by the following described agreements, copies of which are
attached hereto: _________________________________________________
__________________________________________________________________
______________________.
7. Tenant has accepted and is now in possession of the Premises and has not
sublet, assigned or encumbered the Lease, the Premises or any portion thereof
except as follows: ____________________________________________________________
______________________________________________________________________________
____________________________
8. The current Monthly Basic Rent is $ ___________________; and current
monthly parking charges are $________________.
9. Tenant's Percentage is ___________%, and Tenant's Percentage of
Operating Expenses currently payable by Tenant is $____________ per month, which
amount is Landlord's current estimate of Tenant's Percentage of Operating
Expenses in excess of:
(Complete One) $ _________________ per year (expense stop), or
the Operating Expenses incurred in calendar year _______.
10. The amount of security deposit (if any) is $ ______________. No other
security deposits have been made.
11. All rental payments payable by Tenant have been paid in full as of the
date hereof. No rent under the Lease has been paid for more than thirty (30)
days in advance of its due date.
12. All work required to be performed by Landlord under the Lease has been
completed and has been accepted by Tenant, and all tenant improvement allowances
have been paid in full.
13. To the best of Tenant's knowledge, as of the date hereof, there are no
defaults on the part of Landlord or Tenant under the Lease.
14. Tenant has no defense as to its obligations under the Lease and claims
no set-off or counterclaim against Landlord.
15. Tenant has no right to any concession (rental or otherwise) or similar
compensation in connection with renting the space it occupies, except as
expressly provided in the Lease.
16. All insurance required of Tenant under the Lease has been provided by
Tenant and all premiums have been paid.
EXHIBIT "F"
<PAGE> 58
17. There has not been filed by or against Tenant a petition in bankruptcy,
voluntary or otherwise, any assignment of creditors, any petition seeking
reorganization or arrangement under the bankruptcy laws of the United States or
any state thereof, or any other action brought pursuant to such bankruptcy laws
with respect to Tenant.
18. Tenant pays rent due Landlord under the Lease to Landlord and does not
have any knowledge of any other person who has any right to such rents by
collateral assignment or otherwise.
Dated:_________________________, 19__.
"TENANT"
_______________________________________
a______________________________________
By:____________________________________
Print Name:____________________________
Its:___________________________________
F-2
<PAGE> 1
EXHIBIT 10.33
CREDIT AGREEMENT
This Credit Agreement ("Agreement") is made and entered into on August 4, 1999,
by and between WEBSIDESTORY, INC., a California corporation ("Borrower") and
IMPERIAL BANK, a California banking corporation, ("Bank").
Subject to the terms and conditions of this Agreement, any security
agreement(s) executed by Borrower in favor of Bank, any note(s) executed by
Borrower in favor of Bank, or any other agreements executed in conjunction
therewith (collectively, the "Loan Documents"), Bank shall make the loans and
or advances (individually a "Loan" and collectively "Loans") referred to below
to Borrower.
In consideration of mutual covenants and conditions hereof, the parties hereto
agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.01 REVOLVING CREDIT COMMITMENT.
(a) REVOLVING LINE OF CREDIT. Subject to the terms and conditions of this
Agreement, provided that no event of default then has occurred and is
continuing, Bank shall, upon Borrower's request make advances ("Revolving
Loans") to Borrower, for general corporate purposes in an amount not to exceed
$4,000,000, with a sub-limit up to $1,000,000 to finance capital equipment
expenditures (the "Revolving Line of Credit. The Revolving Line of Credit shall
be available until August 2, 2000 ("Revolving Line of Credit Maturity Date").
Revolving Loans may be repaid and reborrowed, provided that all outstanding
principal and accrued interest on the Revolving Loans shall be payable in full
on the Revolving Credit Maturity Date.
(b) EQUIPMENT DRAWS. Equipment draws made under the Revolving Line of
Credit shall be converted to a term loan evidenced by a term note, which shall
provide for equal principal payments plus interest as follows:
On the date that is 12 months from the date hereof, all
Revolving Loans made under the Revolving Line of Credit for equipment purchases
that are then-outstanding shall be converted to a term loan which shall be
evidenced by a 36 month term note.
Equipment draws made under the Revolving Line of Credit may include
up to 100% of invoice value excluding soft costs, freight, and sales taxes.
Each equipment advance shall require a detailed schedule of equipment
purchases and other expenses associated with each draw-down.
(c) REVOLVING NOTE. The interest rate, principal and interest payments,
maturity date and certain other terms of the Revolving Loan will be contained
in a promissory note dated the date of this agreement, as such may be amended
or replaced from time to time.
Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE> 2
(d) LETTER OF CREDIT USAGE AND SUBLIMIT. Subject to availability under
the Revolving Line of Credit, at any time and from time to time from the date
hereof through the banking day immediately prior to the Revolving Line of
Credit Maturity Date, Bank shall issue for the account of Borrower such standby
and commercial letters of credit ("Letters of Credit") as Borrower may
request, which requests shall be made by delivering to Bank a duly executed
letter of credit application on Bank's standard form; provided, however, that
the outstanding and undrawn amounts under all such Letters of Credit (i) shall
not at any time exceed $360,000 ("Letter of Credit Sublimit") and (ii) shall be
deemed to constitute Revolving Loans for the purpose of calculating availability
under the Revolving Line of Credit. Unless agreed to in writing by Bank, no
Letter of Credit shall have an expiration date that is later than the Revolving
Line of Credit Maturity Date. All Letters of Credit shall be in form and
substance acceptable to Bank in its sole discretion and shall be subject to the
terms and conditions of Bank's form application and letter of credit agreement
and other agreements required by Bank. Borrower will pay all usual issuance and
other fees that Bank notifies Borrower will be charged for issuing and
processing Letters of Credit for Borrower.
(d) LATE CHARGE. If any installment payment, interest payment, principal
payment or principal balance due under the Revolving Line of Credit is
delinquent ten (10) or more days, Borrower agrees to pay Bank a late charge in
the amount of five percent (5%) of the payment so due and unpaid, in addition
to the payment; but nothing in this paragraph is to be construed as any
obligation on the part of the Bank to accept payment of any payment past due or
less than the total unpaid principal balance after maturity. All payments, at
Bank's sole discretion, shall be applied first to any late charges owing, then
to interest and the remainder, if any, to principal.
(e) DEFAULT RATE. If an Event of Default occurs hereunder, then during
the continuance thereof at the Bank's option, the interest rate shall be five
percent (5%) per year in excess of the rate otherwise applicable.
(f) INTEREST CALCULATIONS. The term "Prime Rate" shall mean the rate that
the Bank has announced as its prime lending rate, which shall vary concurrently
with any change in the Prime Rate. Interest based on the Prime Rate shall vary
concurrently with any change in the Prime Rate. All interest shall be computed
at the rate specified in any note on the basis of the actual number of days
during which the principal balance of the corresponding Loans are outstanding
divided by 360, which shall for interest computation purposes be considered one
(1) year.
1.02 LOAN FEE. In addition to any other amounts due, or to become due,
concurrent with the execution hereof, in connection with the Revolving Line of
Credit, Borrower shall pay to Bank a loan fee of Five Thousand Dollars ($5,000).
1.03 DOCUMENTATION FEE, COSTS AND EXPENSES. In addition to any other
amounts due, or to become due, concurrently with the execution hereof, Borrower
agrees to pay to Bank a documentation fee in the amount of $500.00 and all
other costs and expenses incurred by the Bank in the preparation of this
Agreement, the other Loan Documents and the perfection of any security interest
granted to Bank by Borrower.
2
Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE> 3
1.04 COLLATERAL. Borrower shall grant or cause to be granted to Bank a first
priority lien on any and all personal property assets of Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank now has
or hereafter acquires a security interest or pursuant to the terms of any
security agreement, an intellectual property security agreement or otherwise as
security for all of Borrower's obligations to Bank, all as may be subject to
Section 5.03 herein.
1.05 COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect all interest,
fees, costs, and/or expenses due under this Agreement by charging Borrower's
demand deposit account number 38-051-660 with Bank, or any other demand deposit
account maintained by Borrower with Bank, for the full amount thereof. Should
there be insufficient funds in any such demand deposit account to pay all such
sums when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.
2. REPRESENTATIONS OF BORROWER
Borrower represents and warrants that:
2.01 EXISTENCE AND RIGHTS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the state of California,
without limit as to the duration of its existence. Borrower is authorized and
in good standing to do business in the state of its incorporation; Borrower has
the appropriate powers and adequate authority, rights and franchises to own its
property and to carry on its business as now conducted, and is duly qualified
and in good standing in the state in which the character of the properties
owned by it therein or the conduct of its business makes such qualification
necessary; and Borrower has the power and adequate authority to make and carry
out this Agreement. Borrower has no investment in any other business entity
unless specified in writing to Bank.
2.02 AGREEMENT AUTHORIZED. The execution, delivery and performance of this
Agreement and the Loan Documents are duly authorized and do not require the
consent or approval of any governmental body or other regulatory authority; are
not in contravention of or in conflict with any law or regulation or any term or
provision of Borrower's charter/articles of incorporation, or similar document
as the case may be, and this Agreement is the valid, binding and legally
enforceable obligation of Borrower in accordance with its terms; subject only to
bankruptcy, insolvency or similar laws affecting creditors rights generally.
2.03 NO CONFLICT. The execution, delivery and performance of this Agreement and
the Loan Documents are not in contravention of or in conflict with any
agreement, indenture or undertaking to which Borrower is a party or by which it
or any of its property may be bound or affected, and do not cause any lien,
change or other encumbrance to be created or imposed upon any such property by
reason thereof.
2.04 LITIGATION. Except as disclosed in writing to bank by Borrower, there is
no litigation or other proceeding pending or threatened against or affecting
Borrower which if determined adversely to Borrower or its interest would have a
material adverse effect on the
3
Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE> 4
financial condition of Borrower, and Borrower is not in default with respect to
any order, writ, injunction, decree or demand of any court or other governmental
or regulatory authority.
2.05 FINANCIAL CONDITION. The balance sheet of Borrower as of April 30,
1999, and the related profit and loss statement for the four-month period ended
as of that date, a copy of which has heretofore been delivered to Bank by
Borrower, and all other statements and data submitted in writing by Borrower to
Bank in connection with this request for credit are true and correct, and said
balance sheet truly presents the financial condition of Borrower as of the date
thereof, and has been prepared in accordance with generally accepted accounting
principles on a basis consistently maintained. Since such date there have been
no material adverse changes in the financial condition or business of Borrower.
Borrower has no knowledge of any liabilities, contingent or otherwise, at such
date not reflected in said balance sheet, and Borrower has not entered into any
special commitments or substantial contracts which are not reflected in said
balance sheet, other than in the ordinary and normal course of its business,
which may have a materially adverse effect upon its financial condition,
operations or business as now conducted.
2.06 TITLE TO ASSETS. Borrower has good title to its assets, and the same
are not subject to any liens or encumbrances other than those permitted by
Section 5.03 hereof.
2.07 TAX STATUS. Borrower has no liability for any delinquent state, local
or federal taxes, and, if Borrower has contracted with any government agency,
Borrower has no liability for renegotiation of profits.
2.08 TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license rights
of others.
2.09 REGULATION U. None of the proceeds of any Loan shall be used to
purchase or carry margin stock (as defined within Regulation U of the Board of
Governors of the Federal Reserve system).
2.10 ERISA. All defined benefit pension plans as defined in the Employees
Retirement Income Security Act of 1974, as amended ("ERISA"), of Borrower meet,
as of the date hereof, the minimum funding standards of Section 302 of ERISA,
and no Reportable Event or Prohibited Transaction as defined in ERISA has
occurred with respect to any such plan.
2.11 YEAR 2000 COMPLIANCE. Borrower and its subsidiaries, as applicable,
have reviewed the areas within their operations and business which could be
adversely affected by, and have developed or are developing a program to address
on a timely basis, the Year 2000 Problem and have made related appropriate
inquiry of material suppliers and vendors, and based on such review and program,
the Year 2000 Problem will not have a material adverse effect upon its financial
condition, operations or business as now conducted. "Year 2000 Problem" means
the possibility that any computer applications or equipment used by Borrower may
be unable to recognize and properly perform date sensitive functions involving
certain dates prior to and any dates on or after December 31, 1999.
4
Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE> 5
3. CONDITIONS PRECEDENT TO LOAN.
Prior to Bank being obligated to make any Loan pursuant to this Agreement,
Bank must receive all of the following, each of which must be in form and
substance satisfactory to Bank:
3.01 PROMISSORY NOTE. Original, executed promissory note.
3.02 SECURITY AGREEMENT. Original, executed security agreement covering
the personal property collateral securing the Loan.
3.03 FINANCING STATEMENT. Financing statement executed by Borrower.
3.04 INSURANCE. Borrower shall have delivered to Bank evidence of
insurance coverage required pursuant to that Agreement to Provide Insurance
executed by Borrower, in form, substance, amounts, covering risks and issued by
companies satisfactory to Bank, and where required by Bank, with loss payable
endorsements in favor of Bank.
3.05 ORGANIZATIONAL DOCUMENTS. Copies of the charter/articles of
incorporation, or similar document as the case may be, of the Borrower.
3.06 AUTHORIZATIONS. Certified copies of all action taken by the Borrower
of a security interest to authorize the execution, delivery and performance of
the Loan Documents.
3.07 GOOD STANDING. Good standing certificates from the appropriate
secretary of state of the state in which the Borrower is organized.
3.08 ADDITIONAL DOCUMENTS. Such other documents as Bank may reasonably
deem necessary.
4. AFFIRMATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, under borrowings, or
other indebtedness, or so long as Bank has any obligation to extend credit to
Borrower it will, unless Bank shall otherwise consent in writing:
4.01 RIGHTS AND FACILITIES. Maintain and preserve all rights, franchises
and other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
4.02 USE OF PROCEEDS. Use the proceeds of the Loans only for purposes
specified in Section 1 of this Agreement.
5
Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE> 6
4.03 INSURANCE. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses and/or in the exercise of good business
judgment, and as required by that Agreement to Provide Insurance executed by
Borrower, with the Bank to be shown as Lenders Loss Payee on such policies.
4.04 TAXES AND OTHER LIABILITIES. Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes, assessments
and governmental charges upon or against it or any of its properties, and
all its other liabilities at any time existing, except to the extent and so long
as:
(a) The same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any materially adverse effect upon
its financial condition or the loss of any right of redemption from any sale
thereunder; and
(b) It shall have set aside on its books reserves (segregated to the
extent required by generally accepted accounting practice) deemed by it to be
adequate with respect thereto.
4.05 RECORDS AND REPORTS. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit Bank's representatives to have access to,
and to examine its properties, books and records at all reasonable times and
upon reasonable notice during normal business hours; and furnish Bank:
(a) MONTHLY FINANCIAL STATEMENT. As soon as available, and in any event
within thirty (30) days after the close of each month, a balance sheet, profit
and loss statement and reconciliation of Borrower's capital balance accounts as
of the close of such period and covering operations for the portion of
Borrower's fiscal year ending on the last day of such period, all in reasonable
detail and reasonably acceptable to Bank, in accordance with generally accepted
accounting principles on a basis consistently maintained by Borrower and
certified by an appropriate officer of Borrower.
(b) ANNUAL FINANCIAL STATEMENT. As soon as available, and in any event
within one hundred twenty (120) days after and as of the close of each fiscal
year of Borrower, a report of audit of Company, all in reasonable detail,
audited by an unqualified certified public accountant selected by Borrower and
reasonably acceptable to Bank, in accordance with generally accepted accounting
principles on a basis consistently maintained by Borrower and certified by an
appropriate officer of Borrower.
(c) OFFICER'S CERTIFICATE. Within thirty (30) days after the end of each
month and fiscal year of Borrower, a certificate of the chief financial officer
of Borrower, stating that Borrower has performed and observed each and every
covenant contained in this Agreement to be performed by it and that no event
has occurred and no condition then exists which constitutes an event of default
hereunder or would constitute such an event of default upon the lapse of time
or upon the giving of notice and the lapse of time specified herein; or, if any
such event has occurred or any such condition exists, specifying the nature
thereof.
6
Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE> 7
(d) OTHER INFORMATION. Such other information relating to the affairs of
Borrower as the Bank reasonably may request from time to time.
4.06 MINIMUM LIQUIDITY. Maintain a minimum liquidity (defined as unrestricted
cash and cash equivalents plus net trade accounts receivable) measured monthly,
equal to the greater of one and one-half times (1.5x) current liabilities and
all bank debt.
4.07 MINIMUM PRE-TAX PROFIT. Maintain on a quarterly basis a minimum pre-tax
profit of not less than:
(a) $251,000 for quarter ending September 30, 1999;
(b) $721,000 for quarter ending December 31, 1999;
(c) $1,002,000 for quarter ending March 31, 2000;
(d) $1,178,000 for quarter ending June 30, 2000;
(e) $1,555,000 for quarter ending September 30, 2000; and
(f) $1,000,000 for quarter ending December 31, 2000 and each quarter end
thereafter.
4.08 EQUIPMENT PURCHASES. Provide a detailed schedule of equipment purchases
and other expenses associated with each draw-down related to the Revolving Line
of Credit. Equipment draws to include 100% of invoice value excluding soft
costs, freight, and sales tax. Advances must be supported by invoice dated no
later than ninety (90) days prior to said advance.
4.09 ERISA. Cause all defined benefit pension plans, as defined in ERISA, of
Borrower to, at all times, meet the minimum funding standards of Section 302 of
ERISA, and ensure that no Reportable Event or Prohibited Transaction, as
defined in ERISA, will occur with respect to any such plan.
4.10 LAWS. At all times comply with, or cause to be complied with, all laws,
statutes, rules, regulations, orders and directions of any governmental
authority having jurisdiction over Borrower or Borrower's business.
4.11 GAAP. Compliance with all financial covenants shall be calculated based on
generally accepted accounting principles applied on a consistent basis as
maintained by Borrower.
4.12 YEAR 2000 COMPLIANT. Borrower shall perform all acts reasonably necessary
to ensure that (a) Borrower and any business in which Borrower holds a
substantial interest, and (b) all customers, suppliers and vendors whose
compliance is likely to be material to Borrower's business, become Year 2000
Compliant in a timely manner. Such acts shall include, without
7
Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE> 8
limitation, performing a comprehensive review and assessment of all Borrower's
systems and adopting a detailed plan, with itemized budget, for the
remediation, monitoring and testing of such systems. As used in this paragraph,
"Year 2000 Compliant" shall mean, in regard to any entity, that all software,
hardware, firmware, equipment, goods or systems utilized by or material to the
business operations or financial condition of such entity, will properly
perform date sensitive functions before, during and after the year 2000.
Borrower shall, immediately upon request, provide to Agent such certifications
or other evidence of Borrower's compliance with the terms of this paragraph as
Bank may from time to time require.
4.13 OPERATING ACCOUNTS. Maintain all primary accounts and banking
relationship with the Bank.
4.14 NOTICES. Promptly notify Bank in writing of (i) the occurrence of any
Event of Default hereunder or any event which upon notice and lapse of time
would be an Event of Default; (ii) all litigation affecting Borrower where the
amount is $500,000 or more; any substantial dispute which may exist between
Borrower and any governmental regulatory body or law enforcement authority; any
change in Borrower's name or principal place of business; or any other matter
which has resulted or might result in a material adverse change in Borrower's
financial condition or operations.
5. NEGATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, or so long as Bank has
any obligation to extend credit to Borrower, it will not, without Bank's
written consent:
5.01 TYPE OF BUSINESS. Make any substantial change in the character of its
business.
5.02 OUTSIDE INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness for borrowed moneys other than Loans from the Bank except
obligations now existing as shown in the financial statement dated April, 1999,
excluding those obligations being refinanced by Bank, and other than those
Permitted Indebtedness or sell or transfer, either with or without recourse,
any accounts or notes receivable or any moneys due or to become due.
5.03 LIENS AND ENCUMBRANCES. Create, incur, permit to exist, or assume any
mortgage, pledge, encumbrance, lien or charge of any kind upon any asset now
owned or hereafter acquired by it, other than liens for taxes not delinquent,
liens arising by operation of law in the ordinary course of business, and liens
in Bank's favor and other than liens agreed to in writing by Bank.
5.04 LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or advances
to any person or other entity other than in the ordinary and normal course of
its business as now conducted or make any investment in the securities of any
person or other entity other than the United States Government; or guarantee or
otherwise become liable upon the obligation of any person or other entity,
except by endorsement of negotiable instruments for deposit or collection in
the ordinary and normal course of its business.
8
Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE> 9
5.05 Acquisition or Sale of Business; Merger or Consolidation. Purchase or
otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings therefor;
or sell any assets except in the ordinary and normal course of its business as
now conducted; or sell, lease, assign, or transfer any substantial part of its
business or fixed assets, or any property or other assets necessary for the
continuance of its business as now conducted, including without limitation the
selling of any property or other asset accompanied by the leasing back of the
same.
5.06 Dividends and Distributions. Declare or pay any dividend or make any
other distribution on any of its capital stock now outstanding or hereafter
issued or purchased, redeem or retire any of such stock other than in dividends
or distributions payable in Borrower's capital stock, except for the repurchase
of Borrower's capital stock from officers, directors, employees or consultants
of Borrower upon termination of their employment with or rendering of service to
Borrower.
9
Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE> 10
6. EVENTS OF DEFAULT
The occurrence of any of the following events of default ("Events of Default")
shall, at Bank's option, terminate Bank's commitment to lend and make all sums
of principal and interest then remaining unpaid on all Borrower's indebtedness
to Bank immediately due and payable, all without demand, presentment or notice,
all of which are hereby expressly waived:
6.01 FAILURE TO PAY. Failure to pay any installment of principal or of
interest on any indebtedness of Borrower to Bank within, five (5) days of its
due date.
6.02 BREACH OF COVENANT. Failure of Borrower to perform any other term or
condition of this Agreement or any Loan Document binding upon Borrower.
6.03 BREACH OF WARRANTY. Any of Borrower's representations or warranties
made herein or any statement or certificate at any time given in writing
pursuant hereto or in connection herewith shall be false or misleading in any
respect.
6.04 INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become insolvent; or
admit its inability to pay its debt as they mature; or make an assignment for
the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.
6.05 JUDGMENTS, ATTACHMENTS. Any money judgment in excess of $500,000,
writ or warrant of attachment, or similar process shall be entered or filed
against Borrower or any of its assets and shall remain unvacated, unbonded or
unstayed for a period of ten (10) days or in any event later than five (5) days
prior to the date of any proposed sale thereunder.
6.06 BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against Borrower and, if
instituted against it, shall not be dismissed within thirty (30) days
thereafter.
6.07 CESSATION OF BUSINESS. Borrower shall voluntarily suspend its
business.
6.08 ADVERSE CHANGE. Any change which, in the reasonable opinion of Bank,
is materially adverse to the financial condition of Borrower or which impairs
the prospect of Borrower's payment or performance hereunder or any other
agreement or instrument with Bank.
6.09 OTHER DEFAULTS. Borrower, or any Guarantor of Borrower's obligations
to Bank, shall commit or do or fail to commit or do any act or thing which
would constitute an event of default under any of the terms of any other
agreement, document or instrument executed or to be executed by it concerning
the obligation to pay money.
6.10 ADVANCES. Notwithstanding anything to the contrary contained herein,
Bank shall have no duty to make advances while any event of default exists
notwithstanding any cure period provided for herein.
10
Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE> 11
7. MISCELLANEOUS PROVISIONS
7.01 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
Bank or any holder of notes issued hereunder, in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this Agreement or any note(s) issued in
connection with a Loan that Bank may make hereunder, are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
7.02 COUNTERPARTS; ENTIRE AGREEMENT. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement. This Agreement, and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersedes any prior agreements, written or oral, with respect thereto.
7.03 ATTORNEY'S FEES. Borrower will pay promptly to Bank without demand
after notice, with interest thereon from the date of expenditure at the rate
applicable to the Loan, reasonable attorney's fees and all costs and expenses
paid or incurred by Bank in collecting or compromising the Loan after the
occurrence of an Event of Default, whether or not suit is filed. If suit is
brought to enforce any provision of this Agreement, the prevailing party shall
be entitled to recover its reasonable attorneys' fees and court costs in
addition to any other remedy or recovery awarded by the court.
7.04 ADDITIONAL REMEDIES. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.
7.05 INUREMENT. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assigns of
Borrower.
7.06 APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the state of California, to the jurisdiction
of whose courts the parties hereby agree to submit.
7.07 OFFSET. In addition to and not in limitation of all rights of offset
that Bank or other holder of the Loan may have under applicable law, Bank or
other holder of any note issued hereunder shall, upon the occurrence of any
Event of Default or any event which with the passage of time or notice would
constitute such an Event of Default, have the right to appropriate and apply to
the payment of the Loan any and all balances, credits, deposits, accounts or
monies of Borrower then or thereafter with Bank or other holder, within ten (10)
days after the Event of Default, and notice of the occurrence of any Event of
Default by Bank to Borrower.
11
Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE> 12
7.08 SEVERABILITY. Should any one or more provisions of the Agreement be
determined to be illegal or unenforceable, all other provisions nevertheless
shall be effective.
7.09 TIME OF THE ESSENCE. Time is hereby declared to be of the essence of
this Agreement and of every part hereof.
7.10 ACCOUNTING. All accounting terms shall have the meanings applied
under generally accepted accounting principles unless otherwise specified.
7.11 REFERENCE PROVISION.
(a) Other than (i) nonjudicial foreclosure and all matters in connection
therewith regarding security interests in real or personal property; or (ii)
the appointment of a receiver, or the exercise of other provisional remedies
(any and all of which may be initiated pursuant to applicable law), each
controversy, dispute or claim between the parties arising out of or relating to
this Credit Agreement, any security agreement executed by Borrower in favor of
Bank or any note executed by Borrower in favor of Bank or any other agreement
or instrument issued in favor of Bank by Borrower (collectively in this Section,
the "Agreement") which controversy, dispute or claim is not settled in writing
within thirty (30) days after the "Claim Date" (defined as the date on which a
party subject to this Agreement gives written notice to all other parties that a
controversy, dispute or claim exists), will be settled by a reference
proceeding in California in accordance with the provisions of Section 638 et.
seq. of the California Code of Civil Procedure, or their successor section
("CCP"), which shall constitute the exclusive remedy for the settlement of any
controversy, dispute or claim concerning this Agreement, including whether such
controversy, dispute or claim is subject to the reference proceeding and except
as set forth above, the parties waive their rights to initiate any legal
proceedings against each other in any court or jurisdiction other than the
Superior Court in the County where the Real Property, if any, is located or Los
Angeles County if none (the "Court"). The referee shall be a retired Judge of
the Court selected by mutual agreement of the parties, and if they cannot so
agree within forty-five (45) days after the Claim Date, the referee shall be
promptly selected by the Presiding Judge of the Court (or his representative).
The referee shall be appointed to sit as a temporary judge, with all of the
powers for a temporary judge, as authorized by law, and upon selection should
take and subscribe to the oath of office as provided for in Rule 244 of the
California Rules of Court (or any subsequently enacted Rule). Each party shall
have one peremptory challenge pursuant to CCP Section 170.6. The referee shall
(a) be requested to set the matter for hearing within sixty (60) days after the
date of selection of the referee and (b) try any and all issues of law or fact
and report a statement of decision upon them, if possible, within ninety (90)
days of the Claim Date. Any decision rendered by the referee will be final,
binding and conclusive and judgment shall be entered pursuant to CCP Section
644 in any court in the state of California having jurisdiction. Any party may
apply for a reference proceeding at any time after thirty (30) days following
notice to any other party of the nature of the controversy, dispute or claim,
by filing a petition for a hearing and/or trial. All discovery permitted by this
Agreement shall be completed no later than fifteen (15) days before the first
hearing date established by the referee. The referee may extend such period in
the event of a party's refusal to provide requested discovery for any reason
whatsoever, including, without limitation, legal objections raised to such
discovery or unavailability of a witness due to absence or illness. No party
shall be entitled to "priority" in conducting discovery. Depositions may be
taken by either
12
Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE> 13
party upon seven (7) days written notice, and request for production or
inspection of documents shall be responded to within ten (10) days after
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided
herein, the Superior Court is empowered to issue temporary and/or provisional
remedies, as appropriate.
(b) Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence, and
all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter except that when any
party so requests, a court reporter will be used at any hearing conducted
before the referee. The party making such a request shall have the obligation
to arrange for and pay for the court reporter. The costs of the court reporter
at the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the state of California. The rules
of evidence applicable to proceedings at law in the state of California will be
applicable to the reference proceeding. The referee shall be empowered to enter
equitable as well as legal relief, to provide all temporary and/or provisional
remedies and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding, which shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties hereto expressly reserve the right
to findings of fact, conclusions of laws, a written statement of decision, and
the right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
(d) In the event that the enabling legislation which provides for appointment
of a referee is repealed (and no successor statute is enacted), any dispute
between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2
of the CCP as amended from time to time. The limitations with respect to
discovery as set forth hereinabove shall apply to any such arbitration
proceeding.
7.12 This Agreement may be modified only by a writing signed by all parties
hereto.
13
Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE> 14
This Agreement is executed on behalf of the parties by duly authorized officers
as of the date first above written.
IMPERIAL BANK WEBSIDESTORY, INC.
("Bank") ("Borrower")
By:
By: /s/ ILLEGIBLE SIGNATURE
------------------------------- --------------------------------
Authorized Officer
Its: Its: PRESIDENT AND CEO
------------------------------ --------------------------------
By: /s/ Michael D. Reynolds
--------------------------------
Authorized Officer
Its: VICE PRESIDENT, FINANCE AND CFO
--------------------------------
14
Borrower's Name: WEBSIDESTORY, INC.
Date: August 4, 1999
<PAGE> 1
EXHIBIT 10.33.1
INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Intellectual Property Security Agreement (the "Agreement") is made as
of August 4, 1999, by and between WEBSIDESTORY, INC., a California corporation
("Grantor"), and IMPERIAL BANK, a California chartered bank ("Secured Party").
RECITALS
A. Secured Party has agreed to lend to Grantor certain funds (the
"Loan"), and Grantor desires to borrow such funds from Secured Party pursuant to
the terms of a Credit Agreement, dated as of August 4, 1999 (the "Credit
Agreement;" all capitalized terms used herein without definition shall have the
meanings ascribed to them in the Credit Agreement).
B. In order to induce Secured Party to enter into the Credit Agreement,
Grantor has agreed to grant a security interest in certain intangible property
to Secured Party for purposes of securing the obligations of Grantor to Secured
Party.
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. Grant of Security Interest. As collateral security for the prompt and
complete payment and performance of all of Grantor's present or future
indebtedness, obligations and liabilities to Secured Party, Grantor hereby
grants a security interest and mortgage to Secured Party, as security, in and to
Grantor's entire right, title and interest in, to and under the following (all
of which shall collectively be called the "Collateral"):
(a) Any and all copyright rights, copyright applications, copyright
registrations and like protections in each work or authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret, now or hereafter existing, created, acquired or
held, including without limitation those set forth on Exhibit A attached hereto
(collectively, the "Copyrights");
(b) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing, created, acquired or held;
(c) Any and all design rights which may be available to Grantor now
or hereafter existing, created, acquired or held;
(d) All patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same, including without limitation
the patents and patent applications set forth on Exhibit B attached hereto
(collectively, the "Patents");
(e) Any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Grantor connected with and symbolized by
such trademarks, including without limitation those set forth on Exhibit C
attached hereto (collectively, the "Trademarks");
(f) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;
(g) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights; and
(h) All amendments, renewals and extensions of any of the Copyrights,
Trademarks or Patents; and
<PAGE> 2
(i) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
2. Authorization and Request. Grantor authorizes and requests that the
Register of Copyrights and the Commissioner of Patents and Trademarks record
this security agreement.
3. Covenants and Warranties. Grantor represents, warrants, covenants and
agrees as follows:
(a) Grantor is now the sole owner of the Collateral, except for
non-exclusive licenses granted by Grantor to its customers in the ordinary
course of business;
(b) Performance of this Agreement does not conflict with or result in
a breach of any agreement to which Grantor is party or by which Grantor is
bound, except to the extent that certain intellectual property agreements
prohibit the assignment of the rights thereunder to a third party without the
licensor's or other party's consent and this Agreement constitutes an
assignment;
(c) During the term of this Agreement, Grantor will not transfer or
otherwise encumber any interest in the Collateral, except for non-exclusive
licenses granted by Grantor in the ordinary course of business or as set forth
in this Agreement;
(d) To its knowledge, each of the Patents is valid and enforceable,
and no part of the Collateral has been judged invalid or unenforceable, in whole
or in part, and no claim has been made that any part of the Collateral violates
the rights of any third party;
(e) Grantor shall deliver to Secured Party within (30) days of the
last day of each fiscal quarter, a report signed by Grantor, in form reasonably
acceptable to Secured Party, listing any applications or registrations that
Grantor has made or filed in respect of any patents, copyrights or trademarks
and the status of any outstanding applications or registrations. Grantor shall
promptly advise Secured Party of any material change in the composition of the
Collateral, including but not limited to any subsequent ownership right of the
Grantor in or to any Trademark, Patent or Copyright not specified in this
Agreement;
(f) Grantor shall (i) protect, defend and maintain the validity and
enforceability of the Trademarks, Patents and Copyrights (ii) use commercially
reasonable efforts to detect infringements of the Trademarks, Patents and
Copyrights and promptly advise Secured Party in writing of material
infringements detected and (iii) not allow any Trademarks, Patents or Copyrights
to be abandoned, forfeited or dedicated to the public without the written
consent of Secured Party, which shall not be unreasonably withheld, unless
Grantor determines that reasonable business practices suggest the abandonment is
appropriate;
(g) Grantor shall register or cause to be registered (to the extent
not already registered) with the United States Patent and Trademark Office or
the United States Copyright Office, as applicable, those intellectual property
rights listed on Exhibits A, B and C hereto within thirty (30) days of the date
of this Agreement, Grantor shall register or cause to be registered with the
United States Patent and Trademark Office or the United States Copyright Office,
as applicable, those additional intellectual property rights developed or
acquired by Grantor from time to time in connection with any product prior to
the sale or licensing of such product to any third party (including without
limitation revisions or additions to the intellectual property rights listed on
such Exhibits A, B and C). Grantor shall, from time to time, execute and file
such other instruments, and take such further actions as Secured Party may
reasonably request from time to time to perfect or continue the perfection of
Secured Party's interest in the Collateral;
(h) Grantor has not granted a security interest in the Collateral in
favor of any other Person;
(i) To its knowledge, except for, and upon, the filing with the
United States Patent and Trademark office with respect to the Patents and
Trademarks and the Register of Copyrights with respect to the Copyrights
necessary to perfect the security interests created hereunder, and except as has
been already made or obtained, no authorization, approval or other action by,
and no notice to or filing with, any United States
2
<PAGE> 3
governmental authority or United States regulatory body is required for the
grant by Grantor of the security interest granted hereby or for the execution,
delivery or performance of this Agreement by Grantor in the United States;
(j) All information heretofore, herein or hereafter supplied to
Secured Party by or on behalf of Grantor with respect to the Collateral is
accurate and complete in all material respects;
(k) Grantor shall not enter into any agreement that would
materially impair or conflict with Grantor's obligations hereunder without
Secured Party's prior written consent, which consent shall not be unreasonably
withheld. Grantor shall not permit the inclusion in any material contract to
which it becomes a party of any provisions that could or might in any way
prevent the creation of a security interest in Grantor's rights and interests
in any property included within the definition of the Collateral acquired under
such contracts; and
(l) Upon any executive officer of Grantor obtaining actual knowledge
thereof, Grantor will promptly notify Secured Party in writing of any event
that materially adversely affects the value of any Collateral, the ability of
Grantor to dispose of any Collateral or the rights and remedies of Secured
Party in relation thereto, including the levy of any legal process against any
of the Collateral.
4. Secured Party's Rights. Secured Party shall have the right, but not
the obligation, to take, at Grantor's sole expense, any actions that Grantor is
required under this Agreement to take but which Grantor fails to take, after
fifteen (15) days' notice to Grantor. Grantor shall reimburse and indemnify
Secured Party for all reasonable costs and reasonable expenses incurred in the
reasonable exercise of its rights under this section 4.
5. Further Assurances: Attorney in Fact.
(a) On a continuing basis, Grantor will make, execute, acknowledge
and deliver, and file and record in the proper filing and recording places in
the United States, all such instruments, including appropriate financing and
continuation statements and collateral agreements and filings with the United
States Patent and Trademark Office and the Register of Copyrights, and take all
such action as may reasonably be deemed necessary or advisable, or as requested
by secured Party, to perfect Secured Party's security interest in all
Copyrights, Patents and Trademarks and otherwise to carry out the intent and
purposes of this Agreement, or for assuring and confirming to Secured Party the
grant or perfection of a security interest in all Collateral.
(b) Grantor hereby irrevocably appoints Secured Party as Grantor's
attorney-in-fact, with full authority in the place and stead of Grantor and in
the name of Grantor, from time to time in Secured Party's discretion, to take
any action and to execute any instrument which Secured Party may deem necessary
or advisable to accomplish the purposes of this Agreement, including (i) to
modify, in its sole discretion, this Agreement without first obtaining
Grantor's approval of or signature to such modification by amending Exhibit A,
Exhibit B and Exhibit C, thereof, as appropriate, to include reference to any
right, title or interest in any Copyrights, Patents or Trademarks acquired by
Grantor after the execution hereof or to delete any reference to any right,
title or interest in any Copyrights, Patents or Trademarks in which Grantor no
longer has or claims any right, title or interest, (ii) to file, in its sole
discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of Grantor
where permitted by law and (iii) after the occurrence of an Event of Default, to
transfer the Collateral into the name of Bank or a third party to the extent
permitted under the California Uniform Commercial Code.
6. Events of Default. The occurrence of any of the following shall
constitute an Event of Default under the Agreement:
(a) An Event of Default occurs under the Credit Agreement; or
(b) Grantor breaches any warranty or agreement made by Grantor in
this Agreement and, as to any breach that is capable of cure, Grantor fails to
cure such breach within five (5) days of the occurrence of such breach.
7. Remedies. Upon the occurrence and continuance of an Event of
Default, Secured Party shall have the right to exercise all the remedies of a
secured party under the California Uniform Commercial Code, including
3
<PAGE> 4
without limitation the right to require Grantor to assemble the Collateral and
any tangible property in which Secured Party has a security interest and to
make it available to Secured Party at a place designated by Secured Party.
Secured Party shall have a nonexclusive, royalty free license to use the
Copyrights, Patents and Trademarks to the extent reasonably necessary to permit
Secured Party to exercise its rights and remedies upon the occurrence of an
Event of Default. Grantor will pay any expenses (including reasonable
attorneys' fees) incurred by Secured Party in connection with the exercise of
any Secured Party's rights hereunder, including without limitation any expense
incurred in disposing of the Collateral. All of Secured Party's rights and
remedies with respect to the Collateral shall be cumulative.
8. Indemnity. Grantor agrees to defend, indemnify and hold harmless
Secured Party and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement, and
(b) all losses or expenses in any way suffered, incurred, or paid by Secured
Party as a result of or in any way arising out of, following or consequential
to transactions between Secured Party and Grantor, under this Agreement
(including without limitation reasonable attorneys' fees and reasonable
expenses), except for losses arising from or out of Secured Party's gross
negligence or willful misconduct.
9. Course of Dealing. No course of dealing, nor any failure to
exercise, nor any delay in exercising any right, power or privilege hereunder
shall operate as a waiver thereof.
10. Attorneys' Fees. If any action relating to this Agreement is brought
by either party hereto against the other party, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs and disbursements.
11. Amendments. This Agreement may be amended only by a written
instrument signed by both parties hereto.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute the same instrument.
4
<PAGE> 5
13. California Law and Jurisdiction; Jury Waiver. This Agreement shall be
governed by the laws of the State of California, without regard for choice of
law provisions. Grantor and Secured Party consent to the exclusive jurisdiction
of any state or federal court located in Santa Clara County, California.
GRANTOR AND SECURED PARTY EACH WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE CREDIT AGREEMENT,
THIS AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
OR STATUTORY CLAIMS.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
GRANTOR:
Address of Grantor: WEBSIDESTORY, INC.
6450 Lusk Blvd., Suite E205 By: /s/ Michael D. Reynolds
San Diego, CA 92121 ------------------------------
Its: VP FINANCE & CFO
------------------------------
Attn: Legal Dept. By: [SIGNATURE ILLEGIBLE]
---------------------- ------------------------------
Its: C.O.O. AND GENERAL COUNSEL
------------------------------
SECURED PARTY
Address of Secured Party: IMPERIAL BANK
226 Airport Parkway By: [SIGNATURE ILLEGIBLE]
San Jose, CA 95110-1024 ------------------------------
Its: S.V.P.
------------------------------
Attn: Corporate Banking Center
5
<PAGE> 6
<TABLE>
<S> <C>
ALL PURPOSE ACKNOWLEDGMENT
State of CALIFORNIA |
| ss.
County of SAN DIEGO |
On 18 August 1999 before me, ROBERT E. ANDERSON, Notary Public
---------------------------- ----------------------------------------------------------,
(DATE) (NOTARY)
personally appeared Michael D. Reynolds and Michael Christian
----------------------------------------------------------------------------------
[ ] personally known to me -OR- [X] proved to me on the basis of satisfactory evidence to
be the person(s) whose name(s) are subscribed to the
within instrument and acknowledged to me that they
executed the same in their authorized capacity(ies),
and that by their signature(s) on the instrument the
person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
ROBERT E. ANDERSON
[SEAL] COMM. #1112238 WITNESS my hand and official seal.
NOTARY PUBLIC - CALIFORNIA
SAN DIEGO COUNTY /s/ Robert E. Anderson
My Comm. Expires December 14, 2000 --------------------------------------------------------
NOTARY'S SIGNATURE
- ---------------------------------------OPTIONAL INFORMATION-------------------------------------------
The information below is not required by law. However, it could prevent fraudulent attachment of this
acknowledgment to an unauthorized document.
CAPACITY CLAIMED BY SIGNER (PRINCIPAL) DESCRIPTION OF ATTACHED DOCUMENT
[ ] INDIVIDUAL
[X] CORPORATE OFFICER INTELLECTUAL PROP SECURITY AGREE
---------------------------------------------- ------------------------------------------------
TITLE(S) TITLE OR TYPE OF DOCUMENT
[ ] PARTNER(S) 7
[ ] ATTORNEY-IN-FACT ------------------------------------------------
[ ] TRUSTEE(S) NUMBER OF PAGES
[ ] GUARDIAN/CONSERVATOR
[ ] OTHER:
----------------------------------------
----------------------------------------------
---------------------------------------------- -------------------------------------------------
DATE OF DOCUMENT
SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)
- --------------------------------------------------
- -------------------------------------------------- ---------------------------------------------------
OTHER
</TABLE>
<PAGE> 7
EXHIBIT B
Patents
<TABLE>
<CAPTION>
Registration/Application
Description Registration/Serial Number Date
----------- -------------------------- ------------------------
<S> <C> <C>
Internet Website Traffic Flow 09/326,475 06/04/99
Analysis
</TABLE>
<PAGE> 8
EXHIBIT C
Trademarks
<TABLE>
<CAPTION>
Registration/Application Registration/Application
Description Number Date
- ----------- ------------------------ ------------------------
<S> <C> <C>
Web Side Story 2,174,768 07/21/98
Hitbox 2,174,844 07/21/98
Traffic App. No. 75/444698 Applied March 5, 1998
XY2K Not Available Applied July 14, 1999
Yep App. No. 75/653048 Applied March 3, 1999
</TABLE>
8
<PAGE> 1
EXHIBIT 10.34
SIGNATURE AUTHORIZATION
=====================================================================
BORROWER: WEBSIDESTORY, INC. LENDER: IMPERIAL BANK
10182 TELESIS COURT EMERGING GROWTH INDUSTRIES GROUP --
SAN DIEGO, CA 92121 SOUTHERN CALIFORNIA REGIONAL OFFICE
701 B STREET, SUITE 600
SAN DIEGO, CA 92101-8120
=====================================================================
THIS SIGNATURE AUTHORIZATION IS ATTACHED TO AND BY THIS REFERENCE IS MADE A
PART OF EACH BORROWING RESOLUTION, DATED MARCH 27, 2000, AND EXECUTED IN
CONNECTION WITH A LOAN OR OTHER FINANCIAL ACCOMMODATIONS BETWEEN IMPERIAL BANK
AND WEBSIDESTORY, INC.
The individuals named below, any one acting alone, are hereby authorized and
appointed for and on behalf of Borrower from time to time to do any of the
following:
(1) To request advances of credit under the Agreement and to effect repayment
of any credit outstanding under the Agreement;
(2) To execute and deliver assignments, borrowing certificates, instruments,
schedules, reports, invoices, bills, shipping documents and such other
documents or certificates as may be necessary or appropriate under the
Agreement or any other agreement or instrument relating thereto or delivered in
connection therewith;
(3) To transfer and endorse to Bank in payment of Borrower's obligations to
Bank any checks, drafts, notes or other instruments payable to Borrower; and
(4) To do or perform any and all other acts or matters in any way relating to
any or all of the foregoing.
The undersigned individuals each further certifies that the specimen signatures
below are the genuine signatures of the individuals designated herein and that
their signatures shall be binding on Borrower until Bank receives written
notice of termination of the authority of any such designated individuals.
Signature:
------------------------------------------
Name:
-----------------------------------------------
Signature: /s/ Terance A. Kinninger
------------------------------------------
Name: TERANCE A. KINNINGER
-----------------------------------------------
Signature: /s/ John Hentrich
------------------------------------------
Name: JOHN HENTRICH
-----------------------------------------------
Signature: /s/ Michael Christian
------------------------------------------
Name: MICHAEL CHRISTIAN
-----------------------------------------------
THIS SIGNATURE AUTHORIZATION IS EXECUTED ON MARCH 27, 2000.
BORROWER:
WEBSIDESTORY, INC.
By: /s/ John Hentrich
-------------------------------------------------
JOHN HENTRICH, PRESIDENT/CEO
By: /s/ Michael Christian
-------------------------------------------------
MICHAEL CHRISTIAN, SVP
LENDER:
IMPERIAL BANK
By:
--------------------------------------------------
AUTHORIZED OFFICER
===============================================================================
<PAGE> 2
CORPORATE RESOLUTION TO BORROW
<TABLE>
<CAPTION>
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$3,000,000.00 03-27-2000 04-02-2004 24 738000065 177
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: WEBSIDESTORY, INC. Lender: IMPERIAL BANK
10182 TELESIS COURT EMERGING GROWTH INDUSTRIES GROUP-
SAN DIEGO, CA 92121 SOUTHERN CALIFORNIA REGIONAL OFFICE
701 B STREET, SUITE 600
SAN DIEGO, CA 92101-8120
================================================================================
I, THE UNDERSIGNED SECRETARY OR ASSISTANT SECRETARY OF WEBSIDESTORY, INC. (THE
"CORPORATION"), HEREBY CERTIFY that the Corporation is organized and existing
under and by virtue of the laws of the State of California as a corporation for
profit, with its principal office at 10182 TELESIS COURT, SAN DIEGO, CA 92121,
and is duly authorized to transact business in the State of California.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation, duly
called and held on 4/10/2000, at which a quorum was present and voting, or by
other duly authorized corporate action in lieu of a meeting, the following
resolutions were adopted:
BE IT RESOLVED, that ANY TWO (2) of the following named officers, employees, or
agents of this Corporation, whose actual signatures are shown below:
<TABLE>
<CAPTION>
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
<S> <C> <C>
JOHN HENTRICH PRESIDENT/CEO /s/ John Hentrich
MICHAEL CHRISTIAN SENIOR VICE PRESIDENT/SECRETARY /s/ Michael Christian
</TABLE>
acting for and on behalf of the Corporation and as its act and deed be, and
they hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Imperial Bank ("Lender"),
on such terms as may be agreed upon between the Corporation and Lender,
such sum or sums of money as in their judgment should be borrowed; however,
not exceeding at any one time the amount of THREE MILLION & 00/100 DOLLARS
($3,000,000.00), in addition to such sum or sums of money as may be
currently borrowed by the Corporation from Lender.
EXECUTE NOTES. To execute and deliver to Lender the promissory note or
notes, or other evidence of credit accomodations of the Corporation, on
Lender's forms, at such rates of interest and on such terms as may be
agreed upon, evidencing the sums of money so borrowed or any indebtedness
of the Corporation to Lender, and also to execute and deliver to Lender one
or more renewals, extensions, modifications, refinancings, consolidations,
or substitutions for one or more of the notes, any portion of the notes, or
any other evidence of credit accomodations.
GRANT SECURITY. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender, as security for the payment of
any loans or credit accomodations so obtained, any promissory notes so
executed (including any amendments to or modifications, renewals, and
extensions of such promissory notes), or any other or further indebtedness
of the Corporation to Lender at any time owing, however the same may be
evidenced, any property now or hereafter belonging to the Corporation or in
which the Corporation now or hereafter may have an interest, including
without limitation all real property and all personal property (tangible or
intangible) of the Corporation. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated, or encumbered at the time such loans
are obtained or such indebtedness is incurred, or at any other time or
times, and may be either in addition to or in lieu of any property
theretofore mortgaged, pledged, transferred, endorsed, hypothecated, or
encumbered.
EXECUTE SECURITY DOCUMENTS. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and
other security agreements and financing statements which may be required by
Lender, and which shall evidence the terms and conditions under and
pursuant to which such liens and encumbrances, or any of them, are given;
and also to execute and deliver to Lender any other written instruments,
any chattel paper, or any other collateral, of any kind or nature, which
Lender may deem necessary or proper in connection with or pertaining to the
giving of the liens and encumbrances. Notwithstanding the foregoing, any
one of the above authorized persons may execute, deliver, or record
financing statements.
NEGOTIATE ITEMS. To draw, endorse, and discount with Lender all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness
payable to or belonging to the Corporation in which the Corporation may
have an interest, and either to receive cash for the same or to cause such
proceeds to be credited to the account of the Corporation with Lender, or
to cause such other disposition of the proceeds derived therefrom as they
may deem advisable.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder,
and in all cases, to do and perform such other acts and things, to pay any
and all fees and costs, and to execute and deliver such other documents and
agreements, INCLUDING AGREEMENTS WAIVING THE RIGHT TO A TRIAL BY JURY, as
they may in their discretion deem reasonably necessary or proper in order
to carry into effect the provisions of these Resolutions. The following
person or persons currently are authorized to request advances and
authorize payments under the line of credit until Lender receives written
notice of revocation of their authority: JOHN HENTRICH, PRESIDENT/CEO; and
MICHAEL CHRISTIAN, COO/SECRETARY.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
Resolutions and performed prior to the passage of these Resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Lender may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Lender. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
BE IT FURTHER RESOLVED, that the Corporation will notify Lender in writing at
Lender's address shown above (or such other addresses as Lender may designate
from time to time) prior to any (a) change in the name of the Corporation, (b)
change in the assumed business name(s) of the Corporation, (c) change in the
management of the Corporation, (d) change in the authorized signer(s), (e)
conversion of the Corporation to a new or different type of business entity, or
(f) change in any other aspect of the Corporation that directly or indirectly
relates to any agreements between the Corporation and Lender. No change in the
name of the Corporation will take effect until after Lender has been notified.
SIGNATURE AUTHORIZATION. An exhibit, titled "SIGNATURE AUTHORIZATION," is
attached to this Resolution and by this reference is made a part of this
Resolution just as if all the provisions, terms and conditions of the Exhibit
had been fully set forth in this Resolution.
I FURTHER CERTIFY that the officers, employees, and agents named above are duly
elected, appointed, or employed by or for the Corporation, as the case may be,
and occupy the positions set opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever. The Corporation has no corporate seal, and
therefore, no seal is affixed to this certificate.
IN TESTIMONY WHEREOF, I HAVE HEREUNTO SET MY HAND ON MARCH 27, 2000 AND ATTEST
THAT THE SIGNATURES SET OPPOSITE THE NAMES LISTED ABOVE ARE THEIR GENUINE
SIGNATURES.
CERTIFIED TO AND ATTESTED BY:
X /s/ illegible
-------------------------------------
X ------------------------------------
NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, it is advisable to have
this certificate signed by a second Officer or Director of the Corporation.
================================================================================
<PAGE> 3
CREDIT AGREEMENT
This Amended and Restated Credit Agreement ("Agreement") is made and entered
into on March 27, 2000, by and between WEBSIDESTORY, INC., a California
corporation ("Borrower") and IMPERIAL BANK, a California banking corporation,
("Bank").
Subject to the terms and conditions of this Agreement, any security agreement(s)
executed by Borrower in favor of Bank, any note(s) executed by Borrower in favor
of Bank, or any other agreements executed in conjunction therewith
(collectively, the "Loan Documents"), Bank shall make the loan(s) and or
advance(s)(individually a "Loan" and collectively "Loans") referred to below to
Borrower.
In consideration of mutual covenants and conditions hereof, the parties hereto
agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.01 REVOLVING CREDIT COMMITMENT.
(a) REVOLVING LINE OF CREDIT. Subject to the terms and conditions of this
Agreement, provided that no event of default then has occurred and is
continuing, Bank shall, upon Borrower's request make advances ("Revolving
Loans") to Borrower, for general corporate purposes, future capital equipment
expenditures and the issuance of letters of credit, in an amount not to exceed
$3,000,000 (the "Revolving Line of Credit") until April 2, 2001 (the "Revolving
Line of Credit Maturity Date"). Revolving Loans may be repaid and reborrowed,
provided that all outstanding principal and accrued interest on the Revolving
Loans shall be payable in full on the Revolving Line of Credit Maturity Date.
(b) EQUIPMENT DRAWS. Equipment draws, paid on an interest monthly basis,
made under the Revolving Line of Credit shall be converted to a term loan on
April 2, 2001, which shall provide for thirty-six (36) equal principal payments
plus interest as follows:
Equipment draws made under the Revolving Line of Credit may include up
to 100% of invoice value excluding soft costs, freight, and sales tax.
Each equipment advance shall require a detailed schedule of equipment
purchases and other expenses associated with each draw-down.
(c) REVOLVING NOTE. The interest rate, principal and interest payments,
maturity date and certain other terms of the Revolving Loan will be contained in
a promissory note dated the date of this agreement, as such may be amended or
replaced from time to time.
(d) LETTER OF CREDIT USAGE AND SUBLIMIT. Subject to availability under the
Revolving Line of Credit, at any time and from time to time from the date hereof
through the banking day immediately prior to the Revolving Line of Credit
Maturity Date, Bank shall issue for the account of Borrower such standby and
commercial letters of credit ("Letters of Credit") as Borrower may request,
which requests shall be made by delivering to Bank a duly executed
Borrower's Name: WEBSIDESTORY, INC.
Date: March 27, 2000
1
<PAGE> 4
letter of credit application on Bank's standard form; provided, however, that
the outstanding and undrawn amounts under all such Letters of Credit (i) shall
not at any time exceed $360,000 ("Letter of Credit Sublimit") and (ii) shall be
deemed to constitute Revolving Loans for the purpose of calculating availability
under the Revolving Line of Credit. If the Revolving Line of Credit is not
renewed upon its maturity date, the Letters of Credit will be secured by
Imperial Bank Time Certificate of Deposits. All Letters of Credit shall be in
form and substance acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank's form application and letter of
credit agreement and other agreements required by Bank. Borrower will pay all
usual issuance and other fees that Bank notifies Borrower will be charged for
issuing and processing Letters of Credit for Borrower.
(e) LATE CHARGE. If any installment payment, interest payment, principal
payment or principal balance due under the Revolving Line of Credit is
delinquent ten (10) or more days, Borrower agrees to pay Bank a late charge in
the amount of five percent (5%) of the payment so due and unpaid, in addition
to the payment; but nothing in this paragraph is to be construed as any
obligation on the part of the Bank to accept any past due payment or less than
the total unpaid principal balance after maturity. All payments, at Bank's sole
discretion, shall be applied first to any late charges owing, then to interest
and the remainder, if any, to principal.
(f) DEFAULT RATE. If an Event of Default occurs hereunder, then during
the continuance thereof at the Bank's option, the interest rate shall be five
percent (5%) per year in excess of the rate otherwise applicable.
(g) INTEREST CALCULATIONS. The term "Prime Rate" shall mean the rate that
the Bank has announced as its prime lending rate, which shall vary concurrently
with any change in the Prime Rate.
1.02 DOCUMENTATION FEE, COSTS AND EXPENSES. In addition to any other
amounts due, or to become due, concurrently with the execution hereof, Borrower
agrees to pay to Bank a documentation fee in the amount of $250, and all other
costs and expenses incurred by the Bank in the preparation of this Agreement,
the other Loan Documents and the perfection of any security interest granted to
Bank by Borrower.
1.03 COLLATERAL. Borrower shall grant or cause to be granted to Bank a
first priority lien on any and all personal property assets of Borrower which
is assigned or hereafter is assigned to Bank as security or in which Bank now
has or hereafter acquires a security interest or pursuant to the terms of any
security agreement, an intellectual property security agreement or otherwise as
security for all of Borrower's obligations to Bank, all as may be subject to
Section 5.03 hereof.
1.04 COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect all
interest, fees, costs and/or expenses due under this Agreement by charging
Borrower's demand deposit account number 38-051-660 with Bank, or any other
demand deposit account maintained by Borrower with Bank, for the full amount
thereof. Should there be insufficient funds in any such demand deposit account
to pay all such sums when due, the full amount of such deficiency shall be
immediately due and payable by Borrower.
Borrower's Name: WEBSIDESTORY, INC.
Date: March 27, 2000
Version 13
2
<PAGE> 5
2. REPRESENTATIONS OF BORROWER
Borrower represents and warrants that:
2.01 Existence and Rights. Borrower is a corporation duly organized and
existing and in good standing under the laws of the state of California, which
shall survive at least five years beyond the maturity of any Loans hereunder;
Borrower is authorized and in good standing to do business in the state of its
incorporation; Borrower has the appropriate powers and adequate authority,
rights and franchises to own its property and to carry on its business as now
conducted, and is duly qualified and in good standing in each state in which the
character of the properties owned by it therein or the conduct of its business
makes such qualification necessary; and Borrower has the power and adequate
authority to make and carry out this Agreement. Borrower has no investment in
any other business entity unless specified in writing to Bank.
2.02 Agreement Authorized. The execution, delivery and performance of this
Agreement and the Loan Documents are duly authorized and do not require the
consent or approval of any governmental body or other regulatory authority; are
not in contravention of or in conflict with any law or regulation or any term or
provision of Borrower articles of incorporation, by-laws, or similar document as
the case may be, and this Agreement is the valid, binding and legally
enforceable obligation of Borrower in accordance with its terms; subject only to
bankruptcy, insolvency or similar laws affecting creditors rights generally.
2.03 No Conflict. The execution, delivery and performance of this
Agreement and the Loan Documents are not in contravention of or in conflict with
any agreement, indenture or undertaking to which Borrower is a party or by which
it or any of its property may be bound or affected, and do not cause any lien,
change or other encumbrance to be created or imposed upon any such property by
reason thereof.
2.04 Litigation. Except as disclosed in writing to Bank by Borrower, there
is no litigation or other proceeding pending or threatened against or affecting
Borrower which if determined adversely to Borrower or its interest would have a
material adverse effect on the financial condition of Borrower, and Borrower is
not in default with respect to any order, writ, injunction, decree or demand of
any court or other governmental or regulatory authority.
2.05 Financial Condition. The balance sheet of Borrower as of February 29,
2000, and the related profit and loss statement for the same period ended as of
that date, a copy of which has heretofore been delivered to Bank by Borrower,
and all other statements and data submitted in writing by Borrower to Bank in
connection with this request for credit are true and correct, and said balance
sheet truly presents the financial condition of Borrower as of the date thereof,
and has been prepared in accordance with generally accepted accounting
principles on a basis consistently maintained. Since such date there have been
no material adverse changes in the financial condition or business of Borrower.
Borrower has no knowledge of any liabilities, contingent or otherwise, at such
date not reflected in said balance sheet, and Borrower has not entered into any
special commitments or substantial contracts which are not reflected in said
Borrower's Name: WEBSIDESTORY, INC.
Date: March 27, 2000
Version 13
3
<PAGE> 6
balance sheet, other than in the ordinary and normal course of its business,
which may have a materially adverse effect upon its financial condition,
operations or business as now conducted.
2.06 TITLE TO ASSETS. Borrower has good title to its assets, and the same
are not subject to any liens or encumbrances other than those permitted by
Section 5.03 hereof.
2.07 TAX STATUS. Borrower has no liability for any delinquent state, local
or federal taxes, and, if Borrower has contracted with any government agency,
Borrower has no liability for renegotiation of profits.
2.08 TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license rights
of others.
2.09 REGULATION U. None of the proceeds of any Loan shall be used to
purchase or carry margin stock (as defined within Regulation U of the Board of
Governors of the Federal Reserve system).
2.10 ERISA. All defined benefit pension plans as defined in the Employees
Retirement Income Security Act of 1974, as amended ("ERISA"), of Borrower meet,
as of the date hereof, the minimum funding standards of Section 302 of ERISA,
and no Reportable Event or Prohibited Transaction as defined in ERISA has
occurred with respect to any such plan.
3. CONDITIONS PRECEDENT TO LOAN
Prior to Bank being obligated to make any Loan pursuant to this
Agreement, Bank must receive all of the following, each of which must be in
form and substance satisfactory to Bank:
3.01 PROMISSORY NOTE. Original, executed promissory note as applicable.
3.02 SECURITY AGREEMENT. Original, executed security agreement covering
the personal property collateral securing the Loan.
3.03 FINANCING STATEMENT. Financing statement executed by Borrower and any
grantor of a security interest.
3.04 INSURANCE. Borrower shall have delivered to Bank evidence of
insurance coverage required pursuant to that Agreement to Provide Insurance
executed by Borrower, in form, substance, amounts, covering risks and issued by
companies satisfactory to Bank, and where required by Bank, with Lenders Loss
Payable endorsement in favor of Bank.
3.05 ORGANIZATIONAL DOCUMENTS. Copies of the articles of incorporation,
or similar document as the case may be, of the Borrower.
Borrower's Name: WEBSIDESTORY, INC.
Date: March 27, 2000
Version 13
4
<PAGE> 7
3.06 Authorizations. Certified copies of all action taken by any Borrower
to authorize the execution, delivery and performance of the Loan Documents.
3.07 Good Standing. Good standing certificates from the appropriate
secretary of state of the state in which any Borrower is organized and in each
state in which it is required to be qualified to do business.
3.08 Warrants. Borrower to deliver to Bank a five year warrant to purchase
80,000 shares of common stock at an initial exercise price of $2.50 per share.
3.09 This Agreement executed by Borrower.
3.10 Additional Documents. Such other documents as Bank may reasonably
deem necessary.
4. AFFIRMATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, under borrowings, or
other indebtedness, or so long as Bank has any obligation to extend credit to
Borrower it will, unless Bank shall otherwise consent in writing:
4.01 Rights and Facilities. Maintain and preserve all rights, franchises
and other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
4.02 Use of Proceeds. Use the proceeds of the Loans only for purposes
specified in Section 1 of this Agreement.
4.03 Insurance. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses and/or in the exercise of good business
judgment, and as required by that Agreement to Provide Insurance executed by
Borrower, with the Bank to be shown as Lenders Loss Payee on such policies.
4.04 Taxes and Other Liabilities. Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes, assessments
and governmental charges upon or against it or any of its properties, and all
its other liabilities at any time existing, except to the extent and so long as:
(a) The same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any materially adverse effect upon
its financial condition or the loss of any right of redemption from any sale
thereunder; and
(b) It shall have set aside on its books reserves (segregated to the
extent required by generally accepted accounting practice) deemed by it to be
adequate with respect thereto.
Borrower's Name: WEBSIDESTORY, INC.
Date: March 27, 2000
Version 13
5
<PAGE> 8
4.05 Records and Reports. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit Bank's representatives to have access to,
and to examine its properties, books and records at all reasonable times and
upon reasonable notice during normal business hours; and furnish Bank:
(a) Monthly Financial Statement. As soon as available, and in any event
within thirty (30) days after the close of each month, a balance sheet, profit
and loss statement and reconciliation of Borrower's capital balance accounts as
of the close of such period and covering operations for the portion of
Borrower's fiscal year ending on the last day of such period, all in reasonable
detail and reasonably acceptable to Bank, in accordance with generally accepted
accounting principles on a basis consistently maintained by Borrower and
certified by an appropriate officer of Borrower.
(b) Annual Financial Statement. As soon as available, and in any event
within one hundred twenty (120) days after and as of the close of each fiscal
year of Borrower, a report of audit of Company, all in reasonable detail,
audited by an independent certified public accountant selected by Borrower and
reasonably acceptable to Bank, in accordance with generally accepted accounting
principles on a basis consistently maintained by Borrower and certified by an
appropriate officer of Borrower;
(c) Officer's Certificate. Within thirty (30) days after the end of each
month and fiscal year of Borrower, a certificate of the chief financial officer
of Borrower, stating that Borrower has performed and observed each and every
covenant contained in this Agreement to be performed by it and that no event has
occurred and no condition then exists which constitutes an event of default
hereunder or would constitute such an event of default upon the lapse of time or
upon the giving of notice and the lapse of time specified herein; or, if any
such event has occurred or any such condition exists, specifying the nature
thereof.
(d) Other Information. Such other information relating to the affairs of
Borrower as the Bank reasonably may request from time to time.
4.06 Minimum Liquidity. Maintain a Minimum Liquidity (defined as
unrestricted cash and cash equivalents plus eligible accounts receivable),
measured monthly only when Revolving Line of Credit is being utilized, of the
greater of (a) 1.50 times current liabilities and all Bank debit, or (b) three
months cash burn.
4.07 ERISA. Cause all defined benefit pension plans, as defined in ERISA,
of Borrower to, at all times, meet the minimum funding standards of Section 302
of ERISA, and ensure that no Reportable Event or Prohibited Transaction, as
defined in ERISA, will occur with respect to any such plan.
4.08 Laws. At all times comply with, or cause to be complied with, all
laws, statutes, rules, regulations, orders and directions of any governmental
authority having jurisdiction over Borrower or Borrower's business.
Borrower's Name: WEBSIDESTORY, INC.
Date: March 27, 2000
Version 13
6
<PAGE> 9
4.09 GAAP. Compliance with all financial covenants shall be calculated based on
generally accepted accounting principles applied on a consistent basis as
maintained by Borrower.
4.10 OPERATING ACCOUNTS. Maintain all primary accounts and banking relationship
with the Bank. Maintain, or cause to be maintained, on deposit with Bank,
non-interest bearing demand deposit balances sufficient to compensate Bank for
all services provided by Bank. Balances shall be calculated after reduction for
the reserve requirement of the Federal Reserve Board and uncollected funds. Any
deficiencies shall be charged directly to the Borrower on a monthly basis.
4.11 NOTICES. Promptly notify Bank in writing of (i) the occurrence of any
Event of Default hereunder or any event which upon notice and lapse of time
would be an Event of Default; (ii) all litigation affecting Borrower where the
amount is $500,000 or more; any substantial dispute which may exist between
Borrower and any governmental regulatory body or law enforcement authority; any
change in Borrower's name or principal place of business; or any other matter
which has resulted or might result in a material adverse change in Borrower's
financial condition or operations.
5. NEGATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, or so long as Bank has
any obligation to extend credit to Borrower, it will not, without Bank's
written consent:
5.01 TYPE OF BUSINESS. Make any substantial change in the character of its
business.
5.02 OUTSIDE INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness for borrowed moneys other than Loans from the Bank except
obligations now existing as shown in the financial statement dated February 29,
2000, excluding those obligations being refinanced by Bank, or sell or
transfer, either with or without recourse, any accounts or notes receivable or
any moneys due or to become due.
5.03 LIENS AND ENCUMBRANCES. Create, incur, permit to exist, or assume any
mortgage, pledge, encumbrance, lien or charge of any kind upon any asset now
owned or hereafter acquired by it, other than liens for taxes not delinquent
and liens in Bank's favor and other than liens agreed to in writing by Bank.
5.04 LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or advances to
any person or other entity other than in the ordinary and normal course of its
business as now conducted or make any investment in the securities of any
person or other entity other than the United States Government; or guarantee or
otherwise become liable upon the obligation of any person or other entity,
except by endorsement of negotiable instruments for deposit or collection in
the ordinary and normal course of its business.
5.05 ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION. Purchase or
otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings
therefor; or sell any assets except in the
Borrower's Name: WEBSIDESTORY, INC.
Date: March 27, 2000
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<PAGE> 10
ordinary and normal course of its business as now conducted; or sell, lease,
assign, or transfer any substantial part of its business or fixed assets, or any
property or other assets necessary for the continuance of its business as now
conducted, including without limitation the selling of any property or other
asset accompanied by the leasing back of the same.
5.06 DIVIDENDS AND DISTRIBUTIONS. Declare or pay any dividend or make any
other distribution on any of its capital stock now outstanding or hereafter
issued or purchase, redeem or retire any of such stock other than in dividends
or distributions payable in Borrower's capital stock, except for the repurchase
of Borrower's capital stock from officers, directors, employees or consultants
of Borrower upon termination of their employment with or rendering of service
to Borrower.
6. EVENTS OF DEFAULT
The occurrence of any of the following events of default ("Events of Default")
shall, at Bank's option, terminate Bank's commitment to lend and make all sums
of principal and interest then remaining unpaid on all Borrower's indebtedness
to Bank immediately due and payable, all without demand, presentment or notice,
all of which are hereby expressly waived:
6.01 FAILURE TO PAY. Failure to pay any installment of principal or of
interest on any indebtedness of Borrower to Bank within five (5) days of its
due date.
6.02 BREACH OF COVENANT. Failure of Borrower to perform any other term or
condition of this Agreement or any Loan Document binding upon Borrower.
6.03 BREACH OF WARRANTY. Any of Borrower's representations or warranties
made herein or any statement or certificate at any time given in writing
pursuant hereto or in connection herewith shall be false or misleading in any
respect.
6.04 INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become insolvent; or
admit its inability to pay its debts as they mature; or make an assignment for
the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.
6.05 JUDGMENTS, ATTACHMENTS. Any money judgment in excess of $500,000,
writ or warrant of attachment, or similar process shall be entered or filed
against Borrower or any of its assets and shall remain unvacated, unbonded or
unstayed for a period of ten (10) days or in any event later than five (5) days
prior to the date of any proposed sale thereunder.
6.06 BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against Borrower and, if
instituted against it, shall not be dismissed within thirty (30) days
thereafter.
6.07 CESSATION OF BUSINESS. Borrower shall voluntarily suspend its
business.
Borrower's Name: WEBSIDESTORY, INC.
DATE: March 27, 2000
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<PAGE> 11
6.08 ADVERSE CHANGE. Any change which, in the opinion of Bank, is
materially adverse to the financial condition of Borrower; or should Bank, for
any reason, believe that the prospect of Borrower's payment or performance
hereunder or under any other agreement or instrument with Bank be impaired.
6.09 IMPAIRMENT OF SECURITY. Bank in good faith deems itself insecure.
6.10 OTHER DEFAULTS. Borrower shall commit or do or fail to commit or do
any act or thing which would constitute an event of default under any of the
terms of any other agreement, document or instrument executed by it concerning
the obligation to pay money.
6.11 ADVANCES. Notwithstanding anything to the contrary contained herein,
Bank shall have no duty to make advances while any event of default exists
notwithstanding any cure period provided for herein.
6.12 RIGHT TO CURE. If any default, other than a default on indebtedness,
is curable, and if Borrower has not been given a prior notice of a breach of the
same provision of this agreement, it may be cured, (and no Event of Default will
have occurred), if Borrower, after Bank sends written notice demanding cure of
such default, (a) cures the default within ten (10) days, or (b) if the cure
requires more than ten (10) days, immediately initiates steps which Bank deems,
in Bank's sole discretion, to be sufficient to cure the default and thereafter
continues and completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.
7. MISCELLANEOUS PROVISIONS
7.01 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
Bank or any holder of notes issued hereunder, in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this Agreement or any note(s) issued in
connection with a Loan that Bank may make hereunder, are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
7.02 COUNTERPARTS; ENTIRE AGREEMENT. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement. This Agreement, and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and amends and restates in full any prior agreements, written or oral, with
respect thereto.
7.03 ATTORNEY'S FEES. Borrower will pay promptly to Bank without demand
after notice, with interest thereon from the date of expenditure at the rate
applicable to the Loan, reasonable attorneys' fees and all costs and expenses
paid or incurred by Bank in collecting or compromising the Loan after the
occurrence of an Event of Default, whether or not suit is filed.
Borrower's Name: WEBSIDESTORY, INC.
Date: March 27, 2000
Version 13
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<PAGE> 12
If suit is brought to enforce any provision of this Agreement, the prevailing
party shall be entitled to recover its reasonable attorneys' fees and court
costs in addition to any other remedy or recovery awarded by the court.
7.04 Additional Remedies. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.
7.05 Inurement. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assigns of
Borrower.
7.06 Applicable Law. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the state of California, to the jurisdiction
of whose courts the parties hereby agree to submit.
7.07 Offset. In addition to and not in limitation of all rights of offset
that Bank or other holder of the Loan may have under applicable law, Bank or
other holder of any note issued hereunder shall, upon the occurrence of any
Event of Default or any event which with the passage of time or notice would
constitute such an Event of Default, have the right to appropriate and apply to
the payment of the Loan any and all balances, credits, deposits, accounts or
monies of Borrower then or thereafter with Bank or other holder, within ten (10)
days after the Event of Default, and notice of the occurrence of any Event of
Default by Bank to Borrower.
7.08 Severability. Should any one or more provisions of the Agreement be
determined to be illegal or unenforceable, all other provisions nevertheless
shall be effective.
7.09 Time of the Essence. Time is hereby declared to be of the essence of
this Agreement and of every part hereof.
7.10 Accounting. All accounting terms shall have the meanings applied
under generally accepted accounting principles unless otherwise specified.
7.11 Reference Provision.
(a) Other than (i) nonjudicial foreclosure and all matters in connection
therewith regarding security interests in real or personal property; or (ii) the
appointment of a receiver, or the exercise of other provisional remedies (any
and all of which may be initiated pursuant to applicable law), each controversy,
dispute or claim between the parties arising out of or relating to this Credit
Agreement, any security agreement executed by Borrower in favor of Bank or any
note executed by Borrower in favor of Bank or any other agreement or instrument
issued in favor of Bank by Borrower (collectively in this Section, the
"Agreement") which controversy, dispute or claim is not settled in writing
within thirty (30) days after the "Claim Date" (defined as the date on which a
party subject to this Agreement gives written notice to all other parties that a
controversy, dispute or claim exists), will be settled by a reference proceeding
in California in accordance with the
Borrower's Name: WEBSIDESTORY, INC.
Date: March 27, 2000
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<PAGE> 13
provisions of Section 638 et seq. of the California Code of Civil Procedure, or
their successor section ("CCP"), which shall constitute the exclusive remedy
for the settlement of any controversy, dispute or claim concerning this
Agreement, including whether such controversy, dispute or claim is subject to
the reference proceeding and except as set forth above, the parties waive their
rights to initiate any legal proceedings against each other in any court or
jurisdiction other than the Superior Court in the County where the Real
Property, if any, is located or Los Angeles County if none (the "Court"). The
referee shall be a retired Judge of the Court selected by mutual agreement of
the parties, and if they cannot so agree within forty-five (45) days after the
Claim Date, the referee shall be promptly selected by the Presiding Judge of
the Court (or his representative). The referee shall be appointed to sit as a
temporary judge, with all of the powers for a temporary judge, as authorized by
law, and upon selection should take and subscribe to the oath of office as
provided for in Rule 244 of the California Rules of Court (or any subsequently
enacted Rule). Each party shall have one peremptory challenge pursuant to CCP
Section 170.6. The referee shall (a) be requested to set the matter for hearing
within sixty (60) days after the date of selection of the referee and (b) try
any and all issues of law or fact and report a statement of decision upon them,
if possible, within ninety (90) days of the Claim Date. Any decision rendered
by the referee will be final, binding and conclusive and judgment shall be
entered pursuant to CCP Section 644 in any court in the state of California
having jurisdiction. Any party may apply for a reference proceeding at any time
after thirty (30) days following notice to any other party of the nature of the
controversy, dispute or claim, by filing a petition for a hearing and/or trial.
All discovery permitted by this Agreement shall be completed no later than
fifteen (15) days before the first hearing date established by the referee. The
referee may extend such period in the event of a party's refusal to provide
requested discovery for any reason whatsoever, including, without limitation,
legal objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be taken by either party upon seven (7) days written
notice, and request for production or inspection of documents shall be
responded to within ten (10) days after service. All disputes relating to
discovery which cannot be resolved by the parties shall be submitted to the
referee whose decision shall be final and binding upon the parties. Pending
appointment of the referee as provided herein, the Superior Court is empowered
to issue temporary and/or provisional remedies, as appropriate.
(b) Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence, and
all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter except that when any
party so requests, a court reporter will be used at any hearing conducted
before the referee. The party making such a request shall have the obligation
to arrange for and pay for the court reporter. The costs of the court reporter
at the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the state of California. The rules
of evidence applicable to proceedings at law in the state of California will be
applicable to the reference proceeding. The referee shall be empowered to enter
equitable as well as legal relief, to provide all temporary and/or provisional
remedies and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
Borrower's Name: WEBSIDESTORY, INC.
Date: March 27, 2000
Version 13
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<PAGE> 14
(b) Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence, and
all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter except that when any
party so requests, a court reporter will be used at any hearing conducted
before the referee. The party making such a request shall have the obligation
to arrange for and pay for the court reporter. The costs of the court reporter
at the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the state of California. The rules
of evidence applicable to proceedings at law in the state of California will be
applicable to the reference proceeding. The referee shall be empowered to enter
equitable as well as legal relief, to provide all temporary and/or provisional
remedies and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties hereto expressly reserve the right
to findings of fact, conclusions of laws, a written statement of decision, and
the right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
(d) In the event that the enabling legislation which provides for appointment
of a referee is repealed (and no successor statute is enacted), any dispute
between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.
7.12 This Agreement may be modified only by writing signed by all parties
hereto.
This Agreement is executed on behalf of the parties by duly authorized officers
as of the date first above written.
IMPERIAL BANK WEBSIDESTORY, INC.
("BANK") ("BORROWER")
By: /s/ Imperial Bank By:
----------------------- ---------------------------------
John Hentrich, President/CEO
By:
---------------------------------
Michael Christian, COO/Secretary
Borrower's Name: WEBSIDESTORY, INC.
Date: March 27, 2000
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<PAGE> 15
judgment entered by the referee. The parties hereto expressly reserve the right
to findings of fact, conclusions of laws, a written statement of decision, and
the right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
(d) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.
7.12 This Agreement may be modified only by writing signed by all parties
hereto.
This Agreement is executed on behalf of the parties by duly authorized officers
as of the date first above written.
IMPERIAL BANK WEBSIDESTORY, INC.
("BANK") ("BORROWER")
By: By: /s/ John J. Hentrich
-------------------------------- ----------------------------------
John Hentrich, President/CEO
By: /s/ Michael Christian
----------------------------------
Michael Christian, Senior Vice
President
Borrower's Name: WEBSIDESTORY, INC.
Date: March 27, 2000
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<PAGE> 16
[LOGO OF IMPERIAL BANK]
PROMISSORY NOTE
<TABLE>
<CAPTION>
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$3,000,000.00 03-27-2000 04-02-2004 24 738000065 177
- ----------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to
any particular loan or item.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
BORROWER: WEBSIDESTORY, INC. LENDER: Imperial Bank
10182 TELESIS COURT Emerging Growth Industries Group -
SAN DIEGO, CA 92121 Southern California Regional Office
701 B Street, Suite 600
San Diego, CA 92101-8120
================================================================================
<TABLE>
<S> <C> <C>
PRINCIPAL AMOUNT: $3,000,000.00 INITIAL RATE: 9.250% DATE OF NOTE: March 27, 2000
</TABLE>
PROMISE TO PAY. WEBSIDESTORY, INC. ("Borrower") promises to pay to Imperial
Bank ("Lender"), or order, in lawful money of the United States of America, the
principal amount of Three Million & 00/100 Dollars ($3,000,000.00) or so much
as may be outstanding, together with Interest on the unpaid outstanding
principal balance of each advance. Interest shall be calculated from the date
of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in accordance with the following payment
schedule:
Advances under the Note shall be available through April 2, 2001 (the
"Revolving Line of Credit Maturity Date"). Prior to such date, interest
only shall be due monthly beginning May 2, 2000. The outstanding
principal balance of the advances under the Note used for equipment
expenditures shall be payable monthly in 36 equal payments of principal
plus accrued interest beginning May 2, 2001. All principal and accrued
but unpaid interest for equipment expenditures shall in any event be
due and payable on or before April 2, 2004. All principal plus accrued
but unpaid interest for all other purposes shall be due and payable on
the Revolving Line of Credit Maturity Date.
The annual interest rate for this Note is computed on a 365/360 basis; that is,
by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender
at Lender's address shown above or at such other place as Lender may designate
in writing. Unless otherwise agreed or required by applicable law, payments
will be applied first to any unpaid collection costs and any late charges, then
to any unpaid interest, and any remaining amount to principal.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the Imperial Bank Prime
Rate (the "Index"). The Prime Rate is the rate announced by Lender as its Prime
Rate of interest from time to time. Lender will tell Borrower the current index
rate upon Borrower's request. Borrower understands that Lender may make loans
based on other rates as well. The interest rate change will not occur more
often than each day. THE INDEX CURRENTLY IS 9.000%. THE INTEREST RATE TO BE
APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A RATE OF 0.250
PERCENTAGE POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 9.250%.
NOTICE: Under no circumstances will the interest rate on this Note be more than
the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even
upon full prepayment of this Note, Borrower understands that Lender is entitled
to a minimum interest charge of $250.00. Other than Borrower's obligation to
pay any minimum interest charge, Borrower may pay without penalty all or a
portion of the amount owed earlier than it is due. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower of Borrower's
obligation to continue to make payments of accrued unpaid interest. Rather,
they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Any representation or statement made or furnished
to Lender by Borrower or on Borrower's behalf is false or misleading in any
material respect either now or at the time made or furnished. (d) Borrower
becomes insolvent, a receiver is appointed for any part of Borrower's property,
Borrower makes an assignment for the benefit of creditors, or any proceeding is
commenced either by Borrower or against Borrower under any bankruptcy or
insolvency laws. (e) Any creditor tries to take any of Borrower's property on
or in which Lender has a lien or security interest. This includes a garnishment
of any of Borrower's accounts with Lender. (f) Any guarantor dies or any of the
other evens described in this default section occurs with respect to any
guarantor of this Note. (g) A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or performance
of the indebtedness is impaired. (h) Lender in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender
demanding cure of such default: (a) cures that default within ten (10) days; or
(b) if the cure requires more than ten (10) days, immediately initiates steps
which Lender deems in Lender's sole discretion to be sufficient to cure the
default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to pay
all amounts declared due pursuant to this section, including failure to pay
upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the variable
interest rate on this Note to 5.250 percentage points over the Index, and (b)
add any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Note (including any increased
rate). Lender may hire or pay someone else to help collect this Note if
Borrower does not pay. Borrower also will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses whether or not there is a lawsuit, including
attorney's fees and legal expenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. Borrower also will pay any court
costs, in addition to all other sums provided by law. THIS NOTE HAS BEEN
DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA. IF THERE
IS A LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF LOS ANGELES COUNTY, THE STATE OF CALIFORNIA.
LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE
OTHER. (INITIAL HERE MC/JJH) THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
DISHONORED ITEM FEE. Borrower will pay a fee to the Lender of $25.00 if
Borrower makes a payment on Borrower's loan and the check or preauthorized
charge with which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including without
limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keough accounts,
and all trust accounts for which the grant of a security interest
would be prohibited by law. Borrower authorizes Lender, to the extent permitted
by applicable law, to charge or setoff all sums owing on this Note against any
and all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested orally by Borrower or by an authorized person. All
oral requests shall be confirmed in writing on the day of the request. All
communications, instructions, or directions by telephone or otherwise to Lender
are to be directed to Lender's office shown above. The following party or
parties are authorized to request advances under the line of credit until
Lender receives from Borrower at Lender's address shown above written notice of
revocation of their authority: JOHN HENTRICH, PRESIDENT/CEO; AND MICHAEL
CHRISTIAN, COO/SECRETARY. Borrower agrees to be liable for all sums either: (a)
advanced in accordance with the instructions of an authorized person or (b)
credited to any of Borrower's accounts with Lender. The unpaid principal
balance owing on this Note at any time may be evidenced by endorsements on this
Note or by Lender's internal records, including daily computer print-outs.
Lender will have no obligation to advance funds under this Note if: (a)
Borrower or any guarantor is in default under the terms of this Note or any
agreement that Borrower or any guarantor has with Lender, including any
agreement made in connection with the signing of this Note; (b) Borrower or any
guarantor ceases doing business or is insolvent; (c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; (d) Borrower has applied
funds provided to this Note for purposes other than those authorized by Lender;
or
<PAGE> 17
03-27-2000 PROMISSORY NOTE Page 2
(CONTINUED)
===============================================================================
(e) Lender in good faith deems itself insecure under this Note or any other
agreement between Lender and Borrower.
CREDIT AGREEMENT. This Note is subject to the provisions of the Credit
Agreement dated March 27, 2000, and all amendments thereto and replacements
therefor.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
any applicable statute of limitations, presentment, demand for payment, protest
and notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by
Lender without the consent of or notice to anyone. All such parties also agree
that Lender may modify this loan without the consent of or notice to anyone
other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
WEBSIDESTORY, INC.
By: /s/ John Hentrich By: /s/ Michael Christian
-------------------------------- ---------------------------------
JOHN HENTRICH, PRESIDENT/CEO MICHAEL CHRISTIAN, SECRETARY AND SVP
===============================================================================
<PAGE> 18
[IMPERIAL BANK LOGO]
IMPERIAL BANK
Member FDIC
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$3,000,000.00 03-27-2000 04-02-2004 24 738000065 177
- ---------------------------------------------------------------------------------------------------
References in the shade area are for Lender's use only and do not limit the applicability of this
document to any particular loan or item.
</TABLE>
BORROWER: WEBSIDESTORY, INC. LENDER: IMPERIAL BANK
10182 TELESIS COURT EMERGING GROWTH INDUSTRIES GROUP --
SAN DIEGO, CA 92121 SOUTHERN CALIFORNIA REGIONAL OFFICE
701 B STREET, SUITE 600
SAN DIEGO, CA 92101-8120
================================================================================
LOAN TYPE. This is a Variable Rate (0.250% over Imperial Bank Prime Rate,
making an initial rate of 9.250%) Revolving Line of Credit Loan to a
Corporation for $3,000,000.00 due on April 2, 2004.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for (please
initial)
[ ] ______ PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL INVESTMENT.
[X] ______ BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
SPECIFIC PURPOSE. The specific purpose of this loan is: GENERAL CORPORATE
PURPOSES, FUTURE CAPITAL EQUIPMENT EXPENDITURES AND ISSUANCE OF LETTERS OF
CREDIT.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $3,000,000.00 as follows:
AMOUNT PAID TO BORROWER DIRECTLY: $3,000,000.00
$3,000,000.00 Deposited to Account #38-051-660*
-------------
NOTE PRINCIPAL: $3,000,000.00
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
PREPAID FINANCE CHARGES PAID IN CASH:
$250.000 Documentation Fee $250.00
-------------
TOTAL CHARGES PAID IN CASH: $250.00
INTERNATIONAL SUB-LIMITS. Subject to conditions and limitations as specified in
the Credit Agreement dated March 27, 2000, as it may be revised from time to
time. Proceeds are to be available and applied as required for international
transactions.
DISBURSEMENT PROVISION. *or by Cashier's Check or by wire transfer when
advances are requested.
AUTOMATIC PAYMENT. Borrower hereby authorizes Lender automatically to deduct
from Borrower's account numbered 38-051-660 the amount of any loan payment. If
the funds in the account are insufficient to cover any payment, Lender shall
not be obligated to advance funds to cover the payment,
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED MARCH 27, 2000.
BORROWER:
WEBSIDESTORY, INC.
By: /s/ John Hentrich By: /s/ Michael Christian
--------------------------------- ----------------------------------
JOHN HENTRICH, PRESIDENT/CEO MICHAEL CHRISTIAN, SVP
================================================================================
<PAGE> 19
<TABLE>
<CAPTION>
STATE OF CALIFORNIA UNIFORM COMMERCIAL CODE - FINANCING STATEMENT CHANGE - FORM UCC-2
- ----------------------------------------------------------------------------------------------------------------------------
This STATEMENT is presented for filing pursuant to the CALIFORNIA Uniform Commercial Code
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. FILE NO. OF ORIG. 1A. DATE OF FILING OF ORIG. 1B. DATE OF ORIG. 1C. PLACE OF FILING ORIG.
FINANCING STATEMENT FINANCING STATEMENT FINANCING STATEMENT FINANCING STATEMENT
9924560816 8-23-99 SACRAMENTO
- ----------------------------------------------------------------------------------------------------------------------------
2. DEBTOR (LAST NAME FIRST) 2A. SOCIAL SECURITY NO., FEDERAL TAX NO.
WEBSIDESTORY, INC., A CALIFORNIA CORPORATION 33-0727173
- ----------------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
6450 LUSK BLVD., SUITE E205 SAN DIEGO, CA. 92121
- ----------------------------------------------------------------------------------------------------------------------------
3. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST) 3A. SOCIAL SECURITY OR FEDERAL TAX NO.
- ----------------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY 4A. SOCIAL SECURITY NO., FEDERAL TAX NO.
OR BANK TRANSIT AND A.B.A. NO.
NAME IMPERIAL BANK
16-144/1222
MAILING ADDRESS 701 B STREET, SUITE 600
CITY SAN DIEGO STATE CA ZIP CODE 92101-8120
- ----------------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL TAX NO.
OR BANK TRANSIT AND A.B.A. NO.
NAME
MAILING ADDRESS
CITY STATE ZIP CODE
- ----------------------------------------------------------------------------------------------------------------------------
6.
A [ ] CONTINUATION - The original Financing Statement between the foregoing Debtor and Secured Party bearing the file number
and date shown above is continued, if collateral is crops or timber, check here [ ] and insert description of real
property on which growing or to be grown in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
B [ ] RELEASE - From the collateral described in the Financing Statement bearing the file number shown above, the Secured
Party releases the collateral described in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
C [ ] ASSIGNMENT - The Secured Party certifies that the Secured Party has assigned to the Assignee above named, all the
Secured Party's rights under the Financing Statement bearing the file number shown above in the collateral described
in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
D [ ] TERMINATION - The Secured Party certifies that the Secured Party no longer claims a security interest under the
Financing Statement bearing the file number shown above.
- ----------------------------------------------------------------------------------------------------------------------------
E [X] AMENDMENT - The Financing Statement bearing the file number shown above is amended as set forth in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
F [ ] OTHER
- ----------------------------------------------------------------------------------------------------------------------------
7. CHANGE DEBTORS ADDRESS TO:
10182 TELESIS COURT
SAN DIEGO, CA. 92121
- ----------------------------------------------------------------------------------------------------------------------------
8. (Date) MARCH 27 2000 C 9. THIS SPACE FOR USE OF FILING OFFICER
------------------------------------ 0 (DATE, TIME, FILING OFFICE)
D
WEBSIDESTORY, INC. E
- ------------------------------------------------------------------------------
BY: /s/ Michael Christian SENIOR VICE PRESIDENT 1
-------------------------------------------------------------------------- 2
SIGNATURE(S) OF DEBTOR(S) (TITLE) 3
4
IMPERIAL BANK 5
- ------------------------------------------------------------------------------ 6
7
BY: 8
--------------------------------------------------------------------------- 9
SIGNATURE(S) OF SECURED PARTY(IES) (TITLE)
- ------------------------------------------------------------------------------
10. RETURN COPY TO
NAME IMPERIAL BANK-ACCT #P6-0001-070-6
ADDRESS LOAN DOCUMENTATION SERVICES
CITY AND 9920 S. LA CIENEGA BLVD., SUITE #628
STATE INGLEWOOD, CA 90301
ATTN: RANDAL DECKER
BR: 3805
Filing officer is requested to note date and
hour of filing on (3) Filing Officer Copy UNIFORM COMMERCIAL CODE-FORM UCC-2
Acknowledgement and return to the above party.
(1) Secured Party Copy
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
STATE OF CALIFORNIA UNIFORM COMMERCIAL CODE - FINANCING STATEMENT CHANGE - FORM UCC-2
- ----------------------------------------------------------------------------------------------------------------------------
This STATEMENT is presented for filing pursuant to the CALIFORNIA Uniform Commercial Code
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. FILE NO. OF ORIG. 1A. DATE OF FILING OF ORIG. 1B. DATE OF ORIG. 1C. PLACE OF FILING ORIG.
FINANCING STATEMENT FINANCING STATEMENT FINANCING STATEMENT FINANCING STATEMENT
9924560816 8-23-99 SACRAMENTO
- ----------------------------------------------------------------------------------------------------------------------------
2. DEBTOR (LAST NAME FIRST) 2A. SOCIAL SECURITY NO., FEDERAL TAX NO.
WEBSIDESTORY, INC., A CALIFORNIA CORPORATION 33-0727173
- ----------------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
6450 LUSK BLVD., SUITE E205 SAN DIEGO, CA. 92121
- ----------------------------------------------------------------------------------------------------------------------------
3. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST) 3A. SOCIAL SECURITY OR FEDERAL TAX NO.
- ----------------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY 4A. SOCIAL SECURITY NO., FEDERAL TAX NO.
OR BANK TRANSIT AND A.B.A. NO.
NAME IMPERIAL BANK
16-144/1222
MAILING ADDRESS 701 B STREET, SUITE 600
CITY SAN DIEGO STATE CA ZIP CODE 92101-8120
- ----------------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL TAX NO.
OR BANK TRANSIT AND A.B.A. NO.
NAME
MAILING ADDRESS
CITY STATE ZIP CODE
- ----------------------------------------------------------------------------------------------------------------------------
6.
A [ ] CONTINUATION - The original Financing Statement between the foregoing Debtor and Secured Party bearing the file number
and date shown above is continued, if collateral is crops or timber, check here [ ] and insert description of real
property on which growing or to be grown in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
B [ ] RELEASE - From the collateral described in the Financing Statement bearing the file number shown above, the Secured
Party releases the collateral described in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
C [ ] ASSIGNMENT - The Secured Party certifies that the Secured Party has assigned to the Assignee above named, all the
Secured Party's rights under the Financing Statement bearing the file number shown above in the collateral described
in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
D [ ] TERMINATION - The Secured Party certifies that the Secured Party no longer claims a security interest under the
Financing Statement bearing the file number shown above.
- ----------------------------------------------------------------------------------------------------------------------------
E [X] AMENDMENT - The Financing Statement bearing the file number shown above is amended as set forth in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
F [ ] OTHER
- ----------------------------------------------------------------------------------------------------------------------------
7. CHANGE DEBTORS ADDRESS TO:
10182 TELESIS COURT
SAN DIEGO, CA. 92121
- ----------------------------------------------------------------------------------------------------------------------------
8. (Date) MARCH 27 2000 C 9. THIS SPACE FOR USE OF FILING OFFICER
------------------------------------ 0 (DATE, TIME, FILING OFFICE)
D
WEBSIDESTORY, INC. E
- ------------------------------------------------------------------------------
BY: /s/ Michael Christian SENIOR VICE PRESIDENT 1
-------------------------------------------------------------------------- 2
SIGNATURE(S) OF DEBTOR(S) (TITLE) 3
4
IMPERIAL BANK 5
- ------------------------------------------------------------------------------ 6
7
BY: 8
--------------------------------------------------------------------------- 9
SIGNATURE(S) OF SECURED PARTY(IES) (TITLE)
- ------------------------------------------------------------------------------
10. RETURN COPY TO
NAME IMPERIAL BANK-ACCT #P6-0001-070-6
ADDRESS LOAN DOCUMENTATION SERVICES
CITY AND 9920 S. LA CIENEGA BLVD., SUITE #628
STATE INGLEWOOD, CA 90301
ATTN: RANDAL DECKER
BR: 3805
Filing officer is requested to note date and
hour of filing on (3) Filing Officer Copy UNIFORM COMMERCIAL CODE-FORM UCC-2
Acknowledgement and return to the above party.
(2) Filing Officer Copy
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
STATE OF CALIFORNIA UNIFORM COMMERCIAL CODE - FINANCING STATEMENT CHANGE - FORM UCC-2
- ----------------------------------------------------------------------------------------------------------------------------
This STATEMENT is presented for filing pursuant to the CALIFORNIA Uniform Commercial Code
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. FILE NO. OF ORIG. 1A. DATE OF FILING OF ORIG. 1B. DATE OF ORIG. 1C. PLACE OF FILING ORIG.
FINANCING STATEMENT FINANCING STATEMENT FINANCING STATEMENT FINANCING STATEMENT
9924560816 8-23-99 SACRAMENTO
- ----------------------------------------------------------------------------------------------------------------------------
2. DEBTOR (LAST NAME FIRST) 2A. SOCIAL SECURITY NO., FEDERAL TAX NO.
WEBSIDESTORY, INC., A CALIFORNIA CORPORATION 33-0727173
- ----------------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
6450 LUSK BLVD., SUITE E205 SAN DIEGO, CA. 92121
- ----------------------------------------------------------------------------------------------------------------------------
3. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST) 3A. SOCIAL SECURITY OR FEDERAL TAX NO.
- ----------------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY 4A. SOCIAL SECURITY NO., FEDERAL TAX NO.
OR BANK TRANSIT AND A.B.A. NO.
NAME IMPERIAL BANK
16-144/1222
MAILING ADDRESS 701 B STREET, SUITE 600
CITY SAN DIEGO STATE CA ZIP CODE 92101-8120
- ----------------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL TAX NO.
OR BANK TRANSIT AND A.B.A. NO.
NAME
MAILING ADDRESS
CITY STATE ZIP CODE
- ----------------------------------------------------------------------------------------------------------------------------
6.
A [ ] CONTINUATION - The original Financing Statement between the foregoing Debtor and Secured Party bearing the file number
and date shown above is continued, if collateral is crops or timber, check here [ ] and insert description of real
property on which growing or to be grown in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
B [ ] RELEASE - From the collateral described in the Financing Statement bearing the file number shown above, the Secured
Party releases the collateral described in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
C [ ] ASSIGNMENT - The Secured Party certifies that the Secured Party has assigned to the Assignee above named, all the
Secured Party's rights under the Financing Statement bearing the file number shown above in the collateral described
in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
D [ ] TERMINATION - The Secured Party certifies that the Secured Party no longer claims a security interest under the
Financing Statement bearing the file number shown above.
- ----------------------------------------------------------------------------------------------------------------------------
E [X] AMENDMENT - The Financing Statement bearing the file number shown above is amended as set forth in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
F [ ] OTHER
- ----------------------------------------------------------------------------------------------------------------------------
7. CHANGE DEBTORS ADDRESS TO:
10182 TELESIS COURT
SAN DIEGO, CA. 92121
- ----------------------------------------------------------------------------------------------------------------------------
8. (Date) MARCH 27 2000 C 9. THIS SPACE FOR USE OF FILING OFFICER
------------------------------------ 0 (DATE, TIME, FILING OFFICE)
D
WEBSIDESTORY, INC. E
- ------------------------------------------------------------------------------
BY: /s/ Michael Christian SENIOR VICE PRESIDENT 1
-------------------------------------------------------------------------- 2
SIGNATURE(S) OF DEBTOR(S) (TITLE) 3
4
IMPERIAL BANK 5
- ------------------------------------------------------------------------------ 6
7
BY: 8
--------------------------------------------------------------------------- 9
SIGNATURE(S) OF SECURED PARTY(IES) (TITLE)
- ------------------------------------------------------------------------------
10. RETURN COPY TO
NAME IMPERIAL BANK-ACCT #P6-0001-070-6
ADDRESS LOAN DOCUMENTATION SERVICES
CITY AND 9920 S. LA CIENEGA BLVD., SUITE #628
STATE INGLEWOOD, CA 90301
ATTN: RANDAL DECKER
BR: 3805
Filing officer is requested to note date and
hour of filing on (3) Filing Officer Copy UNIFORM COMMERCIAL CODE-FORM UCC-2
Acknowledgement and return to the above party.
(3) Filing Officer Copy Acknowledgement
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
STATE OF CALIFORNIA UNIFORM COMMERCIAL CODE - FINANCING STATEMENT CHANGE - FORM UCC-2
- ----------------------------------------------------------------------------------------------------------------------------
This STATEMENT is presented for filing pursuant to the CALIFORNIA Uniform Commercial Code
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. FILE NO. OF ORIG. 1A. DATE OF FILING OF ORIG. 1B. DATE OF ORIG. 1C. PLACE OF FILING ORIG.
FINANCING STATEMENT FINANCING STATEMENT FINANCING STATEMENT FINANCING STATEMENT
9924560816 8-23-99 SACRAMENTO
- ----------------------------------------------------------------------------------------------------------------------------
2. DEBTOR (LAST NAME FIRST) 2A. SOCIAL SECURITY NO., FEDERAL TAX NO.
WEBSIDESTORY, INC., A CALIFORNIA CORPORATION 33-0727173
- ----------------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
6450 LUSK BLVD., SUITE E205 SAN DIEGO, CA. 92121
- ----------------------------------------------------------------------------------------------------------------------------
3. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST) 3A. SOCIAL SECURITY OR FEDERAL TAX NO.
- ----------------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY 4A. SOCIAL SECURITY NO., FEDERAL TAX NO.
OR BANK TRANSIT AND A.B.A. NO.
NAME IMPERIAL BANK
16-144/1222
MAILING ADDRESS 701 B STREET, SUITE 600
CITY SAN DIEGO STATE CA ZIP CODE 92101-8120
- ----------------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL TAX NO.
OR BANK TRANSIT AND A.B.A. NO.
NAME
MAILING ADDRESS
CITY STATE ZIP CODE
- ----------------------------------------------------------------------------------------------------------------------------
6.
A [ ] CONTINUATION - The original Financing Statement between the foregoing Debtor and Secured Party bearing the file number
and date shown above is continued, if collateral is crops or timber, check here [ ] and insert description of real
property on which growing or to be grown in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
B [ ] RELEASE - From the collateral described in the Financing Statement bearing the file number shown above, the Secured
Party releases the collateral described in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
C [ ] ASSIGNMENT - The Secured Party certifies that the Secured Party has assigned to the Assignee above named, all the
Secured Party's rights under the Financing Statement bearing the file number shown above in the collateral described
in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
D [ ] TERMINATION - The Secured Party certifies that the Secured Party no longer claims a security interest under the
Financing Statement bearing the file number shown above.
- ----------------------------------------------------------------------------------------------------------------------------
E [X] AMENDMENT - The Financing Statement bearing the file number shown above is amended as set forth in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
F [ ] OTHER
- ----------------------------------------------------------------------------------------------------------------------------
7. CHANGE DEBTORS ADDRESS TO:
10182 TELESIS COURT
SAN DIEGO, CA. 92121
- ----------------------------------------------------------------------------------------------------------------------------
8. (Date) MARCH 27 2000 C 9. THIS SPACE FOR USE OF FILING OFFICER
------------------------------------ 0 (DATE, TIME, FILING OFFICE)
D
WEBSIDESTORY, INC. E
- ------------------------------------------------------------------------------
BY: /s/ Michael Christian SENIOR VICE PRESIDENT 1
-------------------------------------------------------------------------- 2
SIGNATURE(S) OF DEBTOR(S) (TITLE) 3
4
IMPERIAL BANK 5
- ------------------------------------------------------------------------------ 6
7
BY: 8
--------------------------------------------------------------------------- 9
SIGNATURE(S) OF SECURED PARTY(IES) (TITLE)
- ------------------------------------------------------------------------------
10. RETURN COPY TO
NAME IMPERIAL BANK-ACCT #P6-0001-070-6
ADDRESS LOAN DOCUMENTATION SERVICES
CITY AND 9920 S. LA CIENEGA BLVD., SUITE #628
STATE INGLEWOOD, CA 90301
ATTN: RANDAL DECKER
BR: 3805
Filing officer is requested to note date and
hour of filing on (3) Filing Officer Copy UNIFORM COMMERCIAL CODE-FORM UCC-2
Acknowledgement and return to the above party.
(4) Debtor Copy
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
STATE OF CALIFORNIA UNIFORM COMMERCIAL CODE - FINANCING STATEMENT CHANGE - FORM UCC-2
- ----------------------------------------------------------------------------------------------------------------------------
This STATEMENT is presented for filing pursuant to the CALIFORNIA Uniform Commercial Code
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. FILE NO. OF ORIG. 1A. DATE OF FILING OF ORIG. 1B. DATE OF ORIG. 1C. PLACE OF FILING ORIG.
FINANCING STATEMENT FINANCING STATEMENT FINANCING STATEMENT FINANCING STATEMENT
9924560816 8-23-99 SACRAMENTO
- ----------------------------------------------------------------------------------------------------------------------------
2. DEBTOR (LAST NAME FIRST) 2A. SOCIAL SECURITY NO., FEDERAL TAX NO.
WEBSIDESTORY, INC., A CALIFORNIA CORPORATION 33-0727173
- ----------------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
6450 LUSK BLVD., SUITE E205 SAN DIEGO, CA. 92121
- ----------------------------------------------------------------------------------------------------------------------------
3. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST) 3A. SOCIAL SECURITY OR FEDERAL TAX NO.
- ----------------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY 4A. SOCIAL SECURITY NO., FEDERAL TAX NO.
OR BANK TRANSIT AND A.B.A. NO.
NAME IMPERIAL BANK
16-144/1222
MAILING ADDRESS 701 B STREET, SUITE 600
CITY SAN DIEGO STATE CA ZIP CODE 92101-8120
- ----------------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL TAX NO.
OR BANK TRANSIT AND A.B.A. NO.
NAME
MAILING ADDRESS
CITY STATE ZIP CODE
- ----------------------------------------------------------------------------------------------------------------------------
6.
A [ ] CONTINUATION - The original Financing Statement between the foregoing Debtor and Secured Party bearing the file number
and date shown above is continued, if collateral is crops or timber, check here [ ] and insert description of real
property on which growing or to be grown in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
B [ ] RELEASE - From the collateral described in the Financing Statement bearing the file number shown above, the Secured
Party releases the collateral described in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
C [ ] ASSIGNMENT - The Secured Party certifies that the Secured Party has assigned to the Assignee above named, all the
Secured Party's rights under the Financing Statement bearing the file number shown above in the collateral described
in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
D [ ] TERMINATION - The Secured Party certifies that the Secured Party no longer claims a security interest under the
Financing Statement bearing the file number shown above.
- ----------------------------------------------------------------------------------------------------------------------------
E [X] AMENDMENT - The Financing Statement bearing the file number shown above is amended as set forth in item 7 below.
- ----------------------------------------------------------------------------------------------------------------------------
F [ ] OTHER
- ----------------------------------------------------------------------------------------------------------------------------
7. CHANGE DEBTORS ADDRESS TO:
10182 TELESIS COURT
SAN DIEGO, CA. 92121
- ----------------------------------------------------------------------------------------------------------------------------
8. (Date) MARCH 27 2000 C 9. THIS SPACE FOR USE OF FILING OFFICER
------------------------------------ 0 (DATE, TIME, FILING OFFICE)
D
WEBSIDESTORY, INC. E
- ------------------------------------------------------------------------------
BY: 1
-------------------------------------------------------------------------- 2
SIGNATURE(S) OF DEBTOR(S) (TITLE) 3
4
IMPERIAL BANK 5
- ------------------------------------------------------------------------------ 6
7
BY: /s/ Tim Bubnack SVP 8
--------------------------------------------------------------------------- 9
SIGNATURE(S) OF SECURED PARTY(IES) (TITLE)
- ------------------------------------------------------------------------------
10. RETURN COPY TO
NAME IMPERIAL BANK-ACCT #P6-0001-070-6
ADDRESS LOAN DOCUMENTATION SERVICES
CITY AND 9920 S. LA CIENEGA BLVD., SUITE #628
STATE INGLEWOOD, CA 90301
ATTN: RANDAL DECKER
BR: 3805
Filing officer is requested to note date and
hour of filing on (3) Filing Officer Copy UNIFORM COMMERCIAL CODE-FORM UCC-2
Acknowledgement and return to the above party.
(1) Secured Party Copy
</TABLE>
<PAGE> 24
SIGNATURE AUTHORIZATION
===============================================
Borrower: WEBSIDESTORY, INC. LENDER: Imperial Bank
10182 TELESIS COURT Emerging Growth Industries Group --
SAN DIEGO, CA 92121 Southern California Regional Office
701 B Street, Suite 600
San Diego, CA 92101-6120
===============================================
This SIGNATURE AUTHORIZATION is attached to and by this reference is made a
part of each Borrowing Resolution, dated March 27, 2000, and executed in
connection with a loan or other financial accommodations between Imperial Bank
and WEBSIDESTORY, INC.
The individuals named below, any one acting alone, are hereby authorized and
appointed for and on behalf of Borrower from time to time to do any of the
following:
(1) To request advances of credit under the Agreement and to effect repayment
of any credit outstanding under the Agreement;
(2) To execute and deliver assignments, borrowing certificates, instruments,
schedules, reports, invoices, bills, shipping documents and such other
documents or certificates as may be necessary or appropriate under the
Agreement or any other agreement or instrument relating thereto or delivered in
connection therewith;
(3) To transfer and endorse to Bank in payment of Borrower's obligations to
Bank any checks, drafts, notes or other instruments payable to Borrower; and
(4) To do or perform any and all other acts or matters in any way relating to
any or all of the foregoing.
The undersigned individuals each further certifies that the specimen signatures
below are the genuine signatures of the individuals designated herein and that
their signatures shall be binding on Borrower until Bank receives written
notice of termination of the authority of any such designated individuals.
Signature:
-----------------------------
Name:
----------------------------------
Signature:
-----------------------------
Name:
----------------------------------
Signature:
-----------------------------
Name:
----------------------------------
Signature:
-----------------------------
Name:
----------------------------------
THIS SIGNATURE AUTHORIZATION IS EXECUTED ON MARCH 27, 2000.
BORROWER:
WEBSIDESTORY, INC.
By:
------------------------------------
JOHN HENTRICH, PRESIDENT/CEO
By:
------------------------------------
MICHAEL CHRISTIAN, COO/SECRETARY
LENDER:
Imperial Bank
By: /s/ illegible
------------------------------------
Authorized Officer
===============================================================================
<PAGE> 25
IMPERIAL BANK
- --------------------------------------------------------------------------------
Emerging Growth Division * Southern California Region
11512 El Camino Real, Suite 350 * San Diego, California 92130 * (619)509-2360 *
(800) 226-2695 * Fax (619) 509-2365
March 9, 2000
Mr. Michael Christian, SVP
WebSideStory, Inc.
10182 Telesis Court
San Diego, CA 92121
Dear Mr. Christian:
Based on our discussions concerning the financing needs of WebSideStory, Inc.
("Borrower"), and based upon our preliminary review of the information provided
to date, Imperial Bank ("IB" or "Bank") is pleased to propose the following
financing arrangement. The matters outlined herein constitute a proposal as to
certain terms and conditions under which we may provide financing. It is
intended to be used as a vehicle for continued discussions and further due
diligence, and does not constitute a commitment on behalf of IB at this time.
Nevertheless, subject to the qualifications listed below and the satisfactory
completion of our due diligence, we believe we should be in a position to offer
you a financing package structured along the following lines:
1. CREDIT FACILITY - REVOLVING EQUIPMENT LINE OF CREDIT
1.1 Amount: Up to $3,000,000.
1.2 Availability: Up to 100% for general corporate purposes and to
finance capital equipment expenditures.
1.3 Maturity: Up to 12 months from issuance.
1.4 Amortization: Capital equipment financing shall be available up to 12
months from the date of commitment, with interest only payable. At the
end of the 12 months the outstanding equipment balance will convert
to a 36-month term loan with equal principal payments, plus interest.
(Equipment draws to include 100% of invoice value excluding soft
costs, freight, and sales tax).
1.5 Pricing: Interest shall be payable monthly at the Bank's Prime Rate
plus 0.25%.
1.6 Documentation Fee, Costs and Expenses: In addition to any other
amounts due, or to become due, concurrently with the execution hereof,
Borrower agrees to pay to Bank a documentation fee in the amount of
$500, and all other reasonable costs and expenses incurred by the Bank
in the preparation of this Agreement and any other Loan Documents.
1.7 Collateral: First position security interest evidenced by a UCC-1
filing on all corporate assets of Borrower, including specific filings
on intellectual property.
<PAGE> 26
1.8 Covenants: Minimum liquidity (defined as unrestricted cash and cash
equivalents plus eligible accounts receivable), measured monthly, the
greater of 1) 1.50 times current liabilities and all Bank debt, or 2)
three months cash burn.
2. GENERAL CONDITIONS
The extensions of credit would necessarily be subject to the fulfillment of a
number of conditions, including, but not limited to, the following:
2.1 The execution and delivery by the Borrower to IB of such agreements,
documents, instruments, financing statements, consents, evidences of
corporate authority, certificates, insurance certificates, opinions of
counsel, and other such writings to confirm and effectuate the lending
transaction as may be required by IB and its counsel in form and
content acceptable to IB.
2.2. No material adverse change in the business, operations, profits, or
prospects of Borrower or in the condition of the assets of Borrower
prior to funding.
2.3 Negotiation and execution of a satisfactory loan agreement.
2.4 Borrower agrees to maintain all substantive depository accounts with
IB.
2.5 IB's final credit approval and issuance of formal commitment.
2.6 Borrower to deliver to Bank a five-year warrant to purchase $200,000
worth of common stock at $2.50 per share. In the event the Borrower
completes an IPO, the Bank will agree to exercise this warrant, no
later than, one year from the conclusion of the IPO lock out period.
3. REPORTING REQUIREMENTS
3.1 Company prepared monthly financial statements within 30 days of month
end.
3.2 Detailed schedule of equipment purchases and other expenses
associated with each drawdown.
3.3 Annual audited financial statements from independent CPA's
satisfactory to IB within 120 days of fiscal year-end.
3.4 A letter will accompany each delivery of interim financial statements
from Borrower, signed by its Chief Financial Officer, attesting to
compliance or detailing non-compliance with all material covenants in
the loan agreements.
3.5 Access to all Company Board of Directors' minutes upon request by
Bank.
2
<PAGE> 27
CONFIDENTIALITY
This letter is provided solely for your information and is delivered to you with
the understanding that neither it, nor its substance, shall be disclosed to any
third person, except those who are in a confidential relationship to you, or
where the same is required by law.
This letter is meant to be a working document, outlining the general terms and
conditions under which Imperial Bank would be willing to consider a financing
arrangement for WebSideStory, Inc. It is not meant to be a comprehensive list
of terms and conditions that may apply to any future commitment, any credit
agreement, or other document that may be entered into by and between IB and
Borrower. Rather, it is intended only to outline certain basic points of
business understanding around which further discussions may take place.
As a result of further analysis and investigation by us, or by reason of
information of which we are not now aware, impediments to closing may be
discovered. We may require that the arrangement be restructured or otherwise
modified to make allowances for such impediments, or the impediments may be so
serious as to affect the closing of these financial arrangements.
We hope this proposal is acceptable to you and request that you execute the
enclosed copy of this letter and return it to us prior to March 24, 2000, at
which time this proposal will expire. Imperial Bank looks forward to assisting
you in achieving your goals of growth and profitability. Please do not hesitate
to contact us if you have any questions regarding this proposal.
Sincerely,
IMPERIAL BANK
By: /s/ Scott R. Foote By: /s/ Tim Bubnack
------------------------------------ ----------------------------------
Scott R. Foote, Venture Loan Officer Tim Bubnack, Senior Vice President
Received and Accepted:
WEBSIDESTORY, INC.
By: /s/ Michael Christian
---------------------------------------- SUBJECT TO BOARD APPROVAL
Michael Christian, Senior Vice President
Date: March 15, 2000
--------------
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Exhibit 10.35
STOCKHOLDERS AGREEMENT
By and Among
WebSideStory, Inc.
The Founding Stockholders as defined herein
and
The Investors
as defined herein
Dated as of June 18,1999
<PAGE> 2
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is made as of this 18th day
of June, 1999 by and among WebSideStory, Inc., a California corporation (the
"Company"), the stockholders of the Company identified as such on the signature
pages hereto (the "Founding Stockholders"), the persons identified on the
signature pages hereto as the investors (each, an "Investor" and collectively,
the "Investors"), and any other stockholder or optionholder who from time to
time becomes party to this Agreement by execution of a Joinder Agreement in
substantially the form attached hereto as Exhibit A (the "Other Stockholders").
The Founding Stockholders and the Other Stockholders are herein referred to
collectively as the "Stockholders" and individually as a "Stockholder."
WHEREAS, reference is made to the Stock Purchase Agreement, dated as of the
date hereof (the "Purchase Agreement"), pursuant to which the Investors have
agreed to purchase shares of Convertible Redeemable Participating Preferred
Stock of the Company (the "Convertible Preferred Stock") and shares of
Redeemable Preferred Stock (the "Redeemable Preferred Stock");
WHEREAS, the Convertible Preferred Stock is convertible into shares of
Common Stock of the Company ("Common Stock");
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the transactions contemplated by the Purchase Agreement; and
WHEREAS, the parties hereto desire to agree upon the terms upon which the
outstanding securities of the Company, now or hereafter outstanding and held by
them will be held, transferred and voted.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Construction of Terms. As used herein, the masculine, feminine
or neuter gender, and the singular or plural number, shall be deemed to be or to
include the other genders or number, as the case may be, whenever the context so
indicates or requires.
Section 1.2 Terms Not Defined. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Purchase
Agreement.
Section 1.3 Number of Shares of Stock. Whenever any provision of this
Agreement calls for any calculation based on a number of shares of capital stock
held by a Stockholder or an Investor, the number of shares deemed to be held by
that Stockholder or Investor shall be the total number of shares of Common Stock
then owned by the Stockholder or Investor, plus the total number of shares of
Common Stock issuable upon the conversion of any Preferred Stock or
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other convertible securities or the exercise of any vested options, warrants or
subscription rights then owned by such Stockholder or Investor.
Section 1.4 Defined Terms. The following capitalized terms, as used in this
Agreement, shall have the meanings set forth below.
An "Affiliate" of any Person means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by or is under
common control with the first mentioned Person. A Person shall be deemed to
control another Person if such first Person possesses directly or indirectly the
power to direct, or cause the direction of, the management and policies of the
second Person, whether through the ownership of voting securities, by contract
or otherwise.
"Board of Directors" means the Board of Directors of the Company.
"Common Stock" means the Common Stock and any other common equity
securities issued by the Company, and any other shares of stock issued or
issuable with respect thereto (whether by way of a stock dividend or stock split
or in exchange for or upon conversion of such shares or otherwise in connection
with a combination of shares, recapitalization, merger, consolidation or other
corporate reorganization).
"Company" shall refer to the Company and any successor or successors
thereto.
"Majority Interest" means the Investors holding not less than a majority of
the outstanding Shares held by all of the Investors.
"Person" means an individual, a corporation, an association, a partnership,
a limited liability company, an estate, a trust, and any other entity or
organization, governmental or otherwise.
"Preferred Stock" means the Convertible Preferred Stock, together with any
shares issued or issuable with respect thereto (whether by way of a stock
dividend or stock split or in exchange for or in replacement of such shares or
otherwise in connection with a combination of shares, recapitalization, merger,
consolidation or other corporate reorganization).
"Qualified Public Offering" has the meaning set forth in the Company's
Amended and Restated Articles of Incorporation in effect as of the date hereof.
"Shares" means (i) with respect to the Investors, the shares of Common
Stock subject to acquisition upon the conversion of the Preferred Stock at the
relevant time (such number being subject to possible adjustment in accordance
with the terms of the Company's Amended and Restated Articles of Incorporation),
together with the shares of Common Stock held by the Investors at the relevant
time if conversion of any of the Preferred Stock has then occurred, and (ii)
with respect to the Stockholders or any Permitted Transferees (as defined in
Section 2.1(b) below) thereof, all shares of Common Stock then held by the
Stockholders and any Permitted Transferees thereof.
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<PAGE> 4
"Transfer" means any direct or indirect transfer, donation, sale,
assignment, pledge, hypothecation, grant of a security interest in or other
disposal or attempted disposal of all or any portion of a security or of any
rights. "Transferred" means the accomplishment of a transfer, and "transferee"
means the recipient of a transfer.
ARTICLE II
RESTRICTIONS ON TRANSFER; RIGHT OF LAST REFUSAL;
CO-SALE PROVISIONS
Notwithstanding anything herein to the contrary, the following provisions
of this Article II shall terminate immediately prior to the closing of a
Qualified Public Offering and shall not apply with respect to any Qualified
Public Offering.
Section 2.1 Restrictions on Transfer. Each Stockholder agrees that he will
not, without the prior written consent of a Majority Interest of the Investors,
transfer all or any portion of the Shares now owned or hereafter acquired by
him, except in connection with, and in compliance with the conditions of, any of
the following:
(a) Transfers effected pursuant to Sections 2.2 and 2.3 in each case
made in accordance with the procedures set forth therein;
(b) Transfers by any Stockholder to his spouse or children or to a
trust of which he is the settlor and a trustee for the benefit of his spouse or
children; provided, that any such trust or entity does not require or permit
distribution of such Shares during the term of this Agreement; and provided
further, that the transferee shall have entered into a Joinder Agreement in the
form attached as Exhibit A providing that all Shares so transferred shall
continue to be subject to all provisions of this Agreement as if such Shares
were still held by such Stockholder, except that no further transfer shall
thereafter be permitted hereunder except in compliance with Sections 2.2 and
2.3;
(c) Transfers upon the death of any Stockholder to his heirs, executors
or administrators or to a trust under his will or Transfers between such
Stockholder and his guardian or conservator, provided that the transferee shall
have entered into a Joinder Agreement in the form attached as Exhibit A
providing that all Shares so transferred shall continue to be subject to all
provisions of this Agreement as if such Shares were still held by such
Stockholder, except that no further transfer shall thereafter be permitted
hereunder except in compliance with Sections 2.2 and 2.3; and
(d) in addition to the Transfers specified in items (a), (b) and (c)
above, Transfers by Blaise Barrelet and/or Agnes Barrelet of Ten Million
(10,000,000) shares of Common Stock in the aggregate, and Transfers by Michael
Christian of Five Hundred Twenty-Five Thousand Four Hundred Fifty-Four (525,454)
shares of Common Stock in the aggregate, in each case as appropriately adjusted
for any stock split, combination, reorganization, recapitalization,
reclassification, stock distribution, stock dividend or similar event.
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Any permitted transferee described in clauses (b) or (c) above shall be
referred to herein as a "Permitted Transferee." Anything to the contrary in this
Agreement notwithstanding, Permitted Transferees shall take any Shares so
transferred subject to all provisions of this Agreement as if such Shares were
still held by the transferring Stockholder, whether or not they so agree in
writing.
Section 2.2 Right of Last Refusal. In the event that any of the
Stockholders, including any of their Permitted Transferees, receives a bona fide
offer to purchase all or any portion of the Shares held by such person (a
"Transaction Offer") from a non-Affiliate (the "Offeror"), such Stockholders or
Permitted Transferees (a "Transferring Stockholder") may, subject to the
provisions of Section 2.3 hereof, transfer such Shares pursuant to and in
accordance with the following provisions of this Section 2.2:
(a) Such Transferring Stockholder shall cause the Transaction Offer and
all of the terms thereof to be reduced to writing and shall notify each of the
Investors of his wish to accept the Transaction Offer and otherwise comply with
the provisions of this Section 2.2 and, if applicable, Section 2.3 (such notice,
the "Offer Notice"). The Transferring Stockholder's Offer Notice shall
constitute an irrevocable offer to sell the Shares which are the subject of the
Transaction Offer to the Investors, on the basis described below at a purchase
price equal to the price contained in, and on the same terms and conditions of,
the Transaction Offer. The Offer Notice shall be accompanied by a true copy of
the Transaction Offer (which shall identify the Offeror and all relevant
information in connection therewith).
(b) Upon receipt of an Offer Notice, the Investors may elect to accept
the offer to sell with respect to all of the Shares subject thereto and shall
give written notice of such election to the Transferring Stockholder as provided
below. Each Investor shall have the right to offer to purchase up to that number
of Shares covered by the Transaction Offer as shall be equal to the product
obtained by multiplying (i) the total number of Shares subject to the
Transaction Offer by (ii) a fraction, the numerator of which is the total number
of Shares owned by such Investor on the date of the Offer Notice on an as
converted basis (including for this purpose any shares of Common Stock issuable
upon conversion of the Preferred Stock), and the denominator of which is the
total number of Shares then held by all Investors on the date of the Offer
Notice also on an as converted basis, subject to increase as hereinafter
provided. The number of Shares that each Investor is entitled to purchase under
this Section 2.2 as provided in the immediately preceding sentence shall be
referred to as its "Pro Rata Fraction." In the event an Investor does not wish
to purchase its Pro Rata Fraction, then any Investors who so elect to purchase
shall have the right to offer to purchase, on a pro rata basis with any other
Investors who so elect, any Pro Rata Fraction not purchased by such Investor.
Each Investor shall have the right to accept the Transaction Offer by
giving notice of such acceptance to the Transferring Stockholder as provided
herein within thirty (30) calendar days after receipt of the Offer Notice (the
"Election Period"), which notice shall indicate the maximum number of Shares
subject thereto which the Investor is willing to purchase in the event fewer
than all Investors elect to purchase their Pro Rata Fractions. In the event that
the price set forth in the Offer Notice is stated in consideration other than
cash or cash equivalents, the Transferring Stockholder and a Majority Interest
of the Investors shall determine the fair market
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<PAGE> 6
value of such consideration, reasonably and in good faith; provided that, if the
Transferring Stockholder and such Investors are unable to agree on the fair
market value of such consideration, then the fair market value of such
consideration shall be the average of three appraisals conducted by three
independent investment bankers, such that (i) the Transferring Stockholder shall
select and pay the fees of the first investment banker, (ii) such Investors
shall select and pay the fees of the second investment banker and (iii) the
first two investment bankers selected shall select a third investment banker,
the fees of which shall be paid equally by the Transferring Stockholder, on the
one hand, and such Investors, on the other hand. The Investors may exercise
their right to purchase under this Section 2.2 by payment of such fair market
value in cash or cash equivalents. The Transferring Stockholder shall notify the
Investors promptly following any lapse of the rights to purchase under this
Section 2.2 without acceptance thereof or any rejection of such rights.
Upon the expiration of the Election Period, the number of Shares to be
purchased by each Investor (and if applicable by the Company or its assignees)
shall be determined as follows: (x) there shall first be allocated to each
Investor a number of Shares equal to the lesser of (A) the number of Shares as
to which such Investor accepted the Transaction Offer or (B) such Investor's Pro
Rata Fraction, and (y) second, the balance, if any, not allocated under clause
(x) above, shall be allocated to those Investors who accepted the Transaction
Offer as to a number of Shares which exceeded their respective Pro Rata
Fractions, in each case on a pro rata basis in proportion to the amount of such
excess. The closing for any purchase of Shares by the Investors under this
Section 2.2 shall take place within twenty-one (21) calendar days after the
expiration of the Election Period at the place and on the date specified by a
Majority Interest of the Investors (as to purchases by the Investors).
(c) In the event that the Investors do not elect to exercise the rights
to purchase under this Section 2.2 with respect to all of the Shares proposed to
be sold, the Transferring Stockholder may sell any such unsold Shares to the
Offeror on the terms and conditions set forth in the Offer Notice, subject to
the provisions of Section 2.3. If the Transferring Stockholder's sale to an
Offeror is not consummated in accordance with the terms of the Transaction Offer
within the later of (i) ninety (90) calendar days after the expiration of the
right of last refusal under this Section 2.2 and the Co-Sale Option set forth in
Section 2.3 below, if applicable, and (ii) the satisfaction of all governmental
approval or filing requirements, the Transaction Offer shall be deemed to lapse,
and any transfers of Shares pursuant to such Transaction Offer shall be deemed
to be in violation of the provisions of this Agreement unless the Investors and
the Company are once again afforded the right of last refusal provided for
herein with respect to such Transaction Offer.
Section 2.3 Co-Sale Option of Investors. In the event that any Transferring
Stockholder receives a Transaction Offer from an Offeror, and the right to
purchase under Section 2.2 is not exercised by the Investors as to all Shares,
such Transferring Stockholder may transfer any such unsold Shares only pursuant
to and in accordance with the following provisions of this Section 2.3:
(a) Each of the Investors shall have the right to participate in the
Transaction Offer with respect to any Shares subject thereto which are not
purchased pursuant to
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Section 2.2 by giving written notice (the "Acceptance Notice") to the
Transferring Stockholder on or before the last day of the Election Period (the
"Co-Sale Option"). Each Acceptance Notice shall indicate the maximum number of
Shares the Investor wishes to sell including the number of Shares it would sell
if one or more other Investors do not elect to participate in the sale on the
terms and conditions stated in the Offer Notice. Any Investor holding Preferred
Stock shall be permitted to sell to the relevant Offeror in connection with any
exercise of the Co-Sale Option, at its option, shares of Common Stock acquired
upon conversion of such Preferred Stock, or an option to acquire such Common
Stock when it receives the same upon such conversion at the election of such
Investor with the same effect as if Common Stock were being conveyed.
(b) Each Investor shall have the right to sell a portion of its Shares
pursuant to the Transaction Offer which is equal to or less than the product
obtained by multiplying (i) the total number of Shares subject to the
Transaction Offer and available for sale to the Offeror by (ii) a fraction, the
numerator of which is the total number of Shares owned by such Investor on the
date of the Offer Notice on an as converted basis (including all shares of
Common Stock issuable upon conversion of the Preferred Stock) and the
denominator of which is the total number of Shares then held by all Investors
and the Transferring Stockholder (including any of his Permitted Transferees) on
the date of the Offer Notice, also on an as converted basis and including
(without duplication) all shares of Common Stock issuable upon the conversion of
the Preferred Stock. To the extent one or more Investors elect not to sell, or
fail to exercise their rights to sell, the full amount of such Shares which they
are entitled to sell pursuant to this Section 2.3, the right of Investors who
have elected to sell Shares shall be increased proportionately based on their
relative holdings and such other Investors shall have an additional five (5)
business days from the date upon which they are notified of such election or
failure to exercise in which to increase the number of Shares to be sold by them
hereunder.
(c) Within ten (10) calendar days after the date by which the Investors
were first required to notify the Transferring Stockholder of their intent to
participate, the Transferring Stockholder shall notify the Company, which in
turn shall promptly notify each participating Investor of the number of Shares
held by such Investor that will be included in the sale and the date on which
the Transaction Offer will be consummated, which shall be no later than the
later of (i) thirty (30) calendar days after the date by which the Investors
were required to notify the Transferring Stockholder of their intent to
participate and (ii) the satisfaction of any governmental approval or filing
requirements, if any.
(d) Each participating Investor may effect its participation in any
Transaction Offer hereunder by delivery to the Offeror, or to the Transferring
Stockholder for delivery to the Offeror, of one or more instruments or
certificates, properly endorsed for transfer, representing the Shares it elects
to sell therein. At the time of consummation of the Transaction Offer, the
Offeror shall remit directly to each relevant Investor that portion of the sale
proceeds to which the relevant Investor is entitled by reason of its
participation therein (less any adjustments due to the conversion of any
convertible securities or the exercise of any exercisable securities). No Shares
may be purchased by the Offeror from the Transferring Stockholders or any of
their Permitted Transferees unless the Offeror simultaneously purchases from the
participating Investors all of the Shares that they have elected to sell
pursuant to this Section 2.3.
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(e) Any Shares held by a Transferring Stockholder which are the subject
of the Transaction Offer that the Transferring Stockholder desires to sell
following compliance with this Section 2.3 may be sold to the Offeror only
during the period specified in Section 2.2(c) and only on terms no more
favorable to the Transferring Stockholder than those contained in the Offer
Notice. Promptly after such sale, the Transferring Stockholder shall notify the
Company, which in turn shall promptly notify the Investors, of the consummation
thereof and shall furnish such evidence of the completion and time of completion
of such sale and of the terms thereof as may reasonably be requested by a
Majority Interest of the Investors. So long as the Offeror is neither a party
nor an Affiliate of or relative of a party, to this Agreement, such Offeror
shall take the Shares so transferred free and clear of any further restrictions
of this Article II. In the event that the Transaction Offer is not consummated
within the period required by this Section 2.3 or the Offeror fails timely to
remit to each participating Investor its portion of the sale proceeds, the
Transaction Offer shall be deemed to lapse, and any transfers of Shares pursuant
to such Transaction Offer shall be deemed to be in violation of the provisions
of this Agreement unless the Transferring Stockholder once again complies with
the provisions of Section 2.2 and this Section 2.3 hereof with respect to such
Transaction Offer.
Section 2.4 Contemporaneous Transfers. If two or more Stockholders (or
their Permitted Transferees) propose concurrent transfers which are subject to
this Article II, then the relevant provisions of Sections 2.2 and 2.3, as
applicable, shall apply separately to each such proposed transfer.
Section 2.5 Investor Transfer and Assignment. No Investor, without the
consent of the Company, shall have the right to Transfer any of its Shares to
any Person prior to the earlier to occur of (i) the second anniversary of the
Closing Date or (ii) the closing of a Qualified Public Offering, except to an
Affiliate of such Investor; provided that any such Transfer prior to a Qualified
Public Offering shall involve at least Two Million (2,000,000) of the Shares
initially purchased by such Investor pursuant to the Purchase Agreement (as
appropriately adjusted for any stock split, combination, reorganization,
recapitalization, reclassification, stock distribution, stock dividend or
similar event). Each Investor shall have the right to assign its rights to any
transferee of its Shares pursuant to this Section 2.5, and any such transferee
shall be deemed within the definition of an "Investor" for purposes of this
Article II and shall comply with the "market stand-off" obligations set forth in
Section 3 of the related Registration Rights Agreement of even date herewith. No
Investor shall Transfer any of its shares of Redeemable Preferred Stock, except
to the same transferee, and simultaneously with a permitted Transfer, of shares
of Preferred Stock on a proportional basis relative to such Investor's initial
holdings of Preferred Stock and Redeemable Preferred Stock.
Section 2.6 Prohibited Transfers. If any transfer is made or attempted
contrary to the provisions of this Agreement, such purported transfer shall be
void ab initio; the Company and the other parties hereto shall have, in addition
to any other legal or equitable remedies which they may have, the right to
enforce the provisions of this Agreement by actions for specific performance (to
the extent permitted by law); and the Company shall have the right to refuse to
recognize any transferee as one of its Stockholders for any purpose.
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ARTICLE III
RIGHTS TO PURCHASE
Notwithstanding anything herein to the contrary, the following provisions
of this Article III shall terminate immediately prior to the closing of a
Qualified Public Offering and shall not apply with respect to any Qualified
Public Offering.
Section 3.1 Right to Participate in Certain Sales of Additional Securities.
The Company agrees that it will not sell or issue (i) any shares of capital
stock of the Company, (ii) securities convertible into or exchangeable for
capital stock of the Company or (iii) options, warrants or rights carrying any
rights to purchase capital stock of the Company, unless the Company first
submits a written offer to each Investor (collectively, the "Offerees"),
identifying the terms of the proposed sale (including price, number or aggregate
principal amount of securities and all other material terms), and offers to each
Offeree the opportunity to purchase its Pro Rata Allotment (as hereinafter
defined) of the securities (subject to increase for over-allotment if some
Offerees do not fully exercise their rights) on terms and conditions, including
price, not less favorable than those on which the Company proposes to sell such
securities to a third party or parties. Each Offeree's "Pro Rata Allotment" of
such securities shall be based on the ratio (as determined in accordance with
Section 1.3 hereof) which the Shares then owned by it bears to all of the then
issued and outstanding shares of Common Stock (including for this purpose any
shares of Common Stock issuable upon conversion of the Preferred Stock) as of
the date of such written offer. The Company's offer pursuant to this Section 3.1
shall remain open and irrevocable for a period of thirty (30) calendar days, and
the recipients of such offer shall elect to purchase by giving written notice
thereof to the Company within such 30-day period, including therein the maximum
number of shares of capital stock or other securities of the Company which the
Offeree would purchase if other Offerees do not elect to purchase, with the
rights of electing Offerees to purchase such additional shares to be based upon
the relative holdings of Shares of the electing Offerees in the case of
over-subscription. Any securities so offered which are not purchased pursuant to
such offer may be sold by the Company, but only on the terms and conditions set
forth in the initial offer, at any time within 120 calendar days following the
termination of the above-referenced 30-day period but may not be sold to any
other person or on terms and conditions, including price, that are more
favorable to the purchaser than those set forth in such offer or after such
120-day period without renewed compliance with this Section 3.1.
Notwithstanding the foregoing, the right to purchase granted under this
Article III shall be inapplicable with respect to any (i) of the Excluded Shares
(as defined in the Company's Amended and Restated Articles of Incorporation),
(ii) any shares of Common Stock underlying the option previously granted to
Michael Christian (as appropriately adjusted for any stock split, combination,
reorganization, recapitalization, reclassification, stock distribution, stock
dividend or similar event), (iii) securities issued as a result of any stock
split, stock dividend, reclassification or reorganization or similar event with
respect to the Common Stock, (iv) shares issued as consideration for any
acquisition approved by the Board of Directors, or (v) shares of Common Stock
issued upon conversion of the Preferred Stock.
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Section 3.2 Assignment of Rights. Subject to Section 2.5, the rights of the
Offerees set forth in this Article III are transferable to any transferee of
Shares by Investors.
ARTICLE IV
ELECTION OF DIRECTORS
Section 4.1 Preferred Stock Designees. The parties acknowledge that the
terms of the Preferred Stock provide the holders thereof with certain rights to
elect two members of the Board of Directors, who shall initially be Benjamin H.
Ball and Walter G. Kortschak.
Section 4.2 Board Composition. Each Investor and each Stockholder
(including, for purposes of this Section 4.2, each Permitted Transferee) agrees
to vote all of its shares of the capital stock of the Company having voting
power (and any other shares over which it exercises voting control), to the
extent it holds such shares of capital stock at the relevant time, in favor of:
(a) the Board of Directors consisting of not less than five (5) nor
greater than nine (9) members in the aggregate; and
(b) subject to the termination of the right of the holders of Preferred
Stock to elect directors as set forth in the last sentence of Section A.2.(a) of
Article III of the Company's Amended and Restated Articles of Incorporation, one
(1) individual nominated by TA Associates, Inc. on behalf of the Investors and
one (1) individual nominated by Summit Partners, L.P. on behalf of the
Investors; provided, however, that the right of each of TA Associates, Inc. and
Summit Partners, L.P. to nominate one (1) individual for election to the Board
of Directors shall terminate if either entity (together with its Affiliates)
holds of record less than Two Million (2,000,000) shares of Preferred Stock
(adjusted appropriately for stock splits, stock dividends, recapitalizations and
the like with respect to the Preferred Stock).
Section 4.3 Removal; Vacancies. Each Investor and each Stockholder agrees
to vote all of his shares of the capital stock of the Company, having voting
power (and any other shares over which he exercises voting control), to the
extent it holds such voting stock at the relevant time, for the removal of any
director upon the request of the Persons then entitled to nominate such director
and for the election to the Board of Directors of a substitute designated by
such party in accordance with the provisions hereof. Each Investor and each
Stockholder further agrees to vote all of his shares of the capital stock of the
Company having voting power (and any other shares over which he or it exercises
voting control) in such manner as shall be necessary or appropriate to ensure
that any vacancy on the Board of Directors occurring for any reason shall be
filled only in accordance with the provisions of this Article IV.
Section 4.4 Committees of the Board. Prior to the closing of a public
offering of shares of Common Stock or other equity securities of the Company,
the Company, the Investors and the Stockholders agree to cause the Board of
Directors to establish a Compensation Committee (which shall be charged with the
exclusive authority over all compensation matters with respect to the Company's
executive officers) and an Audit Committee (which shall be
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charged with reviewing the Company's financial statements and accounting
practices). The Compensation and Audit Committees shall act by majority
resolution of their members.
Section 4.5 Assignment. Each Investor and Stockholder agrees, as a
condition to any transfer of its Shares, to cause the transferee to agree to the
provisions of this Article IV, whereupon such transferee shall be subject to the
provisions hereof to the same extent as the Investors and the Stockholders, as
applicable, in connection with its ownership of the Shares transferred for
purposes of this Article IV.
Section 4.6 Term. This Article IV shall remain in effect until the earlier
of (a) closing of a Qualified Public Offering or (b) the date which is 10 years
after the date hereof.
ARTICLE V
VOTING
Section 5.1 Voting. Each Investor agrees to vote its Shares in favor of a
Qualified Transaction (as defined below) upon receipt of a written request by a
majority of the outstanding Shares held by the Stockholders, and to take all
reasonably necessary action to effect such Qualified Transaction. Such
Stockholders shall have the right to compel such Investor to Transfer, and such
Investor hereby agrees to Transfer all of its Shares owned, directly or
indirectly, by such Investor, to effect such Qualified Transaction.
Section 5.2 Qualified Transaction. A "Qualified Transaction" shall mean any
transaction pursuant to which the holders of Preferred Stock and Redeemable
Preferred Stock would receive in exchange for all shares of Preferred Stock
(including shares of Common Stock resulting from the conversion of Preferred
Stock) and Redeemable Preferred Stock then held by them an aggregate amount
equal to not less than $90 million with respect to such transaction that occurs
before the first anniversary of the date of this Agreement set forth above, or
thereafter, an aggregate amount equal to not less than $120 million; provided,
however, that in each case such aggregate amount thresholds shall be reduced by
any amounts previously paid by the Company pursuant to a redemption of any
Preferred Stock or Redeemable Preferred Stock.
Section 5.3 Assignment. Each Investor agrees, as a condition to any
transfer of its Shares, to cause the transferee to agree to the provisions of
this Article V, whereupon such transferee shall be subject to the provisions
hereof to the same extent as the Investors in connection with its ownership of
the Shares transferred for purposes of this Article V.
Section 5.4 Term. This Article V shall remain in effect until the earlier
of (a) closing of a Qualified Public Offering or (b) the date which is 10 years
after the date hereof.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1 Survival of Covenants. Each of the parties hereto agrees that
each covenant and agreement made by it in this Agreement or in any certificate,
instrument or
11
<PAGE> 12
other document delivered pursuant to this Agreement is material, shall be deemed
to have been relied upon by the other parties and shall remain operative and in
full force and effect after the date hereof regardless of any investigation.
This Agreement shall not be construed so as to confer any right or benefit upon
any Person other than the parties hereto and their respective successors and
permitted assigns to the extent contemplated herein.
Section 6.2 Legend on Securities. The Company, the Investors and the
Stockholders acknowledge and agree that the following legend shall be typed on
each certificate evidencing any of the securities issued hereunder held at any
time by any of the Stockholders or their Permitted Transferees:
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF A
CERTAIN STOCKHOLDERS AGREEMENT, DATED AS OF JUNE 18, 1999, INCLUDING CERTAIN
RESTRICTIONS ON TRANSFER SET FORTH THEREIN. A COMPLETE AND CORRECT COPY OF SUCH
AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND
WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
Section 6.3 Amendment and Waiver. Any party may waive any provision hereof
intended for its benefit in writing. No failure or delay on the part of any
party hereto in exercising any right, power or remedy hereunder shall operate as
a waiver thereof. The remedies provided for herein are cumulative and are not
exclusive of any remedies that may be available to any party hereto at law or in
equity or otherwise. This Agreement only may be amended with the prior written
consent of (a) the Company, (b) if the amendment relates to Article II or IV,
the Founding Stockholders and (c) a Majority Interest of the Investors. Any
consent given by such Founding Stockholders or a Majority Interest of the
Investors as provided in the preceding sentence shall be binding on all
Stockholders and Permitted Transferees and all Investors, respectively, and no
Stockholders, Permitted Transferee or Investor shall have any cause of action
against any other Person for any action taken by such Person in reliance upon
such consent. All actions by the Company hereunder shall be taken by or upon the
direction of a majority of the members of the Board of Directors of the Company.
Section 6.4 Notices. All notices and other communications provided for
herein shall be in writing and shall be deemed to have been duly given,
delivered and received (a) if delivered personally or (b) if sent by facsimile,
registered or certified mail (return receipt requested) postage prepaid, or by
courier guaranteeing next day delivery, in each case to the party to whom it is
directed at the following addresses (or at such other address for any party as
shall be specified by notice given in accordance with the provisions hereof,
provided that notices of a change of address shall be effective only upon
receipt thereof). Notices delivered personally shall be effective on the day so
delivered, notices sent by registered or certified mail shall be effective three
days after mailing, notices sent by facsimile shall be effective when receipt is
acknowledged, and notices sent by courier guaranteeing next day delivery shall
be effective on the earlier of the second business day after timely delivery to
the courier or the day of actual delivery by the courier:
12
<PAGE> 13
If to the Company:
WebSideStory, Inc.
6450 Lusk Boulevard, Suite E-205
San Diego, CA 92121
Facsimile: (619) 546-0480
Attn: President and Chief Executive Officer
If to the Investors:
TA Associates, Inc.
70 Willow Road, Suite 100
Menlo Park, California 94025
Facsimile: (650) 326-4933
Attn: Mr. Benjamin H. Ball
Summit Partners, L.P.
499 Hamilton Avenue, Suite 200
Palo Alto, CA 94301
Facsimile: (650) 321-1188
Attn: Mr. Walter G. Kortschak
Section 6.5 Headings. The Article and Section headings used or contained in
this Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
Section 6.6 Counterparts. This Agreement may be executed in one or more
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which together
shall be deemed to constitute one and the same agreement.
Section 6.7 Remedies; Severability. It is specifically understood and
agreed that any breach of the provisions of this Agreement by any Person subject
hereto will result in irreparable injury to the other parties hereto, that the
remedy at law alone will be an inadequate remedy for such breach, and that, in
addition to any other legal or equitable remedies which they may have, such
other parties may enforce their respective rights by actions for specific
performance (to the extent permitted by law) and the Company may refuse to
recognize any unauthorized transferee as one of its Stockholders for any
purpose, including, without limitation, for purposes of dividend and voting
rights, until the relevant party or parties have complied with all applicable
provisions of this Agreement.
In the event that any one or more of the provisions contained herein, or
the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby, it being
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<PAGE> 14
intended that all of the rights and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
Section 6.8 Entire Agreement. This Agreement, together with the Purchase
Agreement and any other agreements specifically contemplated hereby and thereby,
is intended by the parties as a final expression of their agreement and intended
to be complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
This Agreement and the Purchase Agreement and other agreements specifically
contemplated hereby and thereby (including the exhibits hereto and thereto)
supersede all prior agreements and understandings between the parties with
respect to such subject matter.
Section 6.9 Adjustments. All references to share prices and amounts herein
shall be equitably adjusted to reflect stock splits, stock dividends,
recapitalizations and similar changes affecting the capital stock of the
Company.
Section 6.10 Law Governing. This Agreement shall be construed and enforced
in accordance with and governed by the laws of the State of California (without
giving effect to principles of conflicts of law).
Section 6.11 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the respective successors and permitted assigns of
the parties hereto as contemplated herein, and any successor to the Company by
way of merger or otherwise shall specifically agree to be bound by the terms
hereof as a condition of such successor. The rights of the Investors hereunder
shall be assignable to Transferees of their Shares as contemplated herein. This
Agreement may not be assigned by any Stockholders, except as provided herein,
without the prior written consent of a Majority Interest of the Investors and,
without such prior written consent, any attempted assignment shall be null and
void.
Section 6.12 Dispute Resolution. Except as provided below, any dispute
arising out of or relating to this Agreement or the breach, termination or
validity hereof shall be finally settled by binding arbitration conducted
expeditiously by one arbitrator in accordance with the J.A.M.S./Endispute
Streamlined Arbitration Rules and Procedures (the "J.A.M.S. Rules"). The
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
Sections 1-16, and judgment upon the award rendered by the arbitrator may be
entered by any court having jurisdiction thereof. The place of arbitration shall
be San Diego, California.
Such proceedings shall be administered by the arbitrator in accordance with
the J.A.M.S. Rules as he/she deems appropriate, however, such proceedings shall
be conducted in accordance with the following agreed upon procedures:
(a) mandatory exchange of all relevant documents, to be accomplished
within forty-five (45) days of the initiation of the procedure (documents not so
exchanged will be excluded from the evidence considered at the hearing absent a
showing of good cause)
(b) no other discovery
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<PAGE> 15
(c) hearings before the arbitrator which shall consist of a summary
presentation by each side of not more than three (3) hours; such hearings to
take place on one or two days at a maximum; and
(d) decision to be rendered not more than ten (10) days following such
hearings.
Notwithstanding anything to the contrary contained herein, the provisions
of this Section 6.12 shall not apply with regard to any equitable remedies to
which any party may be entitled hereunder.
Each of the parties hereto (a) hereby irrevocably submits to the personal
jurisdiction of any court of competent jurisdiction in the United States for the
purpose of enforcing the award or decision in any such proceeding, (b) hereby
waives, and agrees not to assert, by way of motion, as a defense, or otherwise,
in any such suit, action or proceeding, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution (except as protected by applicable
law), that the suit, action or proceeding is brought in an inconvenient forum,
that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court,
and hereby waives and agrees not to seek any review by any court of any other
jurisdiction which may be called upon to grant an enforcement of the judgment of
any such court. Each of the parties hereto hereby consents to service of process
by registered mail at the address to which notices are to be given. Each of the
parties hereto agrees that its or his submission to jurisdiction and its or his
consent to service of process by mail is made for the express benefit of the
other parties hereto. Final judgment against any party hereto in any such
action, suit or proceeding may be enforced in other jurisdictions by suit,
action or proceeding on the judgment, or in any other manner provided by or
pursuant to the laws of such other jurisdiction.
Section 6.13 Term. This Agreement shall remain in effect until the closing
of a Qualified Public Offering, provided that Article IV shall terminate in any
event on the tenth anniversary of this Agreement if not earlier terminated.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Stockholders
Agreement to be duly executed as of the date first set forth above.
THE COMPANY:
WEBSIDESTORY, INC.
By: /s/ Blaise Barrelet
____________________________________
Name: Blaise Barrelet
Title: President and Chief Executive Officer
FOUNDING STOCKHOLDERS:
/s/ Blaise Barrelet
-----------------------------------------
BLAISE BARRELET
/s/ Agnes Barrelet
-----------------------------------------
AGNES BARRELET
/s/ Michael Christian
-----------------------------------------
MICHAEL CHRISTIAN
<PAGE> 17
INVESTORS:
SUMMIT VENTURES V, L.P.
By: Summit Partners V, L.P., its General Partner
By: Summit Partners, LLC, its General Partner
/s/ Walter G. Kortschak
----------------------------------
Walter G. Kortschak
Member
SUMMIT V COMPANION FUND, L.P.
By: Summit Partners V, L.P., its General Partner
By: Summit Partners, LLC, its General Partner
/s/ Walter G. Kortschak
----------------------------------
Walter G. Kortschak
Member
SUMMIT V ADVISORS FUND, L.P.
By: Summit Partners, LLC, its General Partner
/s/ Walter G. Kortschak
----------------------------------
Walter G. Kortschak
Member
SUMMIT V ADVISORS FUND (QP), L.P.
By: Summit Partners, LLC, its General Partner
/s/ Walter G. Kortschak
----------------------------------
Walter G. Kortschak
Member
<PAGE> 18
SUMMIT INVESTORS III, L.P.
/s/ Walter G. Kortschak
----------------------------------
Walter G. Kortschak
General Partner
TA/ADVENT VIII L.P.
By: TA Associates VIII LLC, its General Partner
By: TA Associates, Inc., its Manager
/s/ Jeffrey T. Chambers
----------------------------------
Jeffrey T. Chambers
Managing Director
ADVENT ATLANTIC AND PACIFIC III L.P.
By: TA Associates AAP III Partners,
its General Partner
By: TA Associates, Inc., its General Partner
/s/ Jeffrey T. Chambers
----------------------------------
Jeffrey T. Chambers
Managing Director
TA INVESTORS LLC
By: TA Associates Inc., its Manager
/s/ Jeffrey T. Chambers
----------------------------------
Jeffrey T. Chambers
Managing Director
<PAGE> 19
TA EXECUTIVES FUND LLC
By: TA Associates, Inc., its Manager
/s/ Jeffrey T. Chambers
----------------------------------
Jeffrey T. Chambers
Managing Director
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
<PAGE> 20
EXHIBIT A
Form of Joinder Agreement
The undersigned hereby agrees, effective as of the date hereof, to become a
party to that certain Stockholders Agreement (the "Agreement") dated as of June
18, 1999 by and among Web Side Story, Inc. (the "Company") and the parties named
therein and, for all purposes of the Agreement, the undersigned shall be
included within the term "Stockholders" (as defined in the Agreement). The
address and facsimile number to which notices may be sent to the undersigned is
as follows:
________________________________________________________________________________
Facsimile No. ____________________.
__________________________
[NAME OF UNDERSIGNED]
<PAGE> 1
Exhibit 10.36
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is dated as of the
18th day of June, 1999, by and among WebSideStory, Inc., a California
corporation (the "Company"), and the persons designated as Investors on the
signature pages hereto and any permitted assignees thereof (each, an "Investor"
and collectively, the "Investors").
WHEREAS, the parties to this Agreement are simultaneously entering into a
certain Stock Purchase Agreement, dated as of the date hereof (the "Purchase
Agreement"), whereby the Investors have agreed to purchase (i) shares of
Convertible Redeemable Participating Preferred Stock of the Company
("Convertible Stock"), which are convertible into shares of Common Stock of the
Company, and (ii) shares of Redeemable Preferred Stock of the Company
("Redeemable Stock"); and
WHEREAS, the execution of this Agreement is an inducement and a condition
precedent to the purchase by the Investors of the shares of Convertible Stock
and the shares of Redeemable Stock under the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises, as an inducement to the
Investors to consummate the transactions contemplated by the Purchase Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Investors hereby covenant and
agree with each other as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Board of Directors" means the Board of Directors of the Company.
"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act and the Exchange Act.
"Common Stock" shall mean the common stock of the Company and any other
securities into which or for which such common stock may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or otherwise.
"Company" shall refer to the Company and any successor or successors
thereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.
"Majority Interest" means the Investors holding not less than a
majority in interest in the outstanding Registrable Securities held by all
Investors.
<PAGE> 2
"Person" shall mean an individual, a corporation, a partnership, a
joint venture, a trust, an unincorporated organization, a limited liability
company or partnership, a government and any agency or political subdivision
thereof.
"Registrable Securities" shall mean (i) any shares of Common Stock
received by the Investors, or subject to acquisition by any Investor upon
conversion of the Convertible Stock (it being understood that for purposes of
this Agreement, a Person will be deemed to be a holder of Registrable Securities
whenever such Person has the right to then acquire or obtain from the Company
any Registrable Securities, whether or not such acquisition has actually been
effected) and (ii) any other securities issued and issuable with respect to any
such shares described in clause (i) above by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization; provided, however, that notwithstanding
anything to the contrary contained herein, "Registrable Securities" shall not at
any time include any securities (i) registered and sold pursuant to the
Securities Act, (ii) sold to the public pursuant to Rule 144 or (iii) which
could then be sold in their entirety pursuant to Rule 144(k) without limitation
or restriction.
"Registration Expenses" shall mean the expenses so described in Section
6 hereof.
"Rule 144" shall mean Rule 144 promulgated under the Securities Act (or
any comparable successor rules).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
2. Demand Registrations.
(a) At any time after the first anniversary of the date hereof, a
Majority Interest of the Investors may notify the Company that they intend to
offer or cause to be offered for public sale all or any portion of their
Registrable Securities (representing offering proceeds aggregating not less than
$20 million for an initial public offering or $10 million otherwise) in the
manner specified in such request. Upon receipt of such request, the Company
shall promptly deliver notice of such request to all Persons holding Registrable
Securities who shall then have thirty (30) days to notify the Company in writing
of their desire to be included in such registration. If the request for
registration contemplates an underwritten public offering, the Company shall
state such in the written notice and in such event the right of any Person to
participate in such registration shall be conditioned upon their participation
in such underwritten public offering and the inclusion of their Registrable
Securities in the underwritten public offering to the extent provided herein.
The Company will use its reasonable best efforts to expeditiously effect the
registration of all Registrable Securities whose holders request participation
in such registration under the Securities Act and to qualify such Registrable
Securities for sale under any state blue sky law; provided, however, that the
Company shall not be required to effect registration pursuant to a request under
this Section 2 more than two (2) times for the holders of the Registrable
Securities as a group. Notwithstanding anything to the contrary contained
herein, if the Company receives a request for registration under this Section 2,
then (i) the Company may advise the requesting Investors, within fifteen (15)
days of its receipt of such request, that it
2
<PAGE> 3
intends to file a registration statement for the primary issuance of securities
in an underwritten public offering, and (ii) assuming that the Company files
such registration statement within seventy-five (75) days of its receipt of such
request, the Company's registration obligations under this Section 2 shall not
apply with respect to such request and no additional request may be made under
this Section 2 within one hundred eighty (180) days after the effective date of
such registration statement. In addition, the Company may postpone the filing or
the effectiveness of any registration statement pursuant to this Section 2 for a
reasonable time period, provided that such postponements shall not exceed one
hundred twenty (120) days in the aggregate during any twelve (12) month period,
if (i) the Company has been advised by legal counsel that such filing or
effectiveness would require disclosure of a material financing, acquisition or
other corporate transaction or development, and the Board of Directors of the
Company determines in good faith that such disclosure is not in the best
interests of the Company and its stockholders or (ii) the Board of Directors of
the Company determines in good faith that there is a valid business purpose or
reason for delaying filing or effectiveness. A registration will not count as a
requested registration under this Section 2(a) until the registration statement
relating to such registration has been declared effective by the Commission at
the request of the initiating holders; provided, however, that, if a Majority
Interest of the participating holders of Registrable Securities shall request,
in writing, that the Company withdraw a registration statement which has been
filed under this Section 2(a) but not yet been declared effective, a majority in
interest of such holders may thereafter request the Company to reinstate such
registration statement, if permitted under the Securities Act, or to file
another registration statement, in accordance with the procedures set forth
herein.
(b) If a requested registration pursuant to Section 2(a) involves an
underwritten public offering and the managing underwriter of such offering
determines in good faith that the number of securities sought to be offered
should be limited due to market conditions, then the number of securities to be
included in such underwritten public offering shall be reduced to a number
deemed satisfactory by such managing underwriter, provided that the shares to be
excluded shall be determined in the following sequence: (i) first, securities
held by any other Persons (other than the Investors holding Registrable
Securities) not having either registration rights or contractual, incidental
"piggy back" rights to include such securities in the registration statement,
(ii) second, shares sought to be registered by the Company, (iii) third,
Registrable Securities of holders who did not make the original request for
registration, and (iv) fourth, Registrable Securities of holders who requested
such registration pursuant to Section 2(a), it being understood that no shares
shall be registered for the account of the Company or any shareholder other than
the Investors unless all Registrable Securities for which Investors have
requested registration have been registered. If there is a reduction of the
number of Registrable Securities pursuant to clauses (i), (iii) or (iv), such
reduction shall be made on a pro rata basis (based upon the aggregate number of
shares of Common Stock or Registrable Securities held by the holders in each
tranche and subject to the priorities set forth in the preceding sentence).
(c) With respect to a request for registration pursuant to Section 2(a)
which is for an underwritten public offering, the managing underwriter shall be
chosen by the Investors holding not less than a Majority Interest of the
Registrable Securities to be sold in such offering, subject to the Company's
consent, which consent shall not be unreasonably withheld. The Company may not
cause any other registration of securities for sale for its own account (other
than a registration effected solely to implement an employee benefit plan or a
transaction to
3
<PAGE> 4
which Rule 145 of the Securities Act is applicable) to become effective within
one hundred eighty (180) days following the effective date of any registration
required pursuant to this Section 2 or such lesser period as may be consented to
by the managing underwriter.
3. "Market Stand-Off" Agreement. Notwithstanding the rights granted
pursuant to Section 2(a), each Investor hereby agrees that, during the period of
duration (not to exceed 180 days) specified by the Company and an underwriter of
Common Stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Securities Act, it will
not, to the extent requested by the Company and such underwriter, directly or
indirectly sell, offer to sell, contract to sell (including, without limitation,
any short sale), grant any option to purchase or otherwise transfer or dispose
of any securities of the Company held by it at any time during such period
except shares of Common Stock included in such registration; provided, however,
that:
(a) such agreement will be applicable only to the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(b) all officers and directors of the Company and all other persons
with registration rights (whether or not pursuant to this Agreement) enter into
similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such 180-day period.
4. Piggyback Registration. If the Company at any time proposes to register
any of its Common Stock under the Securities Act for sale to the public
(including pursuant to a demand under Section 2 hereof as provided therein and
except with respect to registration statements on Forms S-4, S-8 or another form
not available for registering the Registrable Securities for sale to the
public), each such time it will give written notice at the applicable address of
record to each holder of Registrable Securities of its intention to do so. Upon
the written request of any of such holders of the Registrable Securities, given
within thirty (30) days after receipt by such Person of such notice, the Company
will, subject to the limits contained in this Section 4, use its reasonable best
efforts to cause all such Registrable Securities of said requesting holders to
be registered under the Securities Act and qualified for sale under any state
blue sky law, all to the extent required to permit such sale or other
disposition of said Registrable Securities; provided, however, that if the
Company is advised in writing in good faith by any managing underwriter of the
Company's securities being offered in a public offering pursuant to such
registration statement that the amount to be sold by persons other than the
Company (collectively, "Selling Stockholders") is greater than the amount which
can be offered without adversely affecting the offering, the Company may reduce
the amount offered for the accounts of Selling Stockholders (including such
holders of shares of Registrable Securities) to a number deemed satisfactory by
such managing underwriter; and provided further, that the shares to be excluded
shall be determined in the following sequence (except with respect to a demand
under Section 2 hereof): (i) first, securities held by any Persons not having
any such contractual, incidental registration rights; (ii) second, securities
held by any Persons having contractual, incidental registration
4
<PAGE> 5
rights pursuant to an agreement which is not this Agreement; (iii) third,
securities held by the Founders (as defined in the Purchase Agreement); and (iv)
fourth, all Registrable Securities in each case as determined on a pro rata
basis in accordance with their holdings. Notwithstanding the foregoing, except
with respect to the Company's first registration of Common Stock pursuant to the
Securities Act, in no event shall the number of Registrable Securities included
in a registration pursuant to this section be reduced to less than twenty
percent (20%) of all shares to be registered.
5. Registration Procedures. If and whenever the Company is required by the
provisions of this Agreement to use its reasonable best efforts to effect the
registration of any of its securities under the Securities Act, the Company
will, as expeditiously as possible:
(a) use its best efforts diligently to prepare and file with the
Commission a registration statement on the appropriate form under the Securities
Act with respect to such securities, which form shall comply as to form in all
material respects with the requirements of the applicable form and include all
financial statements required by the Commission to be filed therewith, and use
its reasonable best efforts to cause such registration statement to become and
remain effective until completion of the proposed offering (but not for more
than one hundred eighty (180) days);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
until the completion of the offering (but not for more than one hundred eighty
(180) days) and to comply with the provisions of the Securities Act with respect
to the sale or other disposition of all securities covered by such registration
statement whenever the seller or sellers of such securities shall desire to sell
or otherwise dispose of the same, but only to the extent provided in this
Agreement;
(c) furnish to each selling holder of Registrable Securities and the
underwriters, if any, such number of copies of such registration statement, any
amendments thereto, any documents incorporated by reference therein, the
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such selling
holder may reasonably request in order to facilitate the public sale or other
disposition of the securities owned by such selling holder;
(d) use its best efforts to register or qualify the securities covered
by such registration statement under and to the extent required by such other
securities or state blue sky laws of such jurisdictions as each selling holder
of Registrable Securities shall reasonably request, and do any and all other
acts and things which may be necessary under such securities or blue sky laws to
enable such selling holder to consummate the public sale or other disposition in
such jurisdictions of the securities owned by such selling holder, except that
the Company shall not for any such purpose be required to qualify to do business
as a foreign corporation in any jurisdiction wherein it is not so qualified;
(e) within a reasonable time before each filing of the registration
statement or prospectus or amendments or supplements thereto with the
Commission, furnish to counsel selected by the holders of a Majority Interest
copies of such documents proposed to be filed,
5
<PAGE> 6
which documents shall be subject to the reasonable approval of such counsel,
which approval shall not be unreasonably withheld;
(f) promptly notify each selling holder of Registrable Securities, such
selling holders' counsel and any underwriter and (if requested by any such
Person) confirm such notice in writing, of the happening of any event which
makes any statement made in the registration statement or related prospectus
untrue or which requires the making of any changes in such registration
statement or prospectus so that they will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in the light of the circumstances
under which they were made not misleading; and, as promptly as practicable
thereafter, prepare and file with the Commission and furnish a supplement or
amendment to such prospectus so that, as thereafter deliverable to the
purchasers of such Registrable Securities, such prospectus will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading;
(g) use its reasonable best efforts to prevent the issuance of any
order suspending the effectiveness of a registration statement, and if one is
issued use its reasonable best efforts to obtain the withdrawal of any order
suspending the effectiveness of a registration statement at the earliest
possible moment;
(h) if requested by the managing underwriter or underwriters (if any),
any selling holder of Registrable Securities, or such selling holder's counsel,
promptly incorporate in a prospectus supplement or post-effective amendment such
information as such Person requests to be included therein with respect to the
selling holder or the securities being sold, including, without limitation, with
respect to the securities being sold by such selling holder to such underwriter
or underwriters, the purchase price being paid therefor by such underwriter or
underwriters and with respect to any other terms of an underwritten offering of
the securities to be sold in such offering, and promptly make all required
filings of such prospectus supplement or post-effective amendment;
(i) make available to each selling holder of Registrable Securities,
any underwriter participating in any disposition pursuant to a registration
statement, and any attorney, accountant or other agent or representative
retained by any such selling holder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records"), as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information requested by any such Inspector in connection with such
registration statement subject, in each case, to such confidentiality agreements
as the Company shall reasonably request;
(j) enter into any reasonable underwriting agreement required by the
proposed underwriter(s) for the selling holders of Registrable Securities, if
any, and use its reasonable best efforts to facilitate the public offering of
the securities;
(k) request that each prospective selling holder be furnished a signed
counterpart, addressed to the prospective selling holder, of , if and to the
extent permitted by
6
<PAGE> 7
applicable professional standards, a "comfort" letter signed by the independent
public accountants who have certified the Company's financial statements
included in the registration statement, covering substantially the same matters
with respect to the registration statement (and the prospectus included therein)
and with respect to events subsequent to the date of the financial statements,
as are customarily covered (at the time of such registration) in accountants'
letters delivered to the underwriters in underwritten public offerings of
securities;
(l) use its reasonable best efforts to cause the securities covered by
such registration statement to be listed on the securities exchange or quoted on
the quotation system on which the Common Stock is then listed or quoted (or, if
the Common Stock is not yet listed or quoted, then on such exchange or quotation
system as the selling holders of Registrable Securities and the Company shall
determine);
(m) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission and make generally available
to its security holders, in each case as soon as reasonably practicable, but not
later than 90 days after the close of the period covered thereby, an earnings
statement of the Company which will satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder (or any comparable successor
provisions); and
(n) otherwise cooperate with the underwriter(s), the Commission and
other regulatory agencies and take all reasonable actions and execute and
deliver or cause to be executed and delivered all documents reasonably necessary
to effect the registration of any securities under this Agreement.
6. Expenses. All reasonable expenses incurred by the Company and the
Investors in effecting the registrations provided for in Sections 2, 3 and 4,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company and one counsel for
the selling stockholders as a group (selected by a majority in interest of the
holders of Registrable Securities who participate in the registration),
underwriting expenses (other than fees, commissions or discounts), expenses of
any audits incident to or required by any such registration and expenses of
complying with the securities or blue sky laws of any jurisdictions pursuant to
Section 5(d) hereof (all of such expenses referred to as "Registration
Expenses"), shall be paid by the Company.
7. Indemnification.
(a) To the maximum extent permitted by law, the Company shall indemnify
and hold harmless the selling holder of Registrable Securities, each underwriter
(as defined in the Securities Act), and each other Person, if any, who controls
(within the meaning of the Securities Act) such selling holder or underwriter
(individually and collectively, the "Indemnified Person") against any losses,
claims, damages or liabilities (collectively, "liability"), joint or several, to
which such Indemnified Person may become subject under the Securities Act or any
other statute or at common law, insofar as such liability (or action in respect
thereof) arises out of or is based upon (i) any untrue statement or alleged
untrue statement of any material fact contained, on the effective date thereof,
in any registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus or final prospectus contained
therein, or any
7
<PAGE> 8
amendment or supplement thereto, or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading. Except as otherwise provided in Section
7(e), the Company shall reimburse each such selling holder of Registrable
Securities in connection with investigating or defending any such liability as
reasonable expenses in connection with the same are incurred; provided, however,
that the Company shall not be liable to any such selling holder of Registrable
Securities in any such case to the extent that any such liability arises out of
or is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, preliminary or final
prospectus, or amendment or supplement thereto in reliance upon and in
conformity with information furnished in writing to the Company by such selling
holder of Registrable Securities specifically for use therein; and provided
further, that the Company shall not be required to indemnify any Indemnified
Person against any liability arising from any untrue or misleading statement or
omission contained in any preliminary prospectus if such deficiency is corrected
in the final prospectus or for any liability which arises out of the failure of
any Indemnified Person to deliver a prospectus as required by the Securities
Act.
(b) Each selling holder of any securities included in such registration
being effected shall indemnify and hold harmless each other selling holder of
any securities, the Company, its directors and officers, each underwriter and
each other Person, if any, who controls (within the meaning of the Securities
Act) the Company or such underwriter (individually and collectively also the
"Indemnified Person"), against any liability, joint or several, to which any
such Indemnified Person may become subject under the Securities Act or any other
statute or at common law, insofar as such liability (or actions in respect
thereof) arises out of or is based upon (i) any untrue statement or alleged
untrue statement of any material fact contained, on the effective date thereof,
in any registration statement under which securities were registered under the
Securities Act at the request of such selling holder, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereto,
or (ii) any omission or alleged omission by such selling holder to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in the case of (i) and (ii) to the extent,
but only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in such registration statement,
preliminary or final prospectus, amendment or supplement thereto in reliance
upon and in conformity with information furnished in writing to the Company by
such selling holder specifically for use therein. Such selling holder shall
reimburse any Indemnified Person for any legal fees incurred in investigating or
defending any such liability; provided, however, that such selling holder's
obligations hereunder shall be limited to an amount equal to the proceeds to
such selling holder of the securities sold in any such registration; and
provided further, that no selling holder shall be required to indemnify any
Person against any liability arising from any untrue or misleading statement or
omission contained in any preliminary prospectus if such deficiency is corrected
in the final prospectus or for any liability which arises out of the failure of
any Person to deliver a prospectus as required by the Securities Act.
(c) Indemnification similar to that specified in Sections 7(a) and (b)
shall be given by the Company and each selling holder (with such modifications
as may be appropriate) with respect to any required registration or other
qualification of their securities under any federal or state law or regulation
of governmental authority other than the Securities Act.
8
<PAGE> 9
(d) Promptly after receipt by an Indemnified Person under this Section
7 of notice of the commencement of any action (including any governmental
action), such Indemnified Person will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 7, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party will have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with qualified counsel;
provided, however, that an Indemnified Person (together with all other
Indemnified Persons which may be represented without conflict by one counsel)
will have the right to retain one separate counsel, with the reasonable fees and
expenses to be paid by the indemnifying party, if representation of such
Indemnified Person by the counsel retained by the indemnifying party is
inappropriate due to actual or potential differing interests between such
Indemnified Person and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, will relieve such indemnifying party of
any liability to the Indemnified Person under this Section 7, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any Indemnified Person otherwise than under
this Section 7.
(e) If the indemnification provided for in this Section 7 for any
reason is held by a court of competent jurisdiction to be unavailable to an
Indemnified Person in respect of any losses, claims, damages, expenses or
liabilities referred to therein, then each indemnifying party under this Section
7, in lieu of indemnifying such Indemnified Person thereunder, shall contribute
to the amount paid or payable by such Indemnified Person as a result of such
losses, claims, damages, expenses or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, the
selling holders and the underwriters from the offering of the Registrable
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company, the other selling holders and the underwriters in
connection with the statements or omissions which resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company, the
selling holders and the underwriters shall be deemed to be in the same
respective proportions that the net proceeds from the offering (before deducting
expenses) received by the Company and the selling holders and the underwriting
discount received by the underwriters, in each case as set forth in the table on
the cover page of the applicable prospectus, bear to the aggregate public
offering price of the Registrable Securities. The relative fault of the Company,
the selling holders and the underwriters shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company, the selling holders or the underwriters and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
(f) The Company, the selling holders and the underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata or per capita allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. In no event, however, shall a selling
holder be required to contribute any amount under this Section 7(f) in
9
<PAGE> 10
excess of the lesser of (i) that proportion of the total of such losses, claims,
damages or liabilities indemnified against equal to the proportion of the total
Registrable Securities sold under such registration statement which are being
sold by such selling holder or (ii) the proceeds received by such selling holder
from its sale of Registrable Securities under such registration statement. No
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not found guilty of such fraudulent misrepresentation.
(g) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with an underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall
control.
8. Compliance with Rule 144.
(a) In the event that the Company (i) registers a class of securities
under Section 12 of the Exchange Act or (ii) shall commence to file reports
under Section 13 or 15(d) of the Exchange Act, the Company will use its best
efforts thereafter to file with the Commission such information as is required
under the Exchange Act for so long as there are holders of Registrable
Securities; and in such event, the Company shall use its best efforts to take
all action as may be required as a condition to the availability of Rule 144.
The Company shall furnish to any holder of Registrable Securities upon
reasonable request a written statement executed by the Company as to the steps
it has taken to comply with the current public information requirement of Rule
144. After the occurrence of the first underwritten public offering of Common
Stock pursuant to an offering registered under the Securities Act on Form S-1 or
Form SB-2 (or any comparable successor forms), subject to the limitations on
transfers imposed by this Agreement, the Company shall use its reasonable best
efforts to facilitate and expedite transfers of Registrable Securities pursuant
to Rule 144, which efforts shall include timely notice to its transfer agent to
expedite such transfers of Registrable Securities.
(b) Except with respect to a demand registration pursuant to Section 2,
prior to the Company's registration of any Registrable Securities hereunder on
behalf of an Investor, such Investor shall (i) use its reasonable best efforts
to sell the maximum number of Registrable Securities that such Investor is able
to sell pursuant to Rule 144 and (ii) exercise the registration rights hereunder
only in the case that such Investor determines in good faith that such rights
are necessary to sell such Registrable Securities in a timely manner.
9. Amendments. The provisions of this Agreement may be amended, and the
Company may take any action herein prohibited or omit to perform any act herein
required to be performed by it, only with the written consent of the Company and
a Majority Interest of the Investors.
10. Transferability of Registration Rights. The registration rights set
forth in this Agreement are transferable to each valid and proper transferee of
at least Two Million (2,000,000) shares of Registrable Securities. Each such
transferee of Registrable Securities must consent in writing to be bound by the
terms and conditions of this Agreement in order to acquire the rights granted
pursuant to this Agreement.
10
<PAGE> 11
11. Rights Which May Be Granted to Subsequent Investors. Other than
transferees of Registrable Securities under Section 10 hereof, the Company shall
not, without the prior written consent of a Majority Interest of the Investors,
(a) allow purchasers of the Company's securities to become a party to this
Agreement or (b) grant any other registration rights to any third parties other
than subordinate piggyback registration rights.
12. Damages. The Company recognizes and agrees that each holder of
Registrable Securities will not have an adequate remedy if the Company fails to
comply with the terms and provisions of this Agreement and that damages will not
be readily ascertainable, and the Company expressly agrees that, in the event of
such failure, it shall not oppose an application by any holder of Registrable
Securities or any other Person entitled to the benefits of this Agreement
requiring specific performance of any and all provisions hereof or enjoining the
Company from continuing to commit any such breach of this Agreement.
13. Miscellaneous.
(a) All notices, requests, demands and other communications provided
for hereunder shall be in writing and mailed (by first class registered or
certified mail, postage prepaid), telegraphed, sent by express overnight courier
service or electronic facsimile transmission (with a copy by mail), or delivered
to the applicable party at the addresses indicated below:
If to the Company: WebSideStory, Inc.
6450 Lusk Boulevard, Suite E-205
San Diego, CA 92121
Facsimile: (619) 546-0480
Attn: President and Chief Executive Officer
If to the Investors: TA Associates, Inc.
70 Willow Road, Suite 100
Menlo Park, California 94025
Facsimile: (650) 326-4933
Attn: Mr. Benjamin H. Ball
Summit Partners
499 Hamilton Avenue, Suite 200
Palo Alto, CA 94301
Facsimile: (650) 321-1188
Attn: Mr. Walter G. Kortschak
If to any other holder of Registrable Securities:
At such Person's address for notice as set forth in the books and
records of the Company.
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to other parties complying as to delivery with
the terms of this subsection (a). All
11
<PAGE> 12
such notices, requests, demands and other communications shall, when mailed,
telegraphed or sent, respectively, be effective (i) two days after being
deposited in the mails or (ii) one day after being delivered to the telegraph
company, deposited with the express overnight courier service or sent by
electronic facsimile transmission, respectively, addressed as aforesaid.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of California, without giving effect to conflict of
laws principles thereof.
(c) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(d) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
14. Dispute Resolution. Except as provided below, any dispute arising out
of or relating to this Agreement or the breach, termination or validity hereof
shall be finally settled by binding arbitration conducted expeditiously by one
arbitrator in accordance with the J.A.M.S./Endispute Streamlined Arbitration
Rules and Procedures (the "J.A.M.S. Rules"). The arbitration shall be governed
by the United States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon
the award rendered by the arbitrator may be entered by any court having
jurisdiction thereof. The place of arbitration shall be San Diego, California.
Such proceedings shall be administered by the arbitrator in accordance with
the J.A.M.S. Rules as he/she deems appropriate, however, such proceedings shall
be conducted in accordance with the following agreed upon procedures:
(a) mandatory exchange of all relevant documents, to be accomplished
within forty-five (45) days of the initiation of the procedure (documents not so
exchanged will be excluded from the evidence considered at the hearing absent a
showing of good cause);
(b) no other discovery;
(c) hearings before the arbitrator which shall consist of a summary
presentation by each side of not more than three (3) hours; such hearings to
take place on one or two days at a maximum; and
(d) decision to be rendered not more than ten (10) days following such
hearings.
Notwithstanding anything to the contrary contained herein, the provisions
of this Section 14 shall not apply with regard to any equitable remedies to
which any party may be entitled hereunder.
12
<PAGE> 13
Each of the parties hereto (a) hereby irrevocably submits to the personal
jurisdiction of any court of competent jurisdiction in the United States for the
purpose of enforcing the award or decision in any such proceeding, (b) hereby
waives, and agrees not to assert, by way of motion, as a defense, or otherwise,
in any such suit, action or proceeding, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution (except as protected by applicable
law), that the suit, action or proceeding is brought in an inconvenient forum,
that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court,
and hereby waives and agrees not to seek any review by any court of any other
jurisdiction which may be called upon to grant an enforcement of the judgment of
any such court. Each of the parties hereto hereby consents to service of process
by registered mail at the address to which notices are to be given. Each of the
parties hereto agrees that its or his submission to jurisdiction and its or his
consent to service of process by mail is made for the express benefit of the
other parties hereto. Final judgment against any party hereto in any such
action, suit or proceeding may be enforced in other jurisdictions by suit,
action or proceeding on the judgment, or in any other manner provided by or
pursuant to the laws of such other jurisdiction.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
13
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed as of the date first set forth above.
THE COMPANY:
WEBSIDESTORY, INC.
By: /s/ Blaise Barrelet
____________________________________
Name: Blaise Barrelet
Title: President and Chief Executive Officer
14
<PAGE> 15
INVESTORS:
SUMMIT VENTURES V, L.P.
By: Summit Partners V, L.P., its General Partner
By: Summit Partners, LLC, its General Partner
/s/ Walter G. Kortschak
----------------------------------
Walter G. Kortschak
Member
SUMMIT V COMPANION FUND, L.P.
By: Summit Partners V, L.P., its General Partner
By: Summit Partners, LLC, its General Partner
/s/ Walter G. Kortschak
----------------------------------
Walter G. Kortschak
Member
SUMMIT V ADVISORS FUND, L.P.
By: Summit Partners, LLC, its General Partner
/s/ Walter G. Kortschak
----------------------------------
Walter G. Kortschak
Member
SUMMIT V ADVISORS FUND (QP), L.P.
By: Summit Partners, LLC, its General Partner
/s/ Walter G. Kortschak
----------------------------------
Walter G. Kortschak
Member
15
<PAGE> 16
SUMMIT INVESTORS III, L.P.
/s/ Walter G. Kortschak
----------------------------------
Walter G. Kortschak
General Partner
TA/ADVENT VIII L.P.
By: TA Associates VIII LLC, its General Partner
By: TA Associates, Inc., its Manager
/s/ Jeffrey T. Chambers
----------------------------------
Jeffrey T. Chambers
Managing Director
ADVENT ATLANTIC AND PACIFIC III L.P.
By: TA Associates AAP III Partners, its
General Partner
By: TA Associates, Inc., its General Partner
/s/ Jeffrey T. Chambers
----------------------------------
Jeffrey T. Chambers
Managing Director
TA INVESTORS LLC
By: TA Associates, Inc., its Manager
/s/ Jeffrey T. Chambers
----------------------------------
Jeffrey T. Chambers
Managing Director
16
<PAGE> 17
TA EXECUTIVES FUND LLC
By: TA Associates, Inc., its Manager
/s/ Jeffrey T. Chambers
----------------------------------
Jeffrey T. Chambers
Managing Director
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
17
<PAGE> 1
EXHIBIT 10.37
B A S I C S A V I N G S P L A N
THE PRINCIPAL
FINANCIAL GROUP
PROTOTYPE
BASIC
SAVINGS PLAN
--------------------------------------------------
--------------------------------------------------
BASIC PLAN NO.: 03 TO BE USED WITH
ADOPTION AGREEMENT PLAN NOS.: 001-002
APPROVED: OCTOBER 26, 1992
<PAGE> 2
TABLE OF CONTENTS
INTRODUCTION 1
- -------------------------------------------------------------------------------
ARTICLE I - FORMAT AND DEFINITIONS 1
Section 1.01 - Format
Section 1.02 - Definitions
- -------------------------------------------------------------------------------
ARTICLE II - MEMBERSHIP 8
Section 2.01 - Active Membership
Section 2.02 - Ceasing Active Membership
Section 2.03 - Adopting Employers - Separate Plans
Section 2.04 - Adopting Employers - Single Plan
- -------------------------------------------------------------------------------
ARTICLE III - CONTRIBUTIONS 9
Section 3.01 - Employer Contributions
Section 3.02 - Voluntary Contributions by Members
Section 3.03 - Rollover Contributions
Section 3.04 - Forfeitures and Restoration
Section 3.05 - Allocation
Section 3.06 - Contribution Limitation
Section 3.07 - Excess Amounts
- -------------------------------------------------------------------------------
ARTICLE IV - INVESTMENT OF CONTRIBUTIONS 19
Section 4.01 - Investment of Contributions
Section 4.02 - Purchase of Insurance
Section 4.03 - Transfer of Ownership
Section 4.04 - Termination of Insurance
- -------------------------------------------------------------------------------
ARTICLE V - BENEFITS 20
Section 5.01 - Retirement Benefits
Section 5.02 - Death Benefits
Section 5.03 - Vested Benefits
Section 5.04 - When Benefits Start
Section 5.05 - Withdrawal Benefits
Section 5.06 - Loans to Members
- -------------------------------------------------------------------------------
ARTICLE VI - DISTRIBUTION OF BENEFITS 24
Section 6.01 - Automatic Forms of Distribution
Section 6.02 - Optional Forms of Distribution and Distribution
Requirements
Section 6.03 - Election Procedures
Section 6.04 - Notice Requirements
Section 6.05 - Transitional Rules
- -------------------------------------------------------------------------------
ARTICLE VII - TERMINATION OF PLAN 30
<PAGE> 3
- -------------------------------------------------------------------------------
ARTICLE VIII - ADMINISTRATION OF PLAN 30
Section 8.01 - Administration
Section 8.02 - Records
Section 8.03 - Information Available
Section 8.04 - Claim and Appeal Procedures
Section 8.05 - Unclaimed Vested Account Procedures
Section 8.06 - Delegation of Authority
- -------------------------------------------------------------------------------
ARTICLE VIIIA - TRUST PROVISIONS 31
Section 8A.01 - The Trust and Trust Fund
Section 8A.02 - The Trustee
Section 8A.03 - Duties of Trustee
Section 8A.04 - Powers of Trustee
Section 8A.05 - Expenses
Section 8A.06 - Accounting
- -------------------------------------------------------------------------------
ARTICLE IX - GENERAL PROVISIONS 32
Section 9.01 - Amendments
Section 9.02 - Mergers and Direct Transfers
Section 9.03 - Provisions Relating to the Insurer and Other Parties
Section 9.04 - Employment Status
Section 9.05 - Rights to Plan Assets
Section 9.06 - Beneficiary
Section 9.07 - Nonalienation of Benefits
Section 9.08 - Construction
Section 9.09 - Legal Actions
Section 9.10 - Small Amounts
Section 9.11 - Word Usage
Section 9.12 - Transfers Between Plans
Section 9.13 - Partnership or Sole Proprietorship
Section 9.14 - Qualification of Plan
- -------------------------------------------------------------------------------
ARTICLE X - TOP-HEAVY PLAN REQUIREMENTS 36
Section 10.01 - Application
Section 10.02 - Definitions
Section 10.03 - Modification of Vesting Requirements
Section 10.04 - Modification of Contributions
Section 10.05 - Modification of Contribution Limitation
<PAGE> 4
- -------------------------------------------------------------------------------
INTRODUCTION
- -------------------------------------------------------------------------------
The provisions of this Plan apply as of the date specified in Item A or such
other dates as may be specified in this Plan with the following exceptions:
1. The provisions included to comply with the technical corrections to the
Deficit Reduction Act and the Retirement Equity Act (REA) contained in the
Tax Reform Act of 1986 are effective as if included in the respective bills
to which the corrections apply.
2. The provisions included to comply with the provisions of the Tax Reform
Act of 1986 other than the technical corrections to DEFRA and REA are
effective as of the dates specified in the law.
3. The provisions included to comply with the provisions of the Omnibus
Budget Reconciliation Act of 1986 (OBRA 86) are effective as of the dates
specified in the law.
4. The provisions included to comply with the provisions of the Omnibus
Budget Reconciliation Act of 1987 (OBRA 87) are effective as of the dates
specified in the law.
5. The provisions included to comply with the final regulations on optional
forms of benefit issued July 11, 1988, are effective as of the effective
date prescribed by such regulations.
6. The provisions included to comply with the final REA regulations issued
August 22, 1988, are effective as of the effective date prescribed by such
regulations.
7. The provisions included to comply with the provisions of the Technical and
Miscellaneous Revenue Act of 1988 are effective as of the dates specified
in the law.
8. The provisions included to comply with the final regulations on loans
issued July 20, 1989, are effective as of the effective date prescribed by
such regulations.
- -------------------------------------------------------------------------------
ARTICLE I
FORMAT AND DEFINITIONS
- -------------------------------------------------------------------------------
SECTION 1.01 - FORMAT.
Our retirement plan is set out in this document, the attached Adoption
Agreement which we signed, and any amendments to these documents.
Words and phrases defined in Section 1.02 shall have that defined meaning when
used in this Plan, unless the context clearly indicates otherwise. These words
and phrases have initial capital letters to aid in identifying them as defined
terms. References to "Section" are references to parts of this document;
references to "Item" are references to parts of the Adoption Agreement.
Some of the defined terms and phrases in Section 1.02 and some of the
provisions contained in the following articles do not apply to our Plan and
shall have no meaning when used in our Plan. The provisions of the attached
Adoption Agreement shall determine whether or not the terms apply.
SECTION 1.02 - DEFINITIONS.
Account means a Member's share of the Investment Fund plus the cash value of
any insurance coverage on his life under this Plan. Separate accounting records
shall be kept for those parts of the Member's Account resulting from the
following:
(a) Required Contributions, if any.
(b) Nondeductible Voluntary Contributions, if any.
(c) Deductible Voluntary Contributions, if any.
(d) Rollover Contributions, if any.
(e) Elective Deferral Contributions.
(f) Qualified Matching Contributions.
(g) Matching Contributions that are not Qualified Matching Contributions.
(h) Qualified Nonelective Contributions.
(i) All other Employer Contributions.
If the Member's Vesting Percentage is less than 100% as to any of these
Contributions, a separate accounting record will be kept for any part of
his Account resulting from such Contributions and, if there has been a
prior Forfeiture Date, from such Contributions made before a prior
Forfeiture Date.
The Account shall be reduced by any distribution of the Member's Vested Account
and by any Forfeitures. The Account shall participate in the earnings credited,
expenses charged and any appreciation or depreciation of the Investment Fund.
The Account is subject to any minimum guarantees applicable under the Annuity
Contract or other investment arrangement.
Accrual Service Period means the period defined in Item Q of the Adoption
Agreement - Plus
Active Member means an Eligible Employee who is actively participating in the
Plan according to the provisions of Section 2.01.
Additional Contributions means additional contributions we make to fund this
Plan. (See Item P and Section 3.01.)
Adjustment Factor means the cost of living adjustment factor prescribed by the
Secretary of the Treasury under Section 415(d) of the Code for years beginning
after December 31, 1987, as applied to such items and in such manner as the
Secretary shall provide.
Adopting Employer means an employer controlled by or affiliated with us and
listed in Item Z of the Adoption Agreement - Plus. If the Adoption Agreement -
Plus is not used, all members of the Controlled Group and the Affiliated
Service Group, whether or not listed in Item Y, shall be Adopting Employers
participating in a single plan.
Adoption Agreement means the attached document which contains our selections
and specifications for our Plan.
Affiliated Service Group means any group of corporations, partnerships or
other organizations of which we are a part and which is affiliated within the
meaning of Code Section 414(m) and regulations thereunder. Such a group
includes at least two organizations one of which is either a service
organization (that is, an organization the principal business of which is
performing services), or an organization the principal business of which
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<PAGE> 5
is performing management functions on a regular and continuing basis. Such
service is of a type historically performed by employees. In the case of a
management organization, the Affiliated Service Group shall include
organizations related, within the meaning of Code Section 144(a)(3), to either
the management organization or the organization for which it performs
management functions. The term Controlled Group, as it is used in our Plan,
shall include the term Affiliated Service Group.
Annual Pay means the Employee's annual pay as defined in Item M.
Annuity Contract means the annuity contract or contracts into which the Trustee
enters (into which we enter, if our Plan is not trusteed) with the Insurer for
the investment of Contributions and the payment of benefits under this Plan.
The term Annuity Contract as it is used in this Plan shall include the plural
unless the context clearly indicates the singular is meant.
Annuity Starting Date means, for a Member, the first day of the first period
for which an amount is payable as an annuity or any other form.
Beneficiary means the person or persons named by a Member to receive any
benefits under the Plan when the Member dies. (See Section 9.06.)
Claimant means any person who makes a claim for benefits under this Plan. (See
Section 8.04.)
Code means the Internal Revenue Code of 1986, as amended.
Contingent Annuitant means an individual named by a Member to receive a
lifetime benefit according to a survivorship life annuity after the Member dies.
Contributions means Elective Deferral, Additional, Discretionary, Matching,
Qualified Nonelective, Voluntary and Rollover Contributions, and Required
Contributions made under the Prior Plan, unless the context clearly indicates
only one is, or certain of these are, meant.
Controlled Group means any group of corporations, trades or businesses of which
we are a part that are under common control. A Controlled Group includes any
group of corporations, trades or businesses, whether or not incorporated, which
is either a parent-subsidiary group, a brother-sister group or a combined group
within the meaning of Code Section 414(b), Code Section 414(c) and regulations
thereunder and, for the purpose of determining contribution limitations under
Section 3.06, as modified by Code Section 415(h) and, for the purpose of
identifying Leased Employees, as modified by Code Section 144(a)(3).
The term Controlled Group, as it is used in our Plan, shall include the term
Affiliated Service Group.
Discretionary Contributions means discretionary contributions we make to fund
this Plan. (See Item P and Section 3.01.)
Early Retirement Date means the date a Member selects for beginning his early
retirement benefit. Early retirement benefits may begin whether the Member met
the age requirement, if any, before or after ceasing to be an Employee. (See
Item X.)
Effective Date means the date in Item D.
Elective Deferral Contributions means Contributions we make to fund this Plan
in accordance with elective deferral agreements between Eligible Employees and
us. Elective deferral agreements shall be made, changed, or terminated
according to the provisions of Item N. (See Item N and Section 3.01.)
A Member's Account resulting from Elective Deferral Contributions may not be
distributed before the Member's separation from service, death, the date the
Member becomes Totally Disabled, before the events described in the last
paragraph of Section 5.04, or before termination of the Plan as described in
Article VII. Elective Deferrals (but no earnings credited after December 31,
1988) may be withdrawn in the case of hardship if Item W(2) is selected.
Eligible Employee means an Employee who meets the requirements specified in
Item J.
Employee means an individual who is employed by us or any other employer
required to be aggregated with us under Code Sections 414(b), (c), (m) or (o).
A Controlled Group member is required to be aggregated with us.
The term Employee shall also include any Leased Employee deemed to be an
employee of any employer described in the preceding paragraph as provided in
Code Sections 414(n) or 414(o).
Employer means the Employer named in Item B and any successor corporation,
trade or business which will, by written agreement, assume the obligations of
this Plan or any Predecessor which maintained this Plan. The terms we, us, and
ours as they are used in this Plan refer to the Employer.
Employer Contributions means the Contributions made by us to fund the Plan.
(See Section 3.01.)
Entry Break means, when the elapsed time method is used, a one-year Period of
Severance beginning on an Employee's Severance Date. An Employee incurs an
Entry Break on the last day of a one-year Period of Severance.
When the hours method is used, Entry Break is defined in Item K. However, if
the Adoption Agreement - Plus is not used. Entry Break means an Entry Service
Period in which an Employee does not have more than one-half of the Hours of
Service required in Item K for a year of Entry Service. An Employee incurs an
Entry Break on the last day of the Entry Service Period in which he has an
Entry Break.
Entry Date means the date an Employee first enters the Plan as an Active
Member. (See Item L and Section 2.01.)
Entry Service means an Employee's service as defined in Item K. Entry Service
shall include service with a Controlled Group member while we are both members
of the Controlled Group.
Entry Service shall include a Period of Military Duty. If the elapsed time
method is used, the entire Period of Military Duty shall be included to the
extent it has not already been counted as Entry Service. If the hours method is
used, an Hour of Service shall be credited (without regard to the 501 Hours of
Service limitation) for each hour the Employee would normally have been
scheduled to work for us during such Period of Military Duty to the extent such
hour has not already been counted for purposes of Entry Service.
If the elapsed time method is used and an Employee has more than one countable
Period of Service, Entry Service shall be determined by adjusting his Hire Date
so that the Employee has one continuous period of Entry Service equal to the
total of all his countable Periods of Service. This period of Entry
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<PAGE> 6
Service shall be expressed as whole years (on the basis that 365 days equal one
year) and days.
If the elapsed time method is used, Entry Service shall include a Period of
Severance (service spanning rule) if
(a) the Period of Severance immediately follows a period during which an
Employee is not absent from work and ends within twelve months, or
(b) the Period of Severance immediately follows a period during which an
Employee is absent from work for any reason other than quitting, being
discharged, or retiring (such as a leave of absence or layoff) and ends
within twelve months of the date he was first absent.
If the hours method is used and the Entry Service Period shifts to the Plan
Year, an Employee will be credited with two years of Entry Service if he has
the Hours of Service required for a year of Entry Service in both his first and
second Entry Service Periods.
If the method of crediting Entry Service changes, the provisions of Section
9.12 shall apply.
Entry Service Period means the period defined in Item K. However, if the
Adoption Agreement - Plus is not used. Entry Service Period means a
12-consecutive month period beginning on an Employee's Hire Date and each
following 12-consecutive month period beginning on an anniversary of that Hire
Date. If an Employee has a Rehire Date, a new Entry Service Period shall begin
on that date in the same manner as if it were a Hire Date.
ERISA means the Employee Retirement Income Security Act of 1974.
Family Member means an individual described in Code Section 414(q)(6)(B).
Fiscal Year means our taxable year. (See Item F.)
Forfeiture means the part, if any, of a Member's Account which is forfeited.
(See Section 3.04.)
Forfeiture Date means, as to a Member, the date the Member incurs five
consecutive Vesting Breaks. Before the first Yearly Date in 1985, the
Forfeiture Date is the date the Member incurs a Vesting Break.
Highly Compensated Employee means a highly compensated active Employee or a
highly compensated former Employee.
A highly compensated active Employee means any Employee who performs service
for us during the determination year and who, during the look-back year:
(a) received compensation from us in excess of $75,000 (as adjusted pursuant to
Code Section 415(d));
(b) received compensation from us in excess of $50,000 (as adjusted pursuant to
Code Section 415(d)) and was a member of the top-paid group for such year;
or
(c) was an officer of ours and received compensation during such year that is
greater than 50 percent of the dollar limitation in effect under Code
Section 415(b)(1)(A).
The term Highly Compensated Employee also means:
(d) Employees who are both described in the preceding sentence if the term
"determination year" is substituted for the term "look-back year" and the
Employee is one of the 100 Employees who received the most compensation from
us during the determination year; and
(e) Employees who are 5 percent owners at any time during the look-back year or
determination year.
If no officer has satisfied the compensation requirement of (c) above during
either a determination year or look-back year, the highest paid officer for
such year shall be treated as a Highly Compensated Employee.
For this purpose, the determination year shall be the Plan Year. The look-back
year shall be the twelve-month period immediately preceding the determination
year.
A highly compensated former Employee means any Employee who separated from
service (or was deemed to have separated) prior to the determination year,
performs no service for us during the determination year, and was a highly
compensated active Employee for either the separation year or any determination
year ending on or after the Employee's 55th birthday.
If an Employee is, during a determination year or look-back year, a family
member of either a 5 percent owner who is an active or former Employee or a
Highly Compensated Employee who is one of the 10 most highly compensated
Employees ranked on the basis of compensation paid by us during such year, then
the family member and the 5 percent owner or top-ten highly compensated Employee
shall be aggregated. In such case, the family member and 5 percent owner or
top-ten highly compensated Employee shall be treated as a single Employee
receiving compensation and Plan contributions or benefits equal to the sum of
such compensation and contributions or benefits of the family member and 5
percent owner or top-ten highly compensated Employee. For purposes of this
definition, family member includes the spouse, lineal ascendants and descendants
of the Employee or former Employee and the spouses of such lineal ascendants and
descendants.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the top-paid group,
the top 100 Employees, the number of Employees treated as officers and the
compensation that is considered, will be made in accordance with Code Section
414(q) and the regulations thereunder.
Hire Date means the date an Employee first performs an Hour of Service.
Hour of Service means, for the elapsed time method of crediting service in this
Plan, each hour for which an Employee is paid, or entitled to payment, for
performing duties for us. Hour of Service means, for the hours method of
crediting service in this Plan, the following:
(a) Each hour for which an Employee is paid, or entitled to payment, for
performing duties for us during the applicable service period.
(b) Each hour for which an Employee is paid, or entitled to payment, by us on
account of a period of time in which no duties are performed (irrespective
of whether the employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), layoff, jury duty,
military duty, or leave of absence. Notwithstanding the preceding provisions
of this subparagraph (b) no credit shall be given to the Employee.
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<PAGE> 7
(1) for more than 501 Hours of Service under this subparagraph (b) on
account of any single continuous period in which the Employee performs
no duties (whether or not such period occurs in a single service
period); or
(2) for an Hour of Service for which the Employee is directly or
indirectly paid, or entitled to payment, on account of a period in
which no duties are performed if such payment is made or due under a
plan maintained solely for the purpose of complying with applicable
worker's or workmen's compensation, or unemployment compensation or
disability insurance laws; or
(3) for an Hour of Service for a payment which solely reimburses the
Employee for medical or medically related expenses incurred by him.
For purpose of this subparagraph (b), a payment shall be deemed to be made
by or due from us regardless of whether such payment is made by or due from
us directly or indirectly through, among others, a trust fund or insurer,
to which we contribute or pay premiums and regardless of whether
contributions made or due to the trust fund, insurer, or other entity are
for the benefit of particular employees or are on behalf of a group of
employees in the aggregate.
(c) Each hour for which back pay, irrespective of mitigation of damages, is
either awarded or agreed to by us. The same Hour of Service shall not be
credited under both this subparagraph (c) and under either subparagraph (a)
or (b) above. Crediting of Hours of Service for back pay awarded or agreed
to with respect to periods described in subparagraph (b) above shall be
subject to the limitations set forth in that subparagraph.
The crediting of Hours of Service above shall be applied under the rules of
paragraphs (b) and (c) of the Department of Labor Regulation 2530.200b-2
(including any interpretations or opinions implementing said rules); which
rules, by this reference, are specifically incorporated in full within this
Plan. The reference to paragraph (b) applies to the special rule for
determining hours of service for reasons other than the performance of duties
such as payments calculated (or not calculated) on the basis of units of time
and the rule against double credit. The reference to paragraph (c) applies to
the crediting of hours of service to service periods.
Hours of Service shall be credited for employment with any other employer
required to be aggregated with us under Code Section 414(b), (c), (m) or (o)
and the regulations thereunder for purposes of entry, vesting and, when the
Adoption Agreement - Plus is not used, for purposes of determining eligibility
for contributions. Hours of Service shall also be credited for any individual
who is considered an employee for purposes of this Plan pursuant to Code
Section 414(n) or Code Section 414(o) and the regulations thereunder.
Solely for purposes of determining whether a one-year break in service has
occurred for entry or vesting purposes, during a Parental Absence an Employee
shall be credited with the Hours of Service which would otherwise have been
credited to the Employee but for such absence, or in any case in which such
hours cannot be determined, eight Hours of Service per day of such absence. The
Hours of Service credited under this paragraph shall be credited in the service
period in which the absence begins if the crediting is necessary to prevent a
break in service in that period; or in all other cases, in the following
service period.
Inactive Member means a former Active Member who has an Account. (See Section
2.02.)
Insurance Policy means, for trusteed plans, the life insurance policy or
policies issued by the insurer as provided in Item T and Article IV. The term
Insurance Policy as it is used in this Plan is deemed to include the plural
unless the context clearly indicates the singular is meant.
Insurer means Principal Mutual Life Insurance Company and, if our Plan is
trusteed, any other insurance company or companies named by the Trustee.
Integration Level means the Integration Level defined in Item P. If a Member
also participates in a Controlled Group member's plan which uses an integration
level to determine the allocation or amount of contributions, his Integration
Level shall be adjusted based upon the ratio of the Member's Pay from us to his
total pay from us and the Controlled Group member.
Investment Fund means that part of the Plan assets held under the Trust,
excluding the cash values of any Insurance Policy. (See Article VIIIA.)
If our Plan is not trusteed, Investment Fund means the total assets held under
the Annuity Contract which result from Contributions made under our Plan. The
Investment Fund shall be valued at current fair market value as of the last day
of the last calendar month ending in the Plan Year and, at the discretion of
the Insurer, may be valued more frequently. The valuation shall take into
consideration investment earnings credited, expenses charged, payments made,
and changes in the values of the assets held in the fund.
The Investment Fund shall be allocated at all times to Members. The Account of
a Member shall be credited with its share of the gains and losses of the
Investment Fund. That part of a Member's Account invested in a funding
arrangement which establishes an account or accounts for such Member thereunder
shall be credited with the gain or loss from such account or accounts. That
part of a Member's Account which is invested in other funding arrangements
shall be credited with a proportionate share of the gain or loss of such
investments. The share shall be determined by multiplying the gain or loss of
the investment by the ratio of the part of the Member's Account invested in
such funding arrangement to the total of the Investment Fund invested in such
funding arrangement.
Investment Manager means any fiduciary (other than a Trustee or Named Fiduciary)
(a) who has the power to manage, acquire, or dispose of any assets of the plan;
(b) who (1) is registered as an investment adviser under the Investment
Advisers Act of 1940, or (2) is a bank, as defined in the Investment Advisers
Act of 1940, or (3) is an insurance company qualified to perform services
described in subparagraph (a) above under the laws of more than one state; and
(c) who has acknowledged in writing being a fiduciary with respect to the Plan.
Item means the specified item in the Adoption Agreement we signed.
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<PAGE> 8
Late Retirement Date means the first day of any month which is after a Member's
Normal Retirement Date and on which retirement benefits begin. If a Member
continues to work for us after Normal Retirement Date, his Late Retirement Date
shall be the earliest first day of the month on or after he ceases to be an
Employee. An earlier or a later Retirement Date may apply if the Member so
elects. An earlier Retirement Date may apply if the Member is 70 1/2. (See
Section 5.04)
Leased Employee means any person (other than an employee of the recipient) who
pursuant to an agreement between the recipient and any other person ("leasing
organization") has performed services for the recipient (or for the recipient
and related persons determined in accordance with Code Section 414(n)(6)) on a
substantially full time basis for a period of at least one year, and such
services are of a type historically performed by employees in the business
field of the recipient employer. Contributions or benefits provided a Leased
Employee by the leasing organization which are attributable to service
performed for the recipient employer shall be treated as provided by the
recipient employer.
A Leased Employee shall not be considered an employee of the recipient if:
(a) such employee is covered by a money purchase pension plan providing (1) a
nonintegrated employer contribution rate of at least 10 percent of
compensation, as defined in Code Section 415(c)(3), but including amounts
contributed pursuant to a salary reduction agreement which are excludable
from the employee's gross income under Code Sections 125, 402(a)(8), 402(h)
or 403(b), (2) immediate participation, and (3) full and immediate vesting
and
(b) Leased Employees do not constitute more than 20 percent of the recipient's
nonhighly compensated workforce.
Loan Administrator means the person or positions named in Item T(b)(iii).
Matching Contributions means matching contributions we make to fund this Plan.
(See Item O and Section 3.01.)
Maximum Integration Rate means the Maximum Integration Rate defined in Item P.
Member means either an Active Member or an Inactive Member.
Member Contributions means Voluntary Contributions and Required Contributions
made under the Prior Plan, if any, unless the context clearly indicates only
one is meant.
Monthly Date means the Yearly Date and the same day of each following month
during the Plan Year which begins on that Yearly Date.
Named Fiduciary means the person named in Item G.
Net Profits means our current or accumulated net earnings, determined according
to generally accepted accounting practices, before any Contributions made by us
under this Plan and before any deduction for Federal or state income tax,
dividends on our stock, and capital gains or losses. If we are a nonprofit
organization under Code Section 501(c)(3), Net Profits means excess revenues
(excess of receipts over expenditures).
Nonhighly Compensated Employee means an Employee of the Employer who is neither
a Highly Compensated Employee nor a Family Member.
Nonvested Account means the excess, if any, of a Member's Account over his
Vested Account.
Normal Form means a single life annuity with installment refund.
Normal Retirement Age means, for a Member, the age defined in Item X.
Normal Retirement Date means the earliest first day of the month on or after a
Member reaches Normal Retirement Age. Retirement benefits shall begin on Normal
Retirement Date if the Member is not an Employee, has a Vested Account, and has
not elected to have retirement benefits begin later. However, retirement
benefits shall not begin before the later of age 62 or Normal Retirement Age
unless the qualified election procedures of Article VI are met. Even if the
Member is an Employee on his Normal Retirement Date, he may choose to have
retirement benefits begin on such date. An earlier Retirement Date may apply if
the Member is 70 1/2. (See Section 5.04.)
Parental Absence means an Employee's absence from work which begins on or after
the first Yearly Date after December 31, 1984
(a) by reason of pregnancy of the Employee,
(b) by reason of birth of a child of the Employee,
(c) by reason of the placement of a child with the Employee in connection with
adoption of such child by such Employee, or
(d) for purposes of caring for such child for a period beginning immediately
following such birth or placement.
Pay means the pay defined in Item M. For any Plan Year beginning after December
31, 1988, the annual Pay of each Member taken into account for determining all
benefits provided under the Plan for any determination period shall not exceed
$200,000. This limitation shall be adjusted by the Secretary at the same time
and in the same manner as under Code Section 415(d), except that the dollar
increase in effect on January 1 of any calendar year is effective for years
beginning in such calendar year and the first adjustment to the $200,000
limitation is effected on January 1, 1990. If the Plan determines Pay on a
period of time that contains fewer than 12 calendar months, then the annual Pay
limit is an amount equal to the annual Pay limit for the calendar year in which
the pay period begins multiplied by the ratio obtained by dividing the number
of full months in the period by 12.
In determining the Pay of a Member for purposes of this limitation, the rules
of Code Section 414(q)(6) shall apply, except that in applying such rules, the
term "family" shall include only the spouse of the Member and any lineal
descendants of the Member who have not attained age 19 before the close of the
Plan Year. If, as a result of the application of such rules the adjusted
$200,000 limitation is exceeded, then (except for purposes of determining the
portion of Pay up to the Integration Level if this Plan provides for permitted
disparity), the limitation shall be prorated among the affected individuals in
proportion to each such individual's Pay as determined under this definition
prior to the application of this limitation.
If Pay for any prior Plan Year is taken into account in determining an
Employee's contributions or benefits for the current year, the Pay for such
prior year is subject to the applicable annual Pay limit in effect for that
prior year. For this purpose, for years
- -5-
<PAGE> 9
beginning before January 1, 1990, the applicable annual Pay limit is $200.000.
Pay means, for a Leased Employee, Pay for the services the Leased Employee
performs for us, determined in the same manner as the Pay of Employees who are
not Leased Employees, regardless of whether such Pay is received directly from
us or from the leasing organization.
Pay Year means the period defined in Item M of the Adoption Agreement - Plus.
Period of Military Duty means, for an Employee
(a) who served as a member of the armed forces of the United States, and
(b) who was reemployed by us at a time when the Employee had a right to
reemployment in accordance with seniority rights as protected under Section
2021 through 2026 of Title 38 of the United States Code,
the period of time from the date the Employee was first absent from work for us
because of such military duty to the date the Employee was reemployed.
Period of Service means a period of time beginning on an Employee's Hire or
Rehire Date, whichever applies, and ending on his Severance Date.
Period of Severance means a period beginning on an Employee's Severance Date and
ending on the date he again performs an Hour of Service.
A one-year Period of Severance means a Period of Severance of 12 consecutive
months.
Solely for purposes of determining whether a one-year Period of Severance has
occurred for entry or vesting purposes, the 12-consecutive month period
beginning on the first anniversary of the first date of a Parental Absence
shall not be a one-year Period of Severance.
Plan means our retirement plan set forth in the attached Adoption Agreement and
this document, including any later amendments to them. If this Plan is
trusteed, the term Plan shall include the term Trust, unless the context
clearly indicates otherwise.
Plan Administrator means the person named in Item H.
Plan Year means a 12-consecutive month period beginning on a Yearly Date and
ending on the day before the next Yearly Date. If the Yearly Date changes, the
change will result in a short Plan Year. If a service period or the Pay Year is
based on the Plan Year, corresponding years before the Effective Date shall be
included.
Predecessor means a Predecessor designated in Item I.
Prior Plan means a retirement plan of ours or of a Predecessor which was
qualifiable under Code Section 401(a), and of which this Plan is a restatement,
as specified in the initial Adoption Agreement. If, because of a merger,
consolidation or transfer of assets or liabilities, this Plan is a continuation
of a plan which was qualifiable under Code Section 401(a), that plan shall be a
Prior Plan. If, with the approval of any governmental agency to which it is
subject, the assets of a terminated plan of ours which was qualified under Code
Section 401(a) are transferred to this Plan, that terminated plan shall be
deemed to be the Prior Plan.
Prior Plan Assets means the assets accumulated under the Prior Plan which have
not been distributed and which are held under this Plan.
Qualified Joint and Survivor Form means, for a Member who has a spouse, a
survivorship life annuity with installment refund, where the Contingent
Annuitant is the Member's spouse and the survivorship percentage is 50%. A
former spouse will be treated as the spouse to the extent provided under a
qualified domestic relations order as described in Code Section 414(p). If a
Member does not have a spouse, the Qualified Joint and Survivor Form means the
Normal Form.
The amount of the benefit payable under the Qualified Joint and Survivor Form
shall be the amount of benefit which may be provided by the Member's Vested
Account.
Qualified Matching Contributions means Matching Contributions which are 100%
vested when made and which (including investment gain) may not be distributed
before the Member's separation from service, death, the date the Member becomes
Totally Disabled, before the events described in the last paragraph of Section
5.04, or before termination of Plan as described in Article VII. Our Matching
Contributions shall be Qualified Matching Contributions if so elected in Item O.
Qualified Nonelective Contributions means Employer Contributions which are 100%
vested when made and which (including investment gain) may not be distributed
before the Member's separation from service, death, the date the Member becomes
Totally Disabled, before the events described in the last paragraph of Section
5.04, or before termination of the Plan as described in Article VII. (See Item
P of the Adoption Agreement - Plus and Section 3.01.)
Qualified Preretirement Survivor Annuity means a life annuity with installment
refund payable to the surviving spouse of a Member who dies before his Annuity
Starting Date. A former spouse will be treated as the surviving spouse to the
extent provided under a qualified domestic relations order as described in Code
Section 414(p).
Quarterly Date means each Yearly Date and the third, sixth and ninth Monthly
Date after each Yearly Date which is within the same Plan Year.
Reentry Date means the date a former Active Member reenters the Plan. (See
Section 2.01.)
Rehire Date means the date an Employee first performs an Hour of Service
following an Entry Break, when the hours method is used, or a Period of
Severance, when the elapsed time method is used.
Required Contributions means nondeductible contributions required from a Member
in order to participate in the Prior Plan.
Restatement Date means the date our retirement plan was last restated. (See
Item A of the initial Adoption Agreement.)
Retirement Date means the date a retirement benefit will begin and is a
Member's Early, Normal or Late Retirement Date, as the case may be.
Rollover Contributions means the Rollover Contributions which are made by or
for a Member. (See Section 3.03.)
Semi-yearly Date means each Yearly Date and the sixth Monthly Date after each
Yearly Date which is within the same Plan Year.
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<PAGE> 10
Severance Date means the earlier of
(a) the date on which an Employee quits, retires, dies or is discharged, or
(b) the first anniversary of the date an Employee begins a one-year absence
from service (with or without pay). This absence may be the result of any
combination of vacation, holiday, sickness, disability, leave of absence,
or layoff.
Solely to determine whether a one-year Period of Severance has occurred for
entry or vesting purposes for an Employee who is absent from service beyond the
first anniversary of the first day of a Parental Absence. Severance Date is the
second anniversary of the first day of the Parental Absence. The period between
the first and second anniversaries of the first day of the Parental Absence is
not a Period of Service and is not a Period of Severance.
Taxable Wage Base means the maximum amount of earnings which may be considered
wages for a year under Code Section 3121(a)(1).
TEFRA means the Tax Equity and Fiscal Responsibility Act of 1982.
TEFRA Compliance Date means the date our Plan is to comply with the provisions
of TEFRA. The TEFRA Compliance Date as used in this Plan is.
(a) for purposes of determining the Maximum Permissible Amount and
contribution limitations of Section 3.06.
(1) if this Plan was in effect on July 1, 1982, the first day of the
first Limitation Year which begins after December 31, 1982, or
(2) if this Plan was not in effect on July 1, 1982, the first day of the
first Limitation Year which ends after July 1, 1982.
(b) for all other purposes, the first Yearly Date after December 31, 1983.
Totally Disabled means that a Member is disabled, as a result of sickness or
injury, to the extent that he is prevented from engaging in any substantial
gainful activity, and is eligible for and receives a disability benefit under
Title II of the Federal Social Security Act.
If our Employees are not covered under Title II of the Federal Social Security
Act, Totally Disabled means that a Member is disabled as a result of sickness
or injury, to the extent that he is completely prevented from performing any
work, engaging in any occupation for wage or profit and has been continuously
disabled for six months. Initial written proof that the disability exists and
has continued for at least six months must be furnished to the Plan
Administrator by the Member within one year after the date the disability
begins. The Plan Administrator, upon receipt of any notice of proof of a
Participant's total disability, shall have the right and opportunity to have
physician it designates examine the Member when and as often as it may
reasonably require, but not more than once each year after the disability has
continued uninterruptedly for at least two years beyond the date of furnishing
the first proof.
Trust means, for trusteed plans, the Agreement of Trust set out in Article
VIIIA.
Trust Fund means, for trusteed plans, the total funds held under the Trust as
provided in Article VIIIA.
Trustee means, for trusteed plans, the party or parties named in Item T. The
term Trustee as it is used in this Plan shall include the plural unless the
context clearly indicates the singular is meant.
Vested Account means, on any date, the vested part of a Member's Account
(including the cash values of any insurance coverage on his life under this
Plan). If the Member's Vesting Percentage is 100%, the Vested Account equals
his Account. If the Member's Vesting Percentage is not 100%, the Vested Account
equals the sum of (a) and (b) below:
(a) The part of the Member's Account resulting from vested Employer
Contributions made before any prior Forfeiture Date, and from Member
Contributions and Rollover Contributions. The Member is fully (100%)
vested in this part of his Account.
(b) The balance of the Member's Account in excess of the amount in (a) above
multiplied by his Vesting Percentage.
If the Member has withdrawn any part of his Account resulting from our
Contributions, other than vested Employer Contributions included in (a)
above, the amount determined under this subparagraph (b) shall be equal to
P(AB + D)-D as defined below:
P The Member's Vesting Percentage.
AB the balance of the Member's Account in excess of the amount in (a)
above.
D The amount of withdrawal resulting from our Contributions, other than
our vested Contributions included in (a) above.
Vesting Break means, when the elapsed time method is used, a one-year Period of
Severance. An Employee incurs a Vesting Break on the last day of a one-year
Period of Severance.
When the hours method is used, Vesting Break is defined in Item V. However, if
the Adoption Agreement - Plus is not used, Vesting Break means a Vesting
Service Period in which an Employee does not have more than one-half of the
Hours of Service required in Item V for a year of Vesting Service. An Employee
incurs a Vesting Break on the last day of the Besting Service Period in which
he has a Vesting Break.
Vesting Percentage means the Vesting Percentage of a Member determined under
Item U. If the computation of Vesting Percentage is changed (whether directly
or indirectly), a Member's Vesting Percentage as of the day before the change
shall not be reduced due to the change. Indirect changes include, but are not
limited to, changes in Early Retirement Date requirements or the method of
crediting Vesting Service. The provisions of Section 9.01 regarding changes in
the computation of Vesting Percentage shall apply.
Vesting Service means an Employee's service determined under Item V. Vesting
Service is subject to the modifications selected under that item. Vesting
Service shall include service with a Controlled Group member while we are both
members of the Controlled Group.
If, under Item V(4), Vesting Service is determined under the Prior Plan
provisions, service before the date the Prior Plan became subject to ERISA may
be disregarded if such service would have been disregarded under the Prior Plan
break in service rules as in effect on the day before such date.
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<PAGE> 11
Vesting Service shall include a Period of Military Duty. If the elapsed time
method is used, the entire Period of Military Duty shall be included to the
extent it has not already been counted as Vesting Service. If the hours method
is used, an Hour of Service shall be credited (without regard to the 501 Hours
of Service limitation) for each hour the Employee would normally have been
scheduled to work for us during such Period of Military Duty, to the extent
such hour has not already been credited as Vesting Service.
If the elapsed time method is used and the Employee has more than one countable
Period of Service or if all or a part of a Period of Service is not counted,
Vesting Service shall be determined by adjusting his Hire Date so that the
Employee has one continuous period of Vesting Service equal to the total of all
his countable Periods of Service. This period of Vesting Service shall be
expressed as whole years (on the basis that 365 days equal one year) and days.
If the elapsed time method is used, Vesting Service shall include a Period of
Severance (service spanning rule) if
(a) the Period of Severance immediately follows a period during which an
Employee is not absent from work and ends within twelve months, or
(b) the Period of Severance immediately follows a period during which an
Employee is absent from work for any reason other than quitting, being
discharged, or retiring (such as a leave of absence or layoff) and ends
within twelve months of the date he was first absent.
If the Prior Plan applied the rule of parity before the first Yearly Date in
1985, an Employee's Vesting Service, accumulated before a Vesting Break which
occurred before that date, shall be excluded according to the Prior Plan
provisions if (a) his Vesting Percentage is zero, and (b) his latest period of
consecutive Vesting Breaks equals or exceeds his prior Vesting Service
(disregarding any Vesting Service that was excluded because of a previous
period of Vesting Breaks).
For a Member who is not credited with an Hour of Service on or after the first
Yearly Date in 1985, Vesting Service accrued before such date and before an age
greater than 18 (before the beginning of the Vesting Service Period in which he
attained that age, when the hours method is used) shall be excluded if the
Prior Plan excluded such service.
If the method of crediting Vesting Service changes, the provisions of Sections
9.01 and 9.12 shall apply.
Vesting Service Period means the period defined in Item V. However, if the
Adoption Agreement - Plus is not used. Vesting Service Period means a
12-consecutive month period ending on the last day of the Plan Year.
Voluntary Contributions means the Contributions by a Member that are not
required as a condition of employment or membership or for obtaining
additional benefits from our Contributions. (See Item S and Section 3.02)
Yearly Date means the Yearly Date defined in Item E.
Years of Service means an Employee's Vesting Service as defined in Item V,
disregarding any modifications which exclude service.
If Vesting Service is not defined in Item V, then for purposes of determining
Years of Service, Vesting Service shall be deemed to be determined using the
elapsed time method.
- -------------------------------------------------------------------------------
ARTICLE II
MEMBERSHIP
- -------------------------------------------------------------------------------
SECTION 2.01 - ACTIVE MEMBERSHIP.
An Employee shall first become an Active Member (begin active participation in
the Plan) on the earliest date specified in Item L on which he is an Eligible
Employee and has met all of the entry requirements selected in Item K. This
date is the Member's Entry Date.
Each Employee who was an active member under the Prior Plan on the day before
the Restatement Date shall become an Active Member under this Plan on the
Restatement Date if he is still an Eligible Employee. The Member's entry date
under the Prior Plan is deemed to be his Entry Date under this Plan.
If a person has been an Eligible Employee who has met all of the entry
requirements selected in Item K but is not an Eligible Employee on the date
which would have been his Entry Date, he shall become an Active Member on the
date he again becomes an Eligible Employee. This date is the Member's Entry
Date.
A former Active Member shall reenter the Plan as an Active Member on the date
he again performs an Hour of Service as an Eligible Employee. This date is the
Member's Reentry Date. An Inactive Member ceases to be an Inactive Member on
his Reentry Date.
A Member's benefits under this Plan shall not be duplicated because of more
than one period as an Active Member.
SECTION 2.02 - CEASING ACTIVE MEMBERSHIP.
An Active Member shall become an inactive Member (stop accruing benefits under
the Plan) on the earlier of the following:
(a) The date the Member ceases to be an Eligible Employee (his Retirement Date
if he ceases to be an Eligible Employee within one month of his Retirement
Date).
(b) The effective date of complete termination of the Plan under Article VII.
An Employee or former Employee who was an inactive member under the Prior Plan
on the day before the Restatement Date shall become an Inactive Member under
this Plan on the Restatement Date. Eligibility for any benefits payable to the
Member or on his behalf and the amount of the benefits shall be determined
according to the provisions of the Prior Plan.
A Member shall cease to be a Member on the date he is no longer an Eligible
Employee and his Account is zero.
SECTION 2.03 - ADOPTING EMPLOYERS - SEPARATE PLANS.
If Item Z(1)(a)(i) of the Adoption Agreement - Plus is selected, each Adopting
Employer listed in Item Z maintains this Plan as a separate and distinct plan
for the exclusive benefit of its employees. If Item Z(1)(a)(ii) of the Adoption
Agreement -- Plus is selected, each Adopting Employer identified in Item
Z(1)(a)(ii) maintains this Plan as a separate and distinct plan for the
exclusive benefit of its employees. An adopting Employer's adoption of the Plan
shall be in writing if the Adopting Employer
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<PAGE> 12
did not maintain a Prior Plan, the date of adoption specified in Item Z is the
Effective Date of its Plan. This date is the first Yearly Date for the Adopting
Employer's Plan and shall be the Entry Date for any of its employees who have
met the requirements in Section 2.01 as of that date. If the Adopting Employer
did maintain a Prior Plan, the date of adoption is the Restatement Date of its
Plan.
An Adopting Employer shall be deemed to be the Employer but only with respect
to its Plan and for those Employees who are on its payroll. In interpreting the
Adoption Agreement and this document as to an Adopting Employer, the terms
Employer, we, us, and ours shall be deemed to refer to the Adopting Employer
and the Adopting Employer's fiscal year is deemed to be the Fiscal Year. The
primary Employer in Item B is deemed to be an Adopting Employer for purposes of
the following two paragraphs.
The Contributions made by an Adopting Employer, and Forfeitures arising from
such Contributions, shall not be used to fund the benefits for Employees of any
other Adopting Employer. Service with an Adopting Employer shall be included as
service with all other Adopting Employers and transfer of employment, without
interruption, between Adopting Employers shall not be an interruption of
service. If an Active Member ceases to be an Employee of an Adopting Employer
on other than the last day of the Plan Year and immediately becomes an Employee
of another Adopting Employer, he shall be an Active Member under the first
Adopting Employer's Plan until the next annual Contribution, if any, is due,
regardless of whether he has also become an Active Member in the other
Adopting Employer's Plan. Both Adopting Employers' Contributions on his behalf
will be proportionately reduced on that date based upon his period of
employment with and Pay from each.
If an integrated allocation formula is in effect and a Member received Pay from
more than one Adopting Employer during a Pay Year, the Integration Level used
to determine the allocation of an Adopting Employer's Contributions is equal to
his Integration Level multiplied by the ratio of (a) the Member's Pay from the
Adopting Employer for that year to (b) the Member's Pay from all Adopting
Employers for that year.
Any amendment to the Plan by the primary Employer in Item B of the Adoption
Agreement shall be deemed to be an amendment to each Adopting Employer's Plan.
Without the consent of any other Adopting Employer, an Adopting Employer may
restate its Plan in the form of a separate document at any time and, in that
event, cease to be an Adopting Employer. An employer shall not be an Adopting
Employer if it ceases to be controlled by us or affiliated with us. Such an
employer may continue its Plan by restating it in the form of a separate
document. This Plan shall be amended to delete a former Adopting Employer from
Item Z of the Adopting Agreement.
If the Plan of the Adopting Employer terminates, the provisions of Article VII
shall apply to its Plan.
SECTION 2.04 - ADOPTING EMPLOYERS - SINGLE PLAN.
If the Adoption Agreement - Plus is not used, each Adopting Employer listed in
Item Y and each Controlled Group member, whether or not listed in that item,
shall be an Adopting Employer who participates with us in this Plan. If Item
Z(1)(b)(i) of the Adoption Agreement - Plus is selected, each Adopting Employer
listed in Item Z participates with us in this Plan. If Item Z(1)(b)(ii) of the
Adoption Agreement - Plus is selected, each Adopting Employer identified in Item
Z(1)(b)(ii) participates with us in this Plan. An Adopting Employer's agreement
to participate in this Plan shall be in writing. Employees of Adopting Employers
who do not make such written agreement shall not be eligible to become Members
and shall be entitled to Contributions in the same manner as if their employers
had agreed to participate in the Plan. An Adopting Employer has no rights or
privileges under this Plan.
If the Adopting Employer did not maintain a Prior Plan, the date of
participation in Item Z (Item Y) shall be the Entry Date for any of its
employees who have met the requirements in Section 2.01 as of that date.
Service with and pay from an Adopting Employer shall be included as service
with and pay from us. Transfer of employment, without interruption, between an
Adopting Employer and another Adopting Employer or us shall be considered an
interruption of service. Our Fiscal Year in Item F shall be the Fiscal Year
used in interpreting this Plan for Adopting Employers.
Contributions made by an Adopting Employer shall be treated as Contributions
made by us. Forfeitures arising from those Contributions shall be used for the
benefit of all Members.
An employer shall not be an Adopting Employer if it ceases to be controlled by
us or affiliated with us. Such an employer may continue a retirement plan for
its employees in the form of a separate document. This Plan shall be amended to
delete a former Adopting Employer from the list of Adopting Employers in the
Adoption Agreement.
If an employer ceases to be an Adopting Employer and does not continue a
retirement plan for the benefit of its employees, partial termination may
result and the provisions of Article VII apply.
ARTICLE III
CONTRIBUTIONS
_______________________________________________________________________________
SECTION 3.01 - EMPLOYER CONTRIBUTIONS.
Our Contributions are conditioned on initial qualification of the Plan. If the
Plan is denied initial qualification, the provisions of Section 9.14 shall
apply.
The amount of our Contributions is specified in the Adoption Agreement. Our
Contributions are made from Net Profits unless otherwise specified in Item Q.
Notwithstanding the foregoing, the Plan shall continue to be designed to qualify
as a profit sharing plan for purposes of Code Sections 401(a), 402, 412, and
417.
No member shall be permitted to have Elective Deferral Contributions, as
defined in Section 3.07, made under this Plan, or any other qualified plan
maintained by us, during any taxable year, in excess of the dollar limitation
contained in Code Section 402(g) in effect at the beginning of such taxable
year.
If Matching Contributions, Additional Contributions or Qualified Nonelective
Contributions under Item P(1)(a) of the Adoption Agreement - Plus are made from
Net Profits, Item Q, and our Net Profits are not sufficient to provide such
Contributions, such Contributions shall be proportionately reduced.
Our Contributions are allocated according to the provisions of Section 3.05.
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<PAGE> 13
If Item Q(2)(a) is selected, we may make all or part of our annual Contributions
before the end of the Plan Year. Such Contributions shall be allocated when made
in a manner which approximates the allocation which would otherwise have been
made as of the last day of the Plan Year. Succeeding allocations shall take into
account amounts previously allocated for the Plan Year. The percentage of our
Contributions allocated to the Member for the Plan Year shall be the same
percentage which would have been allocated to him if the entire allocation had
been made as of the last day of the Plan Year.
We shall pay to the Insurer or Trustee our Contributions used to determine the
Actual Deferral Percentage, as defined in Section 3.07, (Elective Deferral
Contributions, Qualified Nonelective Contributions, and Qualified Matching
Contributions) to the Plan for each Plan Year not later than the end of the
twelve-month period immediately following the Plan Year for which they are
deemed to be paid. Any such Contributions accumulated through payroll deductions
shall be paid within 90 days of the date withheld or the date it is first
reasonably practical for us to do so, if earlier.
A portion of the Plan assets resulting from our Contributions (but not more than
the original amount of those Contributions) may be returned if our Contributions
are made because of a mistake of fact or are more than the amount deductible
under Code Section 404 (excluding any amount which is not deductible because the
Plan is disqualified). The amount involved must be returned to us within one
year after the date our Contributions are made by mistake of fact or the date
the deduction is disallowed, whichever applies. Except as provided under this
paragraph and Articles VII and IX, the assets of the Plan shall never be used
for our benefit and are held for the exclusive purpose of providing benefits to
Members and their Beneficiaries and for defraying reasonable expenses of
administering the Plan.
Prior Plan Assets which result from contributions made by us shall be treated in
the same manner as Employer Contributions made under this Plan. They shall be
treated in the same manner as Employer Contributions made under this Plan before
a Forfeiture Date if the Prior Plan Assets are transferred from a terminated
plan.
SECTION 3.02 -- VOLUNTARY CONTRIBUTIONS BY MEMBERS.
If permitted under Item S, an Active Member may make Voluntary Contributions.
Voluntary Contributions shall be made according to nondiscriminatory procedures
and limitations set up by the Plan Administrator.
A Member's membership in the Plan is not affected by stopping or changing
Voluntary Contributions. An Active Member's request to start, change, or stop
Voluntary Contributions must be in writing on a form furnished for that purpose.
The form must be delivered to the Plan Administrator before the date the Member
is to start, change, or stop Voluntary Contributions.
The part of the Member's Account resulting from Voluntary Contributions is fully
(100%) vested and nonforfeitable at all times.
Prior Plan Assets which result from voluntary contributions made by the Member
shall be treated in the same manner as Voluntary Contributions made under this
Plan. These Prior Plan Assets may include deductible Voluntary Contributions
which were made according to the provisions of the Prior Plan.
SECTION 3.03 -- ROLLOVER CONTRIBUTIONS.
With our consent, a Rollover Contribution may be made by or for an Eligible
Employee if the following conditions are met:
(a) The Contribution is a rollover contribution which the Code permits to be
transferred to a plan that meets the requirements of Code Section 401(a).
(b) If the Contribution is made by the Eligible Employee, it is made within
sixty days after he receives the distribution.
(c) The Eligible Employee furnishes evidence satisfactory to the Plan
Administrator that the proposed transfer is in fact a rollover contribution
which meets conditions (a) and (b) above.
The Rollover Contribution may be made by the Eligible Employee or the Eligible
Employee may direct the trustee or named fiduciary of another plan to transfer
the funds which would otherwise be a Rollover Contribution directly to this
Plan. Such transferred funds shall be called a Rollover Contribution. The
Contribution shall be made according to procedures set up by the Plan
Administrator.
If an Eligible Employee participated in a retirement plan which met the
requirements of Code Section 401(a), with our consent, the trustee or named
fiduciary of that plan may transfer funds which could not have been a Rollover
Contribution to this Plan on behalf of the Eligible Employee. The transferred
funds shall be called a Rollover Contribution. If such Rollover Contributions
were made for a period when the Eligible Employee was a five-percent owner of
the employer that maintained the plan, the Rollover Contributions shall be
treated in the same manner as if they were Contributions made under this Plan
for a period when he was a five-percent owner of us.
If the Eligible Employee is not an Active Member when the Rollover Contribution
is made, he shall be deemed to be an Active Member only for the purpose of
investment and distribution of the Rollover Contribution. Our Contributions
shall not be made for or allocated to the Eligible Employee and he may not make
Member Contributions until the time he meets all of the requirements to become
an Active Member.
Rollover Contributions made by or for an Eligible Employee shall be credited to
his Account. The part of the Member's Account resulting from Rollover
Contributions is fully (100%) vested and nonforfeitable at all times. A separate
accounting record shall be maintained for that part of his Rollover Contribution
consisting of voluntary contributions which were deducted from the Member's
gross income for Federal income tax purposes.
Prior Plan Assets which result from the Member's rollover contributions shall be
treated in the same manner as Rollover Contributions made under the Plan.
SECTION 3.04 -- FORFEITURES AND RESTORATION.
The Nonvested Account of a Member shall be forfeited as of the earlier of the
following: the date the Member dies, if prior to such date he had ceased to be
an Employee or this Forfeiture Date. All or part of a Member's Nonvested Account
will be forfeited if, after he ceases to be an Employee, he receives a
distribution of his entire Vested Account or a distribution of his Vested
Account derived from our Contributions which were not 100% vested when made
according to the provisions of Section 5.03 or Section 9.10. If a Member's
Vested Account is zero on the date he ceases to be an Employee, he shall be
deemed to
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<PAGE> 14
have received a distribution of his entire Vested Account on such date. The
forfeiture will occur as of the date he receives the distribution or on the
date such provision became effective, if later. If he receives a distribution
of his entire Vested Account, his entire Nonvested Account will be forfeited.
If he receives a distribution of his Vested Account from our Contributions which
were not 100% vested when made, but less than his entire Vested Account, the
amount to be forfeited will be determined by multiplying his Nonvested Account
by a fraction. The numerator of the fraction is the amount of the distribution
derived from our Contributions which were not 100% vested when made and the
denominator of the fraction is his entire Vested Account derived from such
Contributions on the date of the distribution.
If the Adoption Agreement - Plus is used, Forfeitures shall be allocated as of
the last day of the Plan Year in which such Forfeitures arise or applied to
reduce the earliest Employer Contribution made after the Forfeitures are
determined as provided in Item P(4). Forfeitures shall be determined at least
once during each taxable year of ours. If the Adoption Agreement - Plus is not
used and Item P(2) is selected, Forfeitures shall be allocated with our
Discretionary Contributions and deemed to be Discretionary Contributions as of
the last day of the Plan Year in which such Forfeitures arise. If the Adoption
Agreement - Plus is not used and Item P(2) is not selected, Forfeitures shall
be applied to reduce the earliest Employer Contribution made after the
Forfeitures are determined. Forfeitures of Matching Contributions which relate
to excess amounts shall be applied as provided in Section 3.07.
Forfeitures may first be applied to pay expenses under the Plan which would
otherwise be paid by us before they are applied or allocated as provided above.
Upon their application or allocation, such Forfeitures shall be deemed to be
Employer Contributions.
If a Member again becomes an Eligible Employee after receiving a distribution
which caused his Nonvested Account to be forfeited, he shall have the right to
repay to the Plan the entire amount of the distribution he received (excluding
any amount of such distribution resulting from Contributions which were 100%
vested when made). The repayment must be made before the earlier of the date
five years after the date he again becomes an Eligible Employee or the end of
the first period of five consecutive Vesting Breaks which begin after the date
of the distribution.
If the Member makes the repayment provided above, the Plan Administrator shall
restore to his Account an amount equal to his Nonvested Account which was
forfeited on the date of distribution, unadjusted for any investment gains or
losses. If the Member was deemed to have received a distribution because his
Vested Account was zero or the Plan did not have the repayment provisions in
effect on the date the distribution was made and he again performs an Hour of
Service as an Eligible Employee within the repayment period, the Plan
Administrator shall restore the Member's Account as if he had made a required
repayment on the date he performed such Hour of Service. Restoration of the
Member's Account shall include restoration of all Code Section 411(d)(6)
protected benefits with respect to the restored Account, according to applicable
Treasury regulations. Provided, however, the Plan Administrator shall not
restore the Nonvested Account if a Forfeiture Date has occurred after the date
of the distribution and on or before the date of repayment and that Forfeiture
would result in a complete forfeiture of the amount the Plan Administrator would
otherwise restore. The Plan Administrator shall restore the Member's Account by
the close of the Plan Year following the Plan Year in which repayment is made.
SECTION 3.05 - ALLOCATION.
Our Contributions which are not subject to the requirements of Item Q(2) shall
be allocated to the Members for whom they were made and credited to the Members
Accounts. Our Contributions which are subject to the requirements of Item Q(2)
plus any Forfeitures released for allocation for the Plan Year, shall be
allocated among all persons meeting the requirements in Items P and Q. The
amount allocated to such person shall be determined under the allocation formula
selected in the Adoption Agreement and Article X.
In determining the amount of our Contributions allocated to a Member who is a
Leased Employee, contributions and benefits provided by the leasing
organization which are attributable to services such Leased Employee performs
for us shall be treated as provided by us. Those contributions or benefits
shall not be duplicated under this Plan.
SECTION 3.06 - CONTRIBUTION LIMITATION.
(a) For the purpose of determining the contribution limitation set forth in this
section, the following terms are defined:
Addition Additions mean the sum of the following amounts credited to a
Member's account for the Limitation Year:
(1) employer contributions,
(2) employee contributions,
(3) forfeitures, and
(4) amounts allocated, after March 31, 1984, to an individual medical
account, as defined in Code Section 415(1)(2), which is part of a
pension or annuity plan maintained by the Employer.
These amounts are treated as Annual Additions to a defined contribution
plan. Also amounts derived from contributions paid or accrued after December
31, 1985, in taxable years ending after such date, which are attributable to
post-retirement medical benefits, allocated to the separate account of a key
employee, as defined in Code Section 419A(d)(3), under a welfare benefit
fund, as defined in Code Section 419(e), maintained by the Employer are
treated as Annual Additions to a defined contribution plan.
For this purpose, any Excess Amount applied under (d) and (j) below in the
Limitation Year to reduce Employer Contributions will be considered Annual
Additions for such Limitation Year.
Compensation means one of the following as elected in Item M for purposes of
this section and as defined below:
(1) information required to be reported under Code Sections 6041 and 6051
(Wages, Tips and Other Compensation Box on form W-2). Compensation is
defined as a Member's wages within the meaning of Code Section 3401(a)
and all other payments of compensation to an Employee by us (in the
course of our trade or business), for which we are required to furnish
the Employee a written statement under Code Section 6041(d) and
6051(a)(3), which is actually paid or made available by us for a
specified period.
<PAGE> 15
Compensation is determined without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages based on the nature
or location of the employment or services performed (such as the exception
for agricultural labor in Code Section 3401(a)(2)).
(2) Code Section 3401(a) wages (Wages for purposes of income tax withholding).
Compensation is defined as a Member's wages within the meaning of Code
Section 3401(a), for the purpose of income tax withholding at the source,
which is actually paid or made available by us for a specified period.
Compensation is determined without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages based on the nature
or location of the employment or the services performed (such as the
exception for agricultural labor in Code Section 3401(a)(2)).
(3) 415 state-harbor compensation. Compensation is defined as a Member's wages,
salaries, and fees for professional service and other amounts received
(without regard to whether or not an amount is paid in cash) for personal
service actually rendered in the course of employment with the employer
maintaining the plan to the extent that the amounts are includible in gross
income (including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits and
reimbursements or other expense allowances under a nonaccountable plan (as
described in Section 1.62-2(c) of the regulations)), and excluding the
following:
(i) Employer contributions to a plan of deferred compensation to the
extent contributions are not included in the gross income of the
Employee for the taxable year in which contributed, or employer
contributions under a simplified employee pension plan to the extent
such contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation.
(ii) Amounts realized from the exercise of a non-qualified stock option,
or when restricted stock (or property) held by an Employee becomes
freely transferable or is no longer subject to a substantial risk of
forfeiture.
(iii) Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option.
(iv) Other amounts which receive special tax benefits, or contributions
made by the employer (whether or not under a salary reduction
agreement) towards the purchase of an annuity contract described in
Code Section 403(b) (whether or not the contributions are actually
excludible from the gross income of the Employee).
For any self-employed individual Compensation will mean earned income.
For Limitation Years beginning after December 31, 1991, for purposes of
applying the limitations of this section, Compensation for a Limitation Year is
the Compensation actually paid or made available during such Limitation Year.
For any Limitation Year beginning after December 31, 1988, only the first
$200,000 (multiplied by the Adjustment Factor) of the Member's Compensation
shall be taken into account under the Plan.
Defined Benefit Plan Fraction means a fraction, the numerator of which is the
sum of the Member's Projected Annual Benefits under all the defined benefit
plans (whether or not terminated) maintained by the Employer, and the
denominator of which is the lesser of 125 percent of the dollar limitation
determined for the Limitation Year under Code Sections 415(b) and (d) or 140
percent of the Highest Average Compensation, including any adjustments under
Code Section 415(b).
Notwithstanding the above, if the Member was a member as of the first day of
the first Limitation Year beginning after December 31, 1986, in one or more
defined benefit plans maintained by the Employer which were in existence on
May 6, 1986, the denominator of this fraction will not be less than 125 percent
of the sum of the annual benefits under such plans which the Member had accrued
as of the close of the last Limitation Year beginning before January 1, 1987,
disregarding any changes in the terms and conditions of the plan after May 5,
1986. The preceding sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of Code Section
415 for all Limitation Years beginning before January 1, 1987.
Defined Contribution Dollar Limitation means $30,000 or if greater, one-fourth
of the defined benefit dollar limitation set forth in Code Section 415(b)(1) as
in effect for the Limitation Year.
Defined Contribution Plan Fraction means a fraction, the numerator of which is
the sum of the Annual Additions to the Member's account under all the defined
contribution plans (whether or not terminated) maintained by the Employer for
the current and all prior Limitation Years (including the Annual Additions
attributable to the Member's nondeductible employee contributions to all
defined benefit plans, whether or not terminated, maintained by the Employer,
and the Annual Additions attributable to all welfare benefit funds, as defined
in Code Section 419(e), and individual medical accounts, as defined in Code
Section 415(l)(2), maintained by the Employer), and the denominator of which is
the sum of the maximum aggregate amounts for the current and all prior
Limitation Years of service with the Employer (regardless of whether a defined
contribution plan was maintained by the Employer). The maximum aggregate amount
in any Limitation Year is the lesser of 125 percent of the dollar limitation
determined under Code Section 415(b) and (d) in effect under Code Section
415(c)(1)(A) of the Code or 35 percent of the Member's Compensation for such
year.
If the Member was a member as of the end of the first Limitation Year beginning
after December 31, 1986, in one or more defined contribution plans maintained
by the Employer which were in existence on May 6, 1986, the numerator of this
fraction shall be adjusted if the sum of this fraction and the Defined Benefit
Plan Fraction would otherwise exceed 1.0 under the terms of this Plan. Under
the adjustment an amount equal to the product of (1) the
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<PAGE> 16
excess of the sum of the fractions over 1.0 times (2) the denominator of this
fraction, will be permanently subtracted from the numerator of this fraction.
The adjustment is calculated using the fractions as they would be computed as of
the end of the last Limitation Year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the plan made after May
5, 1986, but using the Code Section 415 limitations applicable to the first
Limitation Year beginning on or after January 1, 1987.
The Annual Addition for any Limitation Year beginning before January 1, 1987,
shall not be recomputed to treat all employee contributions as Annual Additions.
Employer means the employer that adopts this Plan and all members of a
controlled group of corporations (as defined in Code Section 414(b) as modified
by Code Section 415(h)), all commonly controlled trades or businesses (as
defined in Code Section 414(c) as modified by Code Section 415(h)) or affiliated
service groups (as defined in Code Section 414(m)) of which the adopting
employer is a part, and any other entity required to be aggregated with the
employer pursuant to regulations under Code Section 414(o).
Excess Amount means the excess or the Member's Annual Additions for the
Limitation Year over the Maximum Permissible Amount.
Highest Average Compensation means the average Compensation for the three
consecutive Years of Service (see Section 1.02) with the Employer that produces
the highest average.
Limitation Year means a calendar year or the 12-consecutive month period elected
by the Employer in Item R. If the Limitation Year ends on the last day of the
Fiscal Year and the Fiscal Year is a 52-53 week period, then the Limitation Year
shall be such period. All qualified plans maintained by the Employer must use
the same Limitation Year. If the Limitation Year is amended to a different
12-consecutive month period, the new Limitation Year must begin on a date within
the Limitation Year in which the amendment is made.
Master or Prototype Plan means a plan the form of which is the subject of a
favorable opinion letter from the Internal Revenue Service.
Maximum Permissible Amount means the maximum Annual Addition that may be
contributed or allocated to a Member's Account under the Plan for any Limitation
Year. This amount shall not exceed the lesser of:
(1) the Defined Contribution Dollar Limitation, or
(2) 25 percent of the Member's Compensation for the Limitation Year.
The compensation limitation referred to in (2) shall not apply to any
contribution for medical benefits (within the meaning of Code Section 401(h) or
Code Section 419A(f)(2)) which is otherwise treated as an Annual Addition under
Code Section 415(l)(1) or 419A(d)(2).
If a short Limitation Year is created because of an amendment changing the
Limitation Year to a different 12-consecutive month period, the Maximum
Permissable Amount will not exceed the Defined Contribution Dollar Limitation
multiplied by the following fraction:
Number of months in the short Limitation Year
---------------------------------------------
12
Projected Annual Benefit means the annual retirement benefit (adjusted to an
actuarially equivalent straight life annuity if such benefit is expressed in a
form other than a straight life annuity or qualified joint and survivor form) to
which the Member would be entitled under the terms of the plan assuming:
(1) the Member will continue employment until normal retirement age under
the plan (or current age, if later) and
(2) the Member's Compensation for the current Limitation Year and all other
relevant factor used to determine benefits under the plan will remain
constant for all future Limitation Years.
(b) If the Member does not participate in, and has never participated in another
qualified plan maintained by the Employer or a welfare benefit fund, as
defined in Code Section 419(e) maintained by the Employer, or an individual
medical account, as defined in Code Section 415(l)(2) of the Code,
maintained by the Employer, which provides an Annual Addition, the amount of
Annual Additions which may be credited to the Member's Account for any
Limitation Year will not exceed the lesser of the Maximum Permissible amount
or any other limitation contained in this Plan. If the Employer Contribution
that would otherwise be contributed or allocated to the Member's Account
would cause the Annual Additions for the Limitation Year to exceed the
Maximum Permissible Amount, the amount contributed or allocated will be
reduced so that the Annual Additions for the Limitation Year will equal the
Maximum Permissible Amount.
(c) Prior to determining the Member's actual Compensation for the Limitation
Year, the Employer may determine the Maximum Permissible Amount for a Member
on the basis of reasonable estimation of the Member's Compensation for the
Limitation Year, uniformly determined for all Members similarly situated.
(d) As soon as is administratively feasible after the end of the Limitation
Year, the Maximum Permissible Amount for the Limitation Year will be
determined on the basis of the Member's actual Compensation for the
Limitation Year.
(e) If pursuant to (d) above, as a result of the allocation of forfeitures, or
as a result of a reasonable error in determining the amount of Elective
Deferrals (within the meaning of Code Section 402(g)(3)) that may be made
with respect to any individual under the limits of Code Section 415, there
is an Excess Amount, the excess will be disposed of as follows:
(1) Any nondeductible voluntary employee contributions, to the extent they
would reduce the excess amount, will be returned to the Member;
(2) Any Elective Deferral Contributions, to the extent they would reduce the
excess amount, will be returned to the Member;
(3) If after the application of (1) and (2) above an Excess Amount still
exists, and the Member is covered by the
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<PAGE> 17
Plan at the end of the Limitation Year, the Excess Amount in the
Member's Account will be used to reduce Employer Contributions
(including any allocation of forfeitures) for such Member in the next
Limitation Year, and each succeeding Limitation Year if necessary.
(4) If after the application of (1) and (2) above an excess amount still
exists, and the Member is not covered by the Plan at the end of a
Limitation Year, the Excess Amount will be held unallocated in a
suspense account. The suspense account will be applied to reduce
future Employer Contributions for all remaining Members in the next
Limitation Year, and each succeeding Limitation Year if necessary.
(5) If a suspense account is in existence at any time during a Limitation
Year pursuant to this (e), it will participate in the allocation of
the trust's investment gains or losses. If a suspense account is in
existence at any time during a particular Limitation Year, all amounts
in the suspense account must be allocated and reallocated to Member's
Accounts before any Employer or any Member contributions may be made
to the Plan for that Limitation Year. Excess amounts may not be
distributed to Members or former Members.
(f) This (f) applies if, in addition to this Plan, the Member is covered under
another qualified defined contribution Master or Prototype Plan
maintained by the Employer, a welfare benefit fund, as defined in Code
Section 419(e), maintained by the Employer, or an individual medical
account, as defined in Code Section 415(1)(2), maintained by the Employer,
which provides an Annual Addition, during any Limitation Year. The Annual
Additions which may be credited to a Member's Account under this Plan for
any such Limitation Year will not exceed the Maximum Permissible Amount
reduced by the Annual Additions credited to a Member's account under the
other plans and welfare benefit funds for the same Limitation Year. If the
Annual Additions with respect to the Member under other defined
contribution plans and welfare benefit funds maintained by the Employer
are less than the Maximum Permissible Amount and the Employer Contribution
that would otherwise be contributed or allocated to the Member's Account
under this Plan would cause the Annual Additions for the Limitation Year to
exceed this limitation, the amount contributed or allocated will be
reduced so that the Annual Additions under all such plans and funds for the
Limitation Year will equal the Maximum Permissible Amount. If the Annual
Additions with respect to the Member under such other defined
contribution plans and welfare benefit funds in the aggregate are equal to
or greater than the Maximum Permissible Amount, no amount will be
contributed or allocated to the Member's Account under this Plan for the
Limitation Year.
(g) Prior to determining the Member's actual Compensation for the Limitation
Year, the Employer may determine the Maximum Permissible Amount for a
Member in the manner described in (c) above.
(h) As soon as is administratively feasible after the end of the Limitation
Year, the Maximum Permissible Amount for the Limitation Year will be
determined on the basis of the Member's actual Compensation for the
Limitation Year.
(i) If pursuant to (h) above, as a result of the allocation of forfeitures, or
as a result of a reasonable error in determining the amount of Elective
Deferrals (within the meaning of Code Section 402(g)(3)) that may be made
with respect to any individual under the limits of Code Section 415, a
Member's Annual Additions under this Plan and such other plans would
result in an Excess Amount for a Limitation Year, the Excess Amount will
be deemed to consist of the Annual Additions last allocated, except that
Annual Additions attributable to a welfare benefit fund or individual
medical account will be deemed to have been allocated first regardless of
the actual allocation date.
(j) If an Excess Amount was allocated to a Member on an allocation date of
this Plan which coincides with an allocation date of another plan, the
Excess Amount attributed to this Plan will be the product of,
(1) the total Excess Amount allocated as of such date, times
(2) the ratio of (i) the Annual Additions allocated to the Member for the
Limitation Year as of such date under this Plan to (ii) the total
Annual Additions allocated to the Member for the Limitation Year as of
such date under this and all the other qualified defined contribution
Master and Prototype Plans.
(k) Any excess amount attributed to this Plan will be disposed in the manner
described in (e) above.
(l) If the Member is covered under another qualified defined contribution plan
maintained by the Employer which is not a Master or Prototype Plan, Annual
Additions which may be credited to the Member's Account under this Plan
for any Limitation Year will be limited in accordance with (f) through (k)
above as though the other plan were a Master or Prototype Plan unless the
Employer provides other limitations in Item R.
(m) If the Employer maintains, or at any time maintained, a qualified defined
benefit plan covering any Member in this Plan, the sum of the Member's
Defined Benefit Plan Fraction and Defined Contribution Plan Fraction will
not exceed 1.0 in any Limitation Year. The Annual Additions credited to the
Member's Account under this Plan for any Limitation Year will be limited in
accordance with Item R.
SECTION 3.07 -- EXCESS AMOUNTS.
(a) For the purposes of this section, the following terms are defined:
Actual Deferral Percentage means the ratio (expressed as a percentage) of
Elective Deferral Contributions under this Plan on behalf of the Eligible
Member for the Plan Year to the Eligible Member's Pay for the Plan Year
(whether or not the Eligible Member was a Member for the entire Plan
Year). For the first Plan Year of the cash or deferred arrangement, the
amount of Pay for the entire 12-month period ending on the last day of
such Plan Year shall be taken into account. If selected in Item M and in
modification of the foregoing, Pay shall be limited to the Pay received
while an Active Member of the Plan. The Elective Deferral Contributions
used to determine the Actual Deferral Percentage shall include Excess
Elective Deferrals (other than Excess Elective Deferrals of Nonhighly
Compensated Employees that arise solely from Elective Deferral
contributions made under this Plan or any other plans of ours or a
Controlled Group member), but shall exclude Elective Deferral
Contributions that are used in computing the Contribution Percentage
(provided the Average Actual
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<PAGE> 18
Deferral Percentage test is satisfied both with and without exclusion of these
Elective Deferral Contributions). Under such rules as the Secretary of the
Treasury shall prescribe, we may elect to include Qualified Nonelective
Contributions and Qualified Matching Contributions under this Plan in computing
the Actual Deferral Percentage. For an Eligible Member for whom such
Contributions on his behalf for the Plan Year are zero, the percentage is zero.
Aggregate Limit means the sum of
(1) 125 percent of the greater of the Average Actual Deferral Percentage of the
Nonhighly Compensated Employees for the Plan Year or the Average
Contribution Percentage of Nonhighly Compensated Employees under the Plan
subject to Code Section 401(m) for the Plan Year beginning with or within
the Plan Year of the cash or deferred arrangement and
(2) the lesser of 200% or two plus the lesser of such Average Actual Deferral
Percentage or Average Contribution Percentage.
For Plan Years beginning before January 1, 1992, or such later date as provided
in Internal Revenue Service regulations, the Aggregate Limit shall be the
greater of the sum above or the sum of
(3) 125 percent of the lesser of the Average Actual Deferral Percentage of the
Nonhighly Compensated Employees for the Plan Year or the Average
Contribution Percentage of Nonhighly Compensated Employees under the Plan
subject to Code Section 401(m) for the Plan Year beginning with or within
the Plan Year of the cash or deferred arrangement and
(4) the lesser of 200% or two plus the greater of such Average Actual Deferral
Percentage or Average Contribution Percentage.
Average Actual Deferral Percentage means the average (expressed as a percentage)
of the Actual Deferral Percentages of the Eligible Members in a group.
Average Contribution Percentage means the average (expressed as a percentage) of
the Contribution Percentages of the Eligible Members in a group.
Contribution Percentage means the ratio (expressed as a percentage) of the
Eligible Member's Contribution Percentage Amounts to the Eligible Member's Pay
for the Plan Year (whether or not the Eligible Member was a Member for the
entire Plan Year). For the first Plan Year of the Plan, the amount of Pay for
the entire 12-month period ending on the last day of such Plan Year shall be
taken into account. If selected in Item M and in modification of the foregoing,
Pay shall be limited to the Pay received while an Active Member of the Plan. For
an Eligible Member for whom such Contribution Percentage Amounts for the Plan
Year are zero, the percentage is zero.
Contribution Percentage Amounts means the sum of the Member Contributions and
Matching Contributions (that are not Qualified Matching Contributions) under
this Plan on behalf of the Eligible Member for the Plan Year. On and after the
first Yearly Date in 1993, such Contribution Percentage Amounts shall not
include Matching Contributions that are forfeited either to correct Excess
Aggregate Contributions or because the Contributions to which they relate are
Excess Elective Deferrals, Excess Contributions or Excess Aggregate
Contributions. Under such rules as the Secretary of the Treasury shall
prescribe, we may elect to include Qualified Nonelective Contributions and
Qualified Matching Contributions under this Plan which were not used in
computing the Actual Deferral Percentage in computing the Contribution
Percentage. We may also elect to use Elective Deferral Contributions in
computing the Contribution Percentage so long as the Average Actual Deferral
Percentage test is met before the Elective Deferral Contributions are used in
the Average Contribution Percentage test and continues to be met following the
exclusion of those Elective Deferral Contributions that are used to meet the
Average Contribution Percentage test.
Elective Deferral Contributions means employer contributions made on behalf of a
member pursuant to an election to defer under any qualified cash or deferred
arrangement as described in Code Section 401(k), any simplified employee pension
cash or deferred arrangement as described in Code Section 402(h)(1)(B), any
eligible deferred compensation plan under Code Section 457, any plan as
described under Code Section 501(c)(18), and any employer contributions made on
behalf of a member for the purchase of an annuity contract under Code Section
403(b) pursuant to a salary reduction agreement. Elective Deferral Contributions
shall not include any deferrals properly distributed as excess Annual Additions.
Eligible Member means, for purposes of determining the Actual Deferral
Percentage, any Employee who is otherwise authorized under the terms of the Plan
to have Elective Deferral Contributions made on his behalf for the Plan Year.
Eligible Member means, for purposes of determining the Average Contribution
Percentage, any Employee who is otherwise authorized under the terms of the Plan
to have Member Contributions or Matching Contributions made on his behalf for
the Plan Year.
Excess Aggregate Contributions means, with respect to any Plan Year, the excess
of:
(1) The aggregate Contributions taken into account in computing the numerator
of the Contribution Percentage actually made on behalf of Highly
Compensated Employees for such Plan Year, over
(2) The maximum amount of such Contributions permitted by the Average
Contribution Percentage test (determined by reducing Contributions made on
behalf of Highly Compensated Employees in order of their Contribution
Percentages beginning with the highest of such percentages).
Such determination shall be made after first determining Excess Elective
Deferrals and then determining Excess Contributions.
Excess Contributions means, with respect to any Plan Year, the excess of:
(1) The aggregate amount of Contributions actually taken into account in
computing the Actual Deferral Percentage of Highly Compensated Employees
for such Plan Year, over
(2) The maximum amount of such Contributions permitted by the Actual Deferral
Percentage test (determined by reducing Contributions made on behalf of
Highly
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<PAGE> 19
Compensated Employees in order of the Actual Deferral Percentages, beginning
with the highest of such percentage)
Such determination shall be made after first determining Excess Elective
Deferrals.
Excess Elective Deferrals means those Elective Deferral Contributions that are
includible in a Member's gross income under Code Section 402(g) to the extent
such Member's Elective Deferral Contributions for a taxable year exceed the
dollar limitation under such Code selection. Excess Elective Deferrals shall be
treated as Annual Additions under the Plan, unless such amounts are distributed
no later than the first April 15 following the close of the Member's taxable
year.
Matching Contributions means employer contributions made to this or any other
defined contribution plan, or to a contract described in Code Section 403(b), on
behalf of a member on account of a Member Contribution made by such member, or
on account of a member's Elective Deferral Contributions, under a plan
maintained by the employer.
Member Contributions means contributions made to any plan by or on behalf of a
member that are included in the member's gross income in the year in which made
and that are maintained under a separate account to which earnings and losses
are allocated.
Qualified Matching Contributions means any employer contributions (other than
Matching contributions) which an employee may not elect to have paid to him in
cash instead of being contributed to the plan and which are subject to the
distribution and nonforfeitability requirements under Code Section 401(k).
(b) A Member may assign to this Plan any Excess Elective Deferrals made during
a taxable year of the Member by notifying the Plan Administrator in writing
on or before the first following March 1 of the amount of the Excess
Elective Deferrals to be assigned to the Plan. On and after the first
Yearly Date in 1993, a Member is deemed to notify the Plan Administrator of
any Excess Elective Deferrals that arise by taking into account only those
Elective Deferral Contributions made to this Plan and any other plan of
ours. The Member's claim for Excess Elective Deferrals shall be accompanied
by the Member's written statement that if such amounts are not distributed,
such Excess Elective Deferrals, when added to amounts deferred under other
plans or arrangements described in Code Sections 401(k), 408(k) or 403(b),
will exceed the limit imposed on the Member by Code Section 402(g) for the
year in which the deferral occurred. The Excess Elective Deferrals assigned
to this Plan can not exceed the Elective Deferral Contributions allocated
under this Plan for such taxable year.
Notwithstanding any other provisions of the Plan, Elective Deferral
Contributions in an amount equal to the Excess Elective Deferrals assigned
to this Plan, plus any income and minus any loss allocable thereto, shall
be distributed no later than April 15 to any Member to whose Account
Excessive Elective Deferrals were assigned for the Preceding year and who
claims Excess Elective Deferrals for such taxable year.
The income or loss allocable to such Excess Elective Deferrals shall be equal to
the sum of:
(1) the income or loss allocable to the Member's Elective Deferral
Contributions for the taxable year in which the excess occurred multiplied
by a fraction and
(2) the income or loss allocable to the Member's Elective Deferral
Contributions for the gap period between the end of such taxable year and
the date of distribution multiplied by a fraction.
The numerator of the fractions is the Excess Elective Deferrals. The denominator
of the fraction in (1) above is the closing balance without regard to any income
or loss occurring during such taxable year (as of the end of such taxable year)
of the Member's Account resulting from Elective Deferral Contributions. The
denominator of the fraction in (2) above is the closing balance without regard
to any income or loss occurring during such gap period (as of the end of such
gap period) of the Member's Account resulting from Elective Deferral
Contributions. The amount determined in (2) above shall not be included for
taxable years beginning after December 31, 1992.
Any Matching Contributions which were based on the Elective Deferral
Contributions which are distributed as Excess Elective Deferrals, plus any
income and minus any loss allocable thereto, shall be forfeited, if forfeitable.
If the Adoption Agreement - Plus is used, these Forfeitures shall be applied
according to the provisions of Item O(7). If the Adoption Agreement - Plus is
not used, these Forfeitures shall be used to offset the earliest Employer
Contribution due after the Forfeiture arises.
(c) As of the end of each Plan Year after Excess Elective Deferrals have been
determined, one of the following tests must be met:
(1) The Average Actual Deferral Percentage for Eligible Members who are
Highly Compensated Employees for the Plan Year is not more than the
Average Actual Deferral Percentage for Eligible Members who are
Nonhighly Compensated Employees for the Plan Year multiplied by 1.25.
(2) The Average Actual Deferral Percentage for Eligible Members who are
Highly Compensated Employees for the Plan Year is not more than the
Average Actual Deferral Percentage for Eligible Members who are
Nonhighly Compensated Employees for the Plan Year multiplied by 2 and
the difference between the Average Actual Deferral Percentages is not
more than 2.
The Actual Deferral Percentage for any Eligible Member who is a Highly
Compensated Employee for the Plan Year and who is eligible to have Elective
Deferral Contributions (and Qualified Nonelective Contributions or
Qualified Matching Contributions, or both, if used in computing the Actual
Deferral Percentage) allocated to his account under two or more plans or
arrangements described in Code Section 401(k) that are maintained by us or
a Controlled Group member shall be determined as if all such Elective
Deferral Contributions (and, if applicable, such Qualified Nonelective
Contributions or Qualified Matching Contributions, or both) were made under
a single arrangement. If
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<PAGE> 20
a Highly Compensated Employee participates in two or more cash or deferred
arrangements that have different Plan Years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a single
arrangement. The foregoing notwithstanding, certain plans shall be treated as
separate if mandatorily disaggregated under the regulations of Code Section
401(k).
In the event that this Plan satisfies the requirements of Code Sections 401(k),
401(a)(4), or 410(b) only if aggregated with one or more other plans, or if one
or more other plans satisfy the requirements of such Code sections only if
aggregated with this Plan, then this section shall be applied by determining the
Actual Deferral Percentage of employees as if all such plans were a single plan.
For Plan Years beginning after December 31, 1989, plans may be aggregated in
order to satisfy Code Section 401(k) only if they have the same Plan Year.
For purposes of determining the Actual Deferral Percentage of an Eligible Member
who is a five-percent owner or one of the ten most highly-paid Highly
Compensated Employees, the Elective Deferral Contributions (and Qualified
Nonelective Contributions or Qualified Matching Contributions, or both, if used
in computing the Actual Deferral Percentage) and Pay of such Eligible Member
include the Elective Deferral Contributions (and, if applicable, Qualified
Nonelective Contributions or Qualified Matching Contributions, or both) and Pay
for the Plan Year of Family Members. Family Members, with respect to such Highly
Compensated Employees, shall be disregarded as separate employees in determining
the Actual Deferral Percentage both for Members who are Nonhighly Compensated
Employees and for Members who are Highly Compensated Employees.
For purposes of determining the Actual Deferral Percentage, Elective Deferral
Contributions, Qualified Nonelective Contributions and Qualified Matching
Contributions must be made before the last day of the twelve-month period
immediately following the Plan Year to which contributions relate.
We shall maintain records sufficient to demonstrate satisfaction of the Average
Actual Deferral Percentage test and the amount of Qualified Nonelective
Contributions or Qualified Matching Contributions, or both, used in such test.
The determination and treatment of the Contributions used in computing the
Actual Deferral Percentage shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
If the Plan Administrator should determine during the Plan Year that neither of
the above tests is being met, the Plan Administrator may adjust the amount of
future Elective Deferral Contributions of the Highly Compensated Employees.
Notwithstanding any other provisions of this Plan, Excess Contributions, plus
any income and minus any loss allocable thereto, shall be distributed no later
than the last day of each Plan Year to Members to whose Accounts such Excess
Contributions were allocated for the preceding Plan Year. If such excess amounts
are distributed more than 2-1/2 months after the last day of the Plan Year in
which such excess amounts arose, a ten (10) percent excise tax will be imposed
on the employer maintaining the plan with respect to such amounts. Such
distributions shall be made to Highly Compensated Employees on the basis of the
respective portions of the Excess Contributions attributable to each of such
employees. Excess Contributions shall be allocated to Members who are subject to
the family member aggregation rules of Code Section 414(q)(6) in the manner
prescribed by the regulations. On and after the first Yearly Date in 1993,
Excess Contributions of Members who are subject to the family member aggregation
rules shall be allocated among the Family Members in proportion to the Elective
Deferral Contributions (and amounts treated as Elective Deferral Contributions)
of each Family Member that is combined to determine the combined Actual Deferral
Percentage.
Excess Contributions shall be treated as Annual Additions under the Plan.
The Excess Contributions shall be adjusted for income or loss. The income or
loss allocable to such Excess Contributions shall be equal to the sum of
(3) the income or loss allocable to the Member's Elective Deferral Contributions
(and, if applicable, Qualified Nonelective Contributions or Qualified
Matching Contributions, or both) for the Plan Year in which the excess
occurred multiplied by a fraction and
(4) the income or loss allocable to the Member's Elective Deferral Contributions
(and, if applicable, Qualified Nonelective Contributions or Qualified
Matching Contributions, or both) for the gap period between the end of such
Plan Year and the date of distribution multiplied by a fraction.
The numerator of the fractions is the Excess Contributions. The denominator of
the fraction in (3) above is the closing balance without regard to any income or
loss occurring during such Plan Year (as of the end of such Plan Year) of the
Member's Account resulting from Elective Deferral Contributions (and Qualified
Nonelective Contributions or Qualified Matching Contributions, or both, if used
in computing the Actual Deferral Percentage). The denominator of the fraction in
(4) above is the closing balance without regard to any income or loss occurring
during such gap period (as of the end of such gap period) of the Member's
Account resulting from Elective Deferral Contributions (and Qualified
Nonelective Contributions or Qualified Matching Contributions, or both, if used
in computing the Actual Deferral Percentage). The amount determined in (4) above
shall not be included for Plan Years beginning after December 31, 1992.
Excess Contributions shall be distributed from the Member's Account resulting
from Elective Deferral Contributions. If such Excess Contributions exceed the
balance in the Member's Account resulting from Elective Deferral Contributions,
the balance shall be distributed from the Member's Account resulting from
Qualified Matching Contributions (if applicable) and Qualified Nonelective
Contributions, respectively.
On and after the first Yearly Date in 1993, any Matching Contributions which are
distributed as Excess Contributions, plus any income and minus any loss
allocable thereto, shall be forfeited, if forfeitable. If the Adoption Agreement
- - Plus is used, these Forfeitures shall be applied according to the provisions
of Item O(7). If the Adoption Agreement - Plus
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<PAGE> 21
is not used, these Forfeitures shall be used to offset the earliest
Employer Contribution due after the Forfeiture arises.
(d) As of the end of each Plan Year, one of the following tests must be met:
(1) The Average Contribution Percentage for Eligible Members who are
Highly Compensated Employees for the Plan Year is not more than the
Average Contribution Percentage for Eligible Members who are Nonhighly
Compensated Employees for the Plan Year multiplied by 1.25.
(2) The Average Contribution Percentage for Eligible Members who are
Highly Compensated Employees for the Plan Year is not more than the
Average Contribution Percentage for Eligible Members who are Nonhighly
Compensated Employees for the Plan Year multiplied by 2 and the
difference between the Average Contribution Percentages is not more
than 2.
If one or more Highly Compensated Employees participate in both a cash or
deferred arrangement and a plan subject to the Average Contribution
Percentage test maintained by us or a Controlled Group member and the sum
of the Average Actual Deferral Percentage and Average Contribution
Percentage of those Highly Compensated Employees subject to either or
both tests exceeds the Aggregate Limit, then the Contribution Percentage of
those Highly Compensated Employees who also participate in a cash or
deferred arrangement will be reduced (beginning with such Highly
Compensated Employees whose Contribution Percentage is the highest) so that
the limit is not exceeded. The amount by which each Highly Compensated
Employee's Contribution Percentage is reduced shall be treated as an Excess
Aggregate Contribution. The Average Actual Deferral Percentage and Average
Contribution Percentage of the Highly Compensated Employees are determined
after any corrections required to meet the Average Actual Deferral
Percentage and Average Contribution Percentage tests. Multiple use does not
occur if both the Average Actual Deferral Percentage and Average
Contribution Percentage of the Highly Compensated Employees does not exceed
1.25 multiplied by the Average Actual Deferral Percentage and Average
Contribution Percentage of the Nonhighly Compensated Employees.
The Contribution Percentage for any Eligible Member who is a Highly
Compensated Employee for the Plan Year and who is eligible to have
Contribution Percentage Amounts allocated to his account under two or more
plans described in Code Section 401(a) or arrangements described in Code
Section 401(k) that are maintained by us or a Controlled Group member shall
be determined as if the total of such Contribution Percentage Amounts was
made under each plan. If a Highly Compensated Employee participates in two
or more cash or deferred arrangements that have different Plan Years, all
cash or deferred arrangements ending with or within the same calendar year
shall be treated as a single arrangement. The foregoing notwithstanding,
certain plans shall be treated as separate if mandatorily disaggregated
under the regulations of Code Section 401(m).
In the event that this Plan satisfies the requirements of Code Section
410(b) only if aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of Code Section 410(b) only if
aggregated with his Plan, then this section shall be applied by determining
the Contribution Percentages of Eligible Members as if all such plans were
a single plan. For Plan Years beginning after December 31, 1989, plans may
be aggregated in order to satisfy Code Section 401(m) only if they have the
same Plan Year.
For purposes of determining the Contribution Percentage of an Eligible
Member who is a five-percent owner or one of the ten most highly-paid
Highly Compensated Employees, the Contribution Percentage Amounts and Pay
of such Member shall include Contribution Percentage Amounts and Pay for
the Plan Year of Family Members. Family Members, with respect to Highly
Compensated Employees, shall be disregarded as separate employees in
determining the Contribution Percentage both for employees who are
Nonhighly Compensated Employees and for employees who are Highly
Compensated Employees.
For purposes of determining the Contribution Percentage, Member
Contributions are considered to have been made in the Plan Year in which
contributed to the Plan Matching Contributions and Qualified Nonelective
Contributions will be considered made for a Plan Year if made no later than
the end of the twelve-month period beginning on the day after the close of
the Plan Year.
We shall maintain records sufficient to demonstrate satisfaction of the
Average Contribution Percentage test and the amount of Qualified
Nonelective Contributions or Qualified Matching Contributions, or both,
used in such test.
The determination and treatment of the Contribution Percentage of any
Member shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
Notwithstanding any other provisions of this Plan. Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto, shall
be forfeited, if not vested, or distributed, if vested, no later than the
last day of each Plan Year to Members to whose Accounts such Excess
Aggregate Contributions were allocated for the preceding Plan Year. Excess
Aggregate Contributions shall be allocated to Members who are subject to
the family member aggregation rules of Code Section 414(q)(6) in the manner
prescribed by the regulations. On and after the first Yearly Date in 1993,
Excess Aggregate Contributions of Members who are subject to the family
aggregation rules shall be allocated among the Family Members in proportion
to the employee and Matching Contributions (or amounts treated as
Matching Contributions) of each Family Member that is combined to determine
the combined Contribution Percentage. If such Excess Aggregate
Contributions are distributed more than 2 1/2 months after the last day of
the Plan Year in which such excess amounts arose, a ten (10) percent excise
tax will be imposed on the employer maintaining the plan with respect to
those amounts. Excess Aggregate Contributions shall be treated as Annual
Additions under the Plan.
The Excess Aggregate Contributions shall be adjusted for income or loss.
The income or loss allocable to such Excess Aggregate Contributions shall
be equal to the sum of:
(3) the income or loss allocable to the Member's Contribution Percentage
Amounts for the Plan Year in which the excess occurred multiplied by
a fraction and
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<PAGE> 22
(4) the income or loss allocable to the Member's Contribution Percentage
Amounts for the gap period between the end of such Plan Year and the date
of distribution multiplied by a fraction.
The numerator of the fractions is the Excess Aggregate Contributions. The
denominator of the fraction in (3) above is the closing balance without regard
to any income or loss occurring during such Plan Year (as of the end of such
Plan Year) of the Member's Account resulting from Contribution Percentage
Amounts. The denominator of the fraction in (4) above is the closing balance
without regard to any income or loss occurring during such gap period (as of
the end of such gap period) of the Member's Account resulting from Contribution
Percentage Amounts. The amount determined in (4) above shall not be included
for Plan Years beginning after December 31, 1992.
Excess Aggregate Contributions shall be distributed from the Member's Account
resulting from Member Contributions that are not required as a condition of
employment or participation or for obtaining additional benefits from Employer
Contributions. If such Excess Aggregate Contributions exceed the balance in the
Member's Account resulting from such Member Contributions, the balance shall be
forfeited, if not vested, or distributed, if vested, on a pro-rata basis from
the Member's Account resulting from Contribution Percentage Amounts. If the
Adoption Agreement - Plus is used, these Forfeitures shall be applied
according to the provision of Item O(7). If the Adoption Agreement - Plus is not
used, these Forfeitures shall be used to offset the earliest Employer
Contribution due after the Forfeiture arises.
_______________________________________________________________________________
ARTICLE IV
INVESTMENT OF CONTRIBUTIONS
_______________________________________________________________________________
SECTION 4.01 - INVESTMENT OF CONTRIBUTIONS.
(a) The provisions of this subsection apply to trusteed plans.
All Contributions are forwarded by us to the Trustee to be deposited in the
Trust Fund. Member Contributions shall be forwarded within three months
after they are made.
Investment of Contributions is governed by the provisions of the Trust,
the Annuity Contract and any other funding arrangement in which the Trust
Fund is or may be invested. To the extent permitted by the Trust, Annuity
Contract, or other funding arrangement, the parties named in Item T of the
Adoption Agreement shall direct the Contributions to any of the accounts
available under the Trust and may request the transfer of assets resulting
from those Contributions between such accounts. A Member may not direct the
Trustee to invest the Member's Account in collectibles. Collectible means
any work of art, rug or antique, metal or gem, stamp or coin, alcoholic
beverage or other tangible personal property specified by the Secretary of
the Treasury. To the extent that a Member does not direct the investment
of his Account, such Account shall be invested ratably in the accounts
available under the Trust in the same manner as the undirected Accounts of
all other Members.
The Vested Accounts of all Inactive Members may be segregated and invested
separately from the Accounts of all other Members.
At least annually, the Named Fiduciary shall review all pertinent Employee
information and Plan data in order to establish the funding policy of the
Plan and to determine appropriate methods of carrying out the Plan's
objectives. The Named Fiduciary shall inform the Trustee and any
Investment Manager of the Plan's short-term and long-term financial needs
so the investment policy can be coordinated with the Plan's financial
requirements.
However, the Named Fiduciary may delegate to the Investment Manager
investment discretion for Contributions and Plan assets which are not
subject to Member direction.
(b) The provisions of this subsection apply to plans which are not trusteed.
All Contributions are forwarded by us to the Insurer to be deposited under
the Annuity Contract. Member Contributions shall be forwarded within three
months after they are made.
Investment of Contributions is governed by the provisions of the Annuity
Contract. To the extent permitted by the Annuity Contract, the parties
named in Item T of the Adoption Agreement shall direct the Contributions to
any of the accounts available under the Annuity Contract and may request
the transfer of assets resulting from those Contributions between such
accounts. To the extent that a Member does not direct the investment of his
Account, such Account shall be invested ratably in the accounts available
under the Annuity Contract in the same manner as the undirected Accounts of
all other Members. The Vested Accounts of all Inactive Members may be
segregated and invested separately from the Accounts of all other Members.
At least annually, the Named Fiduciary shall review all pertinent Employee
information and Plan data in order to establish the funding policy of the
Plan and to determine appropriate methods of carrying out the Plan's
objectives. The Named Fiduciary shall inform any Investment Manager of the
Plan's short-term and long-term financial needs so the investment policy
can be coordinated with the Plan's financial requirements.
However, the Named Fiduciary may delegate to the Investment Manager
investment discretion for Contributions and Plan assets which are not
subject to Member direction.
SECTION 4.02 -- PURCHASE OF INSURANCE
If permitted under Item T of the Adoption Agreement, life insurance may be
purchased under this Plan for Active Members to provide incidental death
benefits. The Trustee shall apply for and will be the owner of any
Insurance Policy purchased under the terms of this Plan. The purchase
shall be subject to the provisions of this section, the distribution of
benefits provisions of Article VI, and the beneficiary provisions of
Section 9.06. If the Member has a spouse to whom he has been continuously
married for at least one year, such spouse shall be his Beneficiary under
the Insurance Policy unless (a) a qualified election has been made
according to the provisions of Section 6.03 or (b) the Trustee has been
named as Beneficiary. If the Trustee is named as Beneficiary, upon the
death of the Member, the Trustee shall be required to pay over all
proceeds of the Insurance Policy to the Member's Beneficiary or spouse, as
the case may be.
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<PAGE> 23
according to the distribution of benefits provisions of Article VI. Under no
circumstances shall the Trust retain any part of the proceeds. In the event of
any conflict between the terms of this Plan and the terms of any Insurance
Policy purchased hereunder, the Plan provisions shall control.
The purchase of insurance shall be subject to the limitations that may be
imposed by the Insurer under the applicable Insurance Policy. The Insurance
Policy may provide for waiver of premium for disability.
The total of all insurance premiums for insurance coverage on the life of a
Member provided by our Contributions shall be limited to a percentage of all our
Contributions made for that Member. All such ordinary life insurance premiums
shall be limited to a percentage which is less than 50%. All such term life and
universal life insurance premiums shall be limited to a percentage which is not
more than 25%. If both ordinary life insurance and term life or universal life
insurance is purchased, 1/2 of all such ordinary life insurance premiums and all
such other life insurance premiums shall be limited to a percentage which is not
more than 25%. Ordinary life insurance policies are policies with both
nondecreasing death benefits and nonincreasing premiums. The Member's Account
resulting from deductible Voluntary Contributions (and nondeductible Voluntary
Contributions if the Adoption Agreement - Plus is not used) shall not be applied
to pay life insurance premiums.
Any dividends declared upon an amount of insurance in force on the life of a
Member may, within the terms of the Insurance Policy, be applied to reduce the
earliest premium due, purchase paid-up insurance coverage, accumulate under the
policy to provide additional death benefit or be credited to the Member's
Account which is included in the Investment Fund. In the absence of any
direction, such dividends shall be applied to reduce the earliest premium due
for such amount of insurance.
A Member may elect to have amounts deducted from his Account to pay insurance
premiums. The total amount deducted cannot exceed the amount of Contributions
credited to his Account which were not used to provide insurance, but could have
been.
If a decrease in the amount of life insurance is necessary, any cash values of
the terminated insurance shall be retained in the Member's Account and added to
the Investment Fund.
SECTION 4.03 -- TRANSFER OF OWNERSHIP.
Any transfer of ownership under this section shall be subject to the
distribution of benefits provisions of Article VI.
Upon the request of a Member, we may purchase for its cash value a personal life
insurance policy issued to, and insuring the life of, the Member. Such policy
shall be immediately transferred from us to the Trustee. The cash value of the
purchased policy shall be a part of our Contribution for the Plan Year. Any such
purchase shall be accomplished only under an appropriate written agreement
between the Member, the Trustee and us, in lieu of our purchase of such policy
and at our direction, the Trustee may purchase the policy directly from the
Member. These provisions shall not be available if the policy is subject to a
policy loan or similar lien. The purchase of and future premiums for any such
policy shall be subject to the limitations in Section 4.02.
If the Insurance Policy allows, a Member may pay the Trustee an amount equal to
the cash values of any Insurance Policy on his life. Such payment shall become a
part of his Account. Upon receiving the payment, the Trustee shall transfer
ownership of the policy to the Member. This transfer of ownership is not a
distribution from the Plan. This option shall only be available to a Member if
the policy would, but for the sale, be surrendered by the Plan.
If distribution of a Member's Vested Account would include the cash values of
an Insurance Policy on his life, the Member may have ownership of an Insurance
Policy on his life transferred to him without making payment to the Trustee if
permitted by such Insurance Policy. Any Insurance Policy transferred to the
Member for which he has not made payment to the Trustee is a distribution from
the Plan.
In applying the provisions of this section, all Members in similar circumstances
shall be treated in a similar manner. Members who are Highly Compensated
Employees (officers, shareholders or highly compensated Employees before the
first Yearly Date after December 31, 1988) shall not be treated in a manner
more favorable than that afforded all other Members.
SECTION 4.04 -- TERMINATION OF INSURANCE.
The termination of insurance under this section shall be subject to the
distribution of benefits provisions of Article VI.
No premium payments shall be made under this Plan for an Inactive Member. If a
Member becomes an Inactive Member before Retirement Date, the Trustee may either
use the cash values of the Insurance Policy on his life to provide paid-up
insurance or may surrender the Insurance Policy. The cash values of a
surrendered Insurance Policy are retained in the Member's Account and added to
the Investment Fund. The purchase of paid-up insurance shall be subject to the
provisions of the Insurance Policy. If the Member ceases to be an Employee
before Retirement Date, the Member may elect to have the ownership of the
Insurance Policy transferred as provided in Section 4.03.
On a Member's Retirement Date, any Insurance Policy on his life, the ownership
of which has not been transferred to him, shall terminate. The cash values shall
be paid to the Member in cash or applied to provide an income for him according
to the provisions of the Insurance Policy. In any event, no portion of the value
of any Insurance Policy shall be used to continue life insurance protection
under the Plan beyond actual retirement.
ARTICLE V -- BENEFITS
SECTION 5.01 -- RETIREMENT BENEFITS.
On a Member's Retirement Date, the Member's Vested Account shall be distributed
to the Member according to the distribution of benefits provisions of Article VI
and the small amounts provisions of Section 9.10.
SECTION 5.02 -- DEATH BENEFITS.
If a Member dies before his Annuity Starting Date, the Member's Vested Account
shall be distributed according to the distribution of benefits provisions of
Article VI and the small amounts provisions of Section 9.10.
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<PAGE> 24
SECTION 5.03 - VESTED BENEFITS.
If the inactive Member's Vested Account is not payable under the small amounts
provisions of 9.10, he may elect, but is not required, to receive in a single
sum that part of his Vested Account which results from Member Contributions
after he ceases to be an Employee. The Member's election shall meet the consent
requirements in Section 6.03 for a qualified election of a benefit payable in a
form other than a Qualified Joint and Survivor Form.
If the Inactive Member's Vested Account is not payable under the small amounts
provisions of Section 9.10, he may elect, but is not required, to receive a
distribution of his Vested Account after he ceases to be an Employee. If Item
X(3)(a) of the Adoption Agreement - Plus is selected, distributions from the
Member's Vested Account which results from the designated Contributions shall
not begin before the Member retires, becomes Totally Disabled or dies. If item
X(3)(b) of the Adoption Agreement - Plus is selected, distributions shall not be
made until he has ceased to be an Employee for the period of time selected in
Item X(3)(b). The Member's election shall be subject to his spouse's consent as
provided in Section 6.03. A distribution under this paragraph will be a
retirement benefit and shall be distributed to the Member according to the
provisions of Article VI.
If an Inactive Member does not receive an earlier distribution according to the
provisions of the preceding paragraph or the small amounts provisions of Section
9.10, upon his Retirement Date or death, his Vested Account shall be applied
according to the provisions of Section 5.01 or 5.02.
A Member may not receive any such distribution under the provisions of this
section after he again becomes an Employee until he subsequently ceases to be an
Employee and again meets the requirements of this section.
Some or all of an Inactive Member's Vested Account may be transferred directly
to the trustee, named fiduciary, or insurer under the retirement plan of the
Inactive Member's current employer if the following requirements are met: the
Inactive Member would be eligible to receive a distribution of his Vested
Account at the time the transfer is to occur, the amount transferred, if
distributed to the Member, would qualify as a rollover contribution which the
Code permits to be transferred to a plan that meets the requirements of Code
Section 401(a); the current employer's plan meets the requirements of Code
Section 401(a). The Member must request the transfer in writing. The trustee,
named fiduciary or insurer under the plan must be willing to accept such a
transfer. Such transferred amount shall be treated as a distribution under this
plan.
The Nonvested Account of an Inactive Member shall remain a part of his Account
until it becomes a Forfeiture; provided, however, if the Inactive Member again
becomes an Employee so that his Vesting Percentage may increase, the Nonvested
Account may become part of his Vested Account.
SECTION 5.04 - WHEN BENEFITS START.
Benefits under the Plan begin when a Member retires, dies or ceases to be an
Employee, whichever applies, as provided in the preceding sections of this
article. Benefits which begin before Normal Retirement Date for a Member who
became Totally Disabled when he was an Employee shall be deemed to begin because
he is Totally Disabled. The start of benefits is subject to the qualified
election procedures of Article VI.
Unless otherwise elected, benefits shall begin before the sixtieth day following
the close of the Plan Year in which the latest date below occurs:
(a) The date the Member attains the earlier of (i) age 65 or (ii) the later of
Normal Retirement Age or age 62.
(b) The tenth anniversary of the Member's Entry Date.
(c) The date the Member ceases to be an Employee.
Notwithstanding the foregoing, the failure of a Member and spouse to consent to
a distribution while a benefit is immediately distributable, within the meaning
of Section 6.03, shall be deemed to be an election to defer commencement of
payment of any benefit sufficient to satisfy this section.
The Member may elect to have benefits begin after the latest date for beginning
benefits described above, subject to the following provisions of this section.
The Member shall make the election in writing and deliver the signed election to
the Plan Administrator before Normal Retirement Date or the date he ceases to be
an Employee, if later. The election must describe the form of distribution and
the date benefits will begin. The Member shall not elect a date for beginning
benefits or a form of distribution which would result in a benefit payable when
he dies which would be more than incidental within the meaning of governmental
regulations.
Benefits shall begin by the Member's Required Beginning Date, as defined in
Section 6.02. Distribution of the Vested Account resulting from Contributions
made after the Member's Required Beginning Date shall begin by the April 1
following the calendar year in which such Contributions were made.
If a Member receives a taxable distribution (including a withdrawal) of any part
of his Vested Account, he may be subject to a Federal tax penalty. The tax
penalty does not apply if the distribution is:
(a) made on or after age 59 1/2;
(b) made on account of the Member's death to his Beneficiary or estate;
(c) made on account of being disabled;
(d) part of a series of periodic payments after separation from service that
are substantially equal, at least annual, and based on the life expectancy
of the Member or the Member and his Beneficiary; or
(e) made after separation from service after the attainment of age 55.
In addition, no tax is imposed on amounts received and paid during the taxable
year for medical expenses in an amount not to exceed that deductible under Code
Section 213. Disabled means that a Member is disabled to the extent he is unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or be of long-continued and indefinite duration. Proof of the existence of
the disability will be in such form and manner as the Secretary of the Treasury
may require.
Contributions which are used to compute the Actual Deferral Percentage, as
defined in Section 3.07, (Elective Deferral Contributions, Qualified Nonelective
Contributions, and Qualified Matching Contributions) may be distributed upon
disposition by us of substantially all of the assets used by us in a trade or
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<PAGE> 25
business or disposition by us of our interest in a subsidiary if the transferee
corporation is not a Controlled Group member, the Employee continues employment
with the transferor corporation and the transferor corporation continues to
maintain the Plan. The distribution must be a total distribution.
SECTION 5.05 -- WITHDRAWAL BENEFITS.
(a) Distributions on Account of Financial Hardship
If elected by us in Item W(2) of the Adoption Agreement, withdrawals of
part of the Member's Account as provided in Item W(2) will be permitted in
the event of hardship due to an immediate and heavy financial need.
Immediate and heavy financial need shall be limited to: (i) medical
expenses described in Code Section 213(d) incurred by the Member, the
Member's spouse, or any dependents of the Member (as defined in Code
Section 152); (ii) purchase (excluding mortgage payments) of a principal
residence for the Member; (iii) payment of tuition for the next semester or
quarter of post-secondary education for the Member, his spouse, children or
dependents; (iv) the need to prevent the eviction of the Member from his
principal residence or foreclosure on the mortgage of the Member's
principal residence; or (v) any other distribution which is deemed by the
Commissioner of Internal Revenue to be made on account of immediate and
heavy financial need as provided in Treasury regulations. The Member's
request for a withdrawal shall include his written statement that an
immediate and heavy financial need exists and explain its nature.
On and after the first Yearly Date in 1993, immediate and heavy financial
need in (i) shall include medical expenses incurred or necessary for
medical care, described in Code Section 213(d), of the Member, the Member's
spouse, or any dependents of the Member (as defined in Code Section 152)
and such need in (iii) shall include payment of tuition and related
educational fees for the next 12 months of post-secondary education for the
Member, his spouse, children or dependents. In addition, the amount of the
immediate and heavy financial need may include amounts necessary to pay any
Federal, state or local income taxes or penalties reasonably anticipated to
result from the distribution.
No withdrawal shall be allowed which is not necessary to satisfy such
immediate and heavy financial need. Such withdrawal shall be deemed
necessary only if all of the following requirements are met: (i) the
distribution is not in excess of the amount of the immediate and heavy
financial need of the Member; (ii) the Member has obtained all
distributions, other than hardship distributions; and all nontaxable loans
currently available under all plans maintained by us; (iii) the Plan, and
all other plans maintained by us, provide that the Member's elective
contributions and employee contributions will be suspended for at least 12
months after receipt of the hardship distribution; and (iv) the Plan, and
all other plans maintained by us, provide that the Member may not make
elective contributions for the Member's taxable year immediately following
the taxable year of the hardship distribution in excess of the applicable
limit under Code Section 402(g) for such next taxable year less the amount
of such Member's elective contributions for the taxable year of the
hardship distribution. The Plan will suspend elective contributions and
employee contributions for 12 months and limit elective deferrals as
provided in the preceding sentence. A Member shall not cease to be an
Eligible Member, as defined in Section 3.07, merely because his elective
contributions or employee contributions are suspended.
(b) Distributions on Account of Other Withdrawals
A Member may withdraw in a single sum any part of his Account resulting
from his Voluntary Contributions subject to the limitations provided in
Item W(1). If selected by us in Item W(3), withdrawals of the Member's
Account as provided in Item W(3) will be permitted at any time after he
attains age 59 1/2 subject to the limitations provided in Item W(3). If
selected by us in Item W(4) of the Adoption Agreement - Plus, withdrawals
of part of the Member's Account as provided in Item W(4) will be permitted
after he has been an Active Member for at least 5 years subject to the
limitations provided in Item W(4).
A request for withdrawal shall be in writing on a form furnished for that
purpose and delivered to the Plan Administrator before the withdrawal is to
occur. Withdrawals shall be subject to the qualified election provisions of
Article VI. A forfeiture shall not occur solely as a result of a withdrawal.
SECTION 5.06 -- LOANS TO MEMBERS.
Loans shall be made available to all Members on a reasonably equivalent basis.
For purposes of this section, Member means any Member or Beneficiary who is an
Employee. Loans shall not be made to highly compensated employees, as defined in
Code Section 414(q), in an amount greater than the amount made available to
other Members.
No loans will be made to any shareholder-employee or owner-employee. For
purposes of this requirement, a shareholder-employee means an employee or
officer of an electing small business (Subchapter S) corporation who owns (or is
considered as owning within the meaning of Code Section 318(a)(1)), on any day
during the taxable year of such corporation, more than 5% of the outstanding
stock of the corporation.
A loan to a Member shall be a Member-directed investment of his Account. The
loan is a Trust investment but no Account other than the borrowing Member's
Account shall share in the interest paid on the loan or bear any expense or loss
incurred because of the loan.
The number of outstanding loans shall be limited to one, unless otherwise
specified in Item T(b)(vi). No more than one loan will be approved for any
Member in any 12-month period, unless otherwise specified in Item T(b)(vii). The
minimum amount of any loan shall be selected in Item T(b)(iv).
Loans must be adequately secured and bear a reasonable rate of interest.
The amount of the loan shall not exceed the maximum amount that may be treated
as a loan under Code Section 72(p) (rather than a distribution) to the Member
and shall be equal to the lesser of (a) or (b) below:
(a) $50,000 reduced by the highest outstanding loan balance of loans
during the one-year period ending on the day before the new loan is
made.
(b) The greater of (i) or (ii), reduced by (iii) below:
(i) One-half of the Member's Vested Account.
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<PAGE> 26
(ii) $10,000.
(iii) Any outstanding loan balance on the date the new loan is made.
For purposes of this maximum, a Member's Vested Account does not include any
accumulated deductible employee contributions, as defined in Code Section
72(o)(5)(B), and all qualified employer plans, as defined in Code Section
72(p)(4), of ours and any Controlled Group member shall be treated as one plan.
The foregoing notwithstanding, the amount of such loan shall not exceed 50% of
the amount of the Member's Vested Account reduced by any outstanding loan
balance on the date the new loan is made. In addition, the amount of the loan
may be further limited to a specified dollar amount, if Item T(b)(v) so
indicates. No collateral other than a portion of the Member's Vested Account
(as limited above) shall be accepted. The Loan Administrator shall determine if
the collateral is adequate for the amount of the loan requested.
A Member must obtain the consent of the Member's spouse, if any, to the use of
the Vested Account as security for the loan. Spousal consent shall be obtained
no earlier than the beginning of the 90-day period that ends on the date on
which the loan to be so secured is made. The consent must be in writing, must
acknowledge the effect of the loan, and must be witnessed by a plan
representative or a notary public. Such consent shall thereafter be binding
with respect to the consenting spouse or any subsequent spouse with respect to
that loan. A new consent shall be required if the Vested Account is used for
collateral upon renegotiation, extension, renewal, or other revision of the
loan.
If a valid spousal consent has been obtained in accordance with the above,
then, notwithstanding any other provision of this Plan, the portion of the
Member's Vested Account used as a security interest held by the Plan by reason
of a loan outstanding to the Member shall be taken into account for purposes of
determining the amount of the Vested Account payable at the time of death or
distribution, but only if the reduction is used as repayment of the loan. If
less than 100% of the Member's Vested Account (determined without regard to the
preceding sentence) is payable to the surviving spouse, then the Vested Account
shall be adjusted by first reducing the Vested Account by the amount of the
security used as repayment of the loan, and then determining the benefit
payable to the surviving spouse.
Each loan shall bear a reasonable fixed rate of interest to be determined by
the Loan Administrator. In determining the interest rate, the Loan
Administrator shall take into consideration fixed interest rates currently
being charged by commercial lenders for loans of comparable risk on similar
terms and for similar durations, so that the interest will provide for a return
commensurate with rates currently charged by commercial lenders for loans made
under similar circumstances. The Loan Administrator shall not discriminate
among Members in the matter of interest rates, but loans granted at different
times may bear different interest rates in accordance with the current
appropriate standards.
The loan shall by its terms require that repayment (principal and interest) be
amortized in level payments, not less frequently than quarterly, over a period
not extending beyond five years from the date of the loan. The period of
repayment for any loan shall be arrived at by mutual agreement between the Loan
Administrator and the Member.
The Member shall make a written application for a loan from the Plan on forms
provided by the Loan Administrator. The application must specify the amount and
duration requested. No loan will be approved unless the Member is creditworthy.
The Member must grant authority to the Loan Administrator to investigate the
Member's creditworthiness so that the loan application may be properly
considered.
Information contained in the application for the loan concerning the income,
liabilities, and assets of the Member will be evaluated to determine whether
there is a reasonable expectation that the Member will be able to satisfy
payments on the loan as due. Additionally, the Loan Administrator will pursue
any appropriate further investigations concerning the creditworthiness and/or
credit history of the Member to determine whether a loan should be approved.
Each loan shall be fully documented in the form of a promissory note signed by
the Member for the face amount of the loan, together with interest determined
as specified above.
There will be an assignment of collateral to the Plan executed at the time the
loan is made.
In those cases where repayment through payroll deduction by us is available,
installments are so payable, and a payroll deduction agreement will be executed
by the Member at the time of making the loan.
Where payroll deduction is not available, payments are to be timely made.
Any payment that is not by payroll deduction shall be made payable to us or the
Trustee, as specified in the promissory note, and delivered to the Loan
Administrator, including prepayments, service fees and penalties, if any, and
other amounts due under the note.
The promissory note may provide for reasonable late payment penalties and/or
service fees. Any penalties or service fees shall be applied to all Members in
a nondiscriminatory manner. If the promissory note so provides, such amounts
may be assessed and collected from the Account of the Member as part of the
loan balance.
Each loan may be paid prior to maturity, in part or in full, without penalty or
service fee, except as may be set out in the promissory note.
If any amount remains unpaid for more than 31 days after due, a default is
deemed to occur.
Upon default, the Plan has the right to pursue any remedy available by law to
satisfy the amount due, along with accrued interest, including the right to
enforce its claim against the security pledged and execute upon the collateral
as allowed by law.
If any payment of principal or interest or any other amount due under the
promissory note, or any portion thereof, is not made for a period of 90 days
after due, the entire principal balance whether or not otherwise then due,
shall become immediately due and payable without demand or notice, and subject
to collection or satisfaction by any lawful means, including specifically but
not limited to the right to enforce the claim against the security pledged and
to execute upon the collateral as allowed by law.
In the event of default, foreclosure on the note and attachment of security or
use of amounts pledged to satisfy the amount then due, will not occur until a
distributable event occurs in
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<PAGE> 27
accordance with the Plan, and will not occur to an extent greater than the
amount then available upon any distributable event which has occurred under the
Plan.
All reasonable costs and expenses, including but not limited to attorney's
fees, incurred by the Plan in connection with any default or in any proceeding
to enforce any provision of a promissory note or instrument by which a
promissory note for a Member loan is secured, shall be assessed and collected
from the Account of the Member as part of the loan balance.
If payroll deduction is being utilized, in the event that a Member's available
payroll deduction amounts in any given month are insufficient to satisfy the
total amount due, there will be an increase in the amount taken subsequently,
sufficient to make up the amount that is then due. If the subsequent deduction
is also insufficient to satisfy the amount due within 31 days, a default is
deemed to occur as above. If any amount remains past due more than 90 days, the
entire principal amount, whether or not otherwise then due, along with interest
then accrued and any other amount then due under the promissory note, shall
become due and payable, as above.
If the Member ceases to be an Employee, the balance of the outstanding loan
becomes due and payable, and the Member's Vested Account will be used as
available for distribution(s) to pay the outstanding loan. The Member's Vested
Account will not be used to pay any amount due under the outstanding loan
before the date which is 31 days after the date he ceased to be an Employee,
and the Member may elect to repay the outstanding loan with interest on the day
of repayment. If no distributable event has occurred under the Plan at the time
that the Member's Vested Account would otherwise be used under this provision
to pay any amount due under the outstanding loan, this will not occur until the
time, or in excess of the extent to which, a distributable event occurs under
the Plan.
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ARTICLE VI
DISTRIBUTION OF BENEFITS
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The provisions of this article shall apply on or after August 23, 1984, to any
Member who is credited with at least one Hour of Service or one hour of paid
leave on or after that date and to such other Members as provided in Section
6.05. If the Effective Date of our Plan is before January 1, 1984, the
provisions of the Prior Plan as in effect on the day before the TEFRA
Compliance Date shall apply before August 23, 1984. If the Effective Date of
our Plan is on or after January 1, 1984, and before August 23, 1984, the
provisions of the Plan as originally adopted shall apply before August 23, 1984.
SECTION 6.01 -- AUTOMATIC FORMS OF DISTRIBUTION.
Unless a qualified election of an optional form of benefit has been made within
the election period (see Section 6.03), the automatic form of benefit payable
to or on behalf of a Member is determined as follows:
(a) The automatic form of retirement benefit for a Member who does not die
before his Annuity Starting Date shall be the Qualified Joint and Survivor
Form.
(b) The automatic form of death benefit for a Member who dies before his
Annuity Starting Date shall be:
(1) A Qualified Preretirement Survivor Annuity for a Member who has a
spouse to whom he has been continuously married throughout the
one-year period ending on the date of his death. The spouse may elect
to start receiving the death benefit on any first day of the month on
or after the Member dies and by the date the Member would have been
age 70 1/2. If the spouse dies before benefits start, the Member's
Vested Account, determined as of the date of the spouse's death, shall
be paid to the spouse's Beneficiary.
(2) A single sum payment to the Member's Beneficiary for a Member who does
not have a spouse who is entitled to a Qualified Preretirement
Survivor Annuity.
Before a death benefit will be paid on account of the death of a Member who
does not have a spouse who is entitled to a Qualified Preretirement
Survivor Annuity, it must be established to the satisfaction of a plan
representative that the Member does not have such a spouse.
SECTION 6.02 -- OPTIONAL FORMS OF DISTRIBUTION AND DISTRIBUTION REQUIREMENTS.
(a) For purposes of this section, the following terms are defined:
APPLICABLE LIFE EXPECTANCY means Life Expectancy (or Joint and Last
Survivor Expectancy) calculated using the attained age of the Member (or
Designated Beneficiary) as of the Member's (or Designated Beneficiary's)
birthday in the applicable calendar year reduced by one for each calendar
year which has elapsed since the date Life Expectancy was first calculated.
If Life Expectancy is being recalculated, the Applicable Life Expectancy
shall be the Life Expectancy so recalculated. The applicable calendar year
shall be first Distribution Calendar Year, and if Life Expectancy is being
recalculated such succeeding calendar year.
DESIGNATED BENEFICIARY means the individual who is designated as the
beneficiary under the Plan in accordance with Code Section 401(a)(9) and
the regulations thereunder.
DISTRIBUTION CALENDAR YEAR means a calendar year for which a minimum
distribution is required. For distributions beginning before the Member's
death, the first Distribution Calendar Year is the calendar year
immediately preceding the calendar year which contains the Member's
Required Beginning Date. For distributions beginning after the Member's
death, the first Distribution Calendar Year is the calendar year in which
distributions are required to begin pursuant to (e) below.
JOINT AND LAST SURVIVOR EXPECTANCY means joint and last survivor expectancy
computed by use of the expected return multiples in Tables V and VI of
section 1.72-9 of the Income Tax Regulations.
Unless otherwise elected by the Member (or spouse, in the case of
distributions described in (e)(2)(ii) below) by the time distributions are
required to begin, life expectancies shall be recalculated annually. Such
election shall be irrevocable as to the Member (or spouse) and shall apply
to all subsequent years. The life expectancy of a nonspouse Beneficiary may
not be recalculated.
LIFE EXPECTANCY means life expectancy computed by use of the expected
return multiples in Tables V and VI of section 1.72-9 of the Income Tax
Regulations.
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Unless otherwise elected by the Member (or spouse, in the case of distributions
described in (e)(2)(ii) below) by the time distributions are required to begin,
life expectancies shall be recalculated annually. Such election shall be
irrevocable as to the Member (or spouse) and shall apply to all subsequent
years. The life expectancy of a nonspouse Beneficiary may not be recalculated.
Member's Benefit Means
(1) The Account balance as of the last valuation date in the calendar year
immediately preceding the Distribution Calendar Year (valuation calendar
year) increased by the amount of any contributions or forfeitures allocated
to the Account balance as of the dates in the valuation calendar year after
the valuation date and decreased by distributions made in the valuation
calendar year after the valuation date.
(2) For purposes of (1) above, if any portion of the minimum distribution for
the first Distribution Calendar Year is made in the second Distribution
Calendar Year on or before the Required Beginning Date, the amount of the
minimum distribution made in the second Distribution Calendar Year shall be
treated as if it had been made in the immediately preceding Distribution
Calendar Year.
Required Beginning Date means, for a Member, the first day of April of the
calendar year following the calendar year in which the member attains age
70-1/2, unless otherwise provided in (1), (2) or (3) below:
(1) The Required Beginning Date for a Member who attains age 70-1/2 before
January 1, 1988, and who is not a 5-percent owner is the first day of April
of the calendar year following the calendar year in which the later of
retirement or attainment of age 70-1/2 occurs.
(2) The Required Beginning Date for a Member who attains age 70-1/2 before
January 1, 1988, and who is a 5-percent owner is the first day of April of
the calendar year following the later of
(i) the calendar year in which the Member attains age 70-1/2, or
(ii) the earlier of the calendar year with or within which ends the Plan
Year in which the Member becomes a 5-percent owner, or the calendar
year in which the Member retires.
(3) The Required Beginning Date of a Member who is not a 5-percent owner and who
attains age 70-1/2 during 1988 and who has not retired as of January 1,
1989, is April 1, 1990.
A Member is treated as a 5-percent owner for purposes of this section if such
Member is a 5-percent owner as defined in Code Section 416(i)(determined in
accordance with Code Section 416 but without regard to whether the Plan is
top-heavy) at any time during the Plan Year ending with or within the calendar
year in which such owner attains age 66-1/2 or any subsequent Plan Year.
Once distributions have begun to a 5-percent owner under this section, they must
continue to be distributed, even if the Member ceases to be a 5-percent owner in
a subsequent year.
(b) The optional forms of retirement benefit shall be the following: a straight
life annuity; single life annuities with certain periods of five, ten, or
fifteen years; a single life annuity with installment refund; survivorship
life annuities with installment refund and survivor percentages of 50,
66-2/3, or 100; fixed period annuities for any period of whole months which
is not less than sixty and does not exceed the Life Expectancy of the Member
and the named Beneficiary as provided in (d) below where the Life Expectancy
is not recalculated and a series of installments chosen by the Member with a
minimum payment each year beginning with the year the Member turns age
70-1/2. The payment for the first year in which a minimum payment is
required will be made by April 1 of the following calendar year. The payment
for the second year and each successive year will be made by December 31 of
that year. The minimum payment will be based on a period equal to the Joint
and Last Survivor Expectancy of the Member and the Member's spouse, if any,
as provided in (d) below where the Joint and Last Survivor Expectancy is
recalculated. The balance of the Member's Vested Account, if any, will be
payable on the Member's death to his Beneficiary in a single sum, if not
prohibited in Item Y of the Adoption Agreement - Plus, a single sum payment
is also available.
Election of an optional form is subject to the qualified election provisions
of Article VI.
Any annuity contract distributed shall be nontransferable. The terms of any
annuity contract purchased and distributed by the Plan to a Member or spouse
shall comply with the requirements of this Plan.
(c) The optional forms of death benefit are a single sum payment and any annuity
that is an optional form of retirement benefit. However, a series of
installments shall not be available if the Beneficiary is not the spouse of
the deceased Member.
(d) Subject to Section 6.01, joint and survivor annuity requirements, the
requirements of this section shall apply to any distribution of a Member's
interest and will take precedence over any inconsistent provisions of this
Plan. Unless otherwise specified, the provisions of this section apply to
calendar years beginning after December 31, 1984.
All distributions required under this section shall be determined and made
in accordance with the proposed regulations under Code Section 401(a)(9),
including the minimum distribution incidental benefit requirement of section
1 401(a)(9)-2 of the proposed regulations.
The entire interest of a Member must be distributed or begin to be
distributed no later than the Member's Required Beginning Date.
As of the first Distribution Calendar Year, distributions, if not made in a
single sum, may only be made over one of the following periods (or
combination thereof):
(1) the life of the Member,
(2) the life of the Member and a Designated Beneficiary,
(3) a period certain not extending beyond the Life Expectancy of the Member,
or
(4) a period certain not extending beyond the Joint and Last Survivor
Expectancy of the Member and a Designated Beneficiary.
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<PAGE> 29
If the Member's interest is to be distributed in other than a single sum, the
following minimum distribution rules shall apply on or after the Required
Beginning Date
(5) Individual account:
(i) If a Member's Benefit is to be distributed over
(A) a period not extending beyond the Life
Expectancy of the Member or the Joint Life
and Last Survivor Expectancy of the Member
and the Member's Designated Beneficiary or
(B) a period not extending beyond the Life
Expectancy of the Designated Beneficiary,
the amount required to be distributed for each calendar year
beginning with the distributions for the first Distribution Calendar
Year, must be at least equal to the quotient obtained by dividing
the Member's Benefit by the Applicable Life Expectancy.
(ii) For calendar years beginning before January 1, 1989, if the Member's
spouse is not the Designated Beneficiary, the method of distribution
selected must assure that at least 50% of the present value of the
amount available for distribution is paid within the Life Expectancy
of the Member.
(iii) For calendar year beginning after December 31, 1988, the amount to
be distributed each year, beginning with distributions for the first
Distribution Calendar Year shall not be less than the quotient
obtained by dividing the Member's Benefit by the lesser of
(A) the Applicable Life Expectancy or
(B) if the Member's spouse is not the Designated Beneficiary, the
applicable divisor determined from the table set forth in Q&A-4
of section 1.401(a)(9)-2 of the proposed regulations.
Distributions after the death of the Member shall be distributed
using the Applicable Life Expectancy in (5)(i) above as the relevant
divisor without regard to Proposed Regulations section 1.40(a)(9)-2.
(iv) The minimum distribution required for the Member's first
Distribution Calendar Year must be made on or before the Member's
Required Beginning Date. The minimum distribution for the
Distribution Calendar Year for other calendar years, including the
minimum distribution for the Distribution Calendar Year in which the
Member's Required Beginning Date occurs, must be made on or before
December 31 of that Distribution Calendar Year.
(6) Other forms:
(i) If the Member's Benefit is distributed in the form of an annuity
purchased from an insurance company, distributions thereunder shall
be made in accordance with the requirements of Code Section 401(a)(9)
and the proposed regulations thereunder.
(e) Death distribution provisions:
(1) Distribution beginning before death. If the Member dies after
distribution of his interest has begun, the remaining portion of such
interest will continue to be distributed at least as rapidly as under
the method of distribution being used prior to the Member's death.
(2) Distribution beginning after death. If the Member dies before
distribution of his interest begins, distribution of the Member's entire
interest shall be completed by December 31 of the calendar year
containing the fifth anniversary of the Member's death except to the
extent that an election is made to receive distributions in accordance
with (i) or (ii) below:
(i) if any portion of the Member's interest is payable to a Designated
Beneficiary, distributions may be made over the life or over a
period certain not greater than the Life Expectancy of the
Designated Beneficiary commencing on or before December 31 of the
calendar year immediately following the calendar year in which
the Member died:
(ii) if the Designated Beneficiary is the Member's surviving spouse, the
date distributions are required to begin in accordance with
(i) above shall not be earlier than the later of
(A) December 31 of the calendar year immediately following the
calendar year in which the Member died and
(B) December 31 of the calendar year in which the Member would have
attained age 70 1/2.
If the Member has not made an election pursuant to this (e)(2) by the
time of his death, the Member's Designated Beneficiary must elect the
method of distribution no later than the earlier of
(iii) December 31 of the calendar year in which distributions would be
required to begin under this subparagraph, or
(iv) December 31 of the calendar year which contains the fifth
anniversary of the date of death of the Member.
If the Member has no Designated Beneficiary, or if the Designated
Beneficiary does not elect a method of distribution, distribution of
the Member's entire interest must be completed by December 31 of the
calendar year containing the fifth anniversary of the Member's death.
(3) For purposes of (e)(2) above, if the surviving spouse dies after the
Member, but before payments to such spouse begin, the provisions of
(e)(2) above, with the exception of (e)(2)(ii) therein, shall be
applied as if the surviving spouse were the Member.
(4) For purposes of this (e), any amount paid to a child of the Member will
be treated as if it had been paid to the surviving spouse if the amount
becomes payable to the surviving spouse when the child reaches the
age of majority.
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<PAGE> 30
(5) For purposes of this (e), distribution of a Member's interest is
considered to begin on the Member's Required Beginning Date (or if
(e)(3) above is applicable, the date distribution is required to begin
to the surviving spouse pursuant to (e)(2) above). If distribution in
the form of an annuity irrevocably commences to the Member before the
Required Beginning Date, the date distribution is considered to begin
is the date distribution actually commences.
SECTION 6.03 - ELECTION PROCEDURES.
The Member, Beneficiary, or spouse shall make any election under this section
in writing. The Plan Administrator may require such individual to complete and
sign any necessary documents as to the provisions to be made. Any election
permitted under (a) and (b) below shall be subject to the qualified election
provisions of (c) below.
(a) Retirement Benefits. A Member may elect his Beneficiary or Contingent
Annuitant and may elect to have retirement benefits distributed under any of
the optional forms of retirement benefit described in Section 6.02.
(b) Death Benefits. A Member may elect his Beneficiary and may elect to have
death benefits distributed under any of the optional forms of death benefit
described in Section 6.02.
If the Member has not elected an optional form of distribution for the death
benefit payable to his Beneficiary, the Beneficiary may, for his own
benefit, elect the form of distribution, in like manner as a Member.
The Member may waive the Qualified Preretirement Survivor Annuity by naming
someone other than his spouse as Beneficiary.
In lieu of the Qualified Preretirement Survivor Annuity described in Section
6.01, the spouse may, for his own benefit, waive the Qualified Preretirement
Survivor Annuity by electing to have the benefit distributed under any of
the optional forms of death benefit described in Section 6.02.
(c) Qualified Election. The Member, Beneficiary or spouse may make an election
at any time during the election period. The Member, Beneficiary, or spouse
may revoke the election made (or make a new election) at any time and any
number of times during the election period. An election is effective only
if it meets the consent requirements below.
The election period as to retirement benefits is the 90-day period ending on
the Annuity Starting Date. An election to waive the Qualified Joint and
Survivor Form may not be made before the date he is provided with the
notice of the ability to waive the Qualified Joint and Survivor Form. If
the Member elects the series of installments, he may elect on any later
date to have the balance of his Vested Account paid under any of the
optional forms of retirement benefit available under the Plan. His election
period for this election is the 90-day period ending on the Annuity
Starting Date for the optional form of retirement benefit elected.
A Member may make an election as to death benefits at any time before he
dies. The spouse's election period begins on the date the Member dies and
ends on the date benefits begin. The Beneficiary's election period begins on
the date the Member dies and ends on the date benefits begin. An election to
waive the Qualified Preretirement Survivor Annuity may not be made by the
Member before the date he is provided with the notice of the ability to
waive the Qualified Preretirement Survivor Annuity. A Member's election to
waive the Qualified Preretirement Survivor Annuity which is made before the
first day of the Plan Year in which he reaches age 35 shall become invalid
on such date. An election made by a Member after he ceases to be an Employee
will not become invalid on the first day of the Plan Year in which he
reaches age 35 with respect to death benefits from that part of his Account
resulting from Contributions made before he ceased to be an Employee.
If the Member's Vested Account has at any time exceeded $3,500, any benefit
which is (1) immediately distributable or (2) payable in a form other than a
Qualified Joint and Survivor Form or a Qualified Preretirement Survivor
Annuity requires the consent of the Member and the Member's spouse (or
where either the Member or the spouse has died, the survivor). The consent
of the Member or spouse to a benefit which is immediately distributable
must not be made before the date the Member or spouse is provided with the
notice of the ability to defer the distribution. Such consent shall be made
in writing. The consent shall not be made more than 90 days before the
Annuity Starting Date. Spousal consent is not required for a benefit which
is immediately distributable in a Qualified Joint and Survivor Form.
Furthermore, if spousal consent is not required because the Member is
electing an optional form of retirement benefit that is not a life annuity
pursuant to (d) below, only the Member need consent to the distribution of
a benefit payable in a form that is not a life annuity and which is
immediately distributable. Neither the consent of the Member nor the
Member's spouse shall be required to the extent that a distribution is
required to satisfy Code Section 401(a)(9) or Code Section 415. In
addition, upon termination of this Plan if the Plan does not offer an
annuity option (purchased from a commercial provider), the Member's Account
balance may, without the Member's consent, be distributed to the Member or
transferred to another defined contribution plan (other than an employee
stock ownership plan as defined in Code Section 4975(e)(7)) within the same
Controlled Group. A benefit is immediately distributable if any part of the
benefit could be distributed to the Member (or surviving spouse) before the
Member attains (or would have attained if not deceased) the older of Normal
Retirement Age or age 62. If the Qualified Joint and Survivor Form is
waived, the spouse has the right to limit consent only to a specific
Beneficiary or a specific form of benefit. The spouse can relinquish one or
both such rights. Such consent shall be made in writing. The consent shall
not be made more than 90 days before the Annuity Starting Date. If the
Qualified Preretirement Survivor Annuity is waived, the spouse has the
right to limit consent only to a specific Beneficiary. Such consent shall
be in writing. The spouse's consent shall be witnessed by a plan
representative or notary public. The spouse's consent must acknowledge the
effect of the election, including that the spouse had the right to limit
consent only to a specific Beneficiary or a specific form of benefit, if
applicable, and that the relinquishment of one or both such rights was
voluntary. Unless the consent of the spouse expressly permits designations
by the Member without a requirement of further consent by the spouse, the
spouse's consent must be limited to the form of benefit, if applicable, and
the Beneficiary (including any Contingent Annuitant), class of
Beneficiaries, or contingent Beneficiary named in the election. Spousal
consent is not required, however, if the
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<PAGE> 31
Member establishes to the satisfaction of the plan representative that
the consent of the spouse cannot be obtained because there is no spouse or
the spouse cannot be located. A spouse's consent under this paragraph shall
not be valid with respect to any other spouse. A Member may revoke a prior
election without the consent of the spouse. Any new election will require a
new spousal consent, unless the consent of the spouse expressly permits
such election by the Member without further consent by the spouse. A
spouse's consent may be revoked at any time within the Member's election
period.
Before the first Yearly Date in 1989, the Member's Account which results
from deductible Voluntary Contributions shall not be taken into account
in determining whether the Member's Vested Account has exceeded $3,500 and
an election as to the distribution of a Member's Vested Account which
results from deductible Voluntary Contributions is not subject to the
consent requirements above and may be made any time before such
distribution is to begin.
(d) Special Rule for Profit Sharing Plans. As provided in the preceding
provisions of the Plan, if a Member has a spouse to whom he has been
continuously married throughout the one-year period ending on the date of
the Member's death, the Member's Vested Account, including the proceeds
payable under any insurance Policy on the Member's life, shall be paid to
such spouse. However, if there is no such spouse or if the surviving
spouse has already consented in a manner conforming to the qualified
election requirements in (c) above, the Vested Account shall be payable to
the Member's Beneficiary in the event of the Member's death.
The Member may waive the spousal death benefit described above at any time
provided that no such waiver shall be effective unless it satisfies the
conditions of (c) above (other than the notification requirement referred
to therein) that would apply to the Member's waiver of the Qualified
Preretirement Survivor Annuity.
This subsection (d) applies if with respect to the Member, the Plan is not
a direct or indirect transferee after December 31, 1984, of a defined
benefit plan, money purchase plan (including a target plan), stock bonus
or profit sharing plan which is subject to the survivor annuity
requirements of Code Section 401(a)(11) and Code Section 417. If the
above condition is met, spousal consent is not required for electing an
optional form of retirement benefit that is not a life annuity. If the
above condition is not met, the consent requirements of this Article
shall be operative.
SECTION 6.04 -- NOTICE REQUIREMENTS.
(a) Optional forms of retirement benefit. The Plan Administrator shall furnish
to the Member and the Member's spouse a written explanation of the
optional forms of retirement benefit in Section 6.02, including the
material features and relative values of these options, in a manner that
would satisfy the notice requirements of Code Section 417(a)(3) and the
right of the Member and the Member's spouse to defer distribution until the
benefit is no longer immediately distributable. The Plan Administrator
shall furnish the written explanation by a method reasonably calculated to
reach the attention of the Member and the Member's spouse no less than 30
days and no more than 90 days before the Annuity Starting Date.
(b) Qualified Joint and Survivor Form. The Plan Administrator shall furnish to
the Member a written explanation of the following: the terms and
conditions of the Qualified Joint and Survivor Form; the Member's right to
make, and the effect of, an election to waive the Qualified Joint and
Survivor Form; the rights of the Member's spouse; and the right to revoke
an election and the effect of such a revocation. The Plan Administrator
shall furnish the written explanation by a method reasonably calculated to
reach the attention of the Member no less than 30 days and no more than 90
days before the Annuity Starting Date.
After the written explanation is given, a Member or spouse may make
written request for additional information. The written explanation must
be personally delivered or mailed (first class mail, postage prepaid) to
the Member or spouse within thirty days from the date of the written
request. The Plan Administrator does not need to comply with more than one
such request by a Member or spouse.
The Plan Administrator's explanation shall be written in nontechnical
language and will explain the terms and conditions of the Qualified Joint
and Survivor Form and the financial effect upon the Member's benefit (in
terms of dollars per benefit payment) of electing not to have benefits
distributed in accordance with the Qualified Joint and Survivor Form.
(c) Qualified Preretirement Survivor Annuity. The Plan Administrator shall
furnish to the Member a written explanation of the following: the terms
and conditions of the Qualified Preretirement Survivor Annuity: the
Member's right to make, and the effect of, an election to waive the
Qualified Preretirement Survivor Annuity; the rights of the Member's
spouse; and the right to revoke an election and the effect of such a
revocation. The Plan Administrator shall furnish the written explanation by
a method reasonably calculated to reach the attention of the Member within
the applicable period. The applicable period for a Member is whichever of
the following periods ends last:
(1) the period beginning one year before the date the individual becomes a
Member and ending one year after such date; or
(2) The period beginning one year before the date the Member's spouse is
first entitled to a Qualified Preretirement Survivor Annuity and
ending one year after such date.
If such notice is given before the period beginning with the first day of
the Plan Year in which the Member attains age 32 and ending with the close
of the Plan Year preceding the Plan Year in which the Member attains age
35, an additional notice shall be given within such period. If a Member
ceases to be an Employee before attaining age 35, an additional notice
shall be given within the period beginning one year before the date he
ceases to be an Employee and ending one year after such date.
After the written explanation is given, a Member or spouse may make
written request for additional information. The written explanation must
be personally delivered or mailed (first class mail, postage prepaid) to
the Member or spouse within thirty days from the date of the written
request. The Plan Administrator does not need to comply with more than one
such request by a Member or spouse.
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<PAGE> 32
The Plan Administrator's explanation shall be written in nontechnical
language and will explain the terms and conditions of the Qualified
Preretirement Survivor Annuity and the financial effect upon the spouse's
benefit (in terms of dollars per benefit payment) of electing not to have
benefits distributed in accordance with the Qualified Preretirement
Survivor Annuity.
SECTION 6.05 -- TRANSITIONAL RULES.
In modification of the preceding provisions of this Plan, distributions
(including distributions to a five-percent owner of us) may be made in a form
which would not have caused this Plan to be disqualified under Code Section
401(a)(9) as in effect before the TEFRA Compliance Date. The form must be
elected by the Member or, if the Member has died, by the Beneficiary. The
election must be made in writing and signed before January 1, 1984. The election
will only be applicable if the Member has an Account as of December 31, 1983.
The Member's or Beneficiary's election must specify when the distribution is to
begin, the form of distribution and the Contingent Annuitant and/or
Beneficiaries listed in the order of priority, if applicable. A distribution
upon death will not be covered by this transitional rule unless the election
contains the required information described above with respect to the
distributions to be made when the Member dies. Distributions in the process of
payment on January 1, 1984, are deemed to meet the above requirements if the
form of distribution was elected in writing and the form met the requirements of
Code Section 401(a)(9) as in effect before the TEFRA Compliance Date. If the
election under this paragraph is revoked, any subsequent distribution must meet
the requirements of Code Section 401(a)(9) and the proposed regulations
thereunder. If an election is revoked subsequent to the date distributions are
required to begin, the Plan must distribute by the end of the calendar year
following the calendar year in which the revocation occurs the total amount not
yet distributed which would have been required to have been distributed to
satisfy Code Section 401(a)(9) and the proposed regulations thereunder, but for
the Code Section 242(b)(2) election. For calendar years beginning after December
31, 1988, such distribution must meet the minimum distribution incidental
benefit requirements in section 1.401(a)(9)-2 of the proposed regulations. Any
changes in the election will be considered a revocation of the election.
However, the mere substitution or addition of another Beneficiary (one not named
in the election) under the election will not be considered to be a revocation of
the election, so long as such substitution or addition does not alter the period
over which distributions are to be made under the election, directly or
indirectly (for example, by altering the relevant measuring life). In the case
in which an amount is transferred or rolled over from one plan to another plan,
the rules in Q&A J-2 and Q&A J-3 of section 1.401(a)(9)-1 of the proposed
regulations shall apply. A Member's election of an optional form of retirement
benefit shall be subject to his spouse's consent as provided in Section 6.03.
A Member, who would not otherwise receive the benefits prescribed by the
previous sections of this article, will be entitled to the following benefits:
(a) If he is living and not receiving benefits on August 23, 1984, he will be
given the opportunity to elect to have the prior sections of this article
apply, if he is credited with at least one Hour of Service under this Plan
or a predecessor plan in a plan year beginning on or after January 1, 1976,
and he had at least ten Years of Service when he separated from service.
(b) If he is living and not receiving benefits on August 23, 1984, he will be
given the opportunity to elect to have his benefits paid according to the
following provisions of this section, if he is credited with at least one
Hour of Service under this Plan or a predecessor plan on or after September
2, 1974, and he is not credited with any service in a plan year beginning
on or after January 1, 1976.
The respective opportunities to elect (as described in (a) and (b) above) must
be afforded to the appropriate Members during the period beginning on August 23,
1984, and ending on the date benefits would otherwise begin to such Member.
Any Member who has elected according to (b) above and any member who does not
elect under (a) above or who meets the requirements of (a) above except that
such Member does not have at least ten Years of Service when he separated from
service, shall have his benefits distributed in accordance with the following if
benefits would have been payable in the form of a life annuity:
(c) Automatic joint and survivor annuity. If benefits in the form of a life
annuity become payable to a married Member who:
(1) begins to receive payments under the Plan on or after Normal
Retirement Age; or
(2) dies on or after Normal Retirement Age while still working for us; or
(3) begins to receive payments on or after the qualified early retirement
age; or
(4) separates from service on or after attaining Normal Retirement Age (or
the qualified early retirement age) and after satisfying the
eligibility requirements for the payment of benefits under the Plan
and thereafter dies before beginning to receive such benefits;
then such benefits will be paid under the Qualified Joint and Survivor
Form, unless the Member has elected otherwise during the election period.
The election period must begin at least six months before the Member
attains qualified early retirement age and end not more than 90 days before
benefits begin. Any election hereunder will be in writing and may be
changed by the Member at any time.
(d) Election of early survivor annuity. A Member who is employed after
attaining the qualified early retirement age will be given the opportunity
to elect, during the election period, to have a Qualified Preretirement
Survivor Annuity payable on death. Any election under this provision will
be in writing and may be changed by the Member at any time. The election
period begins on the later of (1) the 90th day before the Member attains
the qualified early retirement age, or (2) the Member's Entry Date, and
ends on the date the Member terminates employment.
(e) For purposes of this paragraph, qualified early retirement age is the
latest of:
(1) the earliest date, under the Plan, on which the Member may elect to
receive retirement benefits.
(2) the first day of the 120th month beginning before the Member reaches
Normal Retirement Age, or
(3) the Member's Entry Date.
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ARTICLE VII
TERMINATION OF PLAN
- ----------------------------------------------
We expect to continue the Plan indefinitely, but reserve the right to terminate
the Plan in whole or in part at any time upon giving written notice to all
parties concerned. Complete discontinuance of Contributions constitutes complete
termination of Plan.
The Account of each Member shall be fully (100%) vested and nonforfeitable as of
the effective date of complete termination of the Plan. The Account of each
Member who becomes an Inactive Member because he is no longer an Eligible
Employee due to partial termination of the Plan shall be fully (100%) vested and
nonforfeitable as of the effective date of the partial Plan termination. If a
Member ceased to be an Employee before partial termination of the Plan but
otherwise would have become an Inactive Member upon partial termination due to
no longer being an Eligible Employee, his Account shall be fully (100%) vested
and nonforfeitable as of the effective date of the partial termination of the
Plan. An Inactive Member's Vested Account shall continue to participate in the
earnings credited, expenses charged and any appreciation or depreciation of the
Investment Fund until the Vested Account is distributed. A distribution under
this article shall be a retirement benefit and shall be distributed to the
Member according to the provisions of Article VI.
A Member's Account which does not result from Contributions which are used to
compute the Actual Deferral Percentage, as defined in Section 3.07, may be
distributed to the Member after the effective date of the complete or partial
Plan termination. A Member's Account resulting from Contributions which are used
to compute such percentage (Elective Deferral Contributions, Qualified
Nonelective Contributions, and Qualified Matching Contributions) may be
distributed upon termination of the Plan without the establishment of
another defined contribution plan.
Upon complete termination of the Plan, no more Employees shall become Members
and no more Contributions shall be made.
The assets of this Plan shall not be paid to us at any time, except that, after
the satisfaction of all liabilities under the Plan, any assets remaining may be
paid to us. The payment may not be made if it would contravene any provision of
law.
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ARTICLE VIII
ADMINISTRATION OF PLAN
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SECTION 8.01 -- ADMINISTRATION.
Subject to the provisions of this article, the Plan Administrator has complete
control of the administration of the Plan. The Plan Administrator has all the
powers necessary for it to properly carry out its administrative duties. Not in
limitation, but in amplification of the foregoing, the Plan Administrator has
the power to construe the Plan and to determine all questions that may arise
under the Plan, including all questions relating to the eligibility of Employees
to participate in the Plan and the amount of benefit to which any Member,
Beneficiary, spouse or Contingent Annuitant may become entitled. The Plan
Administrator's decisions upon all matters within the scope of its authority are
final.
Unless otherwise set out in the Plan or Annuity Contract, the Plan Administrator
may delegate recordkeeping and other duties which are necessary to assist it
with the administration of the Plan to any person or firm which agrees to accept
such duties. The Plan Administrator shall be entitled to rely upon all tables,
valuations, certificates, and reports furnished by the consultant or actuary
appointed by the Plan Administrator and upon all opinions given by any counsel
selected or approved by the Plan Administrator.
The Plan Administrator shall receive all claims for benefits by Members, former
Members, Beneficiaries, spouses, and Contingent Annuitants. The Plan
Administrator shall determine all facts necessary to establish the right of any
Claimant to benefits and the amount of those benefits under the provisions of
the Plan. The Plan Administrator may establish rules and procedures to be
followed by Claimants in filing claims for benefits, in furnishing and verifying
proofs necessary to determine age, and in any other matters required to
administer the Plan.
SECTION 8.02 -- RECORDS.
All acts and determinations of the Plan Administrator shall be duly recorded.
All these records, together with other documents necessary for the
administration of the Plan, shall be preserved in the Plan Administrator's
custody.
Writing (handwriting, typing, printing), photostating, photographing,
micro-filming, magnetic impulse, mechanical or electrical recording, or other
forms of data compilation shall be acceptable means of keeping records.
SECTION 8.03 -- INFORMATION AVAILABLE.
Any Member in the Plan or any Beneficiary may examine copies of the Plan
description, latest annual report, any bargaining agreement, this Plan, the
contract, or any other instrument under which the Plan was established or is
operated. The Plan Administrator shall maintain all of the items listed in this
section in its office, or in such other place or places as it may designate in
order to comply with governmental regulations. These items may be examined
during reasonable business hours. Upon the written request of a Member or
Beneficiary receiving benefits under the Plan, the Plan Administrator shall
furnish him with a copy of any of these items. The Plan Administrator may make a
reasonable charge to the requesting person for the copy.
SECTION 8.04 -- CLAIM AND APPEAL PROCEDURES.
A Claimant must submit any required forms and pertinent information when making
a claim for benefits under the Plan.
If a claim for benefits under the Plan is denied, the Plan Administrator shall
provide adequate written notice to any Claimant whose claim for benefits under
the Plan has been denied. The notice must be furnished within ninety days of the
date that the claim is received by the Plan Administrator. The Claimant shall be
notified in writing within this initial ninety-day period if special
circumstances require an extension of time needed to process the claim and the
date by which the Plan Administrator's decision is expected to be rendered. The
written notice shall be furnished no later than 180 days after the date the
claim was received by the Plan Administrator.
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The Plan Administrator's notice to the Claimant shall specify the reason for the
denial; specify references to pertinent Plan provisions on which denial is
based; describe any additional material and information needed for the Claimant
to perfect his claim for benefits; explain why the material and information is
needed; inform the Claimant that any appeal he wishes to make must be made in
writing to the Plan Administrator within sixty days after receipt of the Plan
Administrator's notice of denial of benefits and that failure to make the
written appeal within such sixty-day period renders the Plan Administrator's
determination of such denial final, binding and conclusive.
If the Claimant appeals to the Plan Administrator, the Claimant, or his
authorized representative, may submit in writing whatever issues and comments
the Claimant, or the representative, feels are pertinent. The Claimant, or the
authorized representative, may review pertinent Plan documents. The Plan
Administrator shall reexamine all facts related to the appeal and make a final
determination as to whether the denial of benefits is justified under the
circumstances. The Plan Administrator shall advise the Claimant of its decision
within sixty days of his written request for review, unless special
circumstances (such as a hearing) would make rendering a decision within the
sixty-day limit unfeasible. The Claimant shall be notified within the sixty-day
limit if an extension is necessary. The Plan Administrator shall render a
decision on a claim for benefits no later than 120 days after the request for
review is received.
SECTION 8.05 - UNCLAIMED VESTED ACCOUNT PROCEDURES.
If a Member or the Member's spouse or Beneficiary does not claim the Member's
Vested Account, the Vested Account may be forfeited and applied according to
the provisions of Section 3.04. An unclaimed Vested Account shall not be
forfeited until the latest of the date the Member attains age 62, attains
Normal Retirement Age, or six months after the date the Member, spouse, or
Beneficiary is notified, by certified or registered mail addressed to his last
known address, that he is entitled to a benefit. If by the latest date above,
the Member, spouse, or Beneficiary has not claimed the Vested Account or made
his whereabouts known in writing, the Plan Administrator may treat the Vested
Account as a Forfeiture.
If a Member's Vested Account is forfeited according to the provisions of the
above paragraph and the Member or the Member's spouse or Beneficiary at any
time makes a claim for benefits, the forfeited Vested Account shall be
reinstated, unadjusted for any gains or losses occurring after the date it was
forfeited. The reinstated Vested Account shall then be distributed to the
Member, spouse, or Beneficiary according to the preceding provisions of the
Plan.
SECTION 8.06 - DELEGATION OF AUTHORITY.
All or any part of the administrative duties and responsibilities under this
article may be delegated by the Plan Administrator to a retirement committee.
The duties and responsibilities of the retirement committee shall be set out in
a separate written agreement.
Article VIIIA
Trust Provisions
SECTION 8A.01 - THE TRUST AND TRUST FUND.
If Item T(1) is selected, we have established this Trust by executing the
attached Adoption Agreement. The Trust is established for the purpose of
holding and distributing the Trust Fund under the provisions of the Plan. The
Trust is construed, regulated, and administered under the law of the state in
which we have our principal office.
The Trust Fund consists of the total funds held under the Trust for the purpose
of providing benefits for Members. These funds result from Contributions made
under the Plan, which are forwarded to the Trustee to be deposited in the Trust
Fund. The Trust Fund shall be valued at current fair market value as of the
last day of the last calendar month ending in the Plan Year and, at the
discretion of the Trustee, may be valued more frequently. The valuation shall
take into consideration investment earnings credited, expenses charged,
payments made, and changes in the values of the assets held in the Trust Fund.
The Account of a Member shall be credited with its share of the gains and
losses of the Trust Fund. That part of a Member's Account invested in a funding
arrangement which establishes an account or accounts for such Member thereunder
shall be credited with the gain or loss from such account or accounts. That
part of a Member's Account which is invested in other funding arrangements
shall be credited with a proportionate share of the gain or loss of such
investments. The share shall be determined by multiplying the gain or loss of
the investment by the ratio of the part of the Member's Account invested in
such funding arrangement to the total of the Trust Fund invested in such
funding arrangement.
SECTION 8A.02 - THE TRUSTEE.
We have appointed the Trustee named in Item T. We have the power to appoint an
additional or successor Trustee or remove a Trustee at any time by amending the
Adoption Agreement.
The Trustee accepts this appointment by executing the Adoption Agreement or an
amendment to it. A Trustee may resign at any time upon thirty days written
notice to us. If a Trustee is removed, resigns or dies, the successor Trustee
whom we appoint has the same powers and duties as the Trustee replaced. Pending
the appointment of and acceptance of the successor Trustee, a remaining Trustee
has full power to act. When appointment has been accepted by a successor
Trustee, the removed or resigning Trustee must assign, transfer, pay over, and
deliver to the successor Trustee all of the assets which then constitute the
Trust Fund.
If there are two or more persons appointed as Trustees, the Trustees may, in
writing, name one of their number to act in the execution of all documents
relating to the Plan and Trust. When more than two persons have been appointed
as Trustee, all acts and decisions shall be made by majority vote.
SECTION 8A.03 - DUTIES OF TRUSTEE.
It is the duty of the Trustee to accept and hold the Trust Fund and administer
it according to the provisions of the Trust. The Trustee has no duty to demand
or require that Contributions
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<PAGE> 35
be made to the Trust, nor shall a Trustee be liable to determine the amount of
any Contributions to the Trust.
The Plan is administered by the Plan Administrator. The Trustee is not
responsible for any aspect of its administration. The Trustee is not required
to look into any action taken by the Named Fiduciary, Plan Administrator, or us
and will be fully protected in taking, permitting or omitting any action on the
basis of our actions. Any action by the Named Fiduciary, Plan Administrator, or
us according to the Plan provisions shall be evidenced in writing. We will
indemnify the Trustee by satisfying any liabilities the Trustee may incur in
acting in accordance with the Trust provisions upon written instruction from
the Named Fiduciary, Plan Administrator, or us.
SECTION 8A.04 -- POWERS OF TRUSTEE.
Except where the Plan expressly provides that the Trustee is subject to the
direction of the Named Fiduciary, Plan Administrator, or us, the Trustee is
authorized and empowered.
(a) to apply for and invest all or any part of the assets of the Trust Fund in
the Annuity Contract, an Insurance Policy, or both, issued by the Insurer
and to hold the Annuity Contract and any Insurance Policy as owner;
(b) to invest and reinvest all or any part of the assets of the Trust Fund in
any bonds, debentures, notes, mortgages or mortgage participations,
preferred stocks, common stocks or other securities, or other real or
personal properties;
(c) to sell, exchange, convey, transfer, or otherwise dispose of any property
held by it, by private contract or at public auction;
(d) to exercise the voting rights of any stocks, bonds or other securities and
to exercise any of the powers of an owner with respect to stocks, bonds,
securities, or other property held in the Trust Fund;
(e) to retain in cash an amount which the Trustee considers advisable, and to
deposit cash in any depository selected by it, without liability for
interest;
(f) to make, execute, acknowledge, and deliver any instruments necessary to
carry out the powers granted it;
(g) to employ such agents, actuaries, clerical help, custodians, and others as
are needed to carry out the Trustee's duties;
(h) to consult with legal counsel, including our counsel, with respect to the
meaning or construction of, or the Trustee's obligations or duties under,
the Plan and Trust, or with respect to any action or proceeding or any
question of law. The Trustee shall be fully protected with respect to any
action it takes in good faith pursuant to the advice of such counsel.
(i) to enforce any right, obligation, or claim and, in its absolute
discretion, to protect in any way the interest of the Trust Fund and if
the Trustee considers such an action to be in the best interest of the
Trust Fund, to abstain from the enforcement of any right, obligation, or
claim and to abandon any property it has held.
SECTION 8A.05 -- EXPENSES.
We pay the expenses incurred by the Trustee in the performance of its duties,
any fees for legal services rendered to the Trustee, and compensation to the
Trustee which we have mutually agreed upon in writing. The Trustee may charge
against the Trust Fund taxes imposed with respect to the Trust Fund or its
income.
SECTION 8A.06 -- ACCOUNTING.
The Trustee shall maintain accurate and detailed records on all receipts,
investments, disbursements, and other transactions performed in its capacity as
Trustee. These records must be open to inspection and audit by the Plan
Administrator, Named Fiduciary, and us at all reasonable times.
Writing (handwriting, typing, printing), photostating, photographing,
microfilming, magnetic impulse, mechanical or electrical recording, or other
forms of data compilation shall be acceptable means of keeping records.
The Trustee shall file all reports, returns, and information required under the
Code and regulations and rulings issued under the Code.
The Trustee shall file with us an accounting of its transactions as soon as
practical after each Yearly Date or any other date we may specify. Any report
or accounting which the Trustee files with us is open to inspection by a Member
for a period of sixty days following the date it is filed. At the end of the
sixty-day period, the Trustee is released and discharged as to any matters set
forth in the report or account, except with respect to any act or omission as
to which a Member, the Plan Administrator, the Named Fiduciary or we have filed
a written objection within the sixty-day period.
________________________________________________________________________________
Article IX
General Provisions
________________________________________________________________________________
SECTION 9.01 -- AMENDMENTS.
We may amend a selection or specification in the Adoption Agreement at any time,
including any remedial retroactive changes (within the time specified by
Internal Revenue Service regulation) to comply with any law or regulation issued
by any governmental agency to which the Plan is subject. An amendment may not
diminish or adversely affect any accrued interest or benefit of Members or
their Beneficiaries or eliminate an optional form of distribution with respect
to benefits attributable to service before the amendment nor allow reversion or
diversion of Plan assets to us at any time, except as may be required to comply
with any law or regulation issued by any governmental agency to which the Plan
is subject. No amendment to this Plan shall be effective to the extent that it
has the effect of decreasing a Member's accrued benefit. However, a Member's
Account may be reduced to the extent permitted under Code Section 412(c)(8).
For purposes of this paragraph, a Plan amendment which has the effect of
decreasing a Member's Account or eliminating an optional form of benefit, with
respect to benefits attributable to service before the amendment shall be
treated as reducing an accrued benefit. Furthermore, if the vesting schedule of
the Plan is amended, in the case of an Employee who is a Member as of the later
of the date such amendment is adopted or the date it becomes effective, the
nonforfeitable percentage (determined as of such date) of such Employee's right
to his employer-derived accrued benefit will not be less than his percentage
computed under the Plan without regard to such amendment. We may amend the Plan
by adding overriding plan language to the Adoption Agreement in order to
satisfy Code Sections 415 and
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416 because of the required aggregation of multiple plans under those sections.
We may amend the Plan by adding certain model amendments published by the
Internal Revenue Service which specifically provide that their adoption will not
cause the Plan to be treated as individually designed. An amendment to this Plan
will be forwarded to Principal Mutual Life Insurance Company, the prototype plan
sponsor.
If we amend the Plan for any reason other than those set out above or if the
Plan loses its qualified status, the Plan shall not be a prototype plan within
the meaning of governmental regulations. In that event, Principal Mutual Life
Insurance Company will not be the prototype plan sponsor and the Plan will not
be a prototype plan. As the Employer, we reserve the right to continue our
retirement program under a document separate and distinct from this Plan. In
such event, all rights and obligations of any Member, Beneficiary, or of ours
under this document shall cease. Assets held in support of this Plan will be
transferred to the designated funding medium under the new or restated plan
and, if applicable, trust, in the manner permitted under, and subject to
the provisions of, the Annuity Contract.
We delegate authority to amend this Plan to Principal Mutual Life Insurance
Company as sponsor. We hereby consent to any such amendment. However, no such
amendment shall increase the duties of the Named Fiduciary without his consent.
Such an amendment shall not deprive any Member or Beneficiary of any accrued
benefit except to the extent necessary to comply with any law or
regulation issued by any governmental agency to which this Plan is subject.
Such an amendment shall not provide that the Investment Fund be used for
any purpose other than the exclusive benefit of Members or their Beneficiaries
or that the Investment Fund ever revert to or be used by us.
Any amendment to this Plan by Principal Mutual Life Insurance Company, as
sponsor, shall be deemed to be an amendment to this Plan by us. The effective
date of any amendment shall be specified in the written instrument of amendment.
An amendment shall not decrease a Member's vested interest in the Plan. If an
amendment to the Plan, or a deemed amendment in the case of a change in
top-heavy status of the Plan as provided in Section 10.03, changes the
computation of Vesting Percentage (whether directly or indirectly), each Member
or former Member.
(a) who has completed at least three Years of Service with us on the date the
election period described below ends (five years of Service if the Member
does not have at least one Hour of Service in a Plan Year beginning after
December 31, 1988) and
(b) whose Vesting Percentage will be determined on any date after the date of
the change may elect, during the election period, to have the
nonforfeitable percentage of his Account which results from our
Contributions determined without regard to the amendment. This election may
not be revoked. If after the Plan is changed the Member's Vesting
Percentage will at all times be as great as it would have been if the
change had not been made, no election needs to be provided. The election
period shall begin no later than the date the Plan amendment is adopted, or
deemed adopted in the case of a change in the top-heavy status of the Plan,
and end no earlier than the sixtieth day after the latest of the date the
amendment is adopted (deemed adopted) or becomes effective, or the date the
Member is issued written notice of the amendment (deemed amendment) by us
or the Plan Administrator.
SECTION 9.02 - MERGERS AND DIRECT TRANSFERS.
The Plan may not be merged or consolidated with, nor have its assets or
liabilities transferred to, any other retirement plan, unless each Member in the
plan would (if the plan then terminated) receive a benefit immediately after the
merger, consolidation or transfer which is equal to or greater than the benefit
the Member would have been entitled to receive immediately before the merger,
consolidation or transfer (if this Plan had then terminated). We may enter into
merger agreements or direct transfer of assets agreements with the employers
under other retirement plans which are qualifiable under Code Section 401(a),
including an elective transfer, and may accept the direct transfer of plan
assets, or may transfer plan assets, as a party to any such agreement. We shall
not consent to, or be a party to a merger, consolidation or transfer of assets
with a defined benefit plan if such action would result in a defined benefit
feature being maintained under this Plan.
The Plan may accept a direct transfer of plan assets on behalf of an Eligible
Employee. If the Eligible Employee is not an Active Member when the transfer is
made, the Eligible Employee shall be deemed to be an Active Member only for the
purpose of investment and distribution of the transferred assets. Our
Contributions shall not be made for or allocated to the Eligible Employee and he
may not make Member Contributions, until the time he meets all of the
requirements to become an Active Member.
The Plan shall hold, administer and distribute the transferred assets as a part
of the Plan. The Plan shall maintain a separate account for the benefit of the
Employee on whose behalf the Plan accepted the transfer in order to reflect the
value of the transferred assets. Unless a transfer of assets to the Plan is an
elective transfer, the Plan shall apply the optional forms of benefit
protections described in Section 9.01 to all transferred assets. A transfer is
elective if: (1) the transfer is voluntary, under a fully informed election by
the Member; (2) the Member has an alternative that retains his Code Section
411(d)(6) protected benefits (including an option to leave his benefit in the
transferor plan, if that plan is not terminating); (3) if the transfer or plan
is subject to Code Sections 401(a)(11) and 417, the transfer satisfies
the applicable spousal consent requirements of the Code; (4) the notice
requirements under Code Section 417, requiring a written explanation with
respect to an election not to receive benefits in the form of a qualified
joint and survivor annuity, are met with respect to the Member and spousal
transfer election; (5) the Member has a right to immediate distribution from the
transferor plan under provisions in the plan not inconsistent with Code Section
401(a); (6) the transferred benefit is equal to the Member's entire
nonforfeitable accrued benefit under the transferor plan, calculated to be at
least the greater of the single sum distribution provided by the transferor plan
(if any) or the present value of the Member's accrued benefit under the
transferor plan payable at the plan's normal retirement age and calculated using
an interest rate subject to the restrictions of Code Section 417(e) and subject
to the overall limitations of Code Section 415; (7) the Member has a 100%
nonforfeitable interest in the transferred benefit; and (8) the transfer
otherwise satisfies applicable Treasury regulations.
SECTION 9.03 - PROVISIONS RELATING TO THE INSURER AND OTHER PARTIES.
The obligations of an Insurer shall be governed solely by the provisions of the
Annuity Contract or Insurance Policy. The Insurer shall not be required to
perform any act not provided
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in or contrary to the provisions of the Annuity Contract or Insurance Policy.
The Annuity Contract when purchased will comply with the Plan. See Section 9.08.
Any issuer or distributor of investment contracts or securities is governed
solely by the terms of its policies, written investment contract, prospectuses,
security instruments, and any other written agreements entered into with the
Trustee.
Such insurer, issuer, or distributor is not a party to the Plan, nor bound in
any way by the Plan provisions. Such parties shall not be required to look to
the terms of this Plan, nor to determine whether we, the Plan Administrator,
the Trustee, or the Named Fiduciary have the authority to act in any particular
manner or to make any contract or agreement.
Until notice of any amendment or termination of this Plan or of a change in
Trustee has been received by the Insurer at its home office or an issuer or
distributor at their principal address, they are and shall be fully protected
in assuming that the Plan has not been amended or terminated and in dealing
with any party acting as Trustee according to the latest information which they
have received at their home office or principal address.
SECTION 9.04 -- EMPLOYMENT STATUS.
Nothing contained in this Plan gives any Employee the right to be retained in
our employ or to interfere with our right to discharge any Employee.
SECTION 9.05 -- RIGHTS TO PLAN ASSETS.
An Employee shall not have any right to or interest in any assets of the Plan
upon termination of employment or otherwise except as specifically provided
under this Plan, and then only to the extent of the benefits payable to such
Employee according to the Plan provisions.
Any final payment or distribution to a Member or his legal representative or to
any Beneficiaries, spouse, or Contingent Annuitant of such Member under the
Plan provisions shall be in full satisfaction of all claims against the Plan,
the Named Fiduciary, the Plan Administrator, the Insurer, the Trustee, and us
arising under or by virtue of the Plan.
SECTION 9.06 -- BENEFICIARY.
Each Member may name a Beneficiary to receive any death benefit (other than any
income payable to a Contingent Annuitant) which may arise out of his membership
in the Plan. The Member may change his Beneficiary from time to time. Unless a
qualified election has been made, for purposes of distributing any death
benefits before Retirement Date, the Beneficiary of a Member who has a spouse
who is entitled to a Qualified Preretirement Survivor Annuity shall be the
Member's spouse. The Member's Beneficiary designation and any change of
Beneficiary shall be subject to the provisions of Section 6.03. It is the
responsibility of the Member to give written notice to the Insurer of the name
of the Beneficiary on a form furnished for that purpose.
With our consent, the Plan Administrator may maintain records of Beneficiary
designations for Members before their Retirement Dates. In that event, the
written designations made by Members shall be filed with the Plan Administrator.
If a Member dies before his Retirement Date, the Plan Administrator shall
certify to the Insurer the Beneficiary designation on its records for the
Member.
If there is no Beneficiary named or surviving when a Member dies, any death
benefit under the Annuity Contract or Insurance Policy will be paid according
to the provisions of the respective documents.
SECTION 9.07 -- NONALIENATION OF BENEFITS.
Benefits payable under the Plan are not subject to the claims of any creditor of
any Member, Beneficiary, spouse, or Contingent Annuitant. A Member, Beneficiary,
spouse, or Contingent Annuitant does not have any rights to alienate,
anticipate, commute, pledge, encumber or assign such benefits except in the case
of a Trustee approved loan as provided in Section 5.06. The preceding sentences
shall also apply to the creation, assignment, or recognition of a right to any
benefit payable with respect to a Member according to a domestic relations
order, unless such order is determined by the Plan Administrator to be a
qualified domestic relations order, as defined in Code 414(p), or any domestic
relations order entered before January 1, 1985.
SECTION 9.08 -- CONSTRUCTION.
The validity of the Plan or any of its provisions is determined under and
construed according to Federal law and, to the extent permissible, according to
the laws of the state in which we have our principal office. In case any
provision of this Plan is held illegal or invalid for any reason, such
determination shall not affect the remaining provisions of this Plan, and the
Plan shall be construed and enforced as if the illegal or invalid provision had
never been included.
In the event of any conflict between the provisions of the Plan and the terms
of any contract or policy issued hereunder, the provisions of the Plan control.
SECTION 9.09 -- LEGAL ACTIONS.
The Plan, the Plan Administrator, the Trustee and the Named Fiduciary are the
necessary parties to any action or proceeding involving the assets held with
respect to the Plan or administration of the Plan or Trust. No person employed
by us, no Member, former Member, or their Beneficiaries or any other person
having or claiming to have an interest in the Plan is entitled to any notice of
process. A final judgment entered in any such action or proceeding shall be
binding and conclusive on all persons having or claiming to have an interest in
the Plan.
SECTION 9.10 -- SMALL AMOUNTS.
If the Vested Account of a Member has never exceeded $3,500, the entire Vested
Account shall be payable in a single sum as of the earliest of his Retirement
Date, the date he dies, or the date he ceases to be an Employee for any other
reason. If Item X(3)(b) of the Adoption Agreement -- Plus is selected, the
Member shall not be treated as having ceased to be an Employee for any reason
other than retirement or death before the period of time elected in Item X(3)(b)
has elapsed and no small amount payment shall be made if he again becomes an
Employee before such period of time has elapsed. This is a small amounts
payment. If a small amount is payable as of the date the Member dies, the small
amounts payment shall be made to the Member's Beneficiary (spouse if the death
benefit is payable to the spouse). If a small amount is payable while the Member
is living, the small amounts payment shall be made to the Member. The small
amounts payment is in full settlement of all benefits otherwise payable.
Before the first Yearly Date in 1989, the Member's Vested Account which results
from deductible Voluntary Contributions
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<PAGE> 38
shall not be taken into account in determining whether his Vested Account has
exceeded $3,500.
No other small amounts payment shall be made.
SECTION 9.11 - WORD USAGE.
The masculine gender, where used in this Plan, shall include the feminine
gender and singular words as used in this Plan may include the plural, unless
the context indicates otherwise.
SECTION 9.12 - TRANSFERS BETWEEN PLANS.
If an Employee has been a member of another plan of ours which credited service
under the elapsed time method for any purpose which under this Plan is
determined using the hours method, then the Employee's service shall be equal
to the sum of (a), (b) and (c) below:
(a) The number of whole years of service credited to the Employee under the
other plan as of the date he became an Eligible Employee under this Plan.
(b) One year of service for the applicable service period in which he became an
Eligible Employee if he is credited with the required number of Hours of
Service. If we do not have sufficient records to determine the Employees's
actual Hours of Service in that part of the service period before the date
he became an Eligible Employee, the Hours of Service shall be determined
using an equivalency. For any month in which he would be required to be
credited with one Hour of Service, the Employee shall be deemed for purposes
of this section to be credited with 190 Hours of Service.
(c) The Employee's service determined under this Plan using the hours method
after the end of the service period in which he became an Eligible Employee.
If an Employee has been a member of another plan of ours which credited service
under the hours method for any purpose which under this Plan is determined
using the elapsed time method, then the Employee's service shall be equal to
the sum of (d), (e) and (f) below:
(d) The number of whole years of service credited to the Employee under the
other plan as of the beginning of the service period under that plan in
which he became an Eligible Employee under this Plan.
(e) The greater of (1) the service that would be credited to the Employee for
that entire service period using the elapsed time method or (2) the service
credited to him under the other plan as of the date he became an Eligible
Employee under this Plan.
(f) The Employee's service determined under this Plan using the elapsed time
method after the end of the applicable service period under the other plan
in which he became an Eligible Employee.
Any modification of service contained in this Plan shall be applicable to the
service determined pursuant to this section.
If an Employee used to be a member of a Controlled Group member's plan which
credited service under a different method than is used in this Plan, in order
to determine entry and vesting, the provisions above shall apply as though the
Controlled Group member's plan were our plan. If the method of crediting
service under this Plan is changed, the service credited to an Employee shall
be equal to the service that would be credited to him under the above provisions
as though the Plan as in effect before the change were another plan of ours.
SECTION 9.13 - PARTNERSHIP OR SOLE PROPRIETORSHIP.
(a) For the purpose of applying the provisions of this Plan as to any Plan
Year in which we are a partnership or sole proprietorship, the following
terms are defined:
Control(s) means, with regard to a trade or business, one owner-employee
owns or a group of owner-employees together own (1) the entire interest in
such trade or business or (2) in the case of a partnership, more than fifty
percent of either the capital interest or the profits interest in the
partnership. An owner-employee, or a group of owner-employees, shall be
treated as owning any interest in a partnership which is owned, directly or
indirectly, by a partnership which such owner-employee, or group of
owner-employees, are considered to control within the meaning of the
preceding sentence.
Earned Income means, for a Self-Employed individual, net earnings from
self-employment in the trade or business for which this Plan is established
if such Self-Employed individual's personal services are a material income
producing factor for that trade or business. Earned Income shall be
determined without regard to items not included in gross income and the
deductions properly allocable to or chargeable against such items. After the
TEFRA Compliance Date, Earned Income shall be reduced for our employer
contributions to our qualified retirement plan(s) to the extent deductible
under Code Section 404.
Net earnings shall be determined with regard to the deduction allowed to us
by Code Section 164(f) for taxable years beginning after December 31, 1989.
In applying the provisions of this Plan, the Self-Employed Individual's
Earned Income shall be deemed to be his Pay. For purposes of Section 3.06,
Earned Income shall include earned income within the meaning of Code
Section 911 from sources outside the United States and shall be deemed to be
his Compensation. If any exclusions are used for Pay, Earned Income shall be
adjusted by multiplying the Self-Employed Individual's Earned Income by a
fraction. The numerator of the fraction is the total Pay for all Nonhighly
Compensated Employees after such exclusions are applied. The denominator of
the fraction is the total Pay for all Nonhighly Compensated Employees
before such exclusions are applied. Self-Employed Individuals who are
Nonhighly Compensated Employees are not included for purposes of calculating
this fraction. Earned income includes a Self-Employed Individual's elective
contributions.
Owner-Employee means a Self-Employed Individual who, in the case of a sole
proprietorship, owns the entire interest in the unincorporated trade or
business for which this Plan is established. If this Plan is established for
a partnership, an Owner-Employee means a Self-Employed individual who owns
more than ten percent of either the capital interest or profits interest in
such partnership.
In applying the provisions of this Plan, an Owner-Employee shall be deemed
to be an Employee.
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<PAGE> 39
Self-Employed Individual means, with respect to any Fiscal Year, an
individual who has Earned Income for the Fiscal Year (or who would have
Earned Income but for the fact the trade or business for which this Plan is
established did not have net profits for such Fiscal Year).
In applying the provisions of this Plan, a Self-Employed Individual shall be
deemed to be an Employee.
(b) If contributions are made for or allocated to or benefits accrue to an
Owner-Employee who Controls, or a group of Owner-Employees who together
Control, both the trade or business for which this Plan is established and
one or more other trades or businesses, then this Plan and the plans
established for such other trade(s) or business(es) must, if they were
combined as a single plan, satisfy the requirements of Code Sections 401(a)
and 401(d) and regulations thereunder.
If this Plan provides Contributions for an Owner-Employee who Controls, or a
group of Owner-Employees who Control, one or more other trades or
businesses, the employees of each such other trade or business must be
included in a plan which satisfies Code Sections 401(a) and 401(d) and
regulations thereunder. Each such plan must provide contributions and
benefits which are not less favorable than the Contributions and benefits
provided for the Owner-Employee(s) under this Plan.
If an Owner-Employee is covered under another qualifiable retirement plan as
an owner-employee of a trade or business he does not Control, then the
plan(s) of the trade(s) or business(es) the Owner-Employee does Control
(including this Plan, if applicable) must provide contributions or benefits
as favorable as those provided under the most favorable plan of the trade or
business the Owner-Employee does not Control.
SECTION 9.14 -- QUALIFICATION OF PLAN.
If the Plan is denied initial qualification, it will terminate. We shall give
written notice to the insurer and Trustee of the denial in sufficient time so
the assets resulting from Contributions which were conditioned on initial
qualification of the Plan may be returned within one year after the date of
denial, but only if the application for the qualification is made by the time
prescribed by law for filing our return for the taxable year in which the Plan
is adopted, or such later date as the Secretary of the Treasury may prescribe.
The Insurer will be notified that the Annuity Contract is to be terminated and
any Insurance Policy surrendered. The Plan assets which result from Employer
Contributions and Member Contributions shall be returned to us and the Members,
respectively. The Trustee, the Plan Administrator, and the Named Fiduciary shall
then be discharged from all obligations under the Plan and Trust and the Insurer
shall be discharged from all obligations under the Annuity Contract and any
Insurance Policy. A Member or Beneficiary shall not have any right or claim to
the assets or to any benefit under this Plan before the Internal Revenue Service
determines that the Plan and Trust qualify under the provisions of Section
401(a) of the Code.
If the Plan loses its qualified status, it shall no longer be a prototype plan
within the meaning of governmental regulations. In that event, Principal Mutual
Life Insurance Company will no longer be the Plan sponsor. We agree to give
written notification to Principal Mutual Life Insurance Company of the loss of
qualification.
- -------------------------------------------------------
ARTICLE X
TOP-HEAVY PLAN REQUIREMENTS
- -------------------------------------------------------
SECTION 10.01 -- APPLICATION.
The provisions of this Article X shall supersede all other provisions in the
Plan to the contrary.
For the purpose of applying the Top-heavy Plan requirements of this article, all
members of the Controlled Group shall be treated as one Employer. The terms we,
us, and our as they are used in this article shall be deemed to include all
members of the Controlled Group unless the terms as used clearly indicate only
the Employer is meant.
The accrued benefit or account of a member which results from deductible
voluntary contributions shall not be included for any purpose under this
article.
The minimum vesting and contribution provisions of Sections 10.03 and 10.04
shall not apply to any Employee who is included in a group of Employees covered
by a collective bargaining agreement which the Secretary of Labor finds to be a
collective bargaining agreement between employee representatives and one or more
employers, including us, if there is evidence that retirement benefits were the
subject of good faith bargaining between such representatives. For this purpose,
the term "employee representatives" does not include any organization more than
half of whose members are employees who are owners, officers or executives.
SECTION 10.02 -- DEFINITIONS.
The following terms are defined for purposes of this article.
Aggregation Group means
(a) each of our retirement plans in which a Key Employee is a member during the
Year containing the Determination Date or one of the four preceding Years.
(b) each of our other retirement plans which allows the plan(s) described in (a)
above to meet the nondiscrimination requirement of Code Section 401(a)(4) or
the minimum coverage requirement of Code Section 410, and
(c) any of our other retirement plans not included in (a) or (b) above which we
desire to include as part of the Aggregation Group. Such a retirement plan
shall be included only if the Aggregation Group would continue to satisfy
the requirements of Code Section 401(a)(4) and Code Section 410.
The plans in (a) and (b) above constitute the "required" Aggregation Group. The
plans in (a), (b) and (c) above constitute the "permissive" Aggregation Group.
Compensation means, as to an Employee for any period, compensation as defined in
Item M for purposes of Plan Section 3.06. For purposes of determining who is a
Key Employee, Compensation shall include, in addition to compensation as defined
in Item M for purposes of Plan Section 3.06, elective contributions. Elective
contributions are amounts excludable from the gross income of the Employee under
Code Sections 125, 402(a)(8), 402(h) or 403(b), and contributed by us, at the
Employee's election, to a Code Section 401(k) arrangement, a simplified employee
pension, cafeteria plan or tax-sheltered
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<PAGE> 40
annuity. Elective contributions also include Pay deferred under a Code Section
457 plan maintained by us and Employee contributions "picked up" by a
governmental entity and, pursuant to Code Section 414(h)(2), treated as our
contributions.
Determination Date means as to this Plan, for any Year, the last day of the
preceding Year. However, if there is no preceding Year, the Determination Date
is the last day of such Year.
Key Employee means any Employee or former Employee (including Beneficiaries of
deceased Employees) who at any time during the determination period was
(a) one of our officers (subject to the maximum below) whose Compensation (as
defined in this section) for the Year exceeds 50 percent of the dollar
limitation under Code Section 415(b)(1)(A).
(b) one of the ten Employees who owns (or is considered to own, under Code
Section 318) more than a half percent ownership interest and one of the
largest interests in us during any Year of the determination period if such
person's Compensation (as defined in this section) for the Year exceeds the
dollar limitation under Code Section 415(c)(1)(A),
(c) a five-percent owner of us, or
(d) a one-percent owner of us whose Compensation (as defined in this section)
for the Year is more than $150,000.
Each member of the Controlled Group shall be treated as a separate employer for
purposes of determining ownership in us.
The determination period is the Year containing the Determination Date and the
four preceding Years. If we have fewer than 30 Employees, no more than three
Employees shall be treated as Key Employees because they are officers. If we
have between 30 and 500 Employees, no more than ten percent of our Employees
(if not an integer, increased to the next integer) shall be treated as Key
Employees because they are officers. In no event will more than 50 Employees be
treated as Key Employees because they are officers if we have 500 or more
Employees. The number of Employees for any Plan Year is the greatest number of
Employees during the determination period. Officers who are employees described
in Code Section 414(q)(8) shall be excluded. If we have more than the maximum
number of officers to be treated as Key Employees, the officers shall be ranked
by the amount of annual Compensation (as defined in this section), and those
with the greater amount of annual Compensation during the determination period
shall be treated as Key Employees. To determine the ten Employees owning the
largest interests in us, if more than one Employee has the same ownership
interest, the Employee(s) having the greater annual Compensation shall be
treated as owning the larger interest(s). The determination of who is a Key
Employee shall be made according to Code Section 416(i)(1) and the regulations
thereunder.
Non-key Employee means a person who is a non-key employee within the meaning of
Code Section 416 and regulations thereunder.
Present Value means the present value of a member's accrued benefit under a
defined benefit plan as of his normal retirement age (attained age if later)
or, if the plan provides non-proportional subsidies, the age at which the
benefit is most valuable. The accrued benefit of any Employee (other than a Key
Employee) shall be determined under the method which is used for accrual
purposes for all our plans or if there is no one method which is used for
accrual purposes for all our plans, as if such benefit accrued not more rapidly
than the slowest accrual rate permitted under Code Section 411(b)(1)(C). The
Present Value shall be based only on the interest and mortality rates specified
in the Adoption Agreement. If the Present Value of accrued benefits is
determined for a member under more than one defined benefit plan included in
the Aggregation Group, all such plans shall use the same actuarial assumptions
to determine the Present Value.
Top-heavy Plan means a plan which is a top-heavy plan for any plan year
beginning after December 31, 1983. This Plan shall be a Top-heavy Plan if
(a) the Top-heavy Ratio for this Plan alone exceeds sixty percent and this Plan
is not part of any required Aggregation Group or permissive Aggregation
Group.
(b) this Plan is a part of a required Aggregation Group, but not part of a
permissive Aggregation Group, and the Top-heavy Ratio for the required
Aggregation Group exceeds sixty percent.
(c) this Plan is a part of a required Aggregation Group and part of a permissive
Aggregation Group and the Top-heavy Ratio for the permissive Aggregation
Group exceeds sixty percent.
Top-heavy Ratio means the ratio calculated below for this Plan or for the
Aggregation Group.
(a) The Top-heavy Ratio for this Plan or for the Aggregation Group (including
any simplified employee pension plan) if the Aggregation Group does not
contain a defined benefit plan during the five-year period ending on the
determination date which has or has had accrued benefits, is a fraction, the
numerator of which is the sum of the account balances of all Key Employees
as of the determination date and the denominator of which is the sum of all
account balances of all employees as of the determination date. Both the
numerator and denominator of the Top-heavy Ratio are adjusted for any
distribution of an account balance made in the five-year period ending on
the determination date in accordance with Code Section 416 and the
regulations thereunder. Both the numerator and denominator of the Top-heavy
Ratio are increased to reflect any contribution not actually made as of the
Determination Date, but which is required to be taken into account on that
date under Code Section 416 and the regulations thereunder.
(b) The Top-heavy Ratio for the Aggregation Group (including any simplified
employee pension plan) if the Aggregation Group contains a defined benefit
plan during the five-year period ending on the determination date which has
or has had accrued benefits, is a fraction, the numerator of which is the
sum of the account balances under the defined contribution plan(s) of all
Key Employees and the Present Value of accrued benefits under the defined
benefit plan(s) for all Key employees, and the denominator of which is the
sum of the account balances under the defined contribution plan(s) for all
employees and the Present Value of accrued benefits under the defined
benefit plans for all employees. Both the numerator and denominator of the
Top-heavy Ratio are adjusted for any distribution of an account balance or
an accrued benefit (including those made from terminated plan(s) of ours
which would have been part of
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<PAGE> 41
the required Aggregation Group had such plan(s) not been terminated) made
in the five-year period ending on the determination date in accordance with
Code Section 416 and the regulations thereunder.
(c) For purposes of (a) and (b) above, the value of account balances and the
Present Value of accrued benefits will be determined as of the most recent
valuation date that falls within or ends with the 12-month period ending on
the determination date, except as provided in Code Section 416 and the
regulations thereunder for the first and second plan years of a defined
benefit plan. The account balances and accrued benefits of an employee who
is not a Key Employee but who was a Key Employee in a prior year will be
disregarded. The calculation of the Top-heavy Ratio and the extent to which
distributions, rollovers and transfers during the five-year period ending
on the determination date are to be taken into account, shall be determined
according to the provisions of Code Section 416 and regulations thereunder.
The account balances and accrued benefits of an individual who has
performed no service for us during the five-year period ending on the
determination date shall be excluded from the Top-heavy Ratio until the
time the individual again performs service for us. Deductible employee
contributions will not be taken into account for purposes of computing the
Top-heavy Ratio. When aggregating plans, the value of account balances and
accrued benefits will be calculated with reference to the determination
dates that fall within the same calendar year.
Account, as used in this definition, means the value of an employee's account
under one of our retirement plans on the latest valuation date. In the case of a
money purchase plan or target benefit plan, such value shall be adjusted to
include any contributions made for or by the employee after the valuation date
and on or before such determination date or due to be made as of such
determination date but not yet forwarded to the insurer or trustee. In the case
of a profit sharing plan, such value shall be adjusted to include any
contributions made for or by the employee after the valuation date and on or
before such determination date. During the first Year of any profit sharing plan
such adjustment in value shall include contributions made after such
determination date that are allocated as of a date in such Year. The
nondeductible voluntary contributions which an employee makes under a defined
benefit plan of ours shall be treated as if they were contributions under a
separate defined contribution plan.
Valuation Date means, as to this Plan, the last day of the last calendar month
ending in a Year.
Year means the Plan Year unless another year is specified by us in a separate
written resolution in accordance with regulations issued by the Secretary of the
Treasury or his delegate.
SECTION 10.03 -- MODIFICATION OF VESTING REQUIREMENTS.
If a Member's Vesting Percentage determined under the vesting schedule selected
in Item V is not as great as the Vesting Percentage would be if it were
determined under a schedule permitted in Code Section 416, the following shall
apply. During any Year in which the Plan is a Top-heavy Plan, the Member's
Vesting Percentage shall be the greater of the Vesting Percentage determined
under the schedule selected in Item U or,
(a) if the vesting schedule provides for partial vesting between 0% and 100%,
the schedule below.
<TABLE>
VESTING SERVICE VESTING
(whole years) PERCENTAGE
<S> <C>
Less than 2 0
2 20
3 40
4 60
5 80
6 or more 100
</TABLE>
(b) if the vesting schedule provides for only 0% or 100% vesting, the schedule
below.
<TABLE>
VESTING SERVICE VESTING
(whole years) PERCENTAGE
<S> <C>
Less than 3 0
3 or more 100
</TABLE>
The applicable schedule above shall not apply to Members who are not credited
with an Hour of Service after the Plan first becomes a Top-heavy Plan. The
Vesting Percentage determined above applies to all of the Member's Account
resulting from our Contributions, including Contributions we make before the
TEFRA Compliance Date or when this Plan is not a Top-heavy Plan.
If, in a later Year, this Plan is not a Top-heavy Plan, a Member's Vesting
Percentage shall be determined according to the provisions of Item U. A Member's
Vesting Percentage determined under either Item U or the schedule above shall
never be reduced and the election procedures of Section 9.01 shall apply when
changing to or from the above schedule as though the automatic change were the
result of an amendment.
The part of the Member's Vested Account resulting from the minimum contributions
required pursuant to Section 10.04 shall not be forfeited because of a period of
reemployment after benefit payments have begun or because of a withdrawal of
require contributions, if any.
SECTION 10.04 -- MODIFICATION OF CONTRIBUTIONS.
For any Plan Year in which the Plan is top-heavy, only the first $200,000
(multiplied by the Adjustment Factor) of a Member's annual compensation shall be
taken into account for purposes of determining Employer Contributions under the
Plan. For any Plan Year beginning after December 31, 1988, in determining the
Compensation, as defined in this article, of a Member for purposes of this
limitation, the rules of Code Section 414(q)(6) shall apply, except that in
applying such rules, the term "family" shall include only the spouse of the
Member and any lineal descendants of the Member who have not attained age 19
before the close of the Plan Year. If as a result of the application of such
rules the adjusted $200,000 limitation is exceeded, then the limitation shall be
prorated among the affected individuals in proportion to each such individual's
Compensation as determined under the definition in this article prior to the
application of this limitation.
During any Year in which this Plan is a Top-heavy Plan, we shall make a minimum
contribution or allocation on the last day of the Year for each person who is a
Non-key Employee on that day and who either was or could have been an Active
Member during the Year. A Non-key Employee is not required to have a minimum
number of Hours of Service or minimum
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<PAGE> 42
amount of Pay, or to have made any Elective Deferral Contributions in order to
be entitled to this minimum. The selections we make in Item R shall determine if
Key Employees who are Employees on the last day of the Year are also entitled to
this minimum and if the minimum contribution or allocation shall apply in Years
when this Plan is not a Top-heavy Plan. The minimum contribution and allocation
for such person shall be equal to the amount specified in Item R. If overriding
provisions are not specified in Item R, the minimum is the lesser of (a) or (b)
below:
(a) Three percent of such person's Compensation (as defined in this article).
(b) The "highest percentage" of Compensation (as defined in this article) for
such Year at which our contributions are made for or allocated to any Key
Employee. The highest percentage shall be determined by dividing our
contributions made for or allocated to each Key Employee during the Year by
the amount of his Compensation (as defined in this article) which is not
more than the maximum set out above, and selecting the greatest quotient
(expressed as a percentage). To determine the highest percentage, all our
defined contribution plans within the Aggregation Group shall be treated as
one plan. The provisions of this paragraph shall not apply if this Plan and
a defined benefit plan of ours are required to be included in the
Aggregation Group and this Plan enables the defined benefit plan to meet
the requirements of Code Section 401(a)(4) or Code Section 410.
If our contributions and allocations otherwise required under the defined
contribution plan(s) are at least equal to the minimum above, no additional
contribution or allocation shall be required. If our contributions and
allocations are less than the minimum above and our Contributions under this
Plan are allocated to Members, our Contributions (other than Elective Deferral
Contributions) shall be reallocated to provide the minimum. The remaining
Contributions shall be allocated as provided in the preceding articles of this
Plan. If our total contributions and allocations are less than the minimum above
and our Contributions under this Plan are not allocated, we shall contribute the
difference for the Year.
The minimum contribution or allocation applies to all of our defined
contribution plans in the aggregate which are Top-heavy Plans. A minimum
allocation under a profit sharing plan shall be made without regard to whether
or not we have profits. If a person who is otherwise entitled to an additional
contribution or allocation above is also covered under a defined benefit plan of
ours which is a Top-heavy Plan during that same Year, the minimum benefits for
him shall not be duplicated. The defined benefit plan shall provide an annual
benefit for him on, or adjusted to, a straight life basis of the lesser of (c)
two percent of his average pay multiplied by his years of service or (d) twenty
percent of his average pay. Average pay and years of service shall have the
meaning set forth in such defined benefit plan for this purpose.
We may provide overriding provisions in Item R to satisfy the requirements of
Code Section 416 because of the aggregation of multiple plans.
For purposes of this section, any employer contribution made according to a
salary reduction or similar arrangement shall not apply before the first Yearly
Date in 1985. On and after the first Yearly Date in 1989, any such employer
contributions and employer contributions which are matching contributions, as
defined in Code Section 401(m), shall not apply in determining if the minimum
contribution requirement has been met, but shall apply in determining the
minimum contribution required. Forfeitures credited to a Member's account are
treated as employer contributions.
The requirements of this section shall be met without regard to contributions
under Chapter 2 of the Code (relating to tax on self-employment), Chapter 21 of
the Code (relating to Federal Insurance Contributions Act), Title II of the
Social Security Act or any other Federal or state law.
SECTION 10.5 -- MODIFICATION OF CONTRIBUTION LIMITATION.
If the provisions of subsection (l) of Section 3.06 are applicable for any
Limitation Year during which this Plan is a Top-heavy Plan, the Contribution
limitations shall be modified. The definitions of Defined Benefit Plan Fraction
and Defined Contribution Plan Fraction in Section 3.06 shall be modified by
substituting "100 percent" in lieu of "125 percent." In addition, an adjustment
shall be made to the numerator of the Defined Contribution Plan Fraction. The
adjustment is a reduction of that numerator similar to the modification of the
Defined Contribution Plan Fraction described in Section 3.06 and shall be made
with respect to the last Plan Year beginning before January 1, 1984.
The modifications in the paragraph above shall not apply with respect to a
Member so long as employer contributions, forfeitures or nondeductible employee
contributions are not credited to his account under this or any of our other
defined contribution plans and benefits do not accrue for such Member under
our defined benefit plan(s), until the sum of his Defined Contribution
and Defined Benefit Plan Fractions is less than 1.0.
The modification of the Contribution limitation shall not apply if both of the
following requirements are met:
(a) This Plan would not be a Top-heavy Plan if "ninety percent" were
substituted for "sixty percent" in the definition of Top-heavy Plan.
(b) A Non-key Employee who is not covered under a defined contribution plan of
ours, accrues a minimum benefit on, or adjusted to, a straight life basis
equal to the lesser of (a) twenty percent of his average pay or (b) two
percent of his average pay multiplied by his years of service, increased by
one percentage point for each year (not to exceed ten in the case of (a))
earned while the benefit limitation is to be modified as described above.
The account of a Non-key Employee who is covered under only one or more
defined contribution plans of ours, is credited with a minimum employer
contribution or allocation under such plan(s) equal to four percent of the
person's Compensation for each year in which the plan is a Top-heavy Plan.
If a Non-key Employee is covered under both defined contribution and
defined benefit plans of ours, (i) a minimum accrued benefit for such
person equal to the amount determined above for a person who is not covered
under a defined contribution plan is accrued in the defined benefit plan(s)
or (ii) a minimum contribution or allocation equal to 7.5% of the person's
Compensation for a Year in which the plans are Top-heavy Plans will be
credited to his account under the defined contribution plans.
-39-
<PAGE> 43
CTD 07815
THE PRINCIPAL
FINANCIAL GROUP
PROTOTYPE FOR
SAVINGS PLANS
S
A THIS PLAN IS A 401(K) PROFIT SHARING PLAN
V
I -------------------------------------------
N -------------------------------------------
G
S
ADOPTION AGREEMENT - PLUS
P
L
A
N
IRS SERIAL NO.: D347609B
ADOPTION AGREEMENT PLAN NO.: 001
TO BE USED WITH BASIC PLAN NO.: 03
APPROVED: OCTOBER 26, 1992
103
<PAGE> 44
TABLE OF CONTENTS
A. ADOPTION AGREEMENT..................................................... 1
B. EMPLOYER .............................................................. 1
C. PLAN NAME ............................................................. 1
D. EFFECTIVE DATE ........................................................ 1
E. YEARLY DATE ........................................................... 2
F. FISCAL YEAR ........................................................... 2
G. NAMED FIDUCIARY ....................................................... 2
H. PLAN ADMINISTRATOR .................................................... 2
I. PREDECESSOR ........................................................... 3
J. ELIGIBLE EMPLOYEE ..................................................... 4
K. ENTRY REQUIREMENTS..................................................... 5
L. ENTRY DATE ............................................................ 7
M. PAY ................................................................... 7
N. ELECTIVE DEFERRAL CONTRIBUTIONS ....................................... 9
O. MATCHING CONTRIBUTIONS ................................................ 10
P. OTHER EMPLOYER CONTRIBUTIONS AND FORFEITURES .......................... 12
Q. NET PROFITS AND CONTRIBUTION REQUIREMENTS ............................. 15
R. CONTRIBUTION MODIFICATIONS ............................................ 17
S. VOLUNTARY CONTRIBUTIONS ............................................... 18
T. INVESTMENT ............................................................ 18
U. VESTING PERCENTAGE .................................................... 21
V. VESTING SERVICE ....................................................... 22
W. WITHDRAWAL BENEFITS ................................................... 24
X. RETIREMENT AND THE START OF BENEFITS .................................. 25
Y. FORMS OF DISTRIBUTION ................................................. 27
Z. ADOPTING EMPLOYERS .................................................... 28
<PAGE> 45
Department of the Treasury
Washington, DC 20224
Person to Contact: Ms. Wiggins
Telephone Number: (202) 622-8380
Refer Reply to: E:EP:Q:8
Date: 10/26/92
INTERNAL REVENUE SERVICE
Plan Description: Prototype Non-standardized Profit Sharing Plan
FFN: 50307440001-003 Case: 9200861 EIN: 42-0127290
BPO: 01 Plan: 003 Letter Serial No: D347613b
PRINCIPAL MUTUAL LIFE INSURANCE CO
711 HIGH STREET
DES MOINES, IA 50309
Dear Applicant:
In our opinion, the amendment to the form of the plan identified above does not
in and of itself adversely affect the plan's acceptability under section 401 of
the Internal Revenue Code. This opinion relates only to the amendment to the
form of the plan. It is not an opinion as to the acceptability of any other
amendment or of the form of the plan as a whole, or as to the effect of other
Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this plan.
You are also required to send a copy of the approved form of the plan, any
approved amendments and related documents to each Key District Director of
Internal Revenue Service in whose jurisdiction there are adopting employers.
An employer who adopts the amended form of the plan after the date of the
amendment should apply for a determination letter by filing an application with
the Key District Director of Internal Revenue on Form 5307, Short Form
Application for Determination for Employee Benefit Plan.
This letter with respect to the amendment to the form of the plan does not
affect the applicability to the plan of the continued, interim and extended
reliance provisions of sections 13 and 17.03 of Rev. Proc. 89-9, 1989-1 C.B.
780. The applicability of such provisions may be determined by reference to the
initial opinion letter issued with respect to the plan.
If you, the sponsoring organization, have any questions concerning the IRS
processing of this case, please call the above telephone number. This number is
only for use of the sponsoring organization. Individual participants and/or
adopting employers with questions concerning the plan should contact the
sponsoring organization. The plan's adoption agreement must include the
sponsoring organization's address and telephone number for inquiries by adopting
employers.
If you write to the IRS regarding this plan, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial Number
and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.
Sincerely yours,
/s/
-------------------------------------------
Chief, Employee Plans Qualifications Branch
<PAGE> 46
THE PRINCIPAL FINANCIAL GROUP PROTOTYPE FOR SAVINGS PLANS
ADOPTION AGREEMENT -- PLUS
Use BLACK ink to complete the Adoption Agreement.
<TABLE>
<S> <C>
A. Select (1) or (2) A. This ADOPTION AGREEMENT is
1) If selected, check (a) or (b). 1) [x] the Employer's first adoption of The Principal Financial Group
if this plan is a restatement, Prototype for Savings Plans. Together with THE PRINCIPAL
check (b). FINANCIAL GROUP PROTOTYPE BASIC SAVINGS PLAN, it
constitutes
a) [x] a new plan.
b) If selected, fill in the b) [ ] a restatement of an existing plan (and trust). That plan
restatement date. was qualifiable under 401(a) of the Internal Revenue Code.
The provisions of this restatement are effective on
_______________________________________ ___________________
This is the RESTATEMENT DATE.
2) If selected, fill in the 2) [ ] Amendment No. _________________ to the Plan. It replaces all
amendment number and prior amendments to the Plan and the first Adoption Agreement.
date. The provisions of this amendment are effective on ______________
___________________.
B. Fill in exact, legal name. B. The terms we, us and our, as they are used in this Plan, refer to the
EMPLOYER.
We, WebSideStory, Inc. (a California Corporation)
__________________________________________________________________
______________________________________________________________________
______________________________________________________________________
are the Employer.
C. For example: ABC, Inc. C. The PLANS'S NAME is WebSideStory, Inc. (a California Corporation)
Savings Plan. _________________________________________________
401(k) Plan
_____________________________________________________________________
_____________________________________________________________________
D. Fill in the date your Prior D. Our retirement plan became effective on September 16, 1998.
Plan started if this Plan is a __________________
restatement. If this Plan is
new, use the first day of the This is the EFFECTIVE DATE.
first Plan Year.
</TABLE>
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<TABLE>
<S> <C>
E. Fill in Effective Date and E. The YEARLY DATE is the first day of each Plan Year. The Yearly Date
check (1), (2) or (3). is September 16 , 1998 and
------------------------------------------------------------- --------------
1) [ ] the same day of each following year.
2) The First Plan Year is short. 2) [x] each following January 1 (month and day).
-----------------------------------------------
3) A later Plan Year is short. 3) [ ] (a) each following (month and day)
--------------------------------------------
b) First day of short year (use through (b)
same month and day as in (a)) -----------------------------------------------------------------------
c) First day of new Plan Year. and (c) each following (month and day).
---------------------------------
If the first date in item E is after the Effective Date, Yearly Dates,
before the first date in Item E above, shall be determined under the provisions
of the Prior Plan (Plan) before that date.
F. The FISCAL YEAR is our taxable year and ends on
December 31 (month and day).
--------------------------------------------------
G. We are the NAMED FIDUCIARY, unless otherwise specified in (1) below.
1) Principal Life Insurance 1) [ ] _______________________________________________________________________________
Company may not be named. is the Named Fiduciary.
H. We are the PLAN ADMINISTRATOR, unless otherwise specified in (1) below.
1) Principal Life Insurance 1) [ ] _______________________________________________________________________________
Company may not be named. is the Plan Administrator. The address, phone number and tax filing number
of the Plan Administrator are the same as the Employer's unless otherwise
specified below.
Address:_______________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Phone No.:_____________________________________________________________________
Tax Filing No.:________________________________________________________________
</TABLE>
2
<PAGE> 48
<TABLE>
<S> <C>
I. Select any items below I. A PREDECESSOR employer is a firm of which we were once a part or a firm
which apply. absorbed by us because of a change of name, merger, acquisition or a
change of corporate status.
1) If this Plan is a continuation 1) [ ] A Predecessor is deemed to be the Employer for purposes of
of a plan of a Predecessor determining:
employer, service with that
Predecessor must be a) [ ] Entry Service.
treated as service with you.
b) [ ] Vesting Service.
c) [ ] Hours of Service required to be eligible for an Employer
Contribution.
d) [ ] Pay.
2) [ ] Service with or pay from a Predecessor shall be counted only if
service continued with us without interruption. This item shall not
apply if this Plan is a continuation of a plan of that Predecessor.
3) [ ] Service with or pay from a Predecessor shall include service or
pay while a proprietor or partner (If this item is not checked, such
service or pay shall not be counted.)
4) [ ] Service with or pay from a Predecessor shall be counted only
as to a Predecessor which
a) [ ] maintained a qualified pension or profit sharing plan (or)
b) Exact, legal name(s). b) [ ] is named below:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
</TABLE>
3
<PAGE> 49
<TABLE>
<S> <C>
J. Select (1) or (2). Use Item Z to identify J. An ELIGIBLE EMPLOYEE is
the Controlled Group and Affiliated
Service Group members whose Employees 1) [x] an Employee of ours or of an Adopting
may participate in the Plan. Employer listed in Item Z.
2) If selected, check the requirements 2) [ ] an Employee of ours or of an
in (a), (c), or (d) and (e) below Adopting Employer listed in Item Z
which apply. provided the Employee meets the
requirement(s) selected below.
a) Select any employment classifications a) [ ] Employed in the following employment
below which apply. classification:
i) [ ] Paid on a salaried basis.
ii) [ ] Paid on a commission basis.
iii) [ ] Paid on an hourly rate basis.
iv) [ ] Represented for collective
bargaining purposes by
A. [ ] any bargaining unit.
B. Bargaining unit's name. B. [ ] _____________________
_________________________
_________________________
v) [ ] Not represented for collective
bargaining purposes by
A. [ ] any bargaining unit for which
retirement benefits have been the
subject of good faith bargaining between
Employee representatives and us.
B. Bargaining unit's name. B. [ ] ________________________
____________________________
____________________________
b) If more than one employment classification
is selected, the Employee must meet
b) If more than one employment i) [ ] each of the employment classifications
classification is selected in selected above.
(a), check (i) or (ii).
ii) [ ] any one of the employment classifications
selected above.
</TABLE>
4
<PAGE> 50
<TABLE>
<S> <C>
c) If selected, check (i), (ii) or c) [ ] Not covered under any other qualified
both.
i) [ ] profit sharing plan (or)
ii) [ ] pension plan
to which we contribute.
d) [ ] Employed at the following location or divisions or in the
following positions:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
e) [ ] Not employed at the following location or divisions or in
the following positions:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
K. ENTRY REQUIREMENTS
1) Select (a) or (b). 1) SERVICE REQUIRED to become an Active Member:
a) [ ] Service is not required.
b) If selected, check (i) or (ii). b) [x] The minimum Entry Service required is
Up to 1 year may be used
(6 months if Entry Date is i) [ ] 1 (one) whole year.
Yearly Date).
ii) [x] 3 ______ /12 of a year.
ii) If selected, fill in numerator
of fraction (e.g. 6/12 for Note: If a fractional part of a year is required, the Hours Method
half a year). may not be used to determine Entry Service.
2) Select (a) or (b). (Use only 2) ENTRY SERVICE, subject to the provisions of Plan Section 1.02,
if service is required for shall be determined as follows:
entry.)
a) [x] ELAPSED TIME METHOD, Entry Service is the total of an
Employee's countable Periods of Service without regard to
Hours of Service.
</TABLE>
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<TABLE>
<S> <C>
b) Only available if one b) [ ] HOURS METHOD. A year of Entry Service is an Entry
year is used in K(1) above. Service Period which has ended and in which an Employee has
1,000 Hours of Service, unless a lesser number is specified in
(i) below.
i) Optional reduced Hours of i) [ ] ______ Hours of Service.
Service requirement.
ii) Optional crediting of Entry ii) [ ] A year of Entry Service shall be credited before the
Service before Entry end of the Entry Service Period if the Employee has the
Service Period ends. number of Hours of Service specified above.
iii) An ENTRY SERVICE PERIOD is the 12-consecutive
month period beginning on an Employee's Hire Date
and each following 12-consecutive month period ending
on the last day of the Plan Year, including the 12-
consecutive month period ending on the last day of the
first Plan Year after his Hire Date, unless otherwise
specified in A, below. (See Plan Section 1.02 for the
crediting of Entry Service during the first two periods.)
A. Optional Entry Service A. [ ] An Entry Service Period is the 12-
Period, continues on consecutive month period beginning on
employment anniversaries. an Employee's Hire Date and each following 12-
consecutive month period beginning on an
anniversary of that Hire Date.
iv) An ENTRY BREAK in service, when the Hours Method
is used, is an Entry Service Period in which an
Employee is credited with not more than one-half of the
Hours of Service required for a year of Entry Service,
unless otherwise specified in A. below.
A. Optional Hours of Service A. [ ] ______ or fewer Hours of Service.
requirement. Fill in up to
500 hours but less than
hours required for year of
Entry Service.
3) Select (a) or (b). 3) AGE REQUIRED to become an Active Member:
a) [ ] A minimum age is not required.
b) Not over age 21 (20 1/2 if b) [x] The Employee must be 21 _____ or older.
Entry Date is Yearly Date).
4) This waiver applies only on 4) [ ] The requirement(s) for entry checked below shall be waived
the date you fill in. on _______________________________, ___________________. This date
shall be an Entry Date if the Eligible Employee has met all the other
entry requirements.
a) [ ] Service requirement.
b) [ ] Age requirement.
</TABLE>
6
<PAGE> 52
<TABLE>
<S> <C>
L. Select one of the following dates. L. ENTRY DATE. An Eligible Employee may enter the Plan as an Active Member on
the earliest
1) [ ] Monthly Date,
2) [ ] Semi-yearly Date,
3) [X] Quarterly Date,
4) [ ] Yearly Date,
5) [ ] date.
4) If selected, age and on or after the date this Plan became effective, on which he meets all the
service required in Item K entry requirements. This date is his ENTRY DATE.
can't be over age 20 1/2 or
more than 6 months,
respectively.
M. PAY
1) COMPENSATION for purposes of Plan Section 3.06 is as defined therein,
under information required to be reported under Code Sections 6041 and
6051 (Wages,Tips and Other Compensation Box of Form W-2), which is
actually paid or made available by us for the Limitation Year, unless
otherwise specified in (a) or (b) below.
a) Optional 415(c)(3) a) [ ] 415 safe-harbor compensation as defined in Plan Section 3.06
definition of Pay.
b) Optional W-2 definition of Pay. b) [ ] Code Section 3401(a) wages (wages for purposes of income tax
withholding) as defined in Plan Section 30.6
2) Optional provision to 2) [ ] The definition of Compensation above shall apply on and after the
continue old definition until 1993 Limitation Year. The definition of Compensation on any date before
1993 Limitation Year. the 1993 Limitation Year shall be determined in accordance with the
provisions of the Prior Plan.
3) PAY for purposes of Plan Section 1.02 is the same as compensation for
purposes of Plan Section 3.06 as specified in (1) above.
4) Optional provision to 4) [ ] The definition of Pay in this Item M shall apply on and after the
continue old definition first Yearly Date in 1993. The definition of Pay on any date before the
1993 Plan Year. first Yearly Date in 1993 shall be determined in accordance with the
provisions of the Prior Plan.
</TABLE>
7
<PAGE> 53
<TABLE>
<S> <C>
Pay shall include elective contributions. Elective contributions are amounts
excludable from the gross income of the Employee under Code Sections 125,
402(a)(8), 402(h) or 403(b), and contributed by us, at the Employee's election,
to a code Section 401(k) arrangement, a simplified employee pension, cafeteria
plan or tax-sheltered annuity. Elective contributions also include Pay deferred
under a Code Section 457 plan maintained by us and Employee contributions
"picked up" by a governmental entity and, pursuant to Code Section 414(h)(2),
treated as our contributions.
5) Safe harbor fringe benefit 5) For purposes of Elective Deferral Contributions only Pay shall not include
exclusion. reimbursements or other expense allowances, fringe benefits (cash or non-cash),
moving expenses, deferred compensation, and welfare benefits, unless otherwise
specified in (a) below.
a) Optional provision to a) [ ] Pay for all purposes under the Plan shall not include reimbursements or
exclude fringe benefits for other expense allowances, fringe benefits (cash or non-cash), moving
all purposes. expenses, deferred compensation, and welfare benefits.
6) ANNUAL PAY is, on any given date, an Employee's Pay for the latest Pay Year
ending on or before that date.
7) The PAY YEAR is the one-year period ending on the last day of each Plan
Year, unless a different Pay Year is specified in (a) below.
a) Optional Pay Year. a) [ ] The one-year period ending on each __________________________
(month and day).
Selected any modifications below Pay is modified as follows:
which apply.
8) [ ] An Employee's Annual Pay over $ __________ shall be excluded.
9) [ ] If a Member's Entry Date occurs after ___________________, Pay before
such Entry Date shall be excluded.
</TABLE>
8
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<TABLE>
<S> <C>
Item (10) shall apply to the Pay used for purposes of determining the
allocation or amount of specified Contributions. Item (10) shall not apply to
the Pay used for purposes of determining the allocation of Contributions if an
integration Level is used to determine the allocation of Contributions.
10) Optional exclusions. 10) [ ] Pay for purposes of determining the allocation or amount of
a) [ ] All Employer Contributions
b) [ ] Effective Deferral Contributions
c) [ ] Additional Contributions
d) [ ] Discretionary Contributions
excludes
e) [ ] bonuses
f) [ ] commissions
g) [ ] overtime pay
h) Specify type of special pay excluded h) [ ] other special pay______________________________________________
__________________________________________________________________
Item (11) shall only apply to the Pay used for purposes of determining
excess amounts under Plan Section 3.07.
11) [x] Pay shall include only amounts received while an Active Member
of the Plan for the period described in Plan Section 3.07.
N. ELECTIVE DEFERRAL CONTRIBUTIONS for a Member are equal to a portion of Pay
as specified in the written elective deferral agreement. An Employee who
is eligible to participate in the Plan may file an elective deferral agreement
with us. The elective deferral agreement to start Elective Deferral Contributions
may be effective on a Member's Entry Date (Reentry Date, if applicable) or any
following Semi-yearly Date, unless otherwise specified in (1) below.
1) Optional effective dates for 1) [x] Following a Member's Entry Date (Reentry Date, if applicable), a
elective deferral agreements. Member's elective deferral agreement may become effective on any
If selected, check (a), (b), (c) or (d).
a) [ ] Monthly Date.
b) [x] Quarterly Date.
c) [ ] Yearly Date.
d) [ ] date.
</TABLE>
9
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<TABLE>
<S> <C>
The Member shall make any change or terminate the elective deferral
agreement by filing a new elective deferral agreement. A Member's elective
deferral agreement making a change may be effective on any date an
elective deferral agreement to start Elective Deferral Contributions could be
effective. A Member's elective deferral agreement to stop Elective Deferral
Contributions may be effective on any date. The elective deferral agreement
must be in writing and effective before the beginning of the pay period in
which Elective Deferral Contributions are to start, change or stop. A Member
may not defer more than 20% of Pay for the Plan Year. Elective Deferral
Contributions shall be limited as needed to meet nondiscrimination tests.
2) Optional minimum. 2) [ ] _______ % of Pay is the minimum Elective Deferral Contribution.
3) [ ] Elective Deferral Contributions must be a whole percentage of Pay.
4) Optional maximum. 4) [x] 20% of Pay is the maximum Elective Deferral Contribution.
(Consider using 20% __
reduced by the amount of
other Contributions made
for the Member).
O. [ ] We shall make MATCHING CONTRIBUTIONS.
1) If item O is selected 1) The percentage of Elective Deferral Contributions matched is
check (a) or (b).
a) Not more than 100%. a) [ ] _______ %.
b) [ ] determined by us, but won't be more than 100%.
i) Optional minimum i) [ ] ________ % is the minimum percentage.
percentage.
ii) Optional maximum ii) [ ] ________ % is the maximum percentage.
percentage. Less than
100%.
2) Optional limit on Elective 2) [ ] Elective Deferral Contributions which are over the percentage of
Deferral Contributions Pay below won't be matched.
matched. If selected,
check (a) or (b). Limit can a) [ ] ________ %.
help meet
nondiscrimination tests. b) [ ] A percentage determined by us.
i) Optional minimum i) [ ] _______ % is the minimum percentage.
percentage.
ii) Optional maximum ii) [ ] _______ % is the maximum percentage.
percentage.
</TABLE>
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<TABLE>
<S> <C>
3) If Item Q is selected, 3) Matching Contributions are made
check (a) or (b).
a) [ ] as Elective Deferral Contributions are made.
b) [ ] at the end of the Plan Year for Members meeting the
requirements in Item Q.
4) If (3)(a) is selected, this 4) [ ] At the end of the Plan Year we may make more Matching
option may be used to Contributions for Members who made Elective Deferral
adjust the Matching Contributions. Our total Matching Contributions for the Plan Year
Contributions at the end of shall be made as specified below.
the Plan Year.
a) Optional. Match at the end of a) [ ] The Matching Contributions made at the end of the Plan
year only for those Year shall only be made for those meeting the requirements in
meeting requirements in Item Q.
Item Q.
b) If (4) is selected, check (i) b) The percentage of Elective Deferral Contributions matched is
or (ii).
i) Not more than 100%. i) [ ] ________ %.
ii) [ ] determined by us, but won't be more than 100%.
A. Optional minimum percentage. A. [ ] ________ % is the minimum percentage.
B. Optional maximum B. [ ] ________ % is the maximum percentage.
percentage. Less than
100%.
c) Optional limit on Elective c) [ ] Elective Deferral Contributions which are over the
Deferral Contributions percentage of Pay below won't be matched.
matched if (4) is selected.
If selected, check (i) or (ii). i) [ ] ________ %.
Limit will help meet
nondiscrimination tests.
ii) [ ] A percentage determined by us.
A. Optional minimum A. [ ] ________ % is the minimum percentage.
percentage.
B. Optional maximum B. [ ] ________ % is the maximum percentage.
percentage.
</TABLE>
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<TABLE>
<S> <C>
5) If selected, Matching Contributions 5) [ ] Matching Contributions are Qualified Matching Contributions.
may be tested for nondiscrimination Qualified Matching Contributions are 100% vested and subject to the
with the Elective Deferral withdrawal restrictions of Code Section 401(k).
Contributions.
a) Optional if (5) is selected. a) [ ] Qualified Matching Contributions shall be made only for
Nonhighly Compensated Employees only. Nonhighly Compensated Employees.
6) Optional maximum on 6) [ ] Our Matching Contributions for a Member during any Plan Year
Matching Contributions. shall not be more than $_____________.
7) Forfeitures of Matching Contributions which relate to excess amounts
as provided in Plan Section 3.07 shall be used to offset our first
Contribution after the Forfeiture occurs, unless otherwise
specified in (a) below.
a) Optional treatment of forfeitures a) [ ] Forfeitures of Matching Contributions which relate to excess
which relate to excess amounts. amounts as provided in Plan Section 3.07 shall be allocated
to those meeting the requirements in Item Q who do not have an
excess amount using the allocation formula in P(3)(a) and shall
be deemed to be Matching Contributions.
P. OTHER EMPLOYER CONTRIBUTIONS AND FORFEITURES
1) These contributions are used in the 1) [ ] QUALIFIED NONELECTIVE CONTRIBUTIONS. Qualified Nonelective
nondiscrimination tests. If selected, Contributions are 100% vested and subject to the withdrawal
check (a) or (b). restrictions of Code Section 401(k).
a) Qualified Nonelective Contributions a) [ ] We shall make Qualified Nonelective Contributions equal to
are a set amount. If selected, check the following:
the contribution formula, (i) or (ii).
i) If selected, check A or B. i) [ ] PAY FORMULA. An amount equal to
A. [ ] _________ % of Pay for the pay period of each Member
who is an Active Member on the last day of that period.
B. [ ] _________ % of Annual at the end of the Plan Year for
Members who meet the requirements in Item Q.
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<TABLE>
<S> <C>
ii) If selected, check A. or B. ii) [ ] SERVICE FORMULA. An amount equal to
A. [ ] $________ for the pay period for each
Member who is an Active Member on the last day
of that period.
B. [ ] $________ at the end of the Plan Year for
Members who meet the requirements in Item Q.
b) Qualified Nonelective b) [ ] Qualified Nonelective Contributions may be made for each
Contributions are Plan Year in an amount determined by us. Our Qualified
determined by you each Nonelective Contributions shall be allocated to those meeting
year. the requirements in Item Q using the allocation formula in
P(3)(a).
c) Optional. Nonhighly c) [ ] Qualified Nonelective Contributions shall be made only for
Compensated Employees or allocated only to Nonhighly Compensated Employees.
only.
2) These Contributions are a 2) [ ] We shall make ADDITIONAL CONTRIBUTIONS equal to the
set amount. If selected, following:
check the contribution
formula, (a) or (b).
a) If selected, check (i) or (ii). a) [ ] PAY FORMULA. An amount equal to
i) [ ] _______% of Pay for the pay period for each
Member who is an Active Member on the last day of
that period.
ii) [ ] _______% of Annual Pay at the end of the Plan
Year for Members who meet the requirements in Item Q.
b) If selected, check (i), (ii), b) [ ] SERVICE FORMULA. An amount equal to
(iii) or (iv).
i) [ ] $_______ for the pay period for each Member
who is an Active Member on the last day of that period.
ii) [ ] $_______ at the end of the Plan Year for
Members who meet the requirements in Item Q.
iii) No contribution for paid iii) [ ] $_______ for each Hour of Service he has
nonworking hours such as performed during the pay period for each Member who
vacation. is an Active Member during the pay period.
iv) Contribution is made for iv) [ ] $_______ for each Hour of Service credited
paid nonworking hours during the pay period for each Member who is an Active
such as vacation. Member during the pay period.
</TABLE>
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3) These contributions are 3) [x] DISCRETIONARY CONTRIBUTIONS may be made for each
determined by you each Plan Year in an amount determined by us. The amount of our
year. If selected, check the Discretionary Contributions and Forfeitures, if applicable, allocated
allocation formula, (a) or to a person meeting the requirements in Item O shall be equal to the
(b). following:
a) [ ] PAY FORMULA. An amount equal to our Discretionary
Contributions and Forfeitures, if applicable, multiplied by the
ratio of such person's Annual Pay for the total Annual Pay of all
such persons.
b) [x] INTEGRATED FORMULA. An amount equal to a
percentage of the person's Annual Pay up to the Integration
Level plus a percentage (equal to 2 times the first percentage)
of his Annual Pay over the Integration Level. The first
percentage shall be the Maximum Integration Rate, unless
otherwise specified in (i) below.
i) Optional percentage. If i) [ ] ________ % (If this percentage exceeds the
selected, fill in a Maximum Integration Rate, the Maximum Integration
percentage up to the Rate shall apply.)
Maximum Integration Rate.
If our Discretionary Contributions and Forfeitures, if applicable,
are not great enough to provide this allocation, the percentage
above shall be proportionally reduced.
If our Discretionary Contributions and Forfeitures, if applicable,
are more than enough to provide the allocation above, any
amount remaining shall be allocated in the same manner as
provided in the Pay Formula, Item P(3)(a).
ii) The MAXIMUM INTEGRATION RATE shall be
determined according to the following schedule:
INTEGRATION
INTEGRATION LEVEL RATE
100% OF TWB 5.7%
Less than 100%, but more than
80% of TWB 5.4%
More than the greater of $10,000
or 20% of TWB, but not more than
80% of TWB 4.3%
Not more than the greater of
$10,000 or 20% of TWB 5.7%
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"TWB" means the taxable wage base as in effect on the
latest Yearly Date. "Taxable wage base" means the
maximum amount of earnings which may be considered for
wages for a year under Code Section 3121(a)(1).
On any date the portion of the rate of tax under Code Section
3111(a) (in effect on the latest Yearly Date) which is
attributable to old age insurance exceeds 5.7%, such rate
shall be substituted for 5.7% and 5.4% and 4.3% shall be increased
proportionally.
iii) THE INTEGRATION LEVEL is the taxable wage base (as defined in (ii) above)
as in effect on the latest Yearly Date, unless otherwise specified in A.
or B. below.
A. Optional Dollar amount. A. [ ] $ ____________
Must be less than such
taxable wage base.
B. Optional percentage of B. [ ] ____________% of such taxable wage base.
such taxable wage base.
Must be less than 100%.
4) Not applicable if Vesting 4) If P(3) is selected, FORFEITURES shall be reallocated to remaining Members and if P(3)
Percentage is 100%. is not selected, Forfeitures shall be used to offset our first Contribution made after
the Forfeiture is determined, unless otherwise specified in (a) or (b) below. If P(3) is
selected, Forfeitures shall be allocated with our Discretionary Contributions and deemed
to be Discretionary Contributions. (See Plan Section 3.05.)
a) Optional treatment of a) [ ] Forfeitures shall not be allocated with our Discretionary Contributions, but
Forfeitures if P(3) is shall be used to offset our first Contribution made after the Forfeiture is
selected. determined.
b) Optional treatment of b) [ ] Forfeitures shall not be used to offset our first Contribution, but shall be
Forfeitures if P(3) is not allocated to those meeting the requirements in Item Q using the allocation
selected, but P(2) is selected. formula in P(3)(a) and shall be deemed to be Additional Contributions.
Q. NET PROFITS AND CONTRIBUTION REQUIREMENTS
1) Our Contributions shall be made out of our current or accumulated NET PROFITS unless
otherwise specified below.
a) [x] Our Contributions may be made without regard to our current or accumulated Net
Profits.
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2) If annual contributions are 2) REQUIREMENTS FOR CONTRIBUTIONS. The allocation of our Contributions is
subject to these requirements subject to the provisions of Article III and Article X of the Plan. Our
of if Forfeitures are reallocated Contributions which are subject to the requirements of this Item Q and
(see items O(7) and P(4)), Forfeitures shall be allocated as of the last day of the Plan Year to each
select (a), (b), (c) or (d)
below. If advanced funding is a) [ ] person who was an Active Member at any time during the Plan Year.
used, (a) must be checked.
b) [ ] Active Member on that date.
c) [ ] person who was an Active Member at any time during the Plan Year and
who has at least 1,000 Hours of Service during the latest Accrual Service
Period ending on or before that date, unless a lesser number is specified
in (i) below.
i) Optional reduced Hours of i) [ ] ________________________ Hours of Service.
Service requirements.
d) [X] Active Member on that date who has at least 1,000 Hours of Service
during the latest Accrual Service Period ending on or before that date,
unless a lesser number is specified in (i) below.
i) Optional reduced Hours of i) [ ] ________________________ Hours of Service.
Service requirements.
The allocation requirements in (b), (c) or (d) are modified as follows:
e) Optional allocation e) [ ] Our contributions shall also be allocated to each person who was
requirement, Do not use an Active Member at any time during the Plan Year and who has retired,
with (a) above. become Totally Disabled, or died.
3) THE ACCRUAL SERVICE PERIOD is the 12-consecutive month period ending on the
last day of each Plan Year, unless a different period is specified in (a) below.
a) Optional Accrual Service a) [ ] The 12-consecutive month period ending on each
Period if you use hours in ______________________________ (month and day).
(2) above.
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R. CONTRIBUTION MODIFICATIONS
Contribution Limitations: The Annual Additions for a Member during a
Limitation year shall not be more than the Maximum Permissible Amount.
(See Plan Sections 3.06 and 10.05.)
1) For Limitations Years beginning after December 31, 1991,
for purposes of applying the limitations of Plan Section 3.06,
Compensation for a Limitation Year is the Compensation actually
paid or made available during such Limitation Year.
2) Fill in last day of the 2) The LIMITATION YEAR is the 12-consecutive month period ending
Limitation Year. Normally, on each December 31 (month and day).
the last day of the Plan ___________
Year is used. You must
match the Limitation Years
of all your other plans.
If you or an Employer, as defined 3) If the Member is covered under another qualified defined
in Plan Section 3.06, maintain or contribution plan maintained by the Employer, as defined in Plan
ever maintained another qualified Section 3.06, other than a Master or Prototype Plan:
plan in which any Member in this
Plan is (or was) a member or a) [ ] The provisions of (f) through (k) of Plan Section 3.06 will
could become a member, you apply as if the other plan were a Master or Prototype Plan.
must complete (3) and (4) of this
Item R. b) [ ] The method described on the attached page shall be used
to limit total Annual Additions to the Maximum Permissible
Amount, and will properly reduce the Excess Amounts, in a
manner which precludes Employer discretion.
4) If the Member is or has ever been a member in a defined benefit plan
maintained by the Employer, as defined in Plan Section 3.06, the
method described on the attached page shall be used to satisfy
the 1.0 limitation of Code Section 415, in a manner which precludes
Employer discretion.
5) Optional maximum 5) [ ] The amount of our Contributions for any
allocation. a) [ ] Plan Year
b) [ ] Limitation Year
allocated to a person meeting the requirements in item Q shall not
be more than (the lesser of)
c) [ ] $_________ (or)
d) Less than 25%. d) [ ] _________ % of his Annual Pay (Compensation for the
Limitation Year (if (b) above is selected).
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In Years when this Plan is a Top- Top-heavy Plan Requirements: The amount and allocation of Contributions
heavy Plan, special minimum shall be subject to the provisions of Article X of the Plan in Years when
and maximum Contribution this is a Top-heavy Plan.
provisions apply. Use Items (6)
through (9), as needed, to meet 6) [ ] Key Employees who are Employees on the last day of the Year
the requirements for your plans shall also receive the minimum allocation required in Years when
which are top-heavy or to extend this is a Top-heavy Plan.
the minimums to other
employees or Years. The items 7) [ ] A ________ % (not less than 3%) minimum allocation shall
you select here override any apply in Years when this is a Top-heavy Plan.
provisions of Article X to the
contrary. 8) [ ] The minimum allocation in (6) and (7) above and in Article X
shall apply in all Years without regard to whether or not this is a Top-
heavy Plan or to the requirements in Item Q.
9) [ ] The method described on the attached page shall be used to
meet the minimum allocation and benefit requirements in Years
when this is a Top-heavy Plan, in a manner which precludes
Employer discretion.
Present Value: For purposes of establishing Present Value to compute the
Top-heavy Ratio, any benefit shall be discounted only for 7 1/2% interest and
mortality according to the 1971 Group Annuity Table (Male) without the 7%
margin but with projection by Scale E from 1971 to the later of (a) 1974, or
(b) the year determined by adding the age to 1920, and wherein for females
the male age six years younger is used, unless otherwise specified in (10)
and (11) below:
10) [ ] Interest rate ________ %.
11) [ ] Mortality table:_________________________________________
_________________________________________________________
S. VOLUNTARY CONTRIBUTIONS are not permitted, unless otherwise
specified in (1) below.
1) Select if Voluntary 1) [ ] Voluntary Contributions are permitted.
Contributions are
permitted.
T. Select (1) or (2) and T. INVESTMENT
complete (3).
1) If selected, fill in the 1) [x] The Plan is trusteed. Plan assets may be invested in an Annuity
names of all trustees. Contract and other funding vehicle(s).
(Consider naming two or
more.) Complete (a) and We have named the following person(s) to act as TRUSTEE under
(b). the Trust:
Agnes Barrelet
____________________________________________________________
____________________________________________________________
____________________________________________________________
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a) If the plan is trusteed a) LIFE INSURANCE
select (i) or (ii).
i) [ ] With the Trustee's consent and subject to the limits and
provisions of Article IV of the Plan, an Active Member may elect
to have his Account applied to purchase life insurance coverage on
his life.
ii) [X] Life insurance coverage is not provided under this Plan.
b) If the plan is trusteed, b) LOANS
select (i) or (ii).
i) [ ] The Trustee shall not make a loan to a Member.
ii) [X] The Trustee may make a loan to a Member from the Trust Fund,
subject to the provisions of Plan Section 5.06.
iii) Fill in the person or iii) Office Manager
position authorized to ____________________________________________________________________
administer the Member is the Loan Administrator.
loan program. Principal
Life Insurance Company
may not be used.
iv) Optional minimum loan iv) [X] The minimum amount of any loan is $1,000.00.
amount. Fill in up to
$1,000. If none is selected,
there is no minimum.
v) Optional maximum loan v) [ ] The maximum amount of any loan is the lesser of 50% of the Member's
amount. Fill in up to Vested Account or $_______________ reduced by any outstanding loan
$49,999. If none is balance.
selected, the maximum is
the lesser of 50% of
Vested Account or
$50,000, reduced by any
loan balance.
vi) Optional number of vi) The number of outstanding loans shall be limited to one, unless
outstanding loans. otherwise specified in A. or B. below.
A. [ ] The number shall be limited to ____________________
B. [ ] The number shall not be limited.
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vii) Optional number of loans vii) The number of loans approved in a 12-month period shall be
approved in any 12-month limited to one, unless otherwise specified in A. or B. below.
period.
A. [ ] The number shall be limited to ________________
B. [ ] The number shall not be limited.
2) [ ] The Plan is not trusteed. Plan assets shall be invested only in an
Annuity Contract.
3) Subject to the provisions of Articles IV and VIIIA of the Plan and the
Annuity Contract, the investment of that part of a Member's Account
resulting from
a) Select (i), (ii) or (iii). a) our Contributions other than Elective Deferral Contributions shall
be directed by
i) [ ] the Member with the Trustee's consent (our consent, if not
trusteed).
ii) [X] the Member.
iii) [ ] the Trustee (us, if not trusteed).
b) Select (i), (ii) or (iii). b) Elective Deferral Contributions shall be directed by
i) [ ] the Member with the Trustee's consent (our consent, if not
trusteed).
ii) [X] the Member.
iii) [ ] the Trustee (us, if not trusteed).
c) Select (i), (ii) or (iii). c) Member Contributions and Rollover Contributions shall be directed by
i) [ ] the Member with the Trustee's consent (our consent, if not
trusteed).
ii) [X] the Member.
iii) [ ] the Trustee (us, if not trusteed).
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U. VESTING PERCENTAGE is used to determine the nonforfeitable percentage
of a Member's Account resulting from our Contributions.
The Vesting Percentage for a Member who is an Employee on the date he
reaches Normal Retirement Age, meets the requirement(s) for Early
Retirement Date, becomes Totally Disabled or dies, whichever occurs first,
shall be 100% on such date.
1) Check any other Employer Contributions 1) Fully Vested Contributions. Elective Deferral Contributions are 100%
which are also 100% vested. vested. Qualified Matching Contributions and Qualified Nonelective
Contributions are 100% vested. The following Employer Contributions
are also 100% vested at all times.
a) [ ] All other Employer Contributions.
b) [ ] Additional Contributions.
c) [ ] Matching Contributions.
d) [ ] Discretionary Contributions.
2) Select one of the schedules below 2) A Member's Account resulting from our Contributions which are not
if some Employer Contributions aren't 100% vested is subject to the Vesting Percentage determined below.
100% vested when made.
Vesting
Service Vesting Percentage
e) If selected, fill in the percentages. (a) (b) (c) (d) (e)
The schedule must provide full (100%) [ ] [ ] [ ] [ ] [x]
vesting after 5 years of Vesting Service
or must at all times be as great as the Less
Vesting Percentage which the schedule in than 1 0 0 0 0 0.00
(d) would provide. 1 0 0 0 0 25.00
2 0 20 0 0 50.00
3 100 40 0 20 75.00
4 60 0 40 100.00
5 80 100 60
6 100 80
7 100
A Member's Vesting Percentage determined above shall never be reduced in later
years. If this Plan is or ever has been a Top-heavy Plan, the minimum vesting
provisions of Article X shall apply.
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V. Select (1) or (2). (Don't V. VESTING SERVICE, subject to the provisions of Plan Section 1.02, shall be
use this item if all determined as follows:
Employer Contributions
are fully vested and Early 1) [x] ELAPSED TIME METHOD. Vesting Service is the total of an
Retirement Date is not Employee's countable Periods of Service without regard to Hours of
based on Vesting Service.) Service.
Use (a), (b) or both only if the a) [ ] The Elapsed Time Method is used to determine service on
method of crediting service has and after ___________________________ , _________________ .
changed. The Plan must use
either the Elapsed Time Method b) [ ] The Elapsed Time Method is used to determine service
or the Hours Method after the before _____________________________ , _________________ .
date the Plan became subject to
ERISA. 2) [ ] HOURS METHOD. A year of Vesting Service is a Vesting
Service Period in which an Employee has 1,000 Hours of Service,
unless a lesser number is specified in (a) below.
a) Optional reduced Hours of a) [ ] _______________ Hours of Service.
Service.
b) A VESTING SERVICE PERIOD is the 12-consecutive month
period ending on the last day of each Plan Year, unless
otherwise specified in (i) or (ii) below.
i) Optional Vesting Service i) [ ] The 12-consecutive month period ending on each
Period. _______________________________________ (month
and day).
ii) Optional Vesting Service ii) [ ] The 12-consecutive month period ending on
Period with changes. A. each ____________________________ (month and
B. Month and day used in A. day) through
and last year this period is B. ____________________________________________
used. and
C. Month and day on which C. each following _____________________________
new period ends. (month and day).
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c) A VESTING BREAK in service, when the Hours Method is
used, is a Vesting Service Period in which an Employee is
credited with not more than one-half of the Hours of Service
required for a year of Vesting Service, unless otherwise
specified in (i) below.
i) Optional Hours of Service i) [ ] ________ or fewer Hours of Service.
requirement. Fill in up to
500 hours, but less than
hours required for year of
Vesting Service.
d) and e). See comment for d) [ ] The Hours Method is used to determine service on and
V(1)(a) and (b). after _____________________________, ___________________.
e) [ ] The Hours Method is used to determine service before
_____________________________, ___________________.
Select any modifications below Vesting Service is modified as follows:
which apply. If the Hours Method
is used, any date you use should
be the first day of a service
period. 3) [ ] Service before ____________________, ___________________
a) Not available for service a) [ ] is the total of an Employee's countable service with us,
after the date the Plan expressed in whole years and fractional parts of a year
became subject to ERISA. (counting a partial month as a complete month).
b) [ ] shall be determined under the provisions of the Plan in
effect on the day before that date.
4) If selected, fill in a date on 4) [ ] Service before ____________________, ___________________
or before the Effective shall not be counted.
Date.
5) Not over age 18. 5) [ ] Service before an Employee attains age _________ shall not
be counted. (If the Hours Method is used, service during the Vesting
Service Period in which he attains this age shall not be excluded
because of this item.)
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W. WITHDRAWAL BENEFITS
1) A Member may withdraw, in a single sum, any part of his Vested Account
resulting from Voluntary Contributions. A Member may make only two such
withdrawals in any twelve-month period, unless otherwise specified in
(a) below.
a) Optional frequency for a) [ ] A Member may make
withdrawal of Voluntary
Contributions. If selected, i) [ ] such a withdrawal at any time.
check (i) or (ii).
ii) [ ] only ________________ such withdrawal(s) in any twelve-
month period.
2) Optional 401(k) hardship 2) [X] Unless otherwise specified in (a) below, a Member may withdraw any
withdrawal. part of his Vested Account which does not result from Voluntary
Contributions, Qualified Matching Contributions or Qualified
Nonelective Contributions in the event of undue financial hardship.
Withdrawals from the Member's Account resulting from Elective Deferral
Contributions shall be limited to the amount of the Member's Elective
Deferral Contributions (and earnings thereon accrued as of December 31,
1988). The withdrawal is subject to the provisions of Plan Section
5.05.
a) Optional restriction on a) [ ] Such withdrawal shall be limited to the amount of the Member's
hardship withdrawal. Elective Deferral Contributions (and earnings thereon accrued as of
December 31, 1988).
3) Optional withdrawal after 3) [X] A Member may withdraw any part of his Vested Account which does
age 59 1/2. not result from Voluntary Contributions at any time after he
attains age 59 1/2. A Member may make only two such withdrawals in
any twelve-month period, unless otherwise specified in (a) below.
a) Optional frequency for a) [X] A Member may make
withdrawal after age
59 1/2. If selected, check (i) i) [X] such a withdrawal at any time.
or (ii).
ii) [ ] only ________________ such withdrawal(s) in any twelve-
month period.
4) Optional withdrawal after 5 4) [ ] A percentage of a Member's Vested Account which does not
years as an Active result from Voluntary Contributions, Elective Deferral
Member. Must have Contributions, Qualified Matching Contributions or Qualified
Matching Contributions Nonelective Contributions may be withdrawn after he has been an Active
that are not qualified, Member for at least five (5) years.
Additional Contributions or
Discretionary Contributions.
If selected, check (a), The percentage which may be withdrawn is
(b), (c) or (d).
a) [ ] 25%.
b) [ ] 25% or 50%, as he requests.
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c) [ ] 25%, 50% or 75%, as he requests.
d) [ ] any percentage up to ______ %, as he requests.
A Member shall not make another withdrawal under this item until he
has been an Active Member for at least five (5) years since his last
withdrawal.
Note: Withdrawals are subject to the qualified election procedures of
Article VI.
X. RETIREMENT AND THE START OF BENEFITS
1) Normal Retirement Age 1) NORMAL RETIREMENT AGE is the age at which the Member's
may not exceed any Account shall become nonforfeitable if he is an Employee. A
mandatory retirement age Member's Normal Retirement Age is 65, unless otherwise
imposed by you on your specified in (a) or (b) below.
Employees. Must use (a)
or (b) if mandatory age is
younger than 65.
a) Optional Normal a) [ ] Age ________.
Retirement Age. Fill in age
younger than 65.
b) Optional Normal b) [ ] The older of age ________ or his age on the
Retirement Age. Select (i)
or (ii) and fill in up to age
65.
i) Fill in up to 5 years. i) [ ] date ________ years after the first day of the
Plan Year in which his Entry Date occurred.
ii) Fill in up to 5 years. ii) [ ] earlier of the date ______ years after his Hire
Date or the date 5 years after the first day of the Plan
Year in which his Entry Date occurred.
iii) Optional maximum Normal iii) [ ] A Member's Normal Retirement Age shall not be
Retirement Age if (b) is older than age ______ .
selected. Fill in up to age
70. c) [ ] A Member's Normal Retirement Age shall not be older than
normal retirement age under the Plan on the day before any
change in the Normal Retirement Age provisions, if he was a
Member on such date.
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2) Select (a) or (b). 2) EARLY RETIREMENT DATE
a) [x] Early Retirement Date is the first day of the month before a
a) If selected, check and complete Member's Normal Retirement Date which he selects for the start
any requirements below which apply. of retirement benefits. This day shall be on or after the date
An Employee's Account is 100% vested the Member ceases to be an Employee and the date the following
when the requirements are met. requirement(s) are met:
i) [x] He is age 55 .
_________
ii) [x] He has 4 years of Vesting Service.
________
iii) [ ] He is within ______ years of Normal Retirement Date.
iv) [ ] He has been an Active Member ______ years.
b) [ ] Early retirement is NOT permitted.
3) Optional modification of the start 3) Section 5.03 permits an Employee to elect to start benefits after he
of benefits. Check (a) or (b). ceases to be an Employee. The start of benefits is modified as follows:
a) [ ] Benefit payments from that part of a Member's Vested Account resulting
from our Contributions shall not begin before the Member retires,
becomes Totally Disabled or dies. A small Vested Account may be paid
earlier in a single sum. (See Plan Section 9.10.)
i) Optional. Restriction does not i) [ ] Such restriction shall not apply to that part of a Member's
apply to Elective Deferral Vested Account resulting from Elective Deferral Contributions.
Contributions.
b) If selected, check (i) or (ii). b) [ ] The Member may elect to receive his Member Contributions in a single
sum. Any other benefit payment under Plan Section 5.03 shall not begin
before the Member has ceased to be an Employee for a period of time.
Payment of a small Vested Account will also be delayed. (See Plan
Section 9.10.) The period of time is
i) [ ] ________ month(s).
ii) [ ] ________ year(s).
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Y. FORMS OF DISTRIBUTION
1) If selected, check (a) or 1) [ ] A Member may not receive a single sum payment of that part
(b). of his Vested Account resulting from our Contributions
a) [ ] at any time.
b) [ ] before the Member retires or becomes Totally Disabled.
A small Vested Account may be paid in a single sum. (See Plan
Section 9.10.)
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Z. ADOPTING EMPLOYERS
Note: The Code requires minimum coverage requirements for retirement plans
of Controlled Groups and Affiliated Service Groups. If you are a member of
such a group, you may use this item to identify the other employers in the
group whose Employees may become Members. If an employer listed below does
not evidence the establishment of the separate plan or the agreement to
participate in writing, you and the other Adopting Employers must
contribute on behalf of its Employees who are Active Members.
Affiliated firms which are not a part of a Controlled Group or Affiliated
Service Group may also become Adopting Employers.
1) Separate Plans or Single Plan.
a) Separate Plans. Adopting Employers may establish a separate plan
for the exclusive benefit of their Employees. The establishment
of an Adopting Employer's separate plan shall be evidenced in
writing according to the provisions of Plan Section 2.03.
i) [ ] All of the Adopting Employers listed below establish a
separate plan.
ii) [ ] The Adopting Employers listed in ________ below
establish a separate plan.
b) Single Plan. Adopting Employers may participate with us in a
single plan. An Adopting Employer's agreement to participate in
this Plan shall be evidenced in writing according to the
provisions of Plan Section 2.04.
i) [x] All of the Adopting Employers listed below participate
with us in a single plan.
ii) [ ] The Adopting Employers listed in ________ below
participate with us in a single plan.
2) The Adopting Employers are:
a) Name: REWORD CORPORATION
-----------------------------------------------------------
Address: 6450 Lusk Blvd E-204
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
Phone No.: 619 546 0040
------------
EIN No. (If Separate Plans): ------------------------------------
Plan No. (If Separate Plans): -----------------------------------
Date of Adoption or Participation: SEPT. 16, 1998
------------------------------
Fiscal Year End: DEC. 31 Executed: SEPT. 18, 1998
---------------- ---------------------
(month and day)
By /s/
----------------------------
(signature)
----------------------------
(title)
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b) Name: ___________________________________________________________
Address: ________________________________________________________
________________________________________________________
________________________________________________________
Phone No: _________________________________
EIN No. (If Separate Plans): ____________________________________
Plan No. (If Separate Plans): ___________________________________
Date of Adoption or Participation: __________________,___________
Fiscal Year End: _______________ Executed: ___________,__________
(month and day)
By _______________________________
(signature)
_______________________________
(title)
c) Name: ___________________________________________________________
Address: ________________________________________________________
________________________________________________________
________________________________________________________
Phone No: _________________________________
EIN No. (If Separate Plans): ____________________________________
Plan No. (If Separate Plans): ___________________________________
Date of Adoption or Participation: __________________,___________
Fiscal Year End: _______________ Executed: ___________,__________
(month and day)
By _______________________________
(signature)
_______________________________
(title)
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d) Name: ___________________________________________________________
Address: ________________________________________________________
________________________________________________________
________________________________________________________
Phone No: _________________________________
EIN No. (If Separate Plans): ____________________________________
Plan No. (If Separate Plans): ___________________________________
Date of Adoption or Participation: __________________,___________
Fiscal Year End: _______________ Executed: ___________,__________
(month and day)
By _______________________________
(signature)
_______________________________
(title)
e) Name: ___________________________________________________________
Address: ________________________________________________________
________________________________________________________
________________________________________________________
Phone No: _________________________________
EIN No. (If Separate Plans): ____________________________________
Plan No. (If Separate Plans): ___________________________________
Date of Adoption or Participation: __________________,___________
Fiscal Year End: _______________ Executed: ___________,__________
(month and day)
By _______________________________
(signature)
_______________________________
(title)
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f) Name: ___________________________________________________________
Address: ________________________________________________________
________________________________________________________
________________________________________________________
Phone No: _________________________________
EIN No. (If Separate Plans): ____________________________________
Plan No. (If Separate Plans): ___________________________________
Date of Adoption or Participation: __________________,___________
Fiscal Year End: _______________ Executed: ___________,__________
(month and day)
By _______________________________
(signature)
_______________________________
(title)
g) Name: ___________________________________________________________
Address: ________________________________________________________
________________________________________________________
________________________________________________________
Phone No: _________________________________
EIN No. (If Separate Plans): ____________________________________
Plan No. (If Separate Plans): ___________________________________
Date of Adoption or Participation: __________________,___________
Fiscal Year End: _______________ Executed: ___________,__________
(month and day)
By _______________________________
(signature)
_______________________________
(title)
31
<PAGE> 77
h) Name: ___________________________________________________________
Address: ________________________________________________________
________________________________________________________
________________________________________________________
Phone No: _________________________________
EIN No. (If Separate Plans): ____________________________________
Plan No. (If Separate Plans): ___________________________________
Date of Adoption or Participation: __________________,___________
Fiscal Year End: _______________ Executed: ___________,__________
(month and day)
By _______________________________
(signature)
_______________________________
(title)
32
<PAGE> 78
3) These Adopting Employers had Prior Plans:
DATE PRIOR PLAN
NAME WAS ESTABLISHED
a) _____________________________________ ______________________________
b) _____________________________________ ______________________________
c) _____________________________________ ______________________________
d) _____________________________________ ______________________________
e) _____________________________________ ______________________________
f) _____________________________________ ______________________________
g) _____________________________________ ______________________________
h) _____________________________________ ______________________________
NOTE: If (1)(b)(i) or (ii) above is selected, the provisions of Plan Section
9.02 shall apply in the case of the merger of this Plan with any Prior Plan of
an Adopting Employer participating with us in a single plan.
33
<PAGE> 79
4) These Adopting Employers have waived the following entry requirements
for their Employees who are Eligible Employees on the date specified
below. (Your selections in Item K(4) apply only to the primary
Employer in Item 8.)
AGE SERVICE
NAME REQUIREMENT REQUIREMENT DATE
a) ______________________ [ ] [ ] ______________
b) ______________________ [ ] [ ] ______________
c) ______________________ [ ] [ ] ______________
d) ______________________ [ ] [ ] ______________
e) ______________________ [ ] [ ] ______________
f) ______________________ [ ] [ ] ______________
g) ______________________ [ ] [ ] ______________
h) ______________________ [ ] [ ] ______________
By executing this Adoption Agreement, we, the Employer, adopt "The Principal
Financial Group Prototype for Savings Plans" for the exclusive benefit of our
employees. Our selections and specifications contained in this Adoption
Agreement and the terms, provisions and conditions provided in The Principal
Financial Group Prototype Basic Savings Plan constitute our PLAN. No other basic
plan may be used with this Adoption Agreement.
It is understood that Principal Life Insurance Company is not a party to our
Plan and shall not be responsible for any tax or legal aspects of our Plan. We
assume responsibility for these matters. We acknowledge that we have counseled,
to the extent necessary, with selected legal and tax advisors. The obligations
of Principal Life Insurance Company shall be governed solely by the provisions
of its contracts and policies. Principal Life Insurance Company shall not be
required to look into any action taken by the Plan Administrator, Named
Fiduciary, Trustee or us and shall be fully protected in taking, permitting or
omitting any action on the basis of our actions. Principal Life Insurance
Company shall incur no liability or responsibility for carrying out actions as
directed by the Plan Administrator, Named Fiduciary, Trustee or us.
34
<PAGE> 80
This Plan is an important legal document. It may not fit your situation. You
will want to consult with your lawyer on whether it does or not and on its tax
and legal implications, for which neither Principal Life Insurance Company nor
its agents can assume responsibility.
Failure to properly fill out this Adoption Agreement may result in
disqualification of this Plan. Principal Life Insurance Company will inform you
of any amendments made to the Plan or of the abandonment of the Plan. The
address of Principal Life Insurance Company is 711 High Street, Des Moines, Iowa
50392-0001. When you first adopt the prototype, The Principal will assign a
contact person and give you a toll-free number. If you have not been assigned a
contact person, call 1-800-543-4015, Extension 75397, for assistance.
The opinion letter issued by the National Office of the Internal Revenue Service
applies to the prototype form. You may not rely on it as evidence that your Plan
is qualified under Code Section 401. In order to obtain reliance with respect to
the qualification of your plan, you must apply to your Key District Office for a
determination letter.
(Complete in BLACK ink)
This adoption Agreement is executed September 18, 1998.
---------------
(month and day)
FOR THE EMPLOYER
By /s/_________________________________
(signature)
Trustee
_______________________________________
(title)
[x] By my signature above, I hereby
execute this Adoption Agreement on
behalf of each Adopting Employer
identified in Item Z.
35
<PAGE> 81
FOR THE TRUSTEE FOR THE TRUSTEE
By /s/_________________________________ By ________________________________
(signature) (signature)
Title: CFO_________________________ Title: _________________________
Address: 6540 Lusk Boulevard, Suite Address: _______________________
E-204 San Diego CA 92121-2766______ ________________________________
___________________________________ ________________________________
FOR THE TRUSTEE FOR THE TRUSTEE
By ___________________________________ By ________________________________
(signature) (signature)
Title:_____________________________ Title: _________________________
Address: __________________________ Address: _______________________
___________________________________ ________________________________
___________________________________ ________________________________
FOR THE TRUSTEE FOR THE TRUSTEE
By ___________________________________ By ________________________________
(signature) (signature)
Title:_____________________________ Title: _________________________
Address: __________________________ Address: _______________________
___________________________________ ________________________________
___________________________________ ________________________________
Acknowledgement by the Named Fiduciary (if other than the Employer or Trustee).
By __________________________________
(signature)
Annuity Contract No.: GA____________
36
<PAGE> 82
Item R(3)(b) The method used to limit Annual Additions to the Maximum
Permissible Amount:
Item R(4) The method used to satisfy the 1.0 limitation of Code Section 415:
37
<PAGE> 83
Item R(9) The method used to meet the minimum contribution and allocation
requirements in Years when this is a Top-heavy Plan:
38
<PAGE> 84
[LOGO "PRINCIPAL GROUP"]
<PAGE> 85
UNILATERAL AMENDMENT - MODEL AMENDMENT TO COMPLY WITH
SECTION 401(a)(17) OF THE INTERNAL REVENUE CODE AS AMENDED BY
THE OMNIBUS BUDGET RECONCILIATION ACT OF 1993
Principal Mutual Life Insurance Company hereby amends, effective as of the first
day of January 1, 1994, the following prototype plans and by such amendment,
amends each retirement plan set forth on any such prototype by an adopting
employer.
THE PRINCIPAL FINANCIAL GROUP PROTOTYPE FOR:
<TABLE>
<S> <C> <C> <C>
Profit Sharing Plans-Plus Letter Serial No.: D347613B Plan No.: 003 Basic Plan No.: 01
Profit Sharing Plans-Standardized Letter Serial No.: D247614B Plan No.: 004 Basic Plan No.: 01
Savings Plans-Plus Letter Serial No.: D347609B Plan No.: 001 Basic Plan No.: 03
Savings Plans-Standardized Letter Serial No.: D247610B Plan No.: 002 Basic Plan No.: 03
Money Purchase Plans-Plus Letter Serial No.: D347611B Plan No.: 001 Basic Plan No.: 01
Money Purchase Plans-Standardized Letter Serial No.: D247612B Plan No.: 002 Basic Plan No.: 01
Target Plans-Plus Letter Serial No.: D360921A Plan No.: 005 Basic Plan No.: 01
Target Plans-Standardized Letter Serial No.: D260922A Plan No.: 006 Basic Plan No.: 01
</TABLE>
ARTICLE I: The following is added to the definition of PAY:
In addition to other applicable limitations set forth in the plan, and
notwithstanding any other provision of the plan to the contrary, for plan years
beginning on or after January 1, 1994, the annual pay of each employee taken
into account under the plan shall not exceed the OBRA '93 annual pay limit. The
OBRA '93 annual pay limit is $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with section 401(a)(17)(B) of the
Internal Revenue Code. The cost-of-living adjustment in effect for a calendar
year applies to any period, not exceeding 12 months, over which pay is
determined (determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the OBRA '93 annual pay
limit will be multiplied by a fraction, the numerator of which is the number of
months in the determination period, and the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference in this plan
to the limitation under section 401(a)(17) of the Code shall mean the OBRA '93
annual pay limit set forth in this provision.
If pay for any prior determination period is taken into account in determining
an employee's benefits accruing in the current plan year, the pay for that prior
determination period is subject to the OBRA '93 annual pay limit in effect for
that prior determination period. For this purpose, for determination periods
beginning before the first day of the first plan year beginning on or after
January 1, 1994, the OBRA '93 annual pay limit is $150,000.
Executed by PRINCIPAL MUTUAL LIFE INSURANCE COMPANY on
April 8, 1994 by
- -------
/s/ Roger Jacobsen
- ------------------
Officer
[LOGO PRINCIPAL GROUP]
<PAGE> 86
UNILATERAL AMENDMENT - MODEL AMENDMENT TO COMPLY WITH
SECTION 401(A)(31) OF THE INTERNAL REVENUE CODE
AS ADDED BY THE UNEMPLOYMENT COMPENSATION AMENDMENTS OF 1992
Principal Mutual Life Insurance Company hereby amends, effective as of
January 1, 1993, the following prototype plans and by such amendment, amends
each retirement plan set forth on any such prototype by an adopting employer.
THE PRINCIPAL FINANCIAL GROUP PROTOTYPE FOR:
<TABLE>
<S> <C> <C> <C>
Profit Sharing Plans - Plus Letter Serial No.: D347613B Plan No.: 003 Basic Plan No.: 01
Profit Sharing Plans - Standardized Letter Serial No.: D247614B Plan No.: 004 Basic Plan No.: 01
Savings Plans - Plus Letter Serial No.: D347609B Plan No.: 001 Basic Plan No.: 03
Savings Plans - Standardized Letter Serial No.: D247610B Plan No.: 002 Basic Plan No.: 03
Money Purchase Plans - Plus Letter Serial No.: D347611B Plan No.: 001 Basic Plan No.: 01
Money Purchase Plans - Standardized Letter Serial No.: D247612B Plan No.: 002 Basic Plan No.: 01
Target Plans - Plus Letter Serial No.: D360921A Plan No.: 005 Basic Plan No.: 01
Target Plans - Standardized Letter Serial No.: D260922A Plan No.: 006 Basic Plan No.: 01
Defined Benefit Plans - Nonintegrated Letter Serial No.: D359699A Plan No.: 002 Basic Plan No.: 02
Defined Benefit Plans - Integrated Letter Serial No.: D359696A Plan No.: 001 Basic Plan No.: 02
</TABLE>
ARTICLE I: The following words and phrases are added to the DEFINITIONS section
of Article I:
DIRECT ROLLOVER. A Direct Rollover is a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
DISTRIBUTEE: A Distributee includes an Employee or former Employee. In addition,
the Employee's or former Employee's surviving spouse and the Employee's or
former Employee's spouse or former spouse who is the alternate payee under a
qualified domestic relations order, as defined in section 414(b) of the Code,
are Distributees with regard to the interest of the spouse or former spouse.
ELIGIBLE RETIREMENT PLAN: Eligible Retirement Plan is an individual retirement
account described in section 408(a) of the Code, an individual retirement
annuity described in section 408(b) of the Code, an annuity plan described in
section 403(a) of the Code, or a qualified trust described in section 401(a) of
the Code, that accepts the Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to the surviving
spouse, an Eligible Retirement Plan is an individual retirement account or
individual retirement annuity.
ELIGIBLE ROLLOVER DISTRIBUTION: An Eligible Rollover Distribution is any
distribution of all or any portion of the balance to the credit of the
Distributee, except that an Eligible Rollover Distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the Distributee or the joint lives (or joint life expectancies) of the
Distributee and the Distributee's designated Beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under section 401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
securities).
ARTICLE IX: The following section is added as SECTION 9.01A -- DIRECT
ROLLOVERS:
This section applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a Distributee's election under this section, a Distributee may elect, at
the time and in the manner prescribed by the Plan Administrator, to have any
portion of an Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan, specified by the Distributee in a Direct Rollover.
Executed by PRINCIPAL MUTUAL LIFE INSURANCE COMPANY on
January 11, 1993 by
/s/ Owen M. Westman
- ------------------
Officer
[LOGO PRINCIPAL GROUP]
<PAGE> 1
EXHIBIT 10.38
INDEMNIFICATION AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of this ___
day of June, 1999, between WebSideStory, Inc., a California corporation (the
"Company"), and __________ ("Indemnitee").
RECITALS
WHEREAS, the Company believes that it is essential to its best interest to
attract and retain highly capable persons to serve as directors, officers,
employees and agents of the Company;
WHEREAS, Indemnitee is or has been selected to be a director, officer,
employee and/or agent of the Company;
WHEREAS, the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors, officers,
employees and other agents of corporations;
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability, in order to enhance Indemnitee's service to the
Company, and in order to induce Indemnitee to continue providing services to the
Company as a director, officer, employee and/or agent, the Company wishes to
provide in this Agreement for the indemnification of and the advancement of
Expenses to Indemnitee to the fullest extent permitted by law and as set forth
in this Agreement, and, to the extent applicable insurance is maintained, for
the coverage of Indemnitee under the Company's policies of directors' and
officers' liability insurance; and
WHEREAS, the Company's Bylaws provide for the indemnification of the
directors, officers, employees and agents of the Company to the maximum extent
authorized by the California Corporations Code;
NOW, THEREFORE, in consideration of the foregoing and of Indemnitee's
continued service to the Company directly or, at its request, with another
enterprise, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
(a) "Board" means the board of directors of the Company.
(b) "Change in Control" means a change in control of the Company
occurring after the Effective Date of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in
response to any similar item on any similar schedule or form) promulgated under
the Securities Exchange Act of 1934 (the "Exchange Act"), whether or not the
Company is then subject to such reporting requirement; provided, however, that,
without limitation, such a change in control shall be deemed to have occurred if
after the Effective Date: (i) any Person becomes the "beneficial owner" (as
defined in Rule 13d-3 under
<PAGE> 2
the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the combined voting power of the
Company's then outstanding securities without the prior approval of at least
two-thirds of the members of the Board in office immediately prior to such
Person attaining such percentage interest; or (ii) there occurs a proxy
contest, or the Company is a party to a merger, consolidation, sale of assets,
plan of liquidation or other reorganization not approved by at least two-thirds
of the members of the Board then in office, as a consequence of which members
of the Board in office immediately prior to such transaction or event
constitute less than a majority of the Board thereafter.
(c) "Effective Date" means June __, 1999.
(d) "Expenses" means all reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other reasonable disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, being or preparing to be a witness in, or
otherwise participating in, a Proceeding.
(e) "Indemnifiable Event" means any event or occurrence that takes place
after the Effective Date and that is related to:
(i) the fact that Indemnitee is or was a director, officer, employee
or agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee, trustee, agent or fiduciary of another foreign or
domestic corporation, partnership, joint venture, employee benefit plan, trust
or other enterprise, or was a director, officer, employee or agent of a foreign
or domestic corporation that was a predecessor corporation of the Company or
another enterprise at the request of such predecessor corporation; or
(ii) anything done or not done by Indemnitee in any capacity described
in the above paragraph (i), whether or not the basis of such event or occurrence
is an alleged action in an official capacity as a director, officer, employee or
agent or in any other capacity while serving as a director, officer, employee or
agent of the Company as described in this subsection (e).
(f) "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporate law and neither presently is, nor in
the past five (5) years has been, retained to represent: (i) the Company or
Indemnitee in any matter material to either such party; or (ii) any other party
to a Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any Person, who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this
Agreement.
(g) "Person" means the term "person" as such term is used in sections
13(d) and 14(d) of the Exchange Act, other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company acting in such
capacity, or a corporation owned directly
-2-
<PAGE> 3
or indirectly by the shareholders of the Company in substantially the same
proportions as their ownership of shares of the Company at the date of this
Agreement.
(h) "Participant" means a person who is a party to, or witness or
participant (including an appeal) in, a Proceeding.
(i) "Potential Change in Control" means a state of affairs that shall be
deemed to exist if the Company enters into an agreement or arrangement, the
consummation of which would result in the occurrence of a Change in Control.
(j) "Proceeding" means any threatened, pending or completed action, suit
or proceeding, or any inquiry, hearing or investigation, whether conducted by
or in the right of the Company or by any other party, that Indemnitee in good
faith believes might lead to the institution of any action, suit or proceeding,
whether civil, criminal, administrative, investigative or other, except one (i)
initiated by Indemnitee to enforce his rights under this Agreement or (ii)
pending on or before the Effective Date.
(k) "Reviewing Party" means the party defined in accordance with Section
4(b).
(l) "Voting Securities" means any securities of the Company that have the
right to vote generally in the election of directors.
SECTION 2. SERVICES BY INDEMNITEE. Indemnitee agrees to serve as a director,
officer, employee or agent of the Company. Indemnitee may, at any time and for
any reason, resign from such position (subject to any other contractual
obligation or any obligation imposed by operation of law), in which event the
Company shall have no obligation under this Agreement to continue Indemnitee in
such position. This Agreement shall not be deemed an employment contract
between the Company (or any of its subsidiaries) and Indemnitee. Indemnitee
specifically acknowledges that Indemnitee's employment with the Company (or any
of its subsidiaries), if any, is at will, and the Indemnitee may be discharged
at any time for any reason, with or without cause, except as may be otherwise
provided in any written employment contract between Indemnitee and the Company
(or any of its subsidiaries), other applicable formal severance policies duly
adopted by the Board, or, with respect to service as a director of the Company,
by the Company's Articles of Incorporation, Bylaws, and the laws of the State
of California. The foregoing notwithstanding, this Agreement shall continue in
force after Indemnitee has ceased to serve as an officer, director, agent or
employee of the Company.
SECTION 3. AGREEMENT TO INDEMNIFY.
(a) General Agreement. In the event Indemnitee was, is or becomes a
Participant in, or is threatened to be made a Participant in, a Proceeding by
reason of (or arising in part out of) an Indemnifiable Event, the Company shall
indemnify Indemnitee from and against any and all Expenses to the fullest
extent permitted by law, as the same exists or may hereafter be amended or
interpreted (but in the case of any such amendment or interpretation, only to
the extent that such amendment or interpretation permits the Company to provide
broader indemnification rights than were permitted prior to that amendment or
interpretation). The parties to this Agreement intend that this Agreement shall
provide for indemnification in excess
-3-
<PAGE> 4
of that expressly permitted by statute including, without limitation, any
indemnification provided by the Company's Articles of Incorporation, its
Bylaws, a vote of its shareholders or disinterested directors or applicable law.
(b) Initiation of Proceeding. Notwithstanding anything in this Agreement
to the contrary, Indemnitee shall not be entitled to indemnification under this
Agreement in connection with any Proceeding initiated by Indemnitee against the
Company or any director, officer, employee or agent of the Company unless:
(i) the Company has joined in or the Board has consented to the
initiation of such Proceeding; or
(ii) such Proceeding is one to enforce indemnification rights under
Section 5; or
(iii) such Proceeding is instituted after a Change in Control and
Independent Counsel has approved its initiation.
(c) Advancement of Expenses. The Company shall advance all reasonable
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within twenty (20) days after the receipt by the Company of a
statement or statements from Indemnitee requesting such advance or advances
from time to time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall evidence the Expenses reasonably
incurred by Indemnitee and shall include or be preceded or accompanied by an
undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it
shall ultimately be determined that Indemnitee is not entitled to be
indemnified against such Expenses.
(d) Indemnification for Expenses of a Party Who is Wholly or Partly
Successful. In addition to indemnification authorized under any other provision
of this Agreement, to the extent that Indemnitee is a Participant in, and is
successful on the merits or otherwise in defense of, any Proceeding, Indemnitee
shall be indemnified against all Expenses actually and reasonably incurred by
him or on his behalf in connection therewith. If Indemnitee is not wholly
successful in defense of such Proceeding but is successful, on the merits or
otherwise, as to one or more but less than all claims, issues or matters in
such Proceeding, the Company shall indemnify Indemnitee against all Expenses
actually and reasonably incurred by him or on his behalf in connection with
each successfully resolved claim, issue or matter. The parties hereto shall
make a reasonable allocation of those Expenses that relate to each such claim,
issue or matter. For purposes of this section and without limitation, the
termination of any claim, issue or matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful result as to such
claim, issue or matter.
(e) Prohibited Indemnification. No indemnification under this Agreement
shall be paid by the Company on account of any Proceeding in which judgment is
rendered against Indemnitee for an accounting of profits made from the purchase
or sale by Indemnitee of securities of the Company under the provisions of
Section 16(b) of the Exchange Act, or similar provisions of any federal, state
or local laws.
-4-
<PAGE> 5
SECTION 4. INDEMNIFICATION PROCESS AND APPEAL.
(a) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Company a written request to the Secretary of the Company,
including therein or therewith such documentation and information as is
reasonably available to Indemnitee and is reasonably necessary to determine
whether and to what extent Indemnitee is entitled to indemnification. The
Secretary of the Company shall, promptly upon receipt of such a request for
indemnification, advise the Board in writing that Indemnitee has requested
indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant
to the first sentence of Section 4(a) hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case: (i) if a Change in Control shall have occurred, by
Independent Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee; or (ii) if a Change of Control shall not have occurred,
(A) by a majority vote of the Disinterested Directors, even though less than a
quorum of the Board, or (B) if there are no such Disinterested Directors and, if
required by applicable law, or, if such Disinterested Directors so direct, by
Independent Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee or (C) if so directed by the Board, by the stockholders
of the Company (any such party referenced in (A), (B) or (C) above is referred
to herein as the "Reviewing Party"); and, if it is so determined that Indemnitee
is entitled to indemnification, payment to Indemnitee shall be made within ten
(10) days after such determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such person, persons or
entity upon reasonable advance request any documentation or information which is
not privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Such
determination shall be made as promptly as is reasonably practicable, taking
into account all facts and circumstances. Any reasonable costs or expenses
(including reasonable attorneys' fees and disbursements) actually incurred by
Indemnitee in so cooperating with the person, persons or entity making such
determination shall be borne by the Company (irrespective of the determination
as to Indemnitee's entitlement to indemnification) and the Company hereby
indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 4(b) hereof, the
Independent Counsel shall be selected as provided in this Section 4(c). If a
Change of Control shall not have occurred, the Board shall select the
Independent Counsel, and the Company shall give written notice to Indemnitee
advising him of the identity of the Independent Counsel so selected. If a
Change of Control shall have occurred, the Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board, in which event the preceding sentence shall apply), and
Indemnitee shall give written notice to the Company advising it of the identity
of the Independent Counsel so selected. In either event, Indemnitee or the
Company, as the case may be, may, within ten (10) days after such written
notice of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection;
provided, however, that such objection may be asserted only on the ground that
the Independent Counsel so selected does not meet the requirements of
"Independent Counsel" as defined in Section 1 of this Agreement, and the
objection shall set forth with particularity the
-5-
<PAGE> 6
factual basis of such assertion. If such written objection is so made and
substantiated, the Independent Counsel so selected may not serve as Independent
Counsel unless and until such objection is withdrawn or a court has determined
that such objection is without merit. If, within 20 days after submission by
Indemnitee of a written request for indemnification pursuant to Section 4(a)
hereof, no Independent Counsel shall have been selected and not objected to,
either the Company or Indemnitee may petition any court of competent
jurisdiction for resolution of any objection which shall have been made by the
Company or Indemnitee to the other's selection of Independent Counsel and/or for
the appointment as Independent Counsel of a person selected by the court or by
such other person as the court shall designate, and the person with respect to
whom all objections are so resolved or the person so appointed shall act as
Independent Counsel under Section 4(b) hereof. The Company shall pay any and all
reasonable fees and Expenses of Independent Counsel incurred by such Independent
Counsel in connection with acting pursuant to Section 4(b) hereof, and the
Company shall pay all reasonable fees and Expenses incident to the procedures of
this Section 4(c), regardless of the manner in which such Independent Counsel
was selected or appointed. Upon the due commencement of any judicial proceeding
or arbitration pursuant to Section 4(d) of this Agreement, Independent Counsel
shall be discharged and relieved of any further responsibility in such capacity
(subject to the applicable standards of professional conduct then prevailing).
(d) Suit to Enforce Rights. Regardless of any action by the Reviewing
Party, if Indemnitee has not received full indemnification in a timely manner
after making a demand in accordance with Section 4(a), Indemnitee shall have
the right to enforce its indemnification rights under this Agreement by
commencing litigation in any court in the State of California seeking an
initial determination by the court or challenging any determination by the
Reviewing Party, as applicable, or any aspect thereof. The Company hereby
consents to service of process and to appear in any such proceeding. Any
determination by the Reviewing Party not challenged by Indemnitee shall be
binding on the Company and Indemnitee. The remedy provided for in this Section
4 shall be in addition to any other remedies available to Indemnitee in law or
equity.
(e) Defense to Indemnification, Burden of Proof, and Presumptions.
It shall be a defense to any action brought by Indemnitee against the Company
to enforce this Agreement (other than an action brought to enforce a claim for
Expenses incurred in defending a Proceeding in advance of its final disposition
when the required undertaking has been tendered to the Company) that it is not
permissible, under this Agreement or the applicable law, for the Company to
indemnify Indemnitee for the amount claimed. In connection with any such action
or any determination by the Reviewing Party, as applicable, or otherwise on
whether Indemnitee is entitled to be indemnified under this Agreement, the
burden of proving such a defense or determination shall be on the Company.
Neither the failure of the Reviewing Party or the Company (including its Board
or its shareholders) to have made a determination before the commencement of
such action by Indemnitee that indemnification is proper under the
circumstances because Indemnitee has met the standard of conduct set forth in
applicable law, nor an actual determination by the Reviewing Party or the
Company (including its Board or its shareholders) that Indemnitee has not met
the applicable standard of conduct, shall be a defense to the action or create
a presumption that Indemnitee has not met the applicable standard of conduct.
For purposes of this Agreement, the termination of any Proceeding, by judgment,
order, settlement (whether with or without court approval), conviction or on a
plea of nolo
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contendere, or its equivalent, shall not create a presumption of conduct or
have any particular belief or that a court has determined that indemnification
is not permitted by applicable law.
SECTION 5. INDEMNIFICATION FOR EXPENSES INCURRED IN ENFORCING RIGHTS. The
Company shall indemnify Indemnitee against any and all Expenses actually and
reasonably incurred by Indemnitee in connection with any claim asserted against
or action brought by Indemnitee for:
(a) indemnification of Expenses or advancement of Expenses by the Company
under this Agreement, or any other agreement, or under applicable law, or the
Company's Articles of Incorporation or Bylaws now or hereafter in effect,
relating to indemnification for Indemnifiable Events; and/or
(b) recovery under directors' and officers' liability insurance policies
maintained by the Company, for amounts paid in settlement, if, upon
instruction from the Board, the Reviewing Party has approved the settlement. If
requested by Indemnitee, the Company shall, within ten (10) business days of
such request, advance to Indemnitee any Expenses to which Indemnitee is
entitled under this Section 5. The Company shall not settle any Proceeding in
any manner that would impose any penalty or limitation on Indemnitee without
Indemnitee's written consent. Neither the Company nor Indemnitee will
unreasonably withhold its consent to any proposed settlement. The Company shall
not be liable to indemnify Indemnitee under this Agreement with regard to any
judicial award if the Company was not given a reasonable and timely
opportunity, at its expense, to participate in the defense of such action;
however, the Company's liability under this Agreement shall not be excused if
participation in such Proceeding by the Company was barred by this Agreement.
SECTION 6. SELECTION OF COUNSEL. In the event the Company shall be obligated
under this Agreement to pay the Expenses of any proceeding against Indemnitee,
the Company, if appropriate, shall be entitled to assume the defense of such
proceeding, with counsel approved by Indemnitee, which approval shall not be
unreasonably withheld, upon the delivery to Indemnitee of written notice of its
election so to do. After delivery of such notice, approval of such counsel by
Indemnitee and the retention of such counsel by the Company, the Company will
not be liable to Indemnitee under this Agreement for any fees of counsel
subsequently incurred by Indemnitee with respect to the same proceeding,
provided that (i) Indemnitee shall have the right to employ his counsel in any
such proceeding at Indemnitee's expense; and (ii) if (A) the employment of
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense
or (C) the Company shall not, in fact, have employed counsel to assume the
defense of such proceeding, then the Expenses of Indemnitee counsel shall be at
the expense of the Company.
SECTION 7. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
that in certain instances Federal law or applicable public policy may prohibit
the Company from indemnifying its directors and officers under this Agreement
or otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities
and Exchange Commission to submit the question
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of indemnification to a court in certain circumstances for a determination of
the Company's right under public policy to indemnify Indemnitee.
SECTION 8. DURATION OF AGREEMENT. This Agreement shall continue until and
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as a director, officer, employee or agent of the
Company or of any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise which Indemnitee served at the
request of the Company (the "Anniversary Date"); or (b) the final termination
of any Proceeding then pending on the Anniversary Date in respect of which
Indemnitee is granted rights of indemnification or advancement of Expenses
hereunder and of any Proceeding commenced by Indemnitee pursuant to Section 4
of this Agreement relating thereto.
SECTION 9. NON-EXCLUSIVITY. The rights of Indemnitee under this Agreement shall
be in addition to any other rights that Indemnitee may have under the Company's
Articles of Incorporation, Bylaws, applicable law or otherwise. To the extent
that a change in applicable law (whether by statute or judicial decision)
permits greater indemnification by agreement than would be afforded currently
under the Company's Articles of Incorporation, Bylaws, applicable law or this
Agreement, it is the intent of the parties that Indemnitee enjoy by this
Agreement the greater benefit afforded by such change.
SECTION 10. LIABILITY INSURANCE. To the extent the Company maintains an
insurance policy or policies providing directors' and officers' liability
insurance, Indemnitee shall be covered by such policy or policies, in
accordance with its or their terms, to the maximum extent of the coverage
available for any director or officer of the Company.
SECTION 11. AMENDMENT OF THIS AGREEMENT. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall operate as a waiver or any other provisions of this Agreement (whether or
not similar), nor shall such waiver constitute a continuing waiver. Except as
specifically provided in this Agreement, no failure to exercise or delay in
exercising any right or remedy under it shall constitute a waiver of the right
or remedy.
SECTION 12. SUBROGATION. In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of that payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of any documents necessary to enable the Company effectively to bring suit to
enforce such rights.
SECTION 13. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under
this Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise received payment (under any
insurance policy, bylaw or otherwise) of the amounts otherwise indemnifiable
under this Agreement.
SECTION 14. BINDING EFFECT. This Agreement shall be binding on and inure to the
benefit of and be enforceable by the parties to it and their respective
successors (including any direct or indirect successor by purchase, merger,
consolidation or otherwise to all or substantially all of the Company's
business or assets or both), assigns, spouses, heirs and personal and legal
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<PAGE> 9
representatives. The Company shall require and cause any successor (whether
direct or indirect, by purchase, merger consolidation, or otherwise to all,
substantially all, or a substantial part, of the Company's business or assets
or both) by written agreement, in form and substance reasonably satisfactory to
Indemnitee, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place. The indemnification provided under this
Agreement shall continue for Indemnitee for any action taken or not taken while
serving in an indemnified capacity pertaining to an Indemnifiable Event even
though Indemnitee may have ceased to serve in such capacity at the time of any
Proceeding.
SECTION 15. SEVERABILITY. If any portion of this Agreement is held by a court
of competent jurisdiction to be invalid, void or otherwise unenforceable, the
remaining provisions of this Agreement shall remain enforceable to the fullest
extent permitted by law. Furthermore, to the fullest extent possible, the
provisions of this Agreement (including, without limitation, each portion of
this Agreement containing any provision held to be invalid, void or otherwise
unenforceable, that is not itself invalid, void or unenforceable) shall be
construed so as to give effect to the intent manifested by the provision held
invalid, void or unenforceable.
SECTION 16. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California applicable
to contracts made and to be performed in such state without giving effect to
the principles to conflicts of laws.
SECTION 17. NOTICES. All notices, demands, and other communications required or
permitted under this Agreement shall be made in writing and shall be deemed to
have been duly given if delivered by hand, against receipt, or mailed, first
class postage prepaid, certified or registered mail, and addressed to:
(a) the Company at:
WebSideStory, Inc.
6450 Lusk Boulevard, Suite E205
San Diego, California, 92121
Attention: President
With a copy to Secretary
(b) Indemnitee at:
-------------------------------
-------------------------------
-------------------------------
or to such other address as may have been furnished to Indemnitee by the
Company or to the Company by Indemnitee, as the case may be. Notice of change
of address shall be effective only when given in accordance with this section.
All notices complying with this section shall be deemed to have been received
on the date of delivery or on the third business day after mailing.
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SECTION 18. MISCELLANEOUS. Use of the masculine pronoun shall be deemed to
include usage of the feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement as of the date specified above.
INDEMNITEE: WEBSIDESTORY, INC.
a California corporation
By:
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<PAGE> 1
EXHIBIT 10.39
FORMAT DELAWARE INDEMNITY AGREEMENT
INDEMNITY AGREEMENT
This Indemnity Agreement, dated as of _______________, 2000, is made by
and between WebSideStory, Inc., a Delaware corporation (the "Company"), and
______________________________ (the "Indemnitee").
RECITALS
A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors, officers or agents of corporations
unless they are protected by comprehensive liability insurance or
indemnification, due to increased exposure to litigation costs and risks
resulting from their service to such corporations, and due to the fact that the
exposure frequently bears no reasonable relationship to the compensation of such
directors, officers and other agents.
B. The statutes and judicial decisions regarding the duties of directors
and officers are often difficult to apply, ambiguous, or conflicting, and
therefore fail to provide such directors, officers and agents with adequate,
reliable knowledge of legal risks to which they are exposed or information
regarding the proper course of action to take.
C. Plaintiffs often seek damages in such large amounts and the costs of
litigation may be so enormous (whether or not the case is meritorious), that the
defense and/or settlement of such litigation is often beyond the personal
resources of directors, officers and other agents.
D. The Company believes that it is unfair for its directors, officers
and agents and the directors, officers and agents of its subsidiaries to assume
the risk of huge judgments and other expenses which may occur in cases in which
the director, officer or agent received no personal profit and in cases where
the director, officer or agent was not culpable.
E. The Company recognizes that the issues in controversy in litigation
against a director, officer or agent of a corporation such as the Company or its
subsidiaries are often related to the knowledge, motives and intent of such
director, officer or agent, that he is usually the only witness with knowledge
of the essential facts and exculpating circumstances regarding such matters, and
that the long period of time which usually elapses before the trial or other
disposition of such litigation often extends beyond the time that the director,
officer or agent can reasonably recall such matters; and may extend beyond the
normal time for retirement for such director, officer or agent with the result
that he, after retirement or in the event of his death, his spouse, heirs,
executors or administrators, may be faced with limited ability and undue
hardship in maintaining an adequate defense, which may discourage such a
director, officer or agent from serving in that position.
F. Based upon their experience as business managers, the Board of
Directors of the Company (the "Board") has concluded that, to retain and attract
talented and experienced individuals to serve as directors, officers and agents
of the Company and its subsidiaries and to
<PAGE> 2
encourage such individuals to take the business risks necessary for the success
of the Company and its subsidiaries, it is necessary for the Company to
contractually indemnify its directors, officers and agents and the directors,
officers and agents of its subsidiaries, and to assume for itself maximum
liability for expenses and damages in connection with claims against such
directors, officers and agents in connection with their service to the Company
and its subsidiaries, and has further concluded that the failure to provide such
contractual indemnification could result in great harm to the Company and its
subsidiaries and the Company's stockholders.
G. Section 145 of the General Corporation Law of Delaware, under which
the Company is organized ("Section 145"), empowers the Company to indemnify its
directors, officers, employees and agents by agreement and to indemnify persons
who serve, at the request of the Company, as the directors, officers, employees
or agents of other corporations or enterprises, and expressly provides that the
indemnification provided by Section 145 is not exclusive.
H. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director, officer or agent of the Company and/or one or
more subsidiaries of the Company free from undue concern for claims for damages
arising out of or related to such services to the Company and/or one or more
subsidiaries of the Company.
I. Indemnitee is willing to serve, or to continue to serve, the Company
and/or one or more subsidiaries of the Company, provided that he is furnished
the indemnity provided for herein.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions.
(a) Agent. For the purposes of this Agreement, "agent" of the
Company means any person who is or was a director, officer, employee or other
agent of the Company or a subsidiary of the Company; or is or was serving at the
request of, for the convenience of, or to represent the interests of the Company
or a subsidiary of the Company as a director, officer, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise; or was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor corporation of the Company or a
subsidiary of the Company, or was a director, officer, employee or agent of
another enterprise at the request of, for the convenience of, or to represent
the interests of such predecessor corporation.
(b) Expenses. For purposes of this Agreement, "expenses" include
all out-of-pocket costs of any type or nature whatsoever (including, without
limitation, all attorneys' fees and related disbursements), actually and
reasonably incurred by the Indemnitee in connection with either the
investigation, defense or appeal of a proceeding or establishing or enforcing a
right to indemnification under this Agreement or Section 145 or otherwise;
provided,
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however, that "expenses" shall not include any judgments, fines, ERISA excise
taxes or penalties, or amounts paid in settlement of a proceeding.
(c) Proceeding. For the purposes of this Agreement, "proceeding"
means any threatened, pending, or completed action, suit or other proceeding,
whether civil, criminal, administrative, or investigative.
(d) Subsidiary. For purposes of this Agreement, "subsidiary"
means any corporation of which more than 50% of the outstanding voting
securities is owned directly or indirectly by the Company, by the Company and
one or more other subsidiaries, or by one or more other subsidiaries.
2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to
serve as agent of the Company, at its will (or under separate agreement, if such
agreement exists), in the capacity Indemnitee currently serves as an agent of
the Company, so long as he is duly appointed or elected and qualified in
accordance with the applicable provisions of the Bylaws of the Company or any
subsidiary of the Company or until such time as he tenders his resignation in
writing; provided, however, that nothing contained in this Agreement is intended
to create any right to continued employment by Indemnitee.
3. Liability Insurance.
(a) Maintenance of D&O Insurance. The Company hereby covenants
and agrees that, so long as the Indemnitee shall continue to serve as an agent
of the Company and thereafter so long as the Indemnitee shall be subject to any
possible proceeding by reason of the fact that the Indemnitee was an agent of
the Company, the Company, subject to Section 3(c), shall promptly obtain and
maintain in full force and effect directors' and officers' liability insurance
("D&O Insurance") in reasonable amounts from established and reputable insurers.
(b) Rights and Benefits. In all policies of D&O Insurance, the
Indemnitee shall be named as an insured in such a manner as to provide the
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if the Indemnitee is a director; or of the
Company's officers, if the Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, if the Indemnitee is not a director
or officer but is a key employee.
(c) Limitation on Required Maintenance of D&O Insurance.
Notwithstanding the foregoing, the Company shall have no obligation to obtain or
maintain D&O Insurance if the Company determines in good faith that such
insurance is not reasonably available, the premium costs for such insurance are
disproportionate to the amount of coverage provided, the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or the Indemnitee is covered by similar insurance maintained by a
subsidiary of the Company.
4. Mandatory Indemnification. Subject to Section 9 below, the Company
shall indemnify the Indemnitee as follows:
(a) Successful Defense. To the extent the Indemnitee has been
successful on the merits or otherwise in defense of any proceeding (including,
without limitation, an action by
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<PAGE> 4
or in the right of the Company) to which the Indemnitee was a party by reason of
the fact that he is or was an agent of the Company at any time, against all
expenses of any type whatsoever actually and reasonably incurred by him in
connection with the investigation, defense or appeal of such proceeding.
(b) Third Party Actions. If the Indemnitee is a person who was or
is a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the Company) by reason of the fact that he is or
was an agent of the Company, or by reason of anything done or not done by him in
any such capacity, the Company shall indemnify the Indemnitee against any and
all expenses and liabilities of any type whatsoever (including, but not limited
to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in
settlement) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal of such proceeding, provided the
Indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company and its stockholders, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
(c) Derivative Actions. If the Indemnitee is a person who was or
is a party or is threatened to be made a party to any proceeding by or in the
right of the Company by reason of the fact that he is or was an agent of the
Company, or by reason of anything done or not done by him in any such capacity,
the Company shall indemnify the Indemnitee against all expenses actually and
reasonably incurred by him in connection with the investigation, defense,
settlement, or appeal of such proceeding, provided the Indemnitee acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and its stockholders; except that no indemnification
under this subsection 4(c) shall be made in respect to any claim, issue or
matter as to which such person shall have been finally adjudged to be liable to
the Company by a court of competent jurisdiction unless and only to the extent
that the court in which such proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such amounts which the court shall deem proper.
(d) Actions where Indemnitee is Deceased. If the Indemnitee is a
person who was or is a party or is threatened to be made a party to any
proceeding by reason of the fact that he is or was an agent of the Company, or
by reason of anything done or not done by him in any such capacity, and if prior
to, during the pendency of after completion of such proceeding Indemnitee
becomes deceased, the Company shall indemnify the Indemnitee's heirs, executors
and administrators against any and all expenses and liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
and penalties, and amounts paid in settlement) actually and reasonably incurred
to the extent Indemnitee would have been entitled to indemnification pursuant to
Sections 4(a), 4(b), or 4(c) above were Indemnitee still alive.
(e) Notwithstanding the foregoing, the Company shall not be
obligated to indemnify the Indemnitee for expenses or liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
and penalties, and amounts paid in settlement) for which payment is actually
made to or on behalf of Indemnitee under a valid and collectible insurance
policy of D&O Insurance, or under a valid and enforceable indemnity clause,
by-law or agreement.
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<PAGE> 5
5. Partial Indemnification. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts
paid in settlement) incurred by him in the investigation, defense, settlement or
appeal of a proceeding, but not entitled, however, to indemnification for all of
the total amount hereof, the Company shall nevertheless indemnify the Indemnitee
for such total amount except as to the portion hereof to which the Indemnitee is
not entitled.
6. Mandatory Advancement of Expenses. Subject to Section 8(a) below, the
Company shall advance all expenses incurred by the Indemnitee in connection with
the investigation, defense, settlement or appeal of any proceeding to which the
Indemnitee is a party or is threatened to be made a party by reason of the fact
that the Indemnitee is or was an agent of the Company. Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall be determined ultimately that the Indemnitee is not entitled to be
indemnified by the Company as authorized hereby. The advances to be made
hereunder shall be paid by the Company to the Indemnitee within twenty (20) days
following delivery of a written request therefor by the Indemnitee to the
Company. In the event that the Company fails to pay expenses as incurred by the
Indemnitee as required by this paragraph, Indemnitee may seek mandatory
injunctive relief from any court having jurisdiction to require the Company to
pay expenses as set forth in this paragraph. If Indemnitee seeks mandatory
injunctive relief pursuant to this paragraph, it shall not be a defense to
enforcement of the Company's obligations set forth in this paragraph that
indemnitee has an adequate remedy at law for damages.
7. Notice and Other Indemnification Procedures.
(a) Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof.
(b) If, at the time of the receipt of a notice of the
commencement of a proceeding pursuant to Section 7(a) hereof, the Company has
D&O Insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(c) In the event the Company shall be obligated to pay the
expenses of any proceeding against the Indemnitee, the Company, if appropriate,
shall be entitled to assume the defense of such proceeding, with counsel
approved by the Indemnitee, upon the delivery to the Indemnitee of written
notice of its election so to do. After delivery of such notice, approval of such
counsel by the Indemnitee and the retention of such counsel by the Company, the
Company will not be liable to the Indemnitee under this Agreement for any fees
of counsel subsequently incurred by the Indemnitee with respect to the same
proceeding, provided that (i) the Indemnitee shall have the right to employ his
counsel in any such proceeding at the Indemnitee's expense; and (ii) if (A) the
employment of counsel by the Indemnitee has been previously authorized by
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the Company, (B) the Indemnitee shall have reasonably concluded that there may
be a conflict of interest between the Company and the Indemnitee in the conduct
of any such defense, or (C) the Company shall not, in fact, have employed
counsel to assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
8. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance
expenses to the Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by the Indemnitee and not by way of defense, unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board, (iii) such indemnification is provided by the Company,
in its sole discretion, pursuant to the powers vested in the Company under the
General Corporation Law of Delaware or (iv) the proceeding is brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise as required under Section 145.
(b) Lack of Good Faith. To indemnify the Indemnitee for any
expenses incurred by the Indemnitee with respect to any proceeding instituted by
the Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
(c) Unauthorized Settlements. To indemnify the Indemnitee under
this Agreement for any amounts paid in settlement of a proceeding unless the
Company consents to such settlement, which consent shall not be unreasonably
withheld.
9. Non-exclusivity. The provisions for indemnification and advancement
of expenses set forth in this Agreement shall not be deemed exclusive of any
other rights which the Indemnitee may have under any provision of law, the
Company's Certificate of Incorporation or Bylaws, the vote of the Company's
stockholders or disinterested directors, other agreements, or otherwise, both as
to action in his official capacity and to action in another capacity while
occupying his position as an agent of the Company, and the Indemnitee's rights
hereunder shall continue after the Indemnitee has ceased acting as an agent of
the Company and shall inure to the benefit of the heirs, executors and
administrators of the Indemnitee.
10. Enforcement. Any right to indemnification or advances granted by
this Agreement to Indemnitee shall be enforceable by or on behalf of Indemnitee
in any court of competent jurisdiction if (i) the claim for indemnification or
advances is denied, in whole or in part, or (ii) no disposition of such claim is
made within ninety (90) days of request therefor. Indemnitee, in such
enforcement action, if successful in whole or in part, shall be entitled to be
paid also the expense of prosecuting his claim. It shall be a defense to any
action for which a claim for indemnification is made under this Agreement (other
than an action brought to enforce a claim for expenses pursuant to Section 6
hereof, provided that the required undertaking has been tendered to the Company)
that Indemnitee is not entitled to indemnification because of the limitations
set forth in Sections 4 and 8 hereof. Neither the failure of the Corporation
(including its Board of Directors or its stockholders) to have made a
determination prior to the
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commencement of such enforcement action that indemnification of Indemnitee is
proper in the circumstances, nor an actual determination by the Company
(including its Board of Directors or its stockholders) that such indemnification
is improper, shall be a defense to the action or create a presumption that
Indemnitee is not entitled to indemnification under this Agreement or otherwise.
11. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
12. Survival of Rights.
(a) All agreements and obligations of the Company contained
herein shall continue during the period Indemnitee is an agent of the Company
and shall continue thereafter so long as Indemnitee shall be subject to any
possible claim or threatened, pending or completed action, suit or proceeding,
whether civil, criminal, arbitrational, administrative or investigative, by
reason of the fact that Indemnitee was serving in the capacity referred to
herein.
(b) The Company shall require any successor to the Company
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place.
13. Interpretation of Agreement. It is understood that the parties
hereto intend this Agreement to be interpreted and enforced so as to provide
indemnification to the Indemnitee to the fullest extent permitted by law
including those circumstances in which indemnification would otherwise be
discretionary.
14. Severability. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever, (i)
the validity, legality and enforceability of the remaining provisions of the
Agreement (including without limitation, all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (ii) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable and to give
effect to Section 13 hereof.
15. Modification and Waiver. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
7
<PAGE> 8
16. Notice. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee or (ii) if mailed by
certified or registered mail with postage prepaid, on the third business day
after the mailing date. Addresses for notice to either party are as shown on the
signature page of this Agreement, or as subsequently modified by written notice.
17. Governing Law. This Agreement shall be governed exclusively by and
construed according to the laws of the State of Delaware as applied to contracts
between Delaware residents entered into and to be performed entirely within
Delaware.
The parties hereto have entered into this Indemnity Agreement effective
as of the date first above written.
THE COMPANY:
WEBSIDESTORY, INC.
By
----------------------------------------
Title
-------------------------------------
Address
-----------------------------------
-----------------------------------
-----------------------------------
INDEMNITEE:
------------------------------------------
[Indemnitee's Printed Name]
Address
-----------------------------------
-----------------------------------
-----------------------------------
8
<PAGE> 1
EXHIBIT 10.40
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: WEBSIDESTORY, INC., a California Corporation
Number of Shares: 80,000
Class of Stock: Common
Initial Exercise Price: $2.50 per share
Issue Date: March 27, 2000
Expiration Date: March 26, 2005 (Subject to Article 4.1)
THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00 and
for other good and valuable consideration, IMPERIAL BANCORP or registered
assignee ("Holder") is entitled to purchase the number of fully paid and
nonassessable shares of the class of securities (the "Shares") of the
corporation (the "Company") at the initial exercise price per Share (the
"Warrant Price") all as set forth above and as adjusted pursuant to Article 2 of
this Warrant, subject to the provisions and upon the terms and conditions set
forth of this Warrant.
ARTICLE 1. EXERCISE
1.1 Method of Exercise. Holder may exercise this Warrant by delivering this
Warrant and a duly executed Notice of Exercise in substantially the form
attached as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.3.
1.3 Fair Market Value. If the Shares are traded regularly in a public
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not regularly traded in
a public market, the Board of Directors of the Company shall determine fair
market value in its reasonable good faith judgment. The foregoing
notwithstanding, if Holder advises the Board of Directors in writing that Holder
disagrees with such determination,
1
<PAGE> 2
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid by the Company.
In all other circumstances, such fees and expenses shall be paid by Holder.
1.4 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.5 Replacement of Warrants. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the
case of mutilation, on surrender and cancellation of this Warrant, the Company
at its expense shall execute and deliver, in lieu of this Warrant, a new warrant
of like tenor.
1.6 Repurchase on Sale, Merger, or Consolidation of the Company.
1.6.1. Acquisition. For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of the
assets (including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.6.2. Assumption of Warrant. If upon the closing of any Acquisition
the successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly. The Company shall use reasonable efforts to cause the surviving
corporation to assume the obligations of this Warrant.
1.6.3. Nonassumption. If upon the closing of any Acquisition the
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the Acquisition on the
same terms as other holders of the same class of securities of the Company.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2
<PAGE> 3
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on its common stock payable in common stock, or other securities,
subdivides the outstanding common stock into a greater amount of common stock,
then upon exercise of this Warrant, for each Share acquired, Holder shall
receive, without cost to Holder, the total number and kind of securities to
which Holder would have been entitled had Holder owned the Shares of record as
of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any reclassification,
exchange, substitution, combination, or other event that results in a change of
the number and/or class of the securities issuable upon exercise or conversion
of this Warrant, Holder shall be entitled to receive, upon exercise or
conversion of this Warrant, the number and kind of securities and property that
Holder would have received for the Shares if this Warrant had been exercised
immediately before such reclassification, exchange, substitution, or other
event. Such an event shall include any automatic conversion of the outstanding
or issuable securities of the Company of the same class or series as the Shares
to common stock pursuant to the terms of the Company's Articles of Incorporation
upon the closing of a registered public offering of the Company's common stock.
The Company or its successor shall promptly issue to Holder a new Warrant for
such new securities or other property. The new Warrant shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased, and the number
of shares to which Holder is entitled to receive upon exercise or conversion of
this Warrant shall be adjusted accordingly.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the number of
Shares issuable upon exercise of this Warrant shall be subject to adjustment,
from time to time, in the manner set forth on Exhibit A, if attached, in the
event of Diluting Issuances (as defined on Exhibit A).
2.5 No Impairment. The Company shall not, by amendment of its Articles of
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out all the provisions of this Article 2 and in
taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
3
<PAGE> 4
2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents and
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this
Warrant is not greater than the fair market value of the Shares as of the date
of this Warrant.
(b) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or any
of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all communiques to the shareholders of the Company, (b)
within ninety (90) days after the end of each fiscal year of the Company, the
annual audited financial statements of the Company certified by independent
public accountants of recognized standing and (c) within forty-five (45)
4
<PAGE> 5
days after the end of each of the first three quarters of each fiscal year, the
Company's quarterly, unaudited financial statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company
agrees that the Shares shall be subject to the registration rights set forth on
Exhibit B.
ARTICLE 4. MISCELLANEOUS.
4.1 Term: Notice of Expiration. This Warrant is exercisable, in whole or in
part, at any time and from time to time on or before the Expiration Date set
forth above. The Company shall give Holder written notice of Holder's right to
exercise this Warrant in the form attached as Appendix 2 not more than 90 days
and not less than 30 days before the Expiration Date. If the notice is not so
given, the Expiration Date shall automatically be extended until 30 days after
the date the Company delivers the notice to Holder.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company). The Company
shall not require Holder to provide an opinion of counsel if the transfer is to
an affiliate of Holder or if there is no material question as to the
availability of current information as referenced in Rule 144(c), Holder
represents that it has complied with Rule 144(d) and (e) in reasonable detail,
the selling broker represents that it has complied with Rule 144(f), and the
Company is provided with a copy of Holder's notice of proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.3, Holder
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder, if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the
5
<PAGE> 6
Company shall have the right to refuse to transfer any portion of this Warrant
to any person who directly competes with the Company.
4.5 Notices. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys' Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
WEBSIDESTORY, INC.
By: /s/ Websidestory, Inc.
Name: John Hentrich
Title: President/CEO
By:
Name: Michael Christian
Title: SVP
6
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated April 17, 2000, except for the portion of Note 1 discussing the
stock split to which the date is ___________, 2000 and the portion of Note 1
discussing the reincorporation to which the date is ___________, 2000, relating
to the financial statements of WebSideStory, Inc., which appears in such
Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
San Diego, California
April 17, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS AS OF DECEMBER 31, 1999, CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH PRELIMINARY FORM S-1
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,254
<SECURITIES> 0
<RECEIVABLES> 636
<ALLOWANCES> 76
<INVENTORY> 0
<CURRENT-ASSETS> 5,819
<PP&E> 2,596
<DEPRECIATION> 659
<TOTAL-ASSETS> 8,798
<CURRENT-LIABILITIES> 1,610
<BONDS> 318
29,465
0
<COMMON> 3
<OTHER-SE> 22,796
<TOTAL-LIABILITY-AND-EQUITY> 8,798
<SALES> 0
<TOTAL-REVENUES> 9,600
<CGS> 0
<TOTAL-COSTS> 11,523
<OTHER-EXPENSES> (188)
<LOSS-PROVISION> 76
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> (1,735)
<INCOME-TAX> (550)
<INCOME-CONTINUING> (550)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (550)
<EPS-BASIC> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
